Come to a decision if Tax Liens Are For You
Even before you choose to tax on tax lien investing, you should understand the rewards involved as well as the risks.
You need to understand a few common things about tax lien investing, like the difference between a tax deed and tax lien county or state and what bidding on the premium is. Once you have a basic grasp of the basics of investing in tax liens, you should decide if this is something that you could be passionate about.
If you determine that Tax Lien Investing is something you would like, read on!
Select an online resource for Buying Tax liens
This is actually the easy part. Tax lien sales are processed at the courthouse so you should probably start by finding the website of tax collector for county you want to invest in.
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.
This step will give you a lot of results to filter through.
Register With Online Tax Lien Directories
Not all counties give you the ability to purchase tax liens online, so you will only be able to register in certain counties.
Be ready to fill in personal information about yourself such as your social security number, bank routing info or credit card info for funding and payment purchases, this is normal. 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.
Understand how the Tax Lien Bidding process works
There are different ways to bid on tax liens during an auction. One of several bidding methods will be used if more than one investor bids on the same property.
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.the order of bidders is selected at random with the random selection method. In most cases a computer does the random selection but this can vary. Nevada is a state that uses Random selection.
Rotational Selection. Using this method the liens are offered to the bidders in sequential order. If this bidder refuses the lien, bid ticket number two may then bid. The first bidder cannot bid again until all other bidders have had an opportunity to bid or pass on a lien. The next lien then goes to the next number in line.
Bid Down the Ownership. The winning bid goes to the tax lien investor willing to accept the least percentage of ownership on 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 the even there are multiple bidders on the same tax lien, the random selection method will be used. Liens not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Some states allow "over the counter" purchases of liens not sold at auction.
Even before you choose to tax on tax lien investing, you should understand the rewards involved as well as the risks.
You need to understand a few common things about tax lien investing, like the difference between a tax deed and tax lien county or state and what bidding on the premium is. Once you have a basic grasp of the basics of investing in tax liens, you should decide if this is something that you could be passionate about.
If you determine that Tax Lien Investing is something you would like, read on!
Select an online resource for Buying Tax liens
This is actually the easy part. Tax lien sales are processed at the courthouse so you should probably start by finding the website of tax collector for county you want to invest in.
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.
This step will give you a lot of results to filter through.
Register With Online Tax Lien Directories
Not all counties give you the ability to purchase tax liens online, so you will only be able to register in certain counties.
Be ready to fill in personal information about yourself such as your social security number, bank routing info or credit card info for funding and payment purchases, this is normal. 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.
Understand how the Tax Lien Bidding process works
There are different ways to bid on tax liens during an auction. One of several bidding methods will be used if more than one investor bids on the same property.
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.the order of bidders is selected at random with the random selection method. In most cases a computer does the random selection but this can vary. Nevada is a state that uses Random selection.
Rotational Selection. Using this method the liens are offered to the bidders in sequential order. If this bidder refuses the lien, bid ticket number two may then bid. The first bidder cannot bid again until all other bidders have had an opportunity to bid or pass on a lien. The next lien then goes to the next number in line.
Bid Down the Ownership. The winning bid goes to the tax lien investor willing to accept the least percentage of ownership on 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 the even there are multiple bidders on the same tax lien, the random selection method will be used. Liens not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Some states allow "over the counter" purchases of liens not sold at auction.
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