Well, the 2014 tax lien sales in Arizona are complete. I attended the Pima County tax lien sale where over $10 million dollars of tax liens were sold over the course of two days. What was readily apparent from the beginning is that investors looking to fetch high interest rates on tax liens were going to be sorely disappointed. The competition was incredibly stiff, with one San Diego hedge fund purchasing nearly $4 million dollars worth of liens at rates of 3-4%, while another Florida fund purchased nearly $2 million dollars worth of liens in the 4-5% range. Indeed, investors were even bidding down $200 liens to 4-5%. Several liens were even purchased for 1-2%.
This is a far-cry from just a few years ago where an investor could often pick up a $1,000 tax lien on improved property for 16%. It is clear that in this low interest rate environment, where large funds are able to obtain money at extremely low rates, small investors have largely been shut out. It is no longer about who has done the best due diligence, but who has access to the cheapest money. By the end of the Pima County sale, it really was just a handful of investors that were purchasing all the liens.
So long as the Fed continues to keep interest rates at near historic lows, all those people who have bought into the late-night infomercial view that you can get liens for 16% and get houses free and clear will be sadly awakened to the new reality in tax lien investing.