Is Tax Lien Investing For You?

Tax lien investing used to be something that only the wealthy knew about and took advantage of. For decades it was a little known, high yielding investment vehicle. All of this has changed in the past few years as more and more people become aware of the high yields and minimal risk of investing in tax lien certificates. A lot of people have heard about investing in tax lien certificates but they’re not sure if it’s really something that they can do. Read on to find out if this is an investment vehicle for you.

Tax lien certificates are an attractive investment for the small investor because you don’t need thousands of dollars to start and you don’t have to pay any brokerage fees. There are drawbacks, however. You almost have to become an expert in tax lien investing to invest profitably. This is an investment that you have to be able to devote some time to. It’s not like you can call your broker and tell him to buy some tax liens for your portfolio. Tax lien certificates are sold at tax sales conducted by a county or municipal official. These sales are usually auctions that are held at least once a year. Counties with very large populations may hold tax sales quarterly or even once a month. You have to find out when and where these tax sales are held, do due diligence on the properties in the sale and attend the tax sale to bid on properties. When you are the successful bidder, you are issued a tax lien certificate and must record this certificate with the county clerk. You are then responsible for maintaining accurate records and submitting the proper documents to safeguard your investment.

If you have the time to spend investigating properties and you enjoy the challenge of learning something new, then perhaps investing in tax lien certificates could be a good way for you to increase your bottom line. If, however, you don’t have the time to spend researching properties and finding out about tax sales, then this is probably not the right investment vehicle for you. Another thing you want to consider is where do you live. Some states do not sell tax liens, and if you do not live in a state that has tax lien sales, you may have to spend a considerable amount of money traveling to tax sales in order to buy tax lien certificates. Although some counties have online auctions or sell tax lien through the mail, you would still have to do due diligence on properties before you place a bid. If you don’t, you may wind up loosing money by buying a tax lien certificate on a worthless piece of property.