Determine if Tax Lien Investing is In your future
Even before you choose to tax on tax lien investing, be aware of the risks as well as the rewards.
You must know 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. When you get to the point where you have a good understanding of tax lien investing you should then determine if this suits your personality.
If you feel that being a tax lien investor is in your future, keep reading!
Find A Good Website For Purchasing Tax Liens
Locating a website to buy tax liens is actually easy to do. 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.
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.
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.
Sign up With some Tax Lien Websites
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
Be ready to fill in personal information about yourself such as your social security number, bank routing info or credit card info for funding and payment purchases, this is normal. Be prepared to provide a refundable deposit as a part of the registration process. If you win a bid the deposit will be used to fund the tax lien. Otherwise the amount will be refunded to you once the tax sale is done.
Understand how the Tax Lien Bidding process works
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.
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.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.the order of bidders is selected at random with the random selection method. In most cases a computer does the random selection but this can vary. 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. However, bidder number one will not be offered another lien until their ticket number comes up again in the rotation. The next lien then goes to the next number in line.
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 not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. 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 must know 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. When you get to the point where you have a good understanding of tax lien investing you should then determine if this suits your personality.
If you feel that being a tax lien investor is in your future, keep reading!
Find A Good Website For Purchasing Tax Liens
Locating a website to buy tax liens is actually easy to do. 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.
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.
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.
Sign up With some Tax Lien Websites
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
Be ready to fill in personal information about yourself such as your social security number, bank routing info or credit card info for funding and payment purchases, this is normal. Be prepared to provide a refundable deposit as a part of the registration process. If you win a bid the deposit will be used to fund the tax lien. Otherwise the amount will be refunded to you once the tax sale is done.
Understand how the Tax Lien Bidding process works
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.
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.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.the order of bidders is selected at random with the random selection method. In most cases a computer does the random selection but this can vary. 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. However, bidder number one will not be offered another lien until their ticket number comes up again in the rotation. The next lien then goes to the next number in line.
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 not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Some states allow "over the counter" purchases of liens not sold at auction.