In recent years the prospects of investing in Tax Deed Auctions has started to attract professional investors.

Therefore competition for Tax Deeds particularly in metropolitan areas can sometimes be steep. But if you are a determined individual investor you don’t need to give up and instead can use some of the below creative techniques to still get the Property you set out to purchase.

First it needs to be mentioned that the above said institutional and professional investors mainly attend Tax Deed Auctions in metropolitan areas, where values of properties tends to be quite high and properties tend to move quicker, thus enabling the investors to quick flips. This makes sense for them because they don’t want to mess with Properties worth $5,000 to $30,000 in rural areas which using traditional sales methods might take a few months to sell.

Therefore here are some tricks you can when attending a live Tax Deed Auction to still get your Properties.

1. Go look for Live Tax Deed Auctions. Competition is higher in online auctions because it is so convenient to attend them from the comfort of your home. So if you focus on the ones which do not happen online you have a better chance of winning.

2. Of possible pick a county that has some good valuable property but is not a metropolitan area. If the county is more rural than populated, the institutional investors might not show up or in less numbers.

3. Sit up front and center or if this is not possible sit close to an isle. After all the Auctioneer and his auctioneering assistants are the ones who declare the winning bidders so you want to sit somewhere where they can see you well.

4. If you live in an area where winter storms are common and there is a winter storm or heavy rain on Auction day, make it a point to GO ANYWAY. Because many bidders are only semi-serious so if the weather is bad, they might just decide to stay at home. If you do the extra step and still go, you can get the good deals.

As they say “there is never much traffic on the extra mile”

Almost everyone has heard about foreclosures but not too many have heard about tax lien foreclosures. This type of foreclosure results from non-payment of taxes due to property, income other taxes put against any type of property.

If foreclosure occurs, more likely than not the original property owner will not be able to bid on the property. The sale usually is held at the courthouse or the property being sold and notice of the sale is required.

Here is how this type foreclosure happens:

When a property owner does not pay his taxes on time, it causes the government to have less money to do its business, so what the government puts into place to try to make sure it will have money is a penalty fee (tax lien) against the property where taxes are owed.

This penalty fee is substantial, it can be 18%, 24%, even 36% of taxes due, this is a real incentive to pay on time. Also the government will allow investors to buy certificates (not available in all states) by a bid process. You do not take ownership of the property; you pay the late taxes for the delinquent non-payer and wait for him to pay you back. This allows the government to get their money through investors and when late taxes are paid the investor will get his original investment back, which was the amount paid plus the investor will receive as compensation for covering the tax payment; the late payment fee, which is obviously normally a good return on money invested.

If the above does not work or is not available in your state then tax lien foreclosure happens. It takes time to get this far, in some states up to 5 years.

An investor, if your state sells certificates can start foreclosure proceedings on property that he holds a certificate on after the said amount of time to pay the late taxes back has ended. When this occurs proper foreclosure gives all property rights and ownership to the certificate holder as payment for cost of original investment plus interest.

TAX LIEN FORECLOSURES usually create a very very high profit margin for the investor, I am talking 30%, 50% on up. Now in some states the government will not issue certificates they will go straight to a foreclosure.

If you are reading this and you owe taxes – find a way to pay them, at the very least if you do not you will owe a very steep late penalty fee and at the worst you will be foreclosed on and lose ownership of your property!

If you are reading this and you are thinking up one question after another about TAX LIEN FORECLOSURES and how investing would be easy as pie, think again.

If you do not have the knowledge or know-how for investing it can be costly. But if you get the right information and proper steps are followed, you to can realize your dream of financial stability can be as easy to obtain as pie.

Because you’re reading this article I will assume you’re already somewhat familiar with tax liens and tax deeds. You also probably know that these are two of the most lucrative and rewarding investments available anywhere in the world. They’re in a class of their own.

The question is, which one takes the throne as the king of investments? Are tax liens better than deeds or is it the other way around? Let’s find out! But first, I need to ask you a couple of questions.

