Investing in tax lien certificates and tax deeds is a business that almost anyone can start. It doesn’t require any more than motivation, a small amount of money, and knowledge of how the system works. While I can’t help you with the first two requirements, my successful students and I can help you with the third one.
The Basics of Any Good Business
As the old saying goes, knowledge is power. The more you know, the better your investments will be – whether you are creating wealth through the stock market, by opening your own storefront, or by purchasing tax lien certificates and tax deeds.
Think of your investment business as an office building. Before the walls goes up, there has to be a foundation in place. Not only is the foundation the most important part of constructing the building, it’s the hardest part to do. It takes careful planning, using the blueprints (knowledge) to create a foundation that will support the subsequent structure.
Although its importance can’t be overstated, one day the foundation will be covered up. No one will be able to see it and it will become a forgotten part of the building. Nevertheless, the building must stand firmly on the foundation or it will crumble.
The same is true of a business. Your profits will speak for themselves, but no one will realize the time, research, and effort you put into creating a foundation of success. Just remember that without those ingredients, your road to profitable investments will be a rough one.
Understand the Process
The more comfortable you are with the process of bidding on tax lien certificates and tax deeds, the better your chances of making good buying decisions. One of my successful students, Craig Talkington, puts it this way, “You do it once and it gets easier every time you do it. It’s guaranteed. The worst that happens is you get your money back.”
Not only that, it gets more profitable! Recently, Craig bought a 10-acre tract of land at a Tax Lien certificate sale. It was next to a school in a bad part of town and everyone thought he was crazy. But Craig was crazy like a fox – he figured the school would eventually want to use it for expansion. He bought the certificate for $1,500 and later sold the property to the school system for $34,000. Craig kept investing part time and it didn’t take long for his profits to snowball.
Know the Rules
Each county is different when it comes to auctioning tax lien certificates and tax deeds. They have specific rules and particular bidding procedures. There are many bidding processes, I’m only mentioning two in this tutorial.
The bidding process at a tax lien certificate or tax deed auction varies. Two types are a reverse auction and rotational bidding.
At a traditional auction, bidding starts with a minimum amount and each subsequent bid goes up; in a reverse auction, it starts at the high point and then goes lower. This type of auction is used in the states of Arizona and Florida. In Florida, the bidding is on an interest rate that starts at 18 percent. The interest rate gets progressively lower as the bidding continues and may go down to less than one percent.
The state of Colorado, on the other hand, uses a rotational bidding process. This means the bidders are all given a card with a number; the auctioneer will go around the room in order from lowest to highest number asking for bids. At some rotational bid auctions, the numbers are printed on ping pong balls and put into a big drum, much like you might see at a bingo game.
Dates and times vary widely amongst tax districts, too. For instance, the state of Texas sells tax defaulted properties every month. Texas counties sell tax deeds; however the deed has an encumbrance. Texas allows the property owners to pay the investor directly and redeem the tax-defaulted property anytime within 180 days. The owner must pay the amount of the defaulting taxes on the deed plus 25%, no matter the amount of days the debt has been outstanding. You could easily make a tidy profit in less than 30 days and that is why Texas is a popular state when it comes to tax deed investing.
Obviously, there is a lot to learn about the particular rules imposed by each county and municipality – but learning them forms the foundation of your business.
Get Started Now
The most important thing is that you get started on your investment business. You don’t have to quit your day job; you need to make small changes and begin to control your destiny so you have money in the future.
Ask yourself, “Is this in my best interests?” The more you learn the better your investment business will be and the more you will like it. Tax lien certificate and tax deed investing is as safe an investment as you can imagine since it is secured by real estate, your money protected by tax code, and certificates pay one of the highest rates of interest in the market.
Ted Thomas is famous for showing newcomers and investors how to earn 6 figure incomes within 1 year of completing his training program. Conservative investors love tax lien certificates because they are predictable, certain and secure and sold by local government. Tax defaulted properties are sold at oral big auctions and online. Starting bid, only the back taxes…..Stay tuned on how you can learn more in an upcoming workshop with Ted and Ron.