Frequently I’m asked the question what is more profitable, investing in tax lien certificates or tax deeds. Whether tax lien investing or tax deed investing is better for you depends on the state that you live in and your what your goals are. If you are looking to pick up property under market value than you are better of with tax deeds than with tax liens. If you do your homework and purchase tax liens on good properties, the chances of foreclosure are slim. And in some states, even if the lien is not redeemed, you may not be able to get the property.
In the State of Florida for example, if your lien does not redeem during the redemption period, the property goes into a tax deed sale in order to satisfy your lien. If you did your due diligence and purchased a lien on a decent property, in order to get the property, you will have to bid against other investors at the deed sale. So if you want to invest in Florida, and you are interested in obtaining property, then deed investing is the way to go, not lien investing. If, however, you are not interested in owning property, but just want to get a higher return on your money than you could in the bank, then tax liens are the way to go. In Florida, as long as you do your due diligence, you won’t have to worry about the possibility of owning the property.
If you live on the west cost, you might want to consider investing in tax deeds instead of tax liens. That’s because the states on the west cost are deed states and not lien states. Yes, you could travel to the closest lien state, but that would eat into your profits. And yes, you could invest online but then you have to deal with increased competition and higher costs. Also, would you purchase a property that you did not physically look at first? Even though with tax lien investing, you are not purchasing the property, you’re only buying a lien on the property; your lien is only as good as the property that guarantees it.
If you are interested in either owning the property or getting a very good return on your investment and you live in or near a redeemable deed state, than you should consider investing in redeemable deeds. Redeemable deeds are kind of in-between tax liens and tax deeds. You purchase the tax deed at the sale, but there is a redemption period in which the previous owner can come back and redeem the deed from you. They have to pay a pretty hefty penalty in most redeemable deed states in order to do so, and the penalty is on the total amount that you bid at the sale. In Texas the penalty is 25% and in Georgia it’s 20%. Not a bad rate of return! Another great thing about redeemable deeds is that the larger counties with bigger cities can have a tax sale a few times a year or even every month. That’s better than waiting for a tax sale only once a year sale as in most states that sell regular tax deeds or tax liens.
If you live in a state that sells tax liens, and you are not interested in purchasing property, but are interested in investing your money safely at a high rate of return, than tax lien investing is the best choice for you. To find out more about tax lien and tax deed investing, go to www.TaxLienInvestingBasics.com.