How to Start Investing in Tax Liens and How Does a Tax Lien Sale Work?

Learn how to start investing in tax liens to earn high interest rates while helping local communities and distressed home owners. This is a benevolent investment that’s secure and predictable.

Watch the video above or read the summary below.

The topics I’ll be covering in “How to Start Investing in Tax Liens” are:

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Investing in Tax Lien Certificates

Let’s talk about how to start investing in tax liens. I’ve been involved in tax lien certificates and tax deeds for well over 25 years. And I’ll give you some insight on how easy it is to invest in this business and get yourself started.

You’re definitely in the right place if you want to earn 16%, 18%, 24%, all the way up to 36% interest paid on tax lien certificates. I won’t have time to cover every detail, but I’m going to give you so much that you’re going to be surprised.

Then I’ll wrap it up by telling you about mistakes not to make.

So hang in there, and I’ll tell you about mistakes that newcomers and even experienced auction buyers make that you don’t want to make because it could cost you hundreds of thousands of dollars.

However, if you learn how to start investing in tax liens properly, you can make amazing returns.

Tax Liens and Tax Deeds

There are tax lien certificates and there are tax deeds. So let’s just call them tax liens for now.

The tax liens and tax deeds system has been around for over 200 years. I didn’t invent it; it was invented by the local governments and the state government in order to help the counties collect taxes which they need so desperately.

Thousands of people default every single year. So what happens? Well, we have 3,000 counties in the United States. They’re divided. Half of the states sell tax lien certificates, the other half of the states sell tax deeds.

These tax liens, they pay a lot of money. So let’s understand what’s going on here.

Where and How to Start Tax Lien Investing

The local government sells a tax lien certificate at auction. When they sell that certificate, they sell it by a number.

They announce that in the newspaper, and they also put it on their websites so anybody can know that it’s available. When you purchase a tax lien certificate you’re basically paying someone else’s taxes.

Now, you do not get possession of the property. What really happens is you invest your money with the government. You’re ultimately going to get a check back from the government by paying someone’s taxes.

The counties that sell tax lien certificates are very benevolent. In other words, they’re very nice. They don’t take the property away from people.

The counties that sell tax defaulted properties, they confiscate the property. I’ll come back and talk about that in just a minute.

Why Do Counties Sell Tax Liens?

Investing in tax liens is lucrative because these tax lien certificates pay very high interest rates.

Now why are the counties charging all this interest? Well, I can tell you why. There are local people that are not paying their taxes and causing the government a big problem.

The big problem is this. The local government has to pay its bills, and it has a lot of bills, not just the police and the firefighters.

The county also has to take care of the court system. It has to build the roads, and it has to maintain them. It has to pay the school teachers. You’re getting the idea.

So the county literally has hundreds of bills. If people don’t pay their tax, then what is the County to do? Well, they’d have to go out and borrow money some way.

Rather than go out and borrow the money, they just say to the local people, buy a tax lien certificate, and we’ll assure you that you’re going to get 16% or 18% or 24%, even all the way up to 36% interest.

investing in tax lien certificates

You Can Invest in Tax Liens to Help Communities

So when you’re investing in tax liens, what are you doing? You’re helping your local County. Also, you’re helping someone that’s not paying the taxes now.

When they don’t pay their tax, some people would actually lose their property in other states, but in the tax lien states they don’t lose their property.

Now you don’t get it either. The people stay in the property, so they’re not displaced. They stay in the property, but now you have a lien on that property.

You have a right. That property can’t be sold. It can’t be exchanged with anybody. They can’t remortgage it. Nothing can happen on that property until the tax lien certificate is paid.

Remember, the money that you’re paying is going to pay local bills. It’s going to pay for the hospital, the libraries, to fix the roads. That’s why we have tax lien certificates.

How did all this come about? Well, it came about because people don’t always pay their tax. So now what does the local county do? Well, they don’t have a lot of authority, but the state has a ton of authority.

The legislature grants and authorizes the County Treasurer to:

  1. Levy the tax
  2. Collect the tax.
  3. If they can’t collect the tax, either confiscate the property, or sell a tax lien certificate.

So the treasurer of your county, whom you elected, is the one that has control here.

That treasurer has power to levy taxes, collect taxes, and if they can’t collect the taxes, they can confiscate the property and seize it. Or they can do a tax lien certificate.

All private property in the United States, in other words, eliminate the schools and the churches, but everything else is taxable. So that tax is always levied at a local level.

Back Taxes on Property

Property tax is money that everyone is required to pay. It’s not something, if you want to pay. You are required to pay taxes.

If you own a property in the United States, a private property, you have to pay local property tax. That’s what supports the local government.

If you don’t pay it, they have the right to come and seize it. Half of the counties in the United States will start out with a tax lien certificate. The other half of the counties will actually seize the property.

Once they’ve seized the property, they’re going to take the mortgage off it. They’re going to wipe out the mortgage, which I’ll explain in more detail in a minute,  and then they’re going to sell it for the back taxes.

Tax Liens Are a Lucrative Passive Investment

There are over 3,000 counties involved here. Half of them sell tax lien certificates. They’re very benevolent. The others, they’re not so benevolent. They will seize the property.

So investing in tax liens is a passive investment.

Let’s review this tax lien. With tax liens, you’re going to invest your money to the government and pay someone else’s taxes. Then in turn, you’re going to get a tax lien certificate.

You don’t have any work to do with that certificate. It’s just a piece of paper. You take it home, put it on your desk, and then sit on your rusty dusty.

There’s no work to do. You just wait until the people come in and pay. 95% to 97% of the people will come in and pay.

