Decide if you want to be a tax lien investor
Before you actually even decide to get involved with tax lien certificates, be aware of the risks as well as the rewards.
You must understand some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you get to the point where you have a good understanding of tax lien investing you should then determine if this suits your personality.
If you decide that this is something you want to get into, then proceed to Tip #2.
Locate a good Tax Lien Web Site
Locating a website to buy tax liens is actually easy to do. Tax liens are sold by county so you should pick a county you want to invest in, then locate the website for that county.
Another option, use the famous google search engine and enter the county that you are interested in, followed by "tax collector". For example, if I wanted to invest in a county in Florida I would type in "Florida Tax Collector" in the Google search engine.
Using google will turn up a lot of results for tax lien investing and allow you to even sign up for a few auctions from the comfort of your couch.
Join A few Tax Lien Websites
Not all counties give you the ability to purchase tax liens online, so you will only be able to register in certain counties.
You should be prepared to provide personal information about yourself such as your social security number, name, address, etc. You may also need to fund or provide funding for your account which will be used to purchase the Liens if you win a successful bid.
Learn The Ways to bid on Tax Liens
There are quite a few ways to bid during tax lien sales auctions. In the event that there is more than one tax lien investor one of several bidding methods are used.
Depending on the laws of the county, the bid winner will be determined by one of the five methods below. Bid Down the Interest.this is where several investors negotiate to see who will accept the lowest interest rate among all the bidders. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.With this method investors are fighting to see who will pay the most for the lien. The additional premium may or may not earn interest, and (in some states) the investor might not get the additional premium back if the lien is redeemed. Colorado is a state that uses the premium bid method.
Random Selection.bidders are selected at random with this type of method. Typically a computer is used to select bidders at random, but this can vary from county to county. Nevada is a state that uses Random selection.
Rotational Selection. With this method, the first lien will be offered to the investor holding bid ticket number one. If this bidder refuses the lien, bid ticket number two may then bid. Bidder 1 will have to wait until all the other bidders have had a chance to bid before his or her turn comes up again. Once bidder 1 bids, bidder 2 gets to bid, then bidder 3, then 4 and so on...then back at 1 and repeat.
Bid Down the Ownership. This method is used in Iowa and a few other states, the investor willing to purchase the lien for the lowest percent of ownership on the property will be awarded the lien. An example of this would be a case where the winning bidder only owns 60% of a tax lien. If the lien is not redeemed, the bid winner only receives 85% ownership of the property with the remaining 15% owned by the original owner. Not many investors will buy liens in states that use the ownership method.
So in case where multiple investors are bidding on the same property, the random selection process will be used instead. Liens that are not purchased at the auction are turned over to the county. Some states allow "over the counter" purchases of liens not sold at auction.
Before you actually even decide to get involved with tax lien certificates, be aware of the risks as well as the rewards.
You must understand some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you get to the point where you have a good understanding of tax lien investing you should then determine if this suits your personality.
If you decide that this is something you want to get into, then proceed to Tip #2.
Locate a good Tax Lien Web Site
Locating a website to buy tax liens is actually easy to do. Tax liens are sold by county so you should pick a county you want to invest in, then locate the website for that county.
Another option, use the famous google search engine and enter the county that you are interested in, followed by "tax collector". For example, if I wanted to invest in a county in Florida I would type in "Florida Tax Collector" in the Google search engine.
Using google will turn up a lot of results for tax lien investing and allow you to even sign up for a few auctions from the comfort of your couch.
Join A few Tax Lien Websites
Not all counties give you the ability to purchase tax liens online, so you will only be able to register in certain counties.
You should be prepared to provide personal information about yourself such as your social security number, name, address, etc. You may also need to fund or provide funding for your account which will be used to purchase the Liens if you win a successful bid.
Learn The Ways to bid on Tax Liens
There are quite a few ways to bid during tax lien sales auctions. In the event that there is more than one tax lien investor one of several bidding methods are used.
Depending on the laws of the county, the bid winner will be determined by one of the five methods below. Bid Down the Interest.this is where several investors negotiate to see who will accept the lowest interest rate among all the bidders. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.With this method investors are fighting to see who will pay the most for the lien. The additional premium may or may not earn interest, and (in some states) the investor might not get the additional premium back if the lien is redeemed. Colorado is a state that uses the premium bid method.
Random Selection.bidders are selected at random with this type of method. Typically a computer is used to select bidders at random, but this can vary from county to county. Nevada is a state that uses Random selection.
Rotational Selection. With this method, the first lien will be offered to the investor holding bid ticket number one. If this bidder refuses the lien, bid ticket number two may then bid. Bidder 1 will have to wait until all the other bidders have had a chance to bid before his or her turn comes up again. Once bidder 1 bids, bidder 2 gets to bid, then bidder 3, then 4 and so on...then back at 1 and repeat.
Bid Down the Ownership. This method is used in Iowa and a few other states, the investor willing to purchase the lien for the lowest percent of ownership on the property will be awarded the lien. An example of this would be a case where the winning bidder only owns 60% of a tax lien. If the lien is not redeemed, the bid winner only receives 85% ownership of the property with the remaining 15% owned by the original owner. Not many investors will buy liens in states that use the ownership method.
So in case where multiple investors are bidding on the same property, the random selection process will be used instead. Liens that are not purchased at the auction are turned over to the county. Some states allow "over the counter" purchases of liens not sold at auction.
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