Determine if Tax Lien Investing is In your future
Even before you choose to tax on tax lien investing, you should understand the rewards involved as well as the risks.
You must know some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you have a good grasp on the fundamentals of buying tax liens, you should decide if this is something that you would really like.
If you decide that this is something you want to get into, then proceed to Tip #2.
Locate a good Tax Lien Web Site
This is actually the easy part. Tax liens are sold by county so you should pick a county you want to invest in, then locate the website for that county.
Go to the google search engine and type in the state that you want to invest 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.
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.
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. 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.
Understand the Rules Of Bidding For Tax Liens Online
There are quite a few ways to bid during tax lien sales auctions. In the cases where more than one investor wants to bid on the same property, one of the following five methods is 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.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.Here investors (bidders) bid on the face value of the lien or premium. Note that the amount bid over the original value of the lien may not earn interest. Colorado is one state that does this.
Random Selection.bidders are selected randomly when this method is used. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada uses the random selection method.
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. The bidding process continues in this sequential way until all the liens have been presented.
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. Liens not sold at auction will then be available for "over the counter" purchasing.
Even before you choose to tax on tax lien investing, you should understand the rewards involved as well as the risks.
You must know some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you have a good grasp on the fundamentals of buying tax liens, you should decide if this is something that you would really like.
If you decide that this is something you want to get into, then proceed to Tip #2.
Locate a good Tax Lien Web Site
This is actually the easy part. Tax liens are sold by county so you should pick a county you want to invest in, then locate the website for that county.
Go to the google search engine and type in the state that you want to invest 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.
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.
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. 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.
Understand the Rules Of Bidding For Tax Liens Online
There are quite a few ways to bid during tax lien sales auctions. In the cases where more than one investor wants to bid on the same property, one of the following five methods is 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.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.Here investors (bidders) bid on the face value of the lien or premium. Note that the amount bid over the original value of the lien may not earn interest. Colorado is one state that does this.
Random Selection.bidders are selected randomly when this method is used. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada uses the random selection method.
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. The bidding process continues in this sequential way until all the liens have been presented.
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. Liens not sold at auction will then be available for "over the counter" purchasing.
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