Once you learn the ins and outs of tax lien investing, you'll find it can be an enjoyable and relatively safe way to stash your extra money. Tax lien policies and rates of return differ from one state to another. Some states offer tax liens at auction in a bid down system where the winner is the one who accepts the lowest interest rate, while other states auction the full property deed to the highest bidder.
Research the state and county you want to invest in. Since each state handles tax liens and deeds differently, knowing the separate policies will help you decide which area best meets your needs.
Review the tax lien procedures for the county you plan to invest in. Some counties only sell liens and deeds at scheduled auctions while others may sell them directly over the counter. Still others hold Internet only auctions.
Purchase or download the current list of properties with tax liens or deeds for sale. Some counties make their tax deed lists available as a free download from their website while others, such as Los Angeles county California, require you to buy it.
Create a shortlist of properties you're interested in, then visit each to ensure it is in the shape you expect. All tax lien and deed sales are final so it is best to know the true condition of a property before investing in it.
Fill out and submit bidder registration forms and required financial statements. Most states require an IRS tax form and some require proof of financial capability from your bank. Be sure to submit all of the required forms before the deadlines posted.
Attend the tax lien auction if applicable, online or in person, as required by the county you're bidding in.
- "Profit by Investing in Real Estate Tax Liens"; Larry B. Loftis; 2007
- Los Angeles County Treasurer and Tax Collector
- Photodisc/Photodisc/Getty Images
- How Do I Use a Self-Directed IRA to Purchase a Tax Lien?
- How to Buy a Property at a Tax Sale
- How to Buy a Home by Paying Back Taxes Owed
- The Risks of Tax Lien Investing and How to Avoid Them
- How to Subdivide a Lot & Refinance
- How to Calculate Documentary Transfer Tax
- How to Transfer a Deed in a Living Trust
- Penalties of Non-Payment of Property Tax