Realize that it takes awhile before you can recognize profit from tax lien certificates In many states, the homeowner has up to a year to reimburse you for paying his delinquent taxes. In Cobb County, Georgia, 'the redemption price is the bid amount, plus any taxes paid by the purchaser after the tax sale, plus any special assessments on the property, plus a 20% premium of the amount for the first year or fraction of a year which has elapsed since the date of sale, and a 10% premium for each additional year or fraction of a year thereafter, plus the sheriff and advertisement costs.'

I recommend:  Don’t bid on any tax liens unless you have expendable money that you don’t mind being tied up for a year or more. Read up on various state and municipal guidelines regarding tax liens. Here are some from Florida, Maryland and Alabama.

Retain the title to the property if the taxpayer doesn't reimburse you Why do people bid on real estate tax liens? The potential exists to acquire a house far below its value. You cannot modify or improve the house during the one-year grace period, nor can you rent it, renovate it or evict current tenants. After all, you don't own the house yet. If the homeowner does reimburse you for paying off his tax lien you, you still earn a great rate of return.

I recommend:  Research potential rates of return you can achieve through the use of tax liens. (Rates may change from year to year). Here are a few examples of returns you can earn in New York and Georgia.

Know the downsides associated with real estate investment tax lien certificates You must have a great deal of cash to be able to buy a tax lien, as they usually sell for far more than the outstanding tax debt. If a property has an outstanding $2,000 tax lien, and you purchase the tax lien for $30,000 on a house that is worth $100,000, you may be able to get the house for one-third of the price. Obviously, you have to have a lot of liquidity, and you have to be able to do without the $30,000 for a long time before you realize any return. In many states, it is also your responsibility to foreclose on and/or evict the current owners at the end of any grace period.

I recommend:  Here’s how to evict a tenant. If you’d rather have a professional company do it for you, here is a list of nationwide tenant eviction services.