BiggerPockets

Not only is each state different, but in many states each county is different. There are a number of interesting websites having extensive information on tax lien certificates and tax deed sales. Unless the investor decides to go with a tax lien fund or buy certificates from a tax lien company, putting together a decent size portfolio is very time consuming and requires extensive legwork and detailed analysis. There are also a couple of decent books covering the basics, although this area is so different and specialized amongst the various taxing authorities that a book can only provide an overview with basic information.

Most investors, in this area, are looking for a higher interest rate provided by the states laws.

Because the bidding amount is usually the taxes owed (you are basically giving the homeowner a loan for the redemption period) the risk is lower due to the lower amount of monies risked. But the risks are higher than most ways because if you go on the property itself you are essentially tresspassing on the homeowners property and can be arrested. Therefore it is harder to do proper due diligence on these properties. Plus the lists of available properties are not usually published until 2 weeks before the sale (sometimes one month). It is therefore a lost easier to miss something as you are deciding which properties to bid on.

It would be best to plan to attend your first sale and not "buy" anything but see how things are done in your county. Making notes about anything you did not understand and at a later time ask the officials who conducted the sale, or an individual who you saw was very active at that sale. I have found that most of them will be willing to give you the needed information at a lunch/dinner meeting (you would offer to pay, of course).

Dan,

The key is to know the Rules or what I call the The Facts (Truth) About Tax Sale Investing. You have to know the rules (laws) for the State of interest to you, then understand How to Invest in that state respectively. Some states for example offer Investors an opportunity to Earn Interest on the Liens/Deeds that are purchased. A Tax Lien is usually subject to redemption period--during which the Investor earns interest on his/her money. A Tax Deed is also sometimes subject to a redemption period, depending on the State. Georgia, for example, offers Tax (Sheriff) Deeds, but subject to a 1 year and 45 day redemption period. On the other hand, some states offer Tax Deeds--with no redemption period at all (e.g., Hawaii, New Mexico, and several-several others). Once you determine a State that interest you, learn the rules for that State, know whether it is a Tax Lien State/County or Tax Deed State/county, map-out when the Sales are conducted, get an idea from the Tax Collector of the number of properties offered, redeemed, etc.---just call them for that and ask questions. You may also (which is a good idea) attend the sale to get to know who the players are before you Invest (Learn as much as you can first before you Invest). Be Patient with it and Have fun! Making Money (to me) should be fun---not stressful---so do do not lose your confidence--ever! Have Fun! Learn the Game and Make Money and Play to Win!

Before you Invest in a Property (RESEARCH) it to determine the Property Type, Its' Assessed Value and its' potential Market Value, Location/Area and know the likelihood of you owning it IF that is your goal. Don't be fooled---many properties are redeemed, but there are some states/counties in which you CAN actually Buy Properties "FREE & CLEAR". THE KEY: RESEARCH--RESEARCH. I have done a great deal of this and have found out about SALES that many people may not know even exist. For example, some states offer Tax Sale Properties "OTC"--Over the Counter, meaning you can buy them without attending the Sale. Some say these are left-over properties that may not have any value. Well that really depends on where you want to start financially. It is not at all a bad idea to buy one (A Tax Deed Property) to get a feel for how the Process work. Always buy direct from the County in this case---before you dive into the world of Buying from Third Parties or Individuals. As always, Buyer-Beware" is still the golden rule, but know that you CAN really do well.

Finally, EXPECT TO SUCCEED AT IT! RESEARCH AND YOU WILL BE BLESSED!

Much Success to you, MoneyMakers

Dan,

See Post Below for Response!

:pup: Thanks some more everyone. What is the greatest risk investing in tax deeds as a beginner? You might somehow wind up owning the property itself and be responsbile for it-correct? Also-do you absolutely have to employ an attorney for these just in case or can you get around this? Dan

Dan,

Risk vs Rewards is probably a more appropriate way of addressing your question. The greatest risk in not knowing "the rules" with respect to the Type of Sale you are Investing in, that is, a Tax Lien Certificate Sale vs a Tax Deed Sale. Each type has it advantages or it's disadvantages, depending on your Investment Goals/objectives. Also, for each sale type, each state/county may handle the process differently so it is important that you know how the process works in whatever state is of interest to you. Just as important is your goal: Do you want to focus on primarily earning Interest on your Money? If so, Tax Lien States that pay (rewards) Investors for Investing in Tax Liens in their State/counties may be ideal for you. On the other hand, if your aim is to Own Properties, Tax Deed Sales may be a better approach. Note: You can also acquire properties through Tax Lien Sales as well, but there is the redemption period factor and the process of Foreclosing on that property afterward based on the laws of that state----plus you may want to know about getting Title Insurance for a property in the state/county where the property is being acquired.

As for Tax Deed Sales, you can acquire properties and own them. The Risks all depend on whether or not you know enough about the process, your rights, the owners rights, how to actually get the property if not redeemed---even after a Tax Deed Sale---as some owners still have a right to redeem for a specified period of time. For example, in Tennessee I believe the owners have up to one year to redeem even after a Deed has been issued, so a Title Insurance company may prefer to wait until then before providing you Title Insurance so as to avoid any unanticipated suits/claims against the property. On the other hand, some states will grant Investors a Tax Deed to a property, subject to no redemption period. As it relates to risks, if your goal was to acquire a property with an Improvement on it (e.g., house, etc..) and let's say you did not research it and discovered you Invested in a Vacant Lot instead--then obviously that was a Big-Risk and you may not be happy. Likewise, if the amount you Invest is less than the true value, then that may be risky to some, but if you just want to buy Deeds, then you may enjoy that as well. It really depends on your goal and your style of Investing. You can make money either way---just know the rules & Be Smart & Always Play to WIN!

So Dan, the greatest risk(s) in any sale type depends on a number of factors, but the risks can be minimized by knowing the FACTS about Tax Sale Investing including your rights and the owners rights ultimately. This is how you can effectively position yourself to WIN and SUCCEED in this business.

Finally, never quit---never give-up! The desire to Make Money is what we all have, but the key to really making money is knowing EXACTLY HOW TO DO IT without losing out --- or as you put-it----by knowing "WHAT IS/ARE THE GREATEST RISKs Investing in Tax Deeds as a Beginner"?

Short Answer: Get the Facts, Ask questions, Understand How to Make Money in that particular State by knowing the rules of the Game for that Type of Sale in that particular State/county, and Keep Asking Questions-----Never Stop Learning: The More You Learn (or Know) the More You Earn (or Money You Can Make) and the Bigger You and Your Company Will Grow!


Best Regards & Much Success As You Invest!
MoneyMakers

Some good points already stated above.

One risk not mentioned that can be expensive is environmental issues. For example, houses at one point were allowed to have underground buried heating oil tanks. Over time, these would degrade, and they could discharge the oil into the surrounding grounds. This clean up expense can become substantial.