Faq On Investing In Tax Liens & Deeds

FAQ on Tax Liens and Deeds for investing.

Which States is the best to invest in?
The best State to invest depends upon your goals. If you are interested in a return on your investment than a Lien State is the way you want to go. Iowa is a great Lien State to invest in because it pays currently 24% interest with a 2 year redemption period. If you are more interested in trying to acquire property, a Deed State is the best choice. Texas is possibly the best Deed State to invest in with a 6-month or a 2-year redemption period. To redeem property in Texas the owner must pay a 25% penalty, which you as the investor receive.

How often are auctions held?
States will vary for example Texas has auctions on the 1st Tuesday of each month. Not every county in Texas will have Deeds but you will find several worthwhile counties to look into. Other States will have auctions once a year. Most Lien states will hold their auctions once a year however this is not necessarily the case.

Can I bid in other States and Counties?
In most cases as long as you do not owe property taxes in the County you can attend auctions anywhere in the United States.

What if a Law Firm is handing the auction?
Life becomes a little easier for you. Contact the Law Firm and they are usually more than happy to help. (Believe it or not) They can even tell you about property that did not sale at pervious auctions that you could acquire right on the spot. However you must do you research first.

What is the difference between a Lien State and a Deed State?
Lien States will give you a financial position in the property and after the redemption period has expired you will be able to apply for the deed. Because a Lien State does not give you the Deed you often times will have a smaller investment at the auction usually just the amount of the back taxes. Deed states will give you title to the property at the auction and you can occupy (or whatever) after the redemption period.
At Deed State auctions the cost can and will often times be bid up to over half of the market value of the property and sometimes even more than value of the property.

How do I collect if the taxes are paid?
Go to your mailbox. The county will send you a check.

What do I collect if the taxes are paid?
You will collect your principal and whatever the interest rate is or penalty. For example you purchase a Deed in Texas for $1000, when it is redeemed you will get a check back for $1250. Principal plus penalty.

Why does the county government do this?
The county government has to pay for the services it offers to its citizens. So if you as an investor are willing to pay the late property taxes, the county is willing to have the property owner pay you interest and/or penalties.

How can I determine the value of what I am buying?
You can use several methods. The quickest way is to go to the County Assessors website and just look it up. The County Assessors more than likely will not assess the value to be the same as the market value so do some research, and give yourself a guide and system for the future.

What if the property owner pays off the back taxes?
You get paid

How do I get title to the property?
Each State has different rules concerning the title coming to you. It would be very wise to take the time to read the county website. Suffice it to say that if the taxes are not paid before the redemption period expires the County will have a process for you to take title and possession of the property. Be warned you must never contact the current property owner. We have not come across a single county that allows you to make any form of contact with the owner.

Is it possible to lose my investment?
Yes! Despite what you may have read or heard from the late night Infomercial Gurus you can loose you investment in several ways. IRS liens, Owner declaring bankruptcy, property is declared as an Environmental Hazard, other lines placed by the County. I have even seen where a lien place by a School District will cut into your profits.

What risk do I run when I buy a Tax Lien or Deed?
If you have done your research you will select good properties. If you have done your research you will not over bid for these properties. Because the County government is backing you and doing the collection for you, you are going to be in pretty good shape. Please keep in mind however, people can and do lose money even at Tax Lien and
Deed auctions. Get yourself a system and stick to that system.

The author has permitted the reprinting and redistribution of this article.
See our Terms of Use for more information on reproducing it.


  • Latest_posts_thumb_avatar-taxlienexpress

    Ruth N — almost 5 years ago

    I myself experienced that the tax lien industry can be profitable and involves lots of time, perseverance and patience. One finding them for a good price, then marketing them and selling them. Between all the process sometimes the certificates get redeemed or there are moments where sales are not as strong and usual. It fluctuates time to time. I got myself a book that help me quite bit but what really help me was getting into the counties treasure website and reading all in reference to the subject. Then getting into it and selling them. taxlienexpress

  • Latest_posts_thumb_avatar-kiptone

    A. Kip Tillery — over 4 years ago

    Thank you for that insight.

  • Latest_posts_thumb_avatar-hurricanemitch

    Mitch Early — about 4 years ago

    As this is my first time ever looking at this. I have one question. If I were to follow this road can the entire process be accomplished from a to z on the computer without having to meet face to face or going to properties? If not is there something like this going on that is legal and profiable and once set up my time on the computer will get less and less? Tall order I know! Mitch

  • Latest_posts_thumb_avatar-hurricanemitch

    Mitch Early — about 4 years ago

    makes since, I guess storing all that information is the work.I guess we all must find what we are good at and go for it, and enjoy it if we are lucky

  • Latest_posts_thumb_avatar-jaham

    Jimmy H. — over 3 years ago

    Ruth, you metnion selling them, I know you can do this but most investors (from what i thought) will hold onto the lien and try to get the property, or earn the interest. Also, doing your due diligence is one thing, but if your due diligence doesn't include a title search to see IRS liens etc, how can you protect yourself from loss? It is one thinkg to know what to bid for properties, but how can you avoid loss?

  • Latest_posts_thumb_1378736120-avatar-hardmoneymi

    Trent Dalrymple — over 3 years ago

    One important aspect of tax lien purchases I have not seen mentioned is the problem with title insurance. Here in the state of Michigan our title companies will not insure a property that has been acquired through a tax sale without a quiet title action. Due to the possibilities of title issues not resolved outside of the property tax sale, the purchaser will have to hire an attorney, that's going cost you and it won't be cheap. Just another fact of tax sales that you should consider before buying.

  • Latest_posts_thumb_avatar-adriankw

    Adrian Williams — over 3 years ago

    Awesome article & comments thanks :) !!

  • Latest_posts_thumb_avatar-fariello

    Gena Gonzales — 9 months ago

    Have you done tax sales overbid? I'm trying to get into that area.

  • Latest_posts_thumb_avatar-fariello

    Gena Gonzales — 9 months ago

    Have you done tax sales overbid? I'm trying to get into that area.


Article Views: 6940
All Articles from Glenn Daniels: 2

Print Article

Other Tax Liens, Notes & Paper articles