1. Are you willing to travel to invest or do you strictly want to invest from home?
2. Are you competent at selling a property?
3. Do you want a hands-off investment that requires little of your time, or are you willing to be more active with your investing?
4. Do you want to grow your wealth as quickly as possible, or are you ok with somewhat slower growth?

Your answers to the above questions will determine which investment is better for you. Tax deeds require more time and energy because you need to physically travel to the auctions to bid on the properties. After winning a property, you’ll want to do something with it, such as rent it, sell it, etc. This also takes effort. Not a lot, but some. The advantage to tax deeds is that you’ll make very large windfall profits. It’s not uncommon to pick up properties for between 20-40 cents on the dollar. This is mega bargain territory where big profits hide out. It’s well worth the extra effort.

Tax liens on the other hand are perfect for individuals who want to park their money and make great returns with little effort. You can invest in tax liens through the mail, making things much easier. Tax liens make investing easy. You buy a quantity of liens through the mail after doing some preliminary research and wait for the owners to redeem. When they do, you are issued a certified check, including very high returns.

It’s very easy. The downside is that the process takes time. You may sit on the liens for 6 months to 1 year before they pay off. This is ok considering the enormous returns you’ll make, but it’s not the fastest way possible to wealth.

What is my conclusion on where you should invest in? If you have some available time and capital to start with and want to make a fortune in the quickest amount of time possible, go with tax deed investing. If you want to beat the returns of the stock market, mutual funds, CDs, and other well-known investments with great ease, go with tax liens. Or, you can mix tax lien investing with tax deed investing. This is a great combination that will work miracles for your bank account.

No matter what you decide to do you will have a great and rewarding time with each of these investments. If you want to get started immediately, click on the link in the authors box below. This will put you on the right track!

Tax liens can be a relatively safe investment. A good return on your money is also possible. The catch? Everyone knows about this now, and the bids are pushing down rates of returns.

When we went to the local tax lien properties sale here in Fremont County Colorado, we were amazed that a little community like this could have so many investors wanting to buy tax liens. This is good for the county, but not for an investor.

Tax liens are handled a little differently in each state, but they are essentially the debt that a property owner owes for late taxes. Investors buy these, and to pay them off and so not lose their property, an owner must pay whatever fees and interest rate the law specifies. Here in Colorado, that is 15%. We liked the idea of a 15% return on our money.

Unfortunately, it wasn’t as simple as that. While it is true that the property owner will pay 15% interest and the county will forward that money to you as the lien holder, you don’t necessarily get to buy the lien at face value. It used to be that a few investors in any given county would more or less divvy up all these great little investments among themselves and that was that. However, now there are hundreds of people bidding on them, even in little county like this.

If, for example, the taxes due on a property are $1,000, the bidding starts there. But as we watched, most of these liens were bid up to about 10% over face value. The “premium” goes straight to the county, which is why they employ a professional auctioneer to get those bids up there. This means that if the owner pays his taxes in a year, the lien holder will get just $1,000 plus 15% or another $150: $1150 total. If he paid $1100, that extra $50 is an annual return of just 4.5%.

Wait, there is worse news! If the property owner pays his late taxes a month after the tax sale, the investor would get just $12.50 in interest. In other words, he would lose $87.50 because he paid a $100 premium, which the property owner doesn’t have to repay. It seems that most of the investors thought the late payers wouldn’t pay for a couple years (after three they lose the property), since a 10% premium was average.

Did we see any go for face value? Out of hundreds of liens auctioned, three or four went at face value. They were $30 or $40 tax liens on small properties.

I hear that there are “leftovers” in many counties. These are liens that didn’t sell at the auction, and can be purchased at face value over the counter (if you can find the right person). Maybe this was more common before there were crews of marketers roaming the country selling “get rich with tax liens” seminars and course. I have only checked in the several states I have lived in recently, but we have found no leftovers.

What if you do find a place where you can buy tax liens at face value, and they pay a decent rate of interest in that state. What kind of risks do you take? Not much.

