Any tips for investing in tax lien certificates remotely?

Question

I live in Portland, OR, which is a tax deed state, and the nearest tax lien states to me are Montana, Wyoming, Colorado, and Arizona. Right now I only have around $7k to invest, so I don't really want to spend the money to travel to go to a live auction, because the travel expenses would eat a lot of my profit unless a property doesn't redeem, which is somewhat unlikely. That leaves me with investing in over the counter (aka assignment purchasing, struck liens, whatever the county calls it) or attending an online auction. I know that AZ, CO, and FL do online auctions but I'm not sure what the competition looks like for those and I want my return to be as high as possible. I'm also struggling with the question of whether I should go the tax lien route or if I should just try to put my money towards a buy and hold property instead. How have people been doing with remote tax lien/deed investing?

Note: I've done quite a bit of research on tax liens and deeds through some of the products that the US Tax Lien Association offers, so I feel confident that I have a good basic knowledge around tax liens and deeds, and my next step is to focus on specific states and counties and start learning the specifics.

Jerry K. · Answer

@Paul Spangler I do mainly online tax lien auctions. Review my Biggerpockets blog for what I do.  The link is in my signature line.

It's tough to decide what strategy to start with. Each investor is different and when you begin you want to do it with no mistakes. So let's talk "mindset" more than strategy here.

1. You will make mistakes no matter what strategy you use. Tax liens or buy and hold have their pitfalls each. The key is to reduce risk. Knowledge and advice from a mentor can help reduce risk.  But you will make mistakes - learn from them.

2. The type of strategy you pick is an individual choice. There is no one "right way". People pick some methods based on "gurus", infomercials, books, etc. I have books on all types of real estate investing methods dating back to the early 1980's. I have only done tax liens, tax deeds and REITS. I'll do more, but those interested me the most based on my time comittments and skills. I could never do rehab myself, but I could manage a general contractor if I ever go the flipping route.  Trust your instincts on what you will do versus what you think you could learn to do. If you hate to use a hammer or screwdriver, or have no patience to sand drywall seams - don't think you can do rehabs on your own. You'll hate the time you spend doing it.

3. Realistically figure your time availabilty. Some strategies require more time than others. You mention Tax liens and Buy & hold. Why buy and hold?  Only reason I ask is you have several sentences describing how you have researched lien investing, but nothing about buy and hold.  Your interest seems to be in liens since you have spent time learning about it.  It's less work when you have a natural passion for a strategy versus doing another because you read about people who make money doing the other strategy.

It's ok to start down one path and later find you have no passion for it. But it's much easier to follow the passion than to force yourself to learn a method that goes against your instinct.

Anyway, just a few thoughts.

Bill S. · Answer

I have looked into tax liens in Wyoming and the counties I looked at required the bidding to be in person. There were also more bidders than properties. Each person got a number and the properties were offered to the first number if they didn't take it went to the next. If the next took it then number 3 would have the shot at the #2 property. Basically if you passed on a property you wouldn't get a chance to bid. Again there were way more bidders than property. The interest rate is great, something like 18% but it was really rolling the dice.

Like you said Colorado does on-line auctions. One guy I know chased these for one county in the mountains for a while. He said most "good" properties are bid to the point that people are paying for the right to maybe one day get a tax deed. That's not really investing in my book, it's gambling. That might not be the case everywhere or on every property so you should continue to check it out.

I know there are people who do this with other people's money so you might look into teaming with a local pro. Would cut into the profit but you would be buying experience as well.

Let us know how it goes.

Jerry W. · Answer

@Bill S. is correct about Wyoming tax liens.  I have owned several.  The interest rate is actually 15% but there is a 3% penalty fee that applies only once, but applies even if they pay off the day after you buy it.  Every tax lien sale I have been to in WY you had to be there in person.  I am aware of one law firm in one county who hired a bunch of derelicts off the street and stacked the room with buyers for the lottery drawing.  I should check to see how that turned out.  I have never ended up with ownership of a property but I have handled clearing title to some who did.  That occurs very rarely.

Jaccob Heath · Answer

I thought here in Washington you can go to the court house and purchase a tax lien against a propert. I also believe that washington has an 18% return rate, which is really good. I could be wrong though...

Any tips for investing in tax lien certificates remotely?

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