How much money do you really need to invest in tax liens or tax deeds?
One of the most frequent questions I get about tax lien investing is “How much money do I need to invest in tax liens?”
How much money you need to invest in tax liens depends a few factors:
- Where you live
- Whether you are investing in tax liens or tax deeds
- What type of bidding takes place at the tax sales you’ll be bidding at
- And what your goals are
And it may be more than you think!
I know that some people think you can buy a tax lien for a couple hundred dollars and wind up with a house that is worth a couple of hundred thousand dollars. This is not really how it works, however.
The truth is that tax liens on good properties are going to be more than $200. In fact I don’t bid on tax liens that are less than that. And I make sure that I have enough money in reserve to pay another 2 or 3 years of taxes on the property. That is because in some states the redemption period might be 2 or 3 years and before you can foreclose on the property, you will have to pay the subsequent taxes.
When you buy a tax lien at the tax sale, you are paying previous years delinquent taxes. But there are now current taxes due on the property and there will taxes due during the redemption period. At some point before you can own the property, you will need to pay the subsequent taxes! And then you will either need to hire an attorney to foreclose the right to redeem the lien, or pay a fee to the county to receive the deed to the property.
So how much money do you really need to start investing in tax liens?
I used to recommend that you have at least $2000 to buy a tax lien. But that was 10 years ago when only 4 states had online tax lien sales. Today many tax lien states have their tax sales online, and many of them require deposits. Today, you need a budget of $10,000 for some of these online tax sales.
Also if you are buying deeds and not liens you may need a lot more. At tax deed sales and redeemable deed sales the bidding might start at the back taxes and penalties owed the county. But it is bid up from there. And since investors are bidding for the property, the bidding can go quite high. For these tax sales you will need more money, depending on what state you are bidding in, what the economy is like at the time, and what type of property you are after.
Need help getting started?
Have money to invest but need help getting started? Want to make sure that you bid on the right properties and don’t make mistakes that could cost you? Working with someone who can mentor you could mean the difference making or losing money on your investment. I can help you find the best places to invest, easily get the tax sale information, and find the right properties to bid on. To schedule a complimentary Profit Planning session with me to find out how I can help you. Just fill in the form at https://taxlienlady.com/mentoring-application.
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