If you are to buying tax liens and need help getting started....

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

2y

Don't pay $$$'s on some generic national class. If you follow the following information you will be 1000x better off and still have all of that money left to spend on actually buying tax liens. This is not get rich quick, you need to put the time in if you want to be successful and it will take years to get really good at it.

It’s not hard, but it’s not easy. If you understand that, than you are off to a good start.

1. Research:

A. Read the state statutes

B. Search for information about your state on Facebook groups, Bigger Pockets tax lien forums etc.

C. Online auction sites will have information as well about your state.

D. Search county websites for information, some provide lots of helpful info.

E. Try to find classes or books that are STATE specific. Not a national class but someone with experience in your state and the material is just on your state.

2. Consult:

A. Try to find someone experienced to learn from, usually hard to do.

B. Find an attorney that handles property tax sale cases and pay for a consultation. Have a list of questions for them.

** You should understand all of the laws of your state, every step in the tax sale process. You also need to understand how the auction / bidding process works. You need to understand all of the costs involved as well.

3. Understand your area:

A. You need to know what the property is worth. Find a website that shows sold listings or work with an agent to provide them for you.

B. Know what the pitfalls, red flags, etc. What to avoid in this area. It’s different depending on where you are located. It could be flood zones or wetlands in one place, topography/slope, not located near utilities, etc etc. Also know what liens are common in that area that will not be removed, grass liens, snow removal liens, water liens etc.

4. Buying Tax Liens:

A. Bid / spend what you can afford.

B. Reinvest 100% if at all possible. Treat it like it’s a 401K and you can’t take any of the money.

C. Be Patient and keep doing it every year. Don’t skip a year, don’t quit.

D. Don’t over pay. This will vary depending on the type of bidding. I see a LOT of stupid bidding. Unfortunately a lot of uneducated people waste their money every year. If it’s not a good deal or the bidding gets too high pass on it.

E. Have enough money to pay the subsequent tax bills.

There is a ton more but if you master the above, you will know more than about 90% of your competition. The rest will come from experience.

98% of this is research and it takes alot of time.

Researching the rules and law. (I know the state law pertaining to tax sales better than the local tax collector)

Researching what you are bidding on.

Knowing what a good price at auction is and not overpaying.

Having access to lots of cash to use.

Here is an example of risks:

My friend did his proper research on a house before the auction. He bought the tax lien on the house and drove by it after the auction.

The county had tore it down and there was an empty lot there now. The property will end up with a lien against it for the demo cost. Ouch.

2 Reply

Taylor Stow

Attorney · New Orleans, LA · Member since 2017 · 38 posts · 19 votes

2y

I’d add:

- check out if the land is buildable. Some lots are so narrow that you can’t practically fit a building on them; this requires looking at local zoning codes. Is the land on a slope? Is it marshland or in a river’s flood plain? (If it’s not buildable, could it be something else?)

- learn if your investment will require you to pay the taxes on the property in the future, and account for that in your underwriting.

- In Louisiana, investors bid on a percentage of ownership in the property, where the percentage of ownership given for paying the tax debt starts at 100% and is then bid down. The first investor willing to accept 1% ownership can get the property, but is that percentage of ownership in that property worth what you paid for it, especially considering what you have to do to confirm ownership?

Great post @Will Sifert

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Will Sifert

OP

Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes

2y

Quote from @Taylor Stow:

I’d add:

- check out if the land is buildable. Some lots are so narrow that you can’t practically fit a building on them; this requires looking at local zoning codes. Is the land on a slope? Is it marshland or in a river’s flood plain? (If it’s not buildable, could it be something else?)

- learn if your investment will require you to pay the taxes on the property in the future, and account for that in your underwriting.

- In Louisiana, investors bid on a percentage of ownership in the property, where the percentage of ownership given for paying the tax debt starts at 100% and is then bid down. The first investor willing to accept 1% ownership can get the property, but is that percentage of ownership in that property worth what you paid for it, especially considering what you have to do to confirm ownership?

Great post @Will Sifert

Every tax lien you buy you should be prepared to pay the subsequent taxes. That amount could be more or less than what you paid at the tax sale. There are many variables that are different from state to state, the person investing should learn how it works for the state they are investing in.

The same when it comes to bidding and how the auction process works. They need to know how it works in their state. It could be bid down % of ownership or bid down the interest rate, or premium bidding, or random, or several different versions of those.

1 Reply

Will Sifert

OP

Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes

2y

Quote from @John Underwood:

Quote from @Will Sifert:

Don't pay $$$'s on some generic national class. If you follow the following information you will be 1000x better off and still have all of that money left to spend on actually buying tax liens. This is not get rich quick, you need to put the time in if you want to be successful and it will take years to get really good at it.

It’s not hard, but it’s not easy. If you understand that, than you are off to a good start.

1. Research:

A. Read the state statutes

B. Search for information about your state on Facebook groups, Bigger Pockets tax lien forums etc.

C. Online auction sites will have information as well about your state.

D. Search county websites for information, some provide lots of helpful info.

E. Try to find classes or books that are STATE specific. Not a national class but someone with experience in your state and the material is just on your state.

2. Consult:

A. Try to find someone experienced to learn from, usually hard to do.

B. Find an attorney that handles property tax sale cases and pay for a consultation. Have a list of questions for them.

** You should understand all of the laws of your state, every step in the tax sale process. You also need to understand how the auction / bidding process works. You need to understand all of the costs involved as well.

3. Understand your area:

A. You need to know what the property is worth. Find a website that shows sold listings or work with an agent to provide them for you.

B. Know what the pitfalls, red flags, etc. What to avoid in this area. It’s different depending on where you are located. It could be flood zones or wetlands in one place, topography/slope, not located near utilities, etc etc. Also know what liens are common in that area that will not be removed, grass liens, snow removal liens, water liens etc.

4. Buying Tax Liens:

A. Bid / spend what you can afford.

B. Reinvest 100% if at all possible. Treat it like it’s a 401K and you can’t take any of the money.

C. Be Patient and keep doing it every year. Don’t skip a year, don’t quit.

D. Don’t over pay. This will vary depending on the type of bidding. I see a LOT of stupid bidding. Unfortunately a lot of uneducated people waste their money every year. If it’s not a good deal or the bidding gets too high pass on it.

E. Have enough money to pay the subsequent tax bills.

There is a ton more but if you master the above, you will know more than about 90% of your competition. The rest will come from experience.

98% of this is research and it takes alot of time.

Researching the rules and law. (I know the state law pertaining to tax sales better than the local tax collector)

Researching what you are bidding on.

Knowing what a good price at auction is and not overpaying.

Having access to lots of cash to use.

Here is an example of risks:

My friend did his proper research on a house before the auction. He bought the tax lien on the house and drove by it after the auction.

The county had tore it down and there was an empty lot there now. The property will end up with a lien against it for the demo cost. Ouch.

I could literally write a book of risks and what to look out for. I made this post because people often ask "How do I get started". It is by no means an all inclusive list of everything needed for tax lien investing, there is so much more to learn, some of which is going to be learned from trial error and just doing it. My list above is a good place for them to get started. Many of the same people end up paying for some worthless class because they have no direction, hopefully this helps them and saves them money. If they can do everything I listed above they are off to a good start.

2 Reply

Karl B.

Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes

2y

Great stuff! What advice and red flags do you look out for at judicial tax sales?

I know the risk of liens tends to be less for these auctions VS an upset tax sale.

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If you are to buying tax liens and need help getting started....

If you are to buying tax liens and need help getting started....

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