Figure out If Tax Lien Investing is Something you would enjoy
Even before you choose to tax on tax lien investing, be aware of the risks as well as the rewards.
You need to realise 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 determine that Tax Lien Investing is something you would like, read on!
Locate a good Tax Lien Web Site
This is actually the easy part. Tax lien sales are done at the county level, not the state level. So you should start with the county website.
Another option, use the famous google search engine and enter the county that you are interested 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
Keep in mind that not all Tax Lien auctions are available online so your county of choice may not be available.
You will be required to provide information such as your social security number or EIN (Employer Identification Number) if you will be purchasing the liens through a corporation. 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. One of several bidding methods will be used if more than one investor bids on the same property.
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.With this method investors are fighting to see who will pay the most for the lien. 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. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada is a state that uses Random selection.
Rotational Selection. With this technique, the bidder with bid card 1 gets the first lien, bid card 2 gets the second lien and so on. 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. However, bidder number one will not be offered another lien until their ticket number comes up again in the rotation. 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 not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Liens not sold at auction will then be available for "over the counter" purchasing.
Even before you choose to tax on tax lien investing, be aware of the risks as well as the rewards.
You need to realise 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 determine that Tax Lien Investing is something you would like, read on!
Locate a good Tax Lien Web Site
This is actually the easy part. Tax lien sales are done at the county level, not the state level. So you should start with the county website.
Another option, use the famous google search engine and enter the county that you are interested 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
Keep in mind that not all Tax Lien auctions are available online so your county of choice may not be available.
You will be required to provide information such as your social security number or EIN (Employer Identification Number) if you will be purchasing the liens through a corporation. 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. One of several bidding methods will be used if more than one investor bids on the same property.
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.With this method investors are fighting to see who will pay the most for the lien. 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. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada is a state that uses Random selection.
Rotational Selection. With this technique, the bidder with bid card 1 gets the first lien, bid card 2 gets the second lien and so on. 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. However, bidder number one will not be offered another lien until their ticket number comes up again in the rotation. 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 not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Liens not sold at auction will then be available for "over the counter" purchasing.
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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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