Delinquencies other than property taxes may be sold at a tax sale. This includes unpaid utilities, sewer, water or garbage bills or any special assessments. Basically, any unpaid invoice that is payable to the local government (municipality, township, county, or tax district) and is not paid can be sold in the tax sale as a tax lien. As with unpaid taxes, the lien holder is in first position and can foreclose on the property if the lien is not redeemed within the redemption period. The lien holder also has the ability to pay subsequent utility charges (and even subsequent taxes) if the property owner does not pay them on time.

Many states give you the opportunity to pay subsequent taxes and collect the maximum or default interest on your subs. The exception to this is Florida – Florida counties do not allow you to pay the back taxes and will sell the link each year at the tax sale. So you don’t have that opportunity there, you just have to try to buy the link every year.

Utility links can be a good investment for a couple of reasons. First, the delinquent amounts of these liens are often less than those of taxes, so you need less money to buy a utility lien than you do to buy a tax lien. And because these liens are smaller, institutional investors rarely bid on them, making them slightly less competitive than larger tax liens. Second, when you own a utility lien, you can pay any subsequent taxes, as well as any subsequent sewer charges if the owner doesn’t pay them. I have had some liens that I originally bought as small sewer liens, and then when the property owner stopped paying the taxes, I was able to pay the past due taxes as well as the sewer amounts. This added thousands of dollars to my original link. Since it was a New Jersey tax lien, I was able to get 18% of all my subsequent tax payments!

Buying utility liens is one of the strategies I use to keep my tax lien portfolio in double digits!