Tax Lien Investing: How To Get Started
When a homeowner fails to pay their share of taxes to the local government
, the authorities may issue a lien against the property. But if the owner doesn't quickly take care of his responsibilities, the government doesn't want this burden on the books. To get rid of it, they may hold an auction, opening up the opportunity for what's known as tax lien investing. Private investors show up for the chance to bid on these certificates. Once they make a successful bid, it is then their right to collect the back taxes from the owner. If you want to get involved, here's how to get started.
Start with Your County
There may be a time in the future when you become well versed enough in tax lien investing that you can begin expanding your interests to other counties and even statesMany counties insist that investors be local, anyway, so you'll have that leg up to start. Go to the treasurer's website and see which certificates are up for sale. The auctions will usually take place on an annual basis, so you'll probably have plenty of time to prepare. If there is one, check out the FAQ and familiarize yourself with the rules and regulations surrounding the bidding process.
Property Research
You can make money with tax lien investing in one of two ways. By far the most common way is to simply become little more than a bill collector. You have the certificate and you collect the back taxes from the homeowner. Together with the interest, these payments are your return on investment. However, in rare cases, the owner won't be able to come up with the money. If that happens, you will essentially become the new owner of the property. Well, make sure it's a house you care to own. This property could wind up becoming more of a burden than a blessing, so do your research ahead of time.
Attend
Once you're ready, all that's left is to attend the auction and bid on the certificates you determined to be good investments. The county's FAQ should have prepared you for following the rules, though you might find things are a bit different in person than they were in writing. Just be flexible and don't worry if you do something out of order. Everyone had a first time. The most important thing to keep in mind is that the county will expect payment immediately for a winning bid. Make sure you have the money ready or your career in tax lien investing could be over quickly.
by: Andrew Stratton
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