You can make good money safely in an unsafe economy by learning how to buy a tax lien certificate.  So let’s explore how to buy a tax lien certificate in 3 easy steps, and I’ll show you why this is a great investment.  Then I’ll tell you where you can learn more.

When you compare tax lien certificates vs. CDs for example, the results are compelling.  CDs are averaging, at the time of this writing, between 1-1.5% depending on the length of time involved. That means that CDs don’t even keep up with inflation.  You would actually be losing value on your money, which is hardly a good investment.

Since tax liens regularly return over 15% interest, there is no comparison

Are tax lien certificates a good investment? The answer is a resounding, Yes! They are great investments. Now let’s get to how to buy a tax lien certificate, and make some serious money.

How much can you make? That answer depends because it varies from state to state, and from county to county.  

how to buy a tax lien certificate

How to Buy a Tax Lien Certificate: Which States? 

Step 1 is the find a sale. First of all, you need to determine if the state that you’re interested in sells them or not.  About half the states do.  

Here’s the list of states that offer tax liens of some type: Alabama, Arizona, Colorado, Florida, Illinois, Indiana, Iowa, Kentucky, Maryland, Mississippi, Missouri, Montana, Nebraska, New Jersey, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Vermont, West Virginia, and Wyoming. The District of Columbia is also a tax lien jurisdiction.

So what are the best states to buy a tax lien certificate?

Well, it depends on whom you ask and how you define “best.” Even if we were to define best by the highest percentage of interest offered, that wouldn’t be the end-all because there are other factors involved.  

  • How large is the state?
  • How many properties are behind in taxes?
  • How competitive are the sales? 

For example, tax lien certificates in Florida are available in abundance; there are a variety of property types, and the market is competitive. That means that while there are a lot of opportunities, tax lien investing in Florida requires some study and preparation.  

Before we go into the factors to be considered when bidding on an individual property, let’s start with where the auctions are held, and how one actually buys them.

How Can You Find Tax Lien Auctions?

If you want to know how to buy tax lien certificates, you need to know where.  First things first, right? Tax liens are offered at auctions, either in person or online at the county level.  Even if the county was offering tax liens at auctions in person, you’re going to have to check again. Right now, because of COVID-19, counties that had auctions in person have either suspended their auctions, or they have gone to online platforms.

So check with the county that you’re interested in, and find out what their tax lien auction status is currently.  Even after COVID-19 is no longer an issue, most counties will eventually end up holding auctions online.

Step 2 is to register for the sale. Before you can bid at an auction, there’s a whole checklist of things you’re required to do so.  So before buying tax liens, you need to do your research and get fully educated and familiarized with all the details of the individual county.

How to Buy a Tax Lien Certificate, Nuts, and Bolts…

Let’s talk about the nuts and bolts of how to buy a tax lien certificate, which is Step 3, following through with the sale. When determining what is the best state to buy tax lien certificates, deciding with a list of tax lien interest rates state by state is not necessarily the best way. 

Let’s look at tax lien investing in Florida.  In Florida, the return of interest offered on tax liens is 18%.  But… in many auctions,  bidders compete for who is willing to take less of a percentage of interest because it’s a reverse auction.  So even though the bids start at 18%, you never know what interest rate they will be bought at. 

The way you arrive at the interest depends upon the actual auction and the competitiveness of the auction.  So where you buy and even the individual auction itself plays a factor in how to buy a tax lien certificate.

How to Buy a Tax Lien Certificate: The Rules Depend on the State

Depending on the state, the rate of return offered varies. At whatever point in the bidding process you purchase the certificate, your interest rate on the tax lien is locked in. 

Sometimes the auctions are bid up; sometimes they are bid down.  Sometimes the bidder gets a percentage of the value of the home.

In places like Texas, tax liens are bid up, then if the lien is not paid off (redeemed). then the lien holder can end up as a deed holder with a chance at being the property owner.  Can you buy a property by paying back taxes?  In some places, yes.

My Friend Asked Me How to Buy a Tax Lien Certificate

I recently had a friend tell me he had seen an ad for a 16% tax lien certificate and ask me if he could buy one in Florida where he lives.  I explained that in many states the rate of return offered could even be higher, depending on several factors.  If he was buying a tax lien in Florida, and the bidding started at 18% and went down to 16%, and that bid won, then he would end up with a guaranteed rate of return of 16%.    

Of course, it’s not a case of the drive up to the auction and write a check.  Each county has specific rules and prerequisites.  Some are annual, and some are monthly.  

There is a learning curve and a vocabulary to learn as well, like knowing the difference between buyer’s bid/bonus bids, premium or overbidding, and reverse bidding (like we read about in Florida). 

If you want to learn how to buy a tax lien certificate, taking advantage of the fantastic opportunities that tax liens present is dependent upon doing your research, knowing the rules, and following them.  

In Conclusion

Tax lien certificates are a safe, certain, and predictable investment in uncertain times. Unlike stocks, which offer no guaranteed rate of return, or banks, which offer low interest rates, you can have the best of both worlds with tax lien certificates. You can make 16%, 18%, up to 36% interest.

1.) Find a tax sale, 2.) register for the sale, and 3.) follow through with the sale. That’s it in a nutshell. It sounds easy, but of course, you have to put some work in… otherwise everybody would be doing it.  There is a learning process involved if you want to get the best deals and avoid making the mistakes people commonly make. 

So get started learning today. I’ll even make it easy for you. I have a master course I’m offering as a gift. It’s an online course, valued at $197, but I’ll give it to you absolutely FREE. This course will put you on the fast track and make you more knowledgeable than 99% of investors out there. Get your gift today.

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