Decide if you want to be a tax lien investor
Even before you choose to tax on tax lien investing, be aware of the risks as well as the rewards.
You need to realise some of the common terms and procedures such as redemption period for the particular county, bid down the interest, bid on the premium, etc etc. Once you have a good understanding of the basics of tax lien investing, you need to decide if this type of investing is for you and suits your personality.
If you feel that being a tax lien investor is in your future, keep reading!
Search The Web For Good Tax Lien Websites
Finding a tax lien website is actually quite simple. 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.
This step will give you a lot of results to filter through.
Register With Online Tax Lien Directories
Keep in mind that not all Tax Lien auctions are available online so your county of choice may not be available.
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.
In the event that more than one investor seeks the same lien, depending on state law the winner will be determined by one of five methods: 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.Under this method, the investor bid against each other to see who will pay the higher "premium" (above the face value of 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 one state that does this.
Random Selection.With this method, a bidder will be selected randomly from all the bidders. 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. In the event that bidder number 1 refuses the lien that is offered, the bidder with the next number will have priority over all the other bidders. 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. 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. In actuality, very few investors will bid on liens for less than full ownership to the property.
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.
Even before you choose to tax on tax lien investing, be aware of the risks as well as the rewards.
You need to realise some of the common terms and procedures such as redemption period for the particular county, bid down the interest, bid on the premium, etc etc. Once you have a good understanding of the basics of tax lien investing, you need to decide if this type of investing is for you and suits your personality.
If you feel that being a tax lien investor is in your future, keep reading!
Search The Web For Good Tax Lien Websites
Finding a tax lien website is actually quite simple. 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.
This step will give you a lot of results to filter through.
Register With Online Tax Lien Directories
Keep in mind that not all Tax Lien auctions are available online so your county of choice may not be available.
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.
In the event that more than one investor seeks the same lien, depending on state law the winner will be determined by one of five methods: 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.Under this method, the investor bid against each other to see who will pay the higher "premium" (above the face value of 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 one state that does this.
Random Selection.With this method, a bidder will be selected randomly from all the bidders. 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. In the event that bidder number 1 refuses the lien that is offered, the bidder with the next number will have priority over all the other bidders. 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. 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. In actuality, very few investors will bid on liens for less than full ownership to the property.
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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