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In the 25 plus years I’ve pursued tax lien investing. I can’t tell you the number of times I’ve been asked basic stuff like; how do you select what lien certificates to buy? What auctions to attend? Do you buy for the return on your investment?-or do you buy to own the property? What do you do after you bought a certificate? What’s the secret of making money with tax liens that the guru’s know that I don’t and why won’t they tell me? And on and on…

Does this sound like you?

If so read on. I’ll try to explain the basics and how it relates to you making money. If you able to answer the above questions then just skip the article.

The basic Ways of Making Money with tax lien certificates.

There are many way to make money. But the two most common approaches are investing for the return that is offered and investing to gain full ownership of the property.

I will address Investing for the return in this article and get into investing to own in another post.

Investing for the return is by far the most common approach taken to investing in tax lien certificates. You attend a sale buy a couple certificates put them in a draw and wait for them to be redeemed.

It can’t get much simpler.

In Louisiana state statute entitles you to 1 % interest per month and a 5 % penalty. If you spend $100 on January 1st and the property gets redeemed on February 1st you should get a check for $106. Not bad for an investment that is secured with a senior position on a piece of real estate. Now consider you go into a bank and buy a CD. Today that rate over the same period is .089% or a return of approximately 9 cents. Be still my heart! At least with 6 bucks you can head to the Mickey D’s and get the happy meal. With 9 cents you get …..What ….. a stick of gum if you’re lucky. Think!

This is by far the most common approach to making money with tax lien certificates. You attend a government auction, buy a certificate and wait for it to be redeemed. You don’t need to do anything else. The only thing you need to know is when and where the tax sale is held. What’s the statutory interest and redemption period and how does a tax debtor (homeowner) redeem the property. Pretty much everything can be answered by the tax collector in the county that is conducting the tax sale. And that’s pretty much where most tax sale guru’s end the discussion.

In Mississippi the return is 18 % per annum and a 2 year redemption period.

Alabama 12% return and 3 year redemption period.

Arizona 16% return and a 3 year redemption period.

…And on and on…

There is a lot more than that to investing in tax certificates. But I have yet to see a tax sale course take it beyond the statutory rate of return and period of redemption. You’ll just have to trust me for now. That discussion is way beyond the scope for the time and space allotted here.

Of course all the guru’s use the biggest teaser of all to sell their program.

When a property doesn’t get redeemed and you end up owning it for pennies on the dollar. What could be better than buying a home for a couple of dollars? Owing a home for less money than a homeless guy shaking a can on a street corner for spare change collects?

The secret boils down to knowing the law and procedures for the county in which the property is located. State law dictated how the sales are to be conducted. In Louisiana article 7 section 25 of the state Constitution and Louisiana Revised Statuted Title 47 as well as the US Constitution are the guiding documents when it comes to conducting tax sales and redemption.

You are going to have to invest some time and familiarize yourself with the same in whatever state you intend to invest. There are no secrets. Everything is recorder and documented. You just need to know where to look.

If you are serious about making money investing in tax liens you are going to have to invest some time, energy and thought to make it happen. If you are just a dreamer then quit now. It takes work, dedication and a little bit of cash. But it ain’t rocket science. On the other end the rewards can be better than you ever dreamed.