Think of it this way: Unless the tax assessor is insane, the property can’t be worth much less than half of what he says. Since taxes even in the worst areas are not likely to be more than 5% of this value each year, and owners lose their properties (perhaps to you) after two or three years depending on the state, you should never have to invest more than 15% of the value of the property, or 30% if the assessor is half insane in his assessments.

In other words, unless the owner never pays, and after you take the deed to the property, you find out it is filled with toxic waste, you are fine. To avoid this potentially bad scenario, simply buy only liens on residential property, and spread your money among numerous liens. If you make 15% interest on ten liens for two years, and you have to throw one away, you still have a better over-all return than in the bank.

In fact this strategy of simply spreading the risk is one that has been used for years by big insurance companies. Some of them buy up these liens by the thousands, and they don’t waste their time doing the research that the seminar presenters recommend (maybe they just want to scare you into buying the materials that will teach you how to do this “research”?). If ten out of each a thousand turned out to be never-to-be-paid liens on toxic waste dumps, it would reduce their return by just 1%, and you don’t have to take title to the property.

There are some other things to watch for, however. Here in Colorado, for example, if the property owner doesn’t pay the lien by the deadline, you have to publish a notice three times before getting title to the property. If it is a small lien you could spend all the interest you gained posting ads in the classified section of the local newspaper, just to have the property owner pay up (he doesn’t have to reimburse you for the ads). For this reason and others, I would only invest in liens of $400 or more.

In some states, rather than bid a “premium” buyers bid down the interest rate. The rate mandated by law may be 16%, for example, but the bidder who will take the lowest rate gets to buy the lien. I presume that the county keeps the additional interest.

Bottom line? Investing in tax liens can be profitable in most states, if you can buy the liens at face value, and if you understand how it is done. It is done in many different ways. Find the county employee that know how the whole process works, and have it explained to you. In my experience, they often don’t want to explain it to you, but your taxes pay them, so bug them until they do.

What about actually getting property this way? Far less than 1% of liens auctioned off are left unpaid until the deadline passes. You can do research to find the property owners least likely to pay their liens, but who wouldn’t sell their property before losing it over a few thousand in back taxes? Yes, occasionally someone gets an $80,000 house for $2,000 in back taxes by buying a tax lien, but don’t count on it as a part of your plan.

Are you interested in yields of 6 percent to 50 percent on your money, secured by a property tax lien against real estate?

Author Joel S. Moskowitz explains how investors can buy little known tax lien certificates that pay high yields in his book, “The 16 Percent Solution”

As a bonus, although the author warns it rarely happens, the investor might get kicky and foreclose on the property. However, he cautions that property owners usually redeem, so investors must be content with just high yields.

What is a tax lien certificate?

When a real estate owner does not pay their property taxes, 27 states and 1,152 cities and counties sell tax lien certificates to investors. The government gets its property tax money immediately. The investor buys a tax lien, which is then secured by the real estate.

Tax lien certificate yields vary according to state law. Arizona’s top rate is 16 percent, Florida pays as much as 18 percent, but in Michigan, the rate goes up to 50 percent in the second year. If the property owner doesn’t redeem the property from the investor by paying the back taxes plus the high interest rate, the investor gets the title and possession of the property.

New investors can start small, perhaps investing a few hundred or a few thousand dollars, and then buy more property tax lien certificates later. Although not all states are smart enough to offer tax certificates to speed up tax collections, after reading this book, they’ll learn why they should.

At the time of writing, States currently offering tax certificates include Alabama, Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi Missouri, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Oklahoma, Rhode Island, South Carolina, South Dakota, Vermont, West Virginia and Wyoming.

The book’s outstanding appendix lists the interest rates and state-by-state procedures. For real estate investors who want to earn high yields without physically managing property, this new book shows how to do so. It also explains the few pitfalls to avoid and how to buy die best certificates with the highest profit opportunities.

On my scale of one to 10, this excellent book rates a solid 10.

When you buy a tax deed there is really only one way that you can make a profitable return on investment and that is to sell or rent the property. However, when you purchase a tax lien certificate, there are three ways that you can profit from your investment. These three ways are summarized in this article. Read on to find out more about them.

