Top States to Buy Tax Lien Certificates/Tax Deeds

Do you want to know how to invest in tax lien certificates and tax deeds? Before anything, what you need to ask is, Is this alternative investment really profitable? Well, you will breathe a sigh of relief when you hear what real estate experts say. It is profitable in that, you get either the property or the money from interests. Either way, you don't lose a single cent.

Any real estate guru would tell you of the need to be prepared before shelling out any capital resource. Foremost, attending tax trainings is necessary. If you follow the step-by-step guide in investing, by and large, you can acquire a property for pennies on the dollar.

Next question, Where is the best place to invest? As you know, there are 3,000 counties and over 1,400 municipalities in the US classified as tax entities, sometimes called districts. All 50 states have tax sale.

Now, is it possible to invest in any state where you find it most convenient? The answer is both yes and no. Your place of residence is not a prevailing factor; county governments in all 50 states are authorized to hold auctions to collect back taxes.

However, remember that only about half of all the states are tax lien states and the rest are tax deed states. Again, before investing, you need to decide either to invest in tax lien certificates or tax deed sale.

Consequently, you need to conduct a research on which states are best when it comes to buying tax lien certificates both online and offline. However, research shows that the top four (4) states favored for tax lien investing are Texas, Illinois, Iowa, and Georgia.

1. Texas is not tax lien state, but a redeemable deed state. Here, you not only get a fraction of the penalty but the full amount. To cite clearly, when the property owner redeems the deed in the first six (6) months, you get 25 percent on your money. Nonetheless, if he redeems during the first year, you have 50 percent on your money.

For the best part, you receive ownership of the property if the deed is not redeemed within 6 months. In Texas, the redemption period is only 6 months for non-homesteaded and non-agricultural properties.

2. The good about investing in Illinois is that, they have a 6-month penalty rate and redemption period of 3 years. While you get an annual maximum interest rate of 18 percent in other states, in Illinois, you get annualized interest rate of 36 percent.

The interest rate is bided down at the annual tax sale in most Illinois counties and so the tax lien is awarded to the lowest bidder. 'Leftover' items from the previous tax sale are sold differently. Instead of the interest rate bided down, the certificate is sold to the highest bidder for cash. You would be lucky if they sell it for less than the original amount of delinquent tax.

3. With an annual interest rate of 24 percent in Iowa, the percent ownership is not always bided down during the tax sale. Although such rate is considerably high, the property owner may not have as much incentive to redeem the lien since he will not entirely lose the property even without redeeming the lien.

4. Another redeemable state, Georgia treats redeemable deeds more like liens than deeds. Here, you are not considered the owner of the property until the redemption period is over and you foreclose the right to redeem. As such, you still do not have the right to the property. However, you do get a penalty of 20 percent, if the deed does redeem. Such is paid full on the amount bided during the tax sale.

Best part, price of the deed is bided up during the tax sale. With that, the property owner may find it hard to redeem. As an investor, you will have a high possibility of actually foreclosing the deed.

These mentioned states are noted to have high returns for tax liens or redeemable deeds. Except one county in Illinois, all others don't have online tax sales. You are lucky if you live in or near such states, otherwise, you'll be having a hard time getting your desired profit when you purchase tax lien certificates.

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About the Author

Ted Thomas a Florida based educator, publisher and author who created an easy to understand training course for investors and professionals. His websites are composed of educational videos that will help participants learn how to invest on Tax Lien and Tax Deed in a span of six weeks. Visit his website and experience popular video tutorials that provide financial solutions in many forms.