First and foremost, remember that buying tax lien certificates doesn’t give you any rights to the property. You are essentially purchasing back taxes and the potential interest on them from the government. You have no rights to the property unless the owner defaults on payments. Even then the process of turning over the real estate can be lengthy. While there are some cases of quick turnarounds, don’t expect investing in tax lien certificates to turn you into a millionaire overnight.
Not all states and counties have the same rules regarding purchasing tax lien certificates. If your state doesn’t go through this process, you may be tempted to look elsewhere in the country to invest. Beware that some states do not allow outside residents to participate in tax sales, which is why it is important to put a bit of research into the process before committing to buy.
Going to an auction can be intimidating. After all, it is a competition, and being such, people can get emotional, overheated, and even desperate to get that one specific property they have their hearts set on. The best thing you can do is remain calm and collected during the process. Expect to have to give up some tax lien certificates and wait for more affordable options. You may not find anything suitable the first few times around. It is also important to follow the rules of the auction, keep sharp during it, and stick to your budget. Avoid bidding wars that spiral out of control as these are often the result of egos.
Remember to keep in mind your goals. Are you looking for property owners that will likely default, leaving you as the owner? Or maybe you are looking for a surer bet and want some extra, regular income. Both are definite possibilities, but it will take a bit of skill and guesswork to foresee the probable outcome. Find a mentor or talk with someone who has had some experience in this type of investing to help give you some guidance. For example, it may seem like bidding on a high-priced mansion is an easy way to ensure regular tax payments, but it isn’t that uncommon for the wealthy to abandon such properties rather than deal with the hassle, leaving you with an overpriced property that is expensive and unsalable.
Because tax lien certificates auctions do get so heated, one thing many people forget is to stick through to the end. In most cases, winners of the auction are required to pay following the event, but they do sometimes go outside their means. In these cases, you might be able to snap up the property from under them for a much cheaper price. Or they may have some additional properties up for grabs that they didn’t have time to get to. In either case, you might get a golden opportunity.