The first and most obvious way to make a profit on tax lien certificates is with the redemption of the lien. The delinquent property owner redeems the lien and you, as the lien holder, will receive the certificate amount of the lien plus any interest and penalties that have accrued. Since an annualized rate of interest is offered in most states, you will earn more money the longer the lien is outstanding and before it is redeemed.

If the lien is not redeemed, and once the redemption period is over, you may start foreclosure proceedings on the property in order to be paid what you are owed on the lien. Depending on the state that the tax lien certificate was issued, the foreclosure process can be real easy or real hard. In certain states you only need to petition the county court, or go through an application process, to get the deed to the property. In other states you will have to go through a foreclosure process with an attorney which may take a lot of time and money. If the property has to go through a foreclosure sale, you may not receive the property, as it will go to the highest bidder at the foreclosure sale, but you will get paid on your lien.

Still, in some states, there is a third way that you can profit from your tax lien investment without foreclosing or redemption, and that is by assigning your lien to another investor. Certain states allow for the “assignment”, or sale, of a tax lien certificate from one investor to another. This is a way that you can capture the profit on your lien without having to go through the state’s foreclosure process. Obviously you are relinquishing the possibility of obtaining the property, but you are realizing your profit that much quicker.

I am frequently asked, “How much money do I need to start investing in tax liens.” Well, that all depends on what your goal for investing is. If you’re using tax lien investing as a way to invest for the future, then you can get started with a couple of thousand dollars. But if you want to create an income from tax lien investing than you need to invest much more.

One thing that you have to remember is that tax lien investing is not a get rich quick scheme. It’s not like other types of real estate investing like buying and flipping properties, or owning rental properties. With foreclosure properties, you have an idea of when you’re going to cash out of your deal, and with rental properties you have a steady income. With tax liens, you don’t get paid until the delinquent taxpayer decides to redeem the lien or redeemable deed. This may not be until the redemption period is over and foreclosure notices are delivered.

How much money you will need to invest, in order to meet your goals, also depends on what state you’re investing in. In redeemable deed states, like Georgia and Texas, the price of the deed is bid up, so you will need more money to purchase a redeemable deed than you would to purchase a tax lien certificate in a state where the interest rate is bid down. But it can also be more lucrative and give you a faster payout than lien states.

In Georgia for example, the penalty is 20% and the redemption period is one year. You would have to invest $100,000 over the next year to make $20,000 the following year. And if you needed to foreclose on any properties you would need to pay a lawyer, which would cut into your profits. In Texas, where the penalty is 25% and the redemption period on non-homesteaded properties in only six months, you would need to invest only $80,000 dollars in the first six months of next year to make $20,000 in the following six months, and you don’t have to foreclose on the property. In Texas when the property doesn’t redeem by the end of the redemption period, it automatically reverts to the tax deed purchaser.

You need the least amount of money to get started in tax lien investing in tax lien states where premium is not paid for tax lien certificates. In these states either the interest rate, or the percent ownership (should the property not redeem and you foreclose) is bid down, or they use a random selection or round robin procedure for awarding bids. You need the least amount of money in these states because the price of the tax lien is not bid up. In these states it is possible to buy a tax lien with very little money, but in states where the interest rate is bid down, you might not be getting as much of a return on your money as you would in one of the redeemable deed states. I advise that you attend one or two tax sales before you actually start bidding on properties. This way, you’ll know just how much money you’ll need to start investing in tax liens or redeemable tax deeds in your state.

Recently I sent an e-mail out to my subscribers asking them some questions. I wanted to find out what it is that most people want to know about tax lien investing. I got a lot of good questions and I won’t be able to answer them all in this article, but I want to try to answer those that were asked most often and that weren’t answered in my new free video course.

I especially like to answer questions that start out with the words “How do I…” or “How can I…” This type of question shows me that someone is really interested and is ready to take action. So let’s answer some of these types of questions that are not answered in my video series. So here are some frequently asked questions about tax lien investing.

Q1: How can I buy tax liens or tax deeds without going to the auction?

