If you have limited capital, where do you begin in tax lien investing?
The beauty of tax lien certificates is that they come in all sorts of different unpaid property tax amounts, which are available to investors. Just as diverse are the underlying property types: commercial buildings, single family homes, industrial warehouses and vacant lots - each tax bill is based on a property assessment of its value. The mistake made by many begining tax lien investors is that they perform all the due diligence on the high dollar tax lien, when they really should be paying close attention to the lower dollar tax certificate. As a case in point, a tax bill of $1 million on an oceanfront condo with an assessed value of $250 million is most likely a much safer investment than a $300 tax bill on a landlocked easement with an assessed value of $0.
At the end of the day, all investors must be able to calculate the Lien-to-Value (LTV%) ratio in order to minimize the exposure to losses. Bad investments occur when an investor does the following: 1. Fails to understand the asset. 2. Fails to perform correct due diligence. 3. Fails to understand other liens and their priority. 4. Fails to understand the cost to tax foreclose 5. Fails to understand how subsequent taxes work. And last, fails to recognize where to get good education.
Limited capital does not prohibit an investor from being wise and savvy. The follow-up question you should be asking is: How does an investor with limited capital compete with much larger firms with very deep pockets?
The answer to this question will be addressed at the NTLA Annual Meeting & Conference on February 28th in Ft. Lauderdale.
Register Today: www.ntla.org
The Nation's Largest Tax Lien Conