Determine If Tax Lien Investing is Something you would enjoy
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 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 will provide you with a list of results that will allow you to either contact the tax collectors office directly OR (if available) sign up for auctions online.
Join A few Tax Lien Websites
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
Understand that different counties have different rules for bidding on a tax lien. 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. In some counties the additional premium does not earn any interest and may not be refundable. Colorado is one state that does this.
Random Selection.bidders are selected at random with this type of method. Typically a computer is used to select bidders at random, but this can vary from county to county. Nevada is a state that uses Random selection.
Rotational Selection. With this method, the first lien will be offered to the investor holding bid ticket number one. If this bidder refuses the lien, bid ticket number two may then bid. 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. This method is used in Iowa and a few other states, the investor willing to purchase the lien for the lowest percent of ownership on the property will be awarded 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 case where multiple investors are bidding on the same property, the random selection process will be used instead. Liens not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Liens not sold at auction will then be available for "over the counter" purchasing.
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 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 will provide you with a list of results that will allow you to either contact the tax collectors office directly OR (if available) sign up for auctions online.
Join A few Tax Lien Websites
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
Understand that different counties have different rules for bidding on a tax lien. 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. In some counties the additional premium does not earn any interest and may not be refundable. Colorado is one state that does this.
Random Selection.bidders are selected at random with this type of method. Typically a computer is used to select bidders at random, but this can vary from county to county. Nevada is a state that uses Random selection.
Rotational Selection. With this method, the first lien will be offered to the investor holding bid ticket number one. If this bidder refuses the lien, bid ticket number two may then bid. 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. This method is used in Iowa and a few other states, the investor willing to purchase the lien for the lowest percent of ownership on the property will be awarded 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 case where multiple investors are bidding on the same property, the random selection process will be used instead. Liens not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Liens not sold at auction will then be available for "over the counter" purchasing.
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