Tax Lien Investing – Buying Louisiana Tax Lien Titles

Andrew Severino
Published on June 27, 2017

Tax Lien Investing – Buying Louisiana Tax Lien Titles

By Gilbert Bennet of G Bennett 3 Investments

Basics about Louisiana Tax Lien Titles

Louisiana is a great state for Tax Lien Investing.  I’m going to start with the basics here. Louisiana…
…Is a Tax Lien state
…Is a bid down state
…Has a 3 year redemption period
…Has an additional 6 month period for advertisement and challenge to quiet title

Who sells property tax liens in Louisiana?

In most parishes in Louisiana, the sheriff is the taxing authority and the sheriff holds the tax sales; in New Orleans, one of the state’s largest tax lien markets, the municipal treasury is the taxing authority and therefore responsible for the tax sale.

In many parishes tax lien auctions are held at a site determined by the sheriff and require you or a representative to be present, however, a growing number of parishes have been hosting their auctions online.  For better or worse, online auctions, where they take place, have significantly increased the number of participants in the auction, and, after some initial trepidation, increased the number of investors willing to bid less than 100% ownership for the taxes.

My buddy Andy Severino , a long time real estate investor and an active Realtor, wrote an article about investing in New Orleans Tax Liens, but it is so transferrable to the rest of the state, that I’m going to sample his article to answer many of the most common questions.

How does the bidding process work?

For Online Auction Parishes:
Anybody can bid on the tax liens as long as they were registered with Civic Source before the auction. The easiest way to do this is to set up a bank account in your user profile. It doesn?t cost anything to do so.
Once the auction opens bidders bid on a percentage interest in the property, should title pass to the winning bidder, rather than on how much they are willing to pay for the tax title. In other words, the amount paid by the winning bidder is equivalent to the delinquent taxes and penalties assessed for the tax bill, but the bidder willing to take the smallest interest in the property wins. And the earliest bidder wins, trumped only by a bid for a smaller ownership interest the property.

For In Person Auction Parishes:
The auctioneer reads the legal description and taxes + fees/penalties owed and then randomly selects a bidder from the interested parties.? If an individual not selected would still like the right to purchase that individual may offer a lower ownership interest and some real auction style bidding may occur.

How do I make money investing in tax lien properties?

In Louisiana any tax lien title holder is entitled to the following returns on his or her investment:

– A 5% penalty accrues immediately in favor of the tax lien investor on the full amount paid at the auction to acquire the tax title.

– An additional 1% per month is calculated? not only the amount paid at auction, but also on taxes paid for additional years.

-Annualized return=17% on first year, 12% on each additional year.-Additional 5% penalty for each subsequent years taxes paid.

-Your interest in the property is protected by state law as the tax lien takes precedence over all other liens,excepting IRS Liens, including first mortgages on the subject property.

What happens next?

The owner of the property has three years to redeem the tax lien by paying the taxing authority the full amount of delinquent real estate taxes, penalties and interest. The taxing authority then disburses the funds to the investor, or tax lien title holder.

If the property tax lien is not redeemed in three years, the investor can move forward with a court proceeding to ?quiet? the title, in which case when granted he or she would become an owner in the property, free of all existing mortgages.

There are more details involved in this process so consulting an attorney or reading the real estate law around tax liens in your state is a good idea.