Tax liens and tax deeds are a substantial and safe investment grossing significant returns ranging from 8-18%. However, like any investment, it is important to investigate what you are investing in and protect yourself from damage and monetary loss.

Interested investors are coming out of the wood work to try their hands at tax liens/deeds. However, since this form of investing is starting to become well-known and popular, there are more and more inherent risks, including scam artists. There are several steps an investor can take to heed caution and protect his/her hard-earned money.

1. Know the state and county laws

Every state varies in their laws governing tax liens/deeds. The first and foremost pertinent information would be finding out if a state uses a tax lien, a tax deed, a redeemable deed, or any combination thereof, because they are all very different processes. The laws governing tax liens/deeds determine when, where, and how a sale is held in each county. Most states require the tax lien sale lists to be published in a newspaper 3-4 weeks in advance. This is important information to know because before you purchase a lien, you will want to know what is available for purchase. Other laws include the redemption period for the tax lien/deed. These vary as well between 2-4 years. This, too, is important since as an investor you will want to know how long you will be receiving your return as well as when you may potentially foreclose on the property for ultimate ownership. Overall, to practice your due diligence, the first step is to understand the laws governing that state’s tax liens/deeds. Although there are varying differences, most states have a similar overall procedure. It’s the minor details that can catch you off-guard and leave you dangling with no investment to speak of.

2. Investigate the lien and the property it is against Continue reading →