A: In most states you have to attend the auction in order to bid, or have a representative there to bid on your behalf. But there are 2 ways that you can purchase a tax lien or deed without physically going to the sale. A few states do have online auctions, but not all counties in these states conduct their auctions online. Usually just the larger counties do. Many counties in Florida, California, and Arizona have online tax sales. And I know that some counties in Colorado and Illinois have online tax sales as well. Another way that investors have bought tax lien and tax deeds without going to the sale is to bid on left-over liens, this can usually be done through the mail. The only problem is that as tax lien and tax deed investing become more popular, there are less and less good properties left-over after the tax sale.

Q2: I don’t live in the US; can I still invest in Tax Liens or Tax Deeds?

A: Yes, in most states you can invest in tax liens and tax deeds even if you are not a US citizen and do not live in the US. There are a couple of states that you have to be a resident of the state to invest, but these are not the most popular tax lien states and they don’t have online sales. All you have to do in order to purchase a tax lien is to fill out a tax form called a W-8BEN form. In order to complete this form you will also need to apply for an Individual Tax Identification Number (ITIN) if you are bidding in your own name. If you are bidding using a business name, you must apply for an Employer Identification Number (EIN). This is only for tax liens. You do not have to do this to participate in a tax deed sale.

Q3: So how much money do you need to get started with tax lien investing?

A: The beauty of tax lien investing as opposed to tax deed investing and other types of real estate investing, you can start with a very small investment. The first very profitable tax lien that I purchased started with an initial investment of only a couple of hundred dollars, on a small sewer lien. Then I was able to pay the subsequent sewer taxes the next couple of years and instead of trying to foreclose I just kept paying the subsequent taxes. After a couple of years, the homeowner moved out of state and stopped paying the taxes on the property, so then I got to pay even bigger payments $5000 over the next couple of years. The lien finally redeemed and I collected 18% per annum on most of my investment plus penalties.

Q4: How often do you acquire the property with tax liens?

A: In the state of NJ where I invest, very, very seldom do you get to foreclose on the property. If you are interested in owning property than tax deed investing or redeemable tax deed investing is the way to go. Only about 1% of tax liens will not redeem and of those properties, once you start the foreclosure process about 80% will redeem sometime during the foreclosure process. I’ve been investing for about 6 or seven years and I haven’t foreclosed on a property yet. I do have a couple of liens that I could start foreclosure on right now, but I know that when I do, they will redeem, so I just let them go.

I know some investors who have foreclosed on a couple of properties, but either it is not recent – we’re talking a few years ago when property values were not what they are today and it was much harder to get a loan, or they have a really huge portfolio with thousands of liens.

Q6: Are there risks involved in this type of investing? What are they?

A: Yes, there are risks involved and that’s what the gurus leave out, they make it sound so easy. They like to use the term “Government Guaranteed” to make people think that they can’t go wrong with tax lien investing, that the government guarantees that they’ll get paid on a tax lien. That’s really not true, what they mean by “government Guaranteed” is that there are laws that protect the investor but you not guaranteed to get paid. The guarantee is the property. Tax Liens are guaranteed by the property that you have a lien on, so if you buy a tax lien on a worthless piece of property, then you made a poor investment and it is possible that you could lose your money. Yes, there is risk involved, but that risk is minimized by doing your due diligence on the property before you purchase the lien, just like you would do due diligence on property before giving someone a loan against it. If you do your due diligence properly than tax lien investing is a very safe investment because it’s secured by something tangible, not just a piece of paper.

One of the things that I do in my courses, John, is teach people how to do due diligence for tax sale properties so that they can totally reduce the risk involved with tax lien investing.

Q7: Can you invest in tax liens and tax deeds in your IRA?

A: We all want to keep more of those profits for ourselves and not give half of it away to Uncle Sam. The good news is that you can use money in your IRA or Roth IRA to invest in tax lien certificates or tax deeds, but only if it’s a true self-directed IRA. With a self-directed IRA, your profits can grow tax-differed, and with a Roth IRA, your profits can be totally tax-free. In my courses I have 2 audios from different experts from 2 different self-directed IRA companies that explain how to do this.

