State Tax Lien & Deed Sales List
Tricks and Treats of The Trade - Tax Lien Investing Secrets
Written by: Thomas Needles
"Give a man a fish he eats for a day; Teach a man to fish, he eats forever." Lao Tzu - Chinese Taoist Philosopher- c. 600 B.C.E.
You have brought money, you have made the phone calls and learned all you can about the auction, and you know how to register, but what is going to differentiate you from the rest? What will make you successful? The knowledge that you will learn from this article. You must learn the secrets within the tax lien culture. Someone could point out a potentially promising deal to you, or you can learn to understand a quality investment fully and how to work an auction to get it. Do not borrow someone else's savvy when you can develop and master your own. This will become your greatest tool.
It is essential that you familiarize yourself with the bidding styles. There are six to learn each with its benefits and its disadvantages. Why should you know all of them? Why is not one just enough to become successful? Every tax lien auction will be different. The people bidding will be different and you need to be able to utilize different techniques to obtain the properties that you desire.
And the Lien Goes to...
When a property is up for a tax lien auction, there are interest rates that you can profit off of. Remember, your investment is guaranteed, and the money you put down will be reimbursed as well as any interest or late fee penalties accrued. Interest rate bidding is conducted by the auctioneer starting at a certain statutory interest rate as required by law. Then, the rate slowly goes down. The tax lien is granted to the person that is willing to accept the lowest interest rate.
The bid down method is a useful tool that you need to be aware of, but remember it does not work with every auction or with every auction attendee. There are limits to your money, and when more wealthy bidders, such as those that represent banks, bid on properties, you chances of winning are slashed drastically. It is best to educate yourself on not only the types of properties you should look at but also the types of bidders you can compete with. The secret is knowing what you and your competitors can afford. If you can only afford a Honda, don't bid on the Ferrari.
The Precious Premium
The next bidding system, premium bidding, is a little more complicated, but also highly used, so it needs to be understood. The government has already imposed a tax lien upon the property. In premium bidding, a premium is added to that amount with the highest bidder as the winner. You will receive interest on this premium if you win the bid. Educate yourself on the laws of the county you are bidding in because the amount of interest you receive will vary. This is where this type of auction becomes complicated because the interest rate is not always the same across the board. You may receive the same rate for both the tax lien and the premium, and then you may get different rates for each or only the tax lien or the premium receives the interest, or you lose the premium completely. The best system you can hope for is the win-win where both the premium and the tax lien earn money. The worst is when the premium is lost as you have won the bid, but you have lost the premium money. The secret to success is picking states and counties with the best deals and let others who have not done their research fumble with lost premium auctions.
Raffle Tax Liens- The Secret to Getting Your Ticket Picked
This is most random form of tax lien auctioning. Every bidder's ticket goes into a box, and it is pulled out at unsystematically. If there are numerous quality properties available, this would be a good time to fill out the two W-9 tax forms with your social security number on one and the tax payer identification number of your company on the other. This will double your chances of getting properties.
Be aware of your competition. If a bidder's name is called and they decline to buy the property, another name is called. If this trend continues, you need to notice this red flag immediately. These people may live in the area and surveyed the site or know through the grapevine that problems exist with the property. Do not snatch these all up thinking you are getting a deal. The secret is understanding that every tax lien is not a deal.
"Bid On It Through the Grape Vine"
This system of tax lien auctioning is systematic. The auctioneer gives the first tax lien bidder a shot at the lien and then it moves on down the line until someone finds it favorable. The process starts again, this time with the second bidder and so on so that eventually each bidder has the opportunity to bid first on a tax lien. The secret to random auctions is to attend when there is small group of bidders as you can imagine being at the end of this line of bidders would leave you with a lousy chance to gather tax liens.
The Amazing Shrinking Encumbrance - Warning, Warning!
The secret to success in tax lien investing is to get the best deal possible. This last type of auctioning does not offer this to you the bidder in any way. In fact, you are at the mercy of the owner's decision to pay their back taxes or lose their property. Tax liens cover 100% of the homes cost. This auction type diminishes that percentage. You will still receive interest, but if the property is lost, it is difficult to foreclose when you only own a percentage of the property. This auction turns the win-win in tax liens 180 ° into lose-lose. This is where tax liens lose their guaranteed profitability. The secret is to avoid this type of auction at all costs.
Do not let yourself be caught off guard. Make sure you know how the auction works entirely. It is not enough just to know the type of auction it is. Knowledge is success when it comes to investing and knowing tax lien investing secrets. Now that you have a better understanding of how a tax lien auction works and the tricks on how to make each auction as profitable for you as possible, you are even further on your way to paving a very rewarding tax lien investment future.
