Tax Lien Investing Basics for the New Investor

Are you stalled in your tax lien investing because you think you need to know more before you get started? Tax lien investing is really not that complex. You just need to follow these 5 basic steps.

1.    Choose where you will invest
The first step is to choose the state and county or counties that you want to invest in. Are you interested in investing in tax liens, tax deeds, or redeemable tax deeds? This will help to determine which state you will invest in. If you don’t live in a state that has the type of tax sales that you are interested in you may want to consider the online tax lien or tax deed sales. I believe that it’s best to invest in what you know, so if possible, pick an area that you are somewhat familiar with. It doesn’t necessarily have to be the state that you live in, but it helps if you know something about it. It should be an area where people want to live and the population is growing not decreasing.

2.    Find the Tax Sale Information
Once you know where you want to invest, you need to find out all you can about the tax sales in that state or in that county. Most counties only have a tax sale once a year. Many counties have a lot of information about their tax sales, including the tax sale list, online. Get the tax sale list and see just what information is provided by the county on the list and what you are going to have to find out on your own. If the county doesn’t provide a good list with a lot of information about each property than you may want to purchase the tax sale list from a tax sale list provider.

3.    Do Your Due Diligence
Now that you have the list of properties that are in the tax sale, and know the rules and procedures for the sale, you need to do your due diligence on the tax sale properties. You want to make sure that any properties that you bid on have value of much more than what you bid (in the case of a deed or redeemable deed) or what the lien amount is  (in the case of a tax lien). You need to check the tax records to find out as much as information about each property as you can and determine a rough estimate of the value of each property that you plan to bid on. For tax deeds you will want to do some type of title search to check for liens or judgments that might survive the tax sale. For vacant land (both liens and deeds) you’ll need to check any zoning laws to make sure that the property is buildable.

4.    Prepare to Bid
Now you should know which properties you want to bid on and how much you are willing to pay, or how in interest you are willing to bid. The next step is to prepare to bid at the tax sale. In step 2, you should have found out, how soon before the tax sale you need to register in order to bid. For online tax sales, you may need to have money deposited a few days before the sale in order to bid. Now is the time to make sure that you have the proper form of payment for any bids that you win at the sale.

5.    Bid!
You’ve done your homework and now you’re prepared to bid at the tax sale! Make sure that you know what it that you are bidding. You should have found out what the bidding procedures are in step 2 and you should have enough funds to pay for all of the deeds or liens that you win (step 4). You should also be aware of any other costs and fees involved when you win a bid (find that out in step 2).

Follow these simple 5 steps and you’ll quickly create a profitable tax lien or tax deed portfolio.