How do you choose where to invest in tax liens or tax deeds?
Here are 3 things to keep in mind when you are choosing where to invest:
The first is that going to a tax sale is a better strategy than trying to purchase left over liens or deeds that are offered by the county.
I understand that in the past some tax lien investing experts recommended that you buy liens or deeds directly from the county and avoid the competition. And there are some experienced investors who do make money with this strategy today. But as more investors, funds, and banks have jumped into this market over the last 20 years, it has become even more competitive. So competitive that what is left over are the junk properties and in some areas, even those are bid on so that there is nothing left! In today’s market it’s a better strategy to go to the tax sale. And since online tax sales are more competitive than online tax sales, it’s best to attend a live tax sale if you can.
The second thing to keep in mind when deciding where to invest is where you live.
Since it is better if you can go to a live tax sale, what state do you live in and what type of tax sales do that have? Do they sell tax liens or tax deeds, or redeemable deeds? What is the bidding procedure and do they have live or online tax sales. If your state doesn’t have the type of tax sales that you want to bid at, do you live close to another state that does?
I live in Pennsylvania, which is a deed state, but invest mostly in tax liens and redeemable deeds. I also live really close to New Jersey which is a tax lien state. And though many of the sales are online in NJ, there still quite a few live tax sales. So most of the sales I participate in are in New Jersey.
The third thing to consider when choosing the right place to invest is how much money do you have to invest.
You need more money to invest in deeds and redeemable deeds than you do to invest in tax liens. That is because when you purchase a deed or redeemable deed you are bidding for the property and in competitive real estate markets, investors may bid pretty close to market value to get the deed. Even for tax liens there are some states that you will need more money than others. In states that bid premium for tax liens you will need more money than in states that use a different bidding method.
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