Determine if Tax Lien Investing is In your future
Before you may even choose to tax on tax lien investing, be aware of the risks as well as the rewards.
You need to realize 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 decide that this is something you want to get into, then proceed to Tip #2.
Find A Good Website For Purchasing Tax Liens
Finding a tax lien website is actually quite simple. Tax liens are sold by county so you should pick a county you want to invest in, then locate the website for that county.
Another option, use the famous google search engine and enter the county that you are interested in, followed by "tax collector". If I wanted to buy tax liens in California, I would type in "California 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.
Join A few Tax Lien Websites
Not all counties give you the ability to purchase tax liens online, so you will only be able to register in certain counties.
You should be prepared to provide personal information about yourself such as your social security number, name, address, etc. 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.
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.
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 bid method, the investor willing to accept the lowest interest rate wins. 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 a state that uses the premium bid method.
Random Selection.bidders are selected at random with this type of method. In most cases a computer does the random selection but this can vary. Nevada uses the random selection method.
Rotational Selection. Using this method the liens are offered to the bidders in sequential order. 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. The first bidder cannot bid again until all other bidders have had an opportunity to bid or pass on a lien. 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. 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. If a tax lien is not purchased at an auction, the county will take possession of it. Liens not sold at auction will then be available for "over the counter" purchasing.
Before you may even choose to tax on tax lien investing, be aware of the risks as well as the rewards.
You need to realize 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 decide that this is something you want to get into, then proceed to Tip #2.
Find A Good Website For Purchasing Tax Liens
Finding a tax lien website is actually quite simple. Tax liens are sold by county so you should pick a county you want to invest in, then locate the website for that county.
Another option, use the famous google search engine and enter the county that you are interested in, followed by "tax collector". If I wanted to buy tax liens in California, I would type in "California 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.
Join A few Tax Lien Websites
Not all counties give you the ability to purchase tax liens online, so you will only be able to register in certain counties.
You should be prepared to provide personal information about yourself such as your social security number, name, address, etc. 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.
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.
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 bid method, the investor willing to accept the lowest interest rate wins. 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 a state that uses the premium bid method.
Random Selection.bidders are selected at random with this type of method. In most cases a computer does the random selection but this can vary. Nevada uses the random selection method.
Rotational Selection. Using this method the liens are offered to the bidders in sequential order. 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. The first bidder cannot bid again until all other bidders have had an opportunity to bid or pass on a lien. 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. 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. If a tax lien is not purchased at an auction, the county will take possession of it. Liens not sold at auction will then be available for "over the counter" purchasing.
About the Author:
To find out more about how to buy tax liens, visit Dale Poyser's website to learn more abouttax lien states.
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