So you’re saying to yourself, “Wait a minute, Ted. If they wouldn’t pay the government, why would they pay me?”

Well, here’s why they’ll pay you.

get tax lien property without a mortgage

Get Tax Lien Property Without a Mortgage

When you’re investing in tax liens, if you don’t get paid, the government will award you the property without a mortgage. So let me say that again because that’s just short of unbelievable.

When you invest in a tax lien certificate, they give you the certificate. That certificate will tell you how much interest you’re going to make, and it depends upon the state. It could be all the way up to 36%.

You could make nice interest on your money, but if you don’t get paid, don’t worry about it. You’re going to end up with a property.

Before you say, “Ted, I don’t want the property,” well, maybe you do want the property, if you bought it for 1% or 2%, and it had no mortgage on it.

All properties at auction, whether a tax lien auction or a tax defaulted auction, no matter which it is, the mortgage is wiped out.

When I say it’s wiped out, that’s an act of law. I don’t get to make that decision. They take the mortgage off the property. When I say wiped out, it’s wiped clean of that title report. It’s no longer on that property.

Now, the local government, can’t go rip up a mortgage. They can’t do that.

That mortgage still belongs to the person that signed it. It’s nothing more than a promissory note, and the signatory to that still owes the money, but it’s no longer on the property.

Investing in tax liens is safe and secure. I like to say it’s predictable. It’s certain, and it’s secure. So let’s think about this.

Invest in Tax Liens for High Interest Rates

If you’re doing this in Florida, you can earn up to 18%.

I think the lowest I’ve ever seen is in New York out on Long Island. It’s Nassau County and Suffolk County. They only pay about 12%.

In Illinois, what if you went to DuPage County or Cook County in Chicago? Holy Toledo! All the way up to 36%.

So you need to always check the auction rules. In a place like Maryland, there are some counties that only charge 12%. The county right next door charges 24%.

Invest in Tax Liens Following a Step-by-step Process

So the point is you have to learn this. There’s a step-by-step process we teach that will do that.

For example, all states don’t have counties. Louisiana uses Parishes.

It’s a little bit different because they have a lot of the French law. That used to be the Louisiana purchase. When we purchased it from France, that was way back even before I was around.

The First Step for Tax Lien Investors

We’ve been talking about how to start investing in tax liens. It’s very, very easy to do.

You just get a list. All you do is get a list, choose the one you want, take a look at it, and then you can invest in a tax lien certificate. Very easy to do.

Let me give you some idea of what I’m holding here. This is from Jacksonville. It’s just a list of tax lien certificates, and there are no pictures in this newspaper.

Let me open it up. This is a huge newspaper. It’s got 30,000 tax lien certificates in just Duval County. That’s 30,000!

Let me get another one for you. Here’s one from Tampa, Florida. That’s Hillsborough County over on the West Coast. Same situation. There are no pictures in the newspaper. It’s just a list.

This one will have maybe even 40,000 tax lien certificates available. So there’s going to be an abundance of this no matter where you go.

There are also counties that sell tax-defaulted properties, which is not our subject today. Those counties sometimes will even put together a brochure and give you a picture of those.

We’ll cover those in other lessons. Just thought you’d like to know that much.

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Are Tax Lien Certificates Transferable?

Let’s hope you don’t die, but if you’re worried about transferring your certificate, yes, they are transferable.

The county expects that, and they’ll ask you, “How do you want to title it?” things like that.

It’s not a problem to transfer that tax lien certificate.

The beauty of it is that it can’t be stolen because it’s at the County records.

Nobody can get it. They’re just giving you a copy of it.

How to Invest in Tax Liens Properly

Here are the two biggest mistakes that people make when they’re investing in tax liens at tax auctions. I’d like to see you avoid these.

Tax Lien Investing Mistake #1

Number one, the biggest mistake I see happening is people will start bidding on properties and buying properties that they haven’t seen.

If you haven’t seen a property, if you haven’t had your boots on it, or your eyes on it, or someone you trust looking at it, you don’t want to buy it.

What if there’s been a hurricane? What if there was a flood, or if there was a fire? These properties sometimes disappear, and there’s just a slab leftover.

When you invest with the county, they’re going to tell you your money’s tied up. You own that.

So don’t buy anything that you haven’t seen.

Tax Lien Investing Mistake #2

The second mistake is that people bid on properties, and they don’t have any idea what they’re going to sell it for.

In other words, they haven’t planned their exit strategy.

I tell people don’t buy. Don’t bid. Don’t do any of that, unless you have an exit strategy. Because you might just bid too high.

Sometimes at the auction, people want to win the bidding. You don’t want to win.

It’s okay if someone else wins, but you don’t want to lose all your money because you made either one of those mistakes.

I hope you have learned a lot today. If you have, I’m here with other lessons which I’ll pass on to you.

Conclusion

Learning how to start investing in tax liens could be the best decision you ever make. It’s a predictable, certain and secure investment, if you know the rules and do your homework.

Tax lien certificates can pay interest rates as high as 36%, which is amazing for a passive investment.

It’s also a benevolent form of investing that helps communities and distressed property owners.

If you’d like to learn how to reap huge rewards from investing in tax liens and tax deeds, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.

Get started today by taking advantage of this Free Gift from Ted. Act now, it costs you nothing and will give you a big head start!

Ted Thomas teaches how to start investing in tax liensTed Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.


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The Ted Thomas Difference:
  • Ted is recognized as America’s Tax Lien Certificate & Tax Deed Authority and has been helping people with investing in tat defaulted properties for over 30 years.
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