Recently someone left this comment in reply to one of my articles about tax lien investing, “Thank you for opening my eyes to the tax lien business, but don’t you agree that the real money is in the purchase of tax deeds?”
The truth is that there may be more money in tax buying and flipping tax deed properties, but I still like tax lien investing better, especially for the new investor. There are a lot of reasons that I prefer buying tax liens to tax deeds. If you are a real estate investor and you like rehabbing and selling properties than tax deed investing may be more profitable for you than investing in tax liens. But here are a few reasons why I prefer tax liens, and why you may want to start out with tax liens rather than tax deeds.
First of all tax liens are usually cheaper than than tax deeds. You can start out with very little money. For example in a typical tax lien sale you may be able to purchase 2 or 3 liens for under $1000, but to buy a tax deed on a decent property that is not just vacant land you will have to spend?a few thousand dollars. If you have at least $20,000 to spend, than in some states you may be able to purchase a decent deed. But not every investor wants to start out with that much money, or even has that much to start with.
I’ve purchased many of my liens for less than $500 and I’ve been able to add to my investment by paying the subsequent tax payments. I had one lien that I purchased for around $475.00 and then I was able to pay the subsequent for the next 6 years before finally forcing the lien to foreclose (by sending a foreclosure notice to the mortgage company). I made 18% on most of my investment. Where else can you put less than $500 in an account each year and make that much interest?
The second big reason that I like tax liens better than tax deeds is that I don’t have to worry about owning the property and rehabbing and selling houses. I don’t have to negotiate with anyone. The tax collector does all the work. They collect the redemption money, notify me when the lien is going to redeem, and I just send in my tax lien certificate and get my check. Once in a while when the lien doesn’t redeem after the redemption period is over I may have to send out a pre-foreclosure letter just to let the owner and any lien-holders on the property that I’m going to start foreclosure proceedings if the lien is not redeemed. But I have not actually foreclosed on a property yet, because as long as?you do your due diligence and buy good liens, they will always redeem at some point.
What do you think. Which do you like better tax liens or tax deeds and why? Leave your comment below.икони
By Joan Bland August 29, 2011 - 8:52 pm
Hi Joanne,
I would like to buy a tax deed inorder to flip it or have a rental. I am wondering if I should hire a knowledgeable person to buy for me. Would appreciate your input. Thank you Joan Bland
By Joanne August 31, 2011 - 8:05 am
Hi Joan,
that all depends. What state do you live in? Do you plan on investing where you live, or in another state? And how much money do you have to start with?
By Jerry Larach August 8, 2011 - 12:06 pm
Hey James,
I can see your frustration. It’s better if you don’t try to master all of the states at the same time.
Take one state and master it, then you can start studying another one.
As far as the competition concerns, I kind of like to buy my liens when there is little competition…. Right after the tax sale.
For example, Arizona holds there tax lien sale in February of every year… but, around 30 days later after the investors bid down the interest in order to win the lien, the counties will have any left over liens that were not purchase for sale. This are called over the counter liens.
Personally, I think it’s better to buy the liens after the sale.
You don’t have to bid down the rate and in the case of Arizona, if you decide to buy the lien with the “Add to Cart” button (instead of auction) you automatically earn 16% interest.
I hope this information can help you.
Jerry
By Joanne August 4, 2011 - 10:46 am
I James,
It sounds to me like you need a little help. You can find step-by-step instruction for some of these online tax sales in the Buying Tax Liens Online course and also in the Members Area of TaxLienLady.com.
Find out more about Buying Tax Liens Online at http://www.BuyingTaxLiensOnline.com and about the Members Area at http://www.TaxLienLady.com/MembershipMain.htm.
Joanne
By james August 4, 2011 - 12:08 am
Well, I’ve been studying for 8 months now, about liens and deeds, mainly liens and still have problems, trying to figure out the websites. It’s very difficult trying to figure out a state and all it’s counties, that you no nothing about. It’s also very competitive and they move along very fast, you can get left behind real quick. Also, it seems, it depends on the kind of information they give you. Some sites are relatively easy, while some are very difficult. I guess it just comes with experience. That’s were the frustration comes in, not knowing what to do. Yes, but if your like me, with no kind of experience, liens would be best, the rest will come later, hopefully.