Tax Lien Investing Basics (Part One)

Are you considering tax lien investing as a strategy? If you take the time to learn the ropes, you’ll discover why real estate is the best wealth-builder in the universe–the safest, most accessible, most lucrative investment you can make. You’ll also find out how to use your real estate investments to create multiple income streams and have a river of money flowing your way every day.

As an example, do you know how to invest in Tax Lien Certificates and Tax Deeds? Briefly, state, county and local governments raise money to provide benefits and services via taxation. One type of taxation, is a tax on “real property.” Pursuant to statute, the owner of a parcel of real property is assessed a dollar amount to pay based on the value of that real property.

This tax, in virtually all cases, is collected by the county where the property is located. If the owner of the property fails to pay the tax, the amount of the tax becomes a lien against the property. A lien against the property, however, does not help the county and local governments pay for the services and benefits they have promised to provide for their citizens.

The county needs the money now, not some time in the future. It needs that money in order to fulfill its budgetary obligations. By state statute, each county is authorized to collect the taxes due that remain unpaid by selling at public auction, either a Tax Lien Certificate or a Tax Deed.

Investing in Tax Lien Certificates and Tax Deeds is a very real way to achieve financial independence. The aim of this and the following tax lien article is to help you understand, in layman’s terms, how tax lien investing works and how you can learn how to invest in tax liens successfully.

If you ask most people, you will find that very few of them even know that tax lien investing exists. It is not well publicized; banks and brokerage houses have no incentive to tell you about it; and people who are doing it consider you competition.

So how do I get started investing in tax liens?

How do you get the information and skills you need to make money? While the process is not difficult, it does take a consistent and focused effort. You are the only one who can create your success, and you can do it. Start by learning everything you can about investing in Tax Lien Certificates or Tax Deeds. Don’t try to learn everything all at once.

There are over 3,000 counties in the United States, and each one of them has something a little different about the way they do things. There are some good books on tax lien investing, including my own, and many of the counties have a wealth of tax lien information you can get for free. A good place to access the various counties across the U.S. is

There are a number of approaches you can take at this point. If you have very limited capital or are strictly looking for a guaranteed rate of return on your savings or investment portfolio, you may wish to concentrate on Tax Lien Certificates.

If your ultimate goal is to buy and sell real estate or to build a portfolio of investment properties, you may wish to concentrate on attending Tax Deed Sales. As you become more comfortable with the materials and your knowledge of how they can work for you, your tax lien investing strategy can be modified. But for now let’s keep it simple.

Set up a series of simple steps designed to get you to your ultimate goal, and then go for it. Try this as a start. Contact the Tax Collector or Treasurer’s office in your county and find out the answers to the following questions:

  1. When will the county be conducting the next Tax Sale?
  2. Where will the sale take place? (Get the address, room, and time of sale)
  3. How can I get a list of the Tax Liens/Properties to be auctioned? (Sometimes, the county will have copies available at their offices. Most likely they will refer you to a local newspaper that prints the sale notice and list of properties or liens to be sold)
  4. How can I get the Rules of the Sale? (The terms and conditions of the sale including pre-registration requirements and methods of payment).
  5. If a it’s a Tax Lien sale, what is the interest rate? How is it calculated?
  6. Does the county have any unsold Tax Lien Certificates or properties from the last sale?

The answer to the above question is usually “yes.” At which point, you should ask how to see a copy of that list. Then go review the list! Many counties have THOUSANDS of unsold Tax Lien Certificates.

I recently picked up a list of unsold Tax Lien Certificates from one county in Florida, and it was 905 pages with approximately thirty-two liens per page. Just that list represented millions of dollars worth of delinquent taxes.

If the answer to this is “no,” ask the next question: What happens to any unsold Tax Lien Certificates? Many times, they will respond in a manner that gets you the answer you want. “Such and such department keeps that list” or “They are held by the county.”

Don’t be intimidated or discouraged if initially you get the answers you need to move forward. Be polite and persistent. Again, call and ask for this information from more than one county. The information you get will vary from one county to the next, and you will start to become familiar with the terminology used in your state and counties.

There are a number of counties in Florida with no unsold Tax Lien Certificates. If I had stopped at one call, I may not have gotten the opportunity to buy thousands of dollars worth of certificates at 18%. Now that you have gathered the information, part two talks about how to get ready for a sale.

By CREOnline Contributor

A content contributor to the original