Hey, guys! I've got a little capital that I want to invest, and have read a lot about investing in tax lien certificates. What's the absolute best way for a total newbie to get started? Thanks!!
Have you selected a market? If so, then go to the auction after you've researched 20 or properties. Put down your max bid on a spreadsheet. Observe ... once or twice and meet others.
If you haven't selected your market(s), then start there.
Rick made some good points.
Know your county and State laws as pertaining to tax lien certificates.
There is a difference between tax liens and tax lien certificate. Each
State is different.
Go to counties that are not heavly populated as the competition is less.
Know what the right of redemption period is.
Do you have to pay cash the day of the auction?
Whatever properties you are going to bid on visit them first. I made a list and
visited 20 properties, one was a burnout an another was condemned by the county.
Call the day before the sale to whoever is conducting the sale to make sure the properties you are going to bid on have not been redeemed by the owner at the last minute.
Some counties will list properties for sale and pull them at the last minute because the owner is a Senior citizen and got last minute reprive.
Craig, a lot of good points have been made above. However @Boyd McClean, I think waiting until the day before the sale to contact the auctioneer is a bad idea. You should do it sooner than that. Here's why:
1) You may need to register for the auction ahead of time. The county I work for can process registrations rather quickly, however there could be a hang up that may take a few days to resolve.
2) this is a continuation of one, some counties will not process registrations after a certain date, example Travis County (Austin, Tx) will not accept registrations any later than 10 days before the sale. Check the counties in NY and what they require.
3) Networking, sometimes the clerks will do research on properties for friends or relatives that may pass on the property, they could possibly share the info with you. They also may know of some errors or omission in the listing.
4) Properties can be withdrawn until the start of the sale (this is true in Texas, check your states tax laws to see if true in NY). This is different from being redeemed, and could be caused for various reasons (litigation, failure to notify, decedent heirs come to lay claim, taxes got paid, etc.). So calling the day before may not be sufficient.
5) Less population, doesn't necessarily mean less turn out. I saw an auction in a county with 1.8 million people, where only 3 people showed up to bid at the sale. BTW temp that day was 9 degrees.
I do agree with visiting the property before you bid. Know what kind of shape the property is in, in case you need to set back funds for rehabs. 20 properties is just a number, find the ones that interest you. I myself try and target 10% of whatever is listed for the area I'm in. Unless of course there is only like 4-5 properties available.
You are talking tax lien certificate, the three gentleman above are talking tax deeds.
1)Actually redeemable tax deeds.states like TX, GA, TN, it means even if you are the highest & winning bidder, the owner can still redeem the property from you during the redemption period. You will receive the original bidding amount together with the interest or penalty
2)About half of the states are tax lien states Like NJ, AZ, SC. In most cases, you will get interest payment , but rarely get the properties. Watch our for the life of the lien, there is a expiration period.
3)Some states are Hybrid; that means they have both tax lien & tax deed.like NY, OH, FL. For example, FL , first sells the tax lien & if there is no redemption,lien holder apply for the property to tax deed sale. No bidder. The lien holder are now the owner. If there is a higher bidder, the lien holder gets his share of interest payment.
4)About half of the states are tax deed, that means if you go to the auction & won, you got the properties. States like CA,M,OR
Most states now have online bidding by third party or live.
pick a county & see if the county offer on line bidding & if so, which site.
Most of these sites offer free on line training, so you can practice.
MAKE SURE YOU READ THE DETAILS ON EACH & EVERY COUNTY, CITY & STATE LAW & RULES REGARDING THEIR TAX SALES. THEY ARE ALL VARIED SOMEWHAT.
@Tom Yung I appreciate your clarification on the difference between tax deed sales and tax lien sales by locations. I am very aware of the difference between tax deeds and tax lien sales. I did not write about either type of sale above.
What I did focus on is what @Craig Garrow would gain or lose by contacting the auctioneer earlier rather than later, networking, stereotyping auction location in relation to turnout, due diligence, and how the number of properties he should take into consideration for bidding is only important to himself.
Yes, I used examples from areas I am familiar with (a tax deed state), but referenced checking locally in NY for the requirements he would need to participate in the auction. I am sure there are several variation of requirements to participate from each county within the state of New York.
I believe the best way to start with little cash is to buy left over liens that were not bid on in the auction. This is often called "Over the Counter" liens. You get to buy them at face value. They are sold first come first served.
Not all areas offer these leftover liens. You also need to do your due diligence on what you are buying. Often what is left over is the junk that is not even worth the taxes but sometimes good properties slip through. However I started by buying two leftover liens and one turned out to be my most profitable tax lien deal in 10 years of tax lien investing.
Two keys that you must know; as already said you need to know your local laws. Your strategy can vary tremendously based on the local regulations. Next you need to understand the hidden costs. If you have to foreclose on a property there are legal fees and in MD you pay subsequent taxes. These are the taxes that come due after the line was issued. These hidden costs can add up to a lot more than you may anticipate.
Good luck - Ned
do they have lift over lien or deeds sales in Tx?
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing