Preparing for tax lien sales

[Jimmy H.]

For those experienced in purchasing tax liens, I am interested in making a definitive thread that defines that steps to take to prepare for and purchase tax liens.

In my state the sales are in August, in June our state SOS puts out the sale dates for each county and I can look up property adresses and amounts owed for each property.

Where do I start in terms of due diligence, obviously I want to go take a look at the property, and in my case I was thinking of keeping an eye on vacated properties as my main intention with tax lien investments would be to acquire the property (although I will take a 12% yield even if I don't end up foreclosing and taking possession).

What exactly do I look for besides the condition and location of the property, etc. What do the big tax lien funds look for? - it seems that they go in and buy nearly everything and set up a website so owners can make credit card payments online. Their strategy is to buy a bunch of them, set up for easy payment, collect their 12% and then foreclose on the 1% of properties and take possession when they can. But even then there are some liens that don't get purchased and it makes me curious as to why. the only issue i can imagine is senior liens like an IRS or other federal liens exist.

What is senior besides federal, and do all junior liens (including mortgages) get completely wiped clean?

So is the main premise then that you look for senior liens, understand the condition of the property, and then it is simply a matter of how much you want to pay at auction? It seems to simple - if liens are selling for $3,500 then they'd almost all seem like a good deal. What are the other main concerns - if you aware of condition of property and senior liens?

My state is a lien state, not a deed state, which means you are buying only the lien - which typically sells for less than $5,000. Let's say for instances that I took $50,000 and bought at least 10 liens on properties that I was comfortable with property condition and there were no senior liens - what other concerns should I have. It seems ot me that i'd get a good return on my 50k and a chance to foreclose at an incredibly low price.

Investing in liens seems to be a very profitable sector of REI, and I assume it is because of the barriers to entry - that being knowledge and understanding what you are doing. It is said that you can make a lot of money in liens if you know what you're doing, but can get burned if don't.
In my research I am still not certain that I know enough not to get burned, what should I do to feel fully prepared and confident to invest in liens in my state come August '11?