Figure out If Tax Lien Investing is Something you would enjoy
Before you actually even decide to get involved with tax lien certificates, 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 determine that Tax Lien Investing is something you would like, read on!
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.
You could use the google search engine and enter terms like "buy tax liens in texas" or "counties in texas with tax lien sales." Replace texas with whatever state you are interested in. 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.
Register With Online Tax Lien Directories
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
You will be required to provide information such as your social security number or EIN (Employer Identification Number) if you will be purchasing the liens through a corporation. You might need to set up an account and or provide a deposit which will be required if you want to be a bidder. There could be a minimum requirement to register as a bidder. Don't worry it is refundable.
Learn The Ways to bid on Tax Liens
Understand that different counties have different rules for bidding on a tax lien. In the cases where more than one investor wants to bid on the same property, one of the following five methods is used.
When multiple investors are involved, the winner is determined by one of the following methods. Bid Down the Interest.with this method, investors will bid against each other to see who will accept the lower interest rate. 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. Note that the amount bid over the original value of the lien may not earn interest. Colorado is a state that uses the premium bid method.
Random Selection.bidders are selected randomly when this method is used. Typically a computer is used to select bidders at random, but this can vary from county to county. Nevada uses the random selection method.
Rotational Selection. With this technique, the bidder with bid card 1 gets the first lien, bid card 2 gets the second lien and so on. 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. However, bidder number one will not be offered another lien until their ticket number comes up again in the rotation. The bidding process continues in this sequential way until all the liens have been presented.
Bid Down the Ownership. A few states use this method of bidding on the ownership. The winner is the investor willing to accept the least % ownership on the lien. For example, an investor may decide to take a lien on only 85% of the property. 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. Liens not sold at auction will then be available for "over the counter" purchasing.
Before you actually even decide to get involved with tax lien certificates, 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 determine that Tax Lien Investing is something you would like, read on!
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.
You could use the google search engine and enter terms like "buy tax liens in texas" or "counties in texas with tax lien sales." Replace texas with whatever state you are interested in. 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.
Register With Online Tax Lien Directories
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
You will be required to provide information such as your social security number or EIN (Employer Identification Number) if you will be purchasing the liens through a corporation. You might need to set up an account and or provide a deposit which will be required if you want to be a bidder. There could be a minimum requirement to register as a bidder. Don't worry it is refundable.
Learn The Ways to bid on Tax Liens
Understand that different counties have different rules for bidding on a tax lien. In the cases where more than one investor wants to bid on the same property, one of the following five methods is used.
When multiple investors are involved, the winner is determined by one of the following methods. Bid Down the Interest.with this method, investors will bid against each other to see who will accept the lower interest rate. 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. Note that the amount bid over the original value of the lien may not earn interest. Colorado is a state that uses the premium bid method.
Random Selection.bidders are selected randomly when this method is used. Typically a computer is used to select bidders at random, but this can vary from county to county. Nevada uses the random selection method.
Rotational Selection. With this technique, the bidder with bid card 1 gets the first lien, bid card 2 gets the second lien and so on. 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. However, bidder number one will not be offered another lien until their ticket number comes up again in the rotation. The bidding process continues in this sequential way until all the liens have been presented.
Bid Down the Ownership. A few states use this method of bidding on the ownership. The winner is the investor willing to accept the least % ownership on the lien. For example, an investor may decide to take a lien on only 85% of the property. 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. Liens not sold at auction will then be available for "over the counter" purchasing.
About the Author:
To learn more about tax lien basics, then visit Dale Poyser's website to learnhow to buy tax liens online.