How would you like to gain 16%…18%…24%…even up to 50% on your investment? The government, irrespective of what goes on with the stock market, rising prices, recession or bank rates of interest, securitizes & guarantees the extremely favorable rates of return of tax lien certificates.

This little-known secret is often referred to as the “wealth maker”, and very few people recognize or take advantage of their benefits. Introducing the Tax Lien Certificate. In many counties throughout the U.S., local governments are owed millions of dollars in outstanding and delinquent property taxes.

These local governments finance their the day-to-day service operations of police, fire department, welfare, and teachers with property taxes collected in their jurisdiction annually (or biannually, quarterly, etc. depending on your location). Now, imagine if the revenue for these services stopped. This is why local governments will create and sell tax lien certificates to investors like you and me. The tax lien is secured by the real property it is attached to. In layman’s terms, you will be paying someone else’s property tax. So why would anybody want to do that? Because the return on the tax lien is set at a statutorily-mandated fixed interest rate, you win regardless of whether the property owner pays or not.

Statistics show that 97% of tax lien certificates pay off within two years. The property owner pays his taxes at huge interest rate, that is coupled with your initial investment, which all goes to you. The longer the owner leaves his taxes outstanding, the larger your return becomes. If the owner does not pay his taxes, then the property becomes yours free and clear after the foreclosure process. You now have the options of selling, renting or living in the property. It is an unbelievable win – win situation for any investor.

Tax Lien Certificates will be the safest, easiest and possibly the most profitable investment you will ever make. It is possible for you to get started with as little as $75 in some cases. So, why have you not heard of this type of investing before? Since stockbrokers and bankers are not allowed to make commissions on tax liens, they don’t promote them. But, banks and credit unions invest their surplus money in Tax Lien Certificates.

Here is one scenario exhibiting the wealth creation power of tax lien certificates. An investor I know invested $3000 in Tax Lien Certificates. The owner defaulted and the property became his. It was in need of serious repairs and he was not interested in fixing it up. He simply put the property on the market for 50% of its true value, and sold it for $35,000 cash. Not bad for a $3000 investment.

Wealthy investors have been investing with tax lien certificates for years. Now is the time for you to take advantage of investing in Tax Lien Certificates. This is a golden opportunity to obtain the highest return on investment you will ever find, that is guaranteed by the local government where the property is located. to find out whether your state offers Tax Lien Certificates call your county courthouse.

Like in any market, Tax Deed have their share of problems. For example there is competition. Excessive competition during tax deed auctions auctions will affect the prices drive them up closer to the true market value. However in the Tax Deed arena has some ways to circumvent the number of problems I am listing below;

In this publication I am focusing on the most drastic problem investors face when attending Tax Deed auctions, particularly when targeting higher value properties.

The problem is that Tax Deed Sales are usually a Cash affair. That means you can’t come to an auction with $500.00 in your pocket expecting to be able to buy a $100,000 property and then spend the next few weeks qualifying for financing, like it happens in the regular market for residential homes. Instead most counties have regulations expecting any winning bidder to come up with the full cash within somewhere between 24 and 48 hours from the sale.

As a result, because most of the population does not have $100,000 or even $10,000 sitting in their bank accounts unused, the vast majority of the population will and cannot attend the auctions to buy a property.

Solution: Partner with investors
One of the fastest and easiest ways to solve the CASH requirement in a Tax deed auction if you don’t have the cash yourself is to partner up with someone who has the cash. As they say “If the deal is good enough, the money will show up.” In my experience of doing over 5,000 Real Estate Deals in the tax Delinquent real Estate area I have yet to see where this is not true. Any investor in his/her right mind will say yes to a deal you bring to them, where they can buy a property for as little as 10-30% of market value, where you do all the work and they give the money and then you share the profits in some way (up for negotiation).

And finding investors is easy. Just place an ad into the newspaper or attend a meeting of your local Real Estate Investor’s association. Or just ask around, I am sure you have someone in your extended circle of friends who has some money available. If none of this works go online and look for Real Estate investors or private money (also called hard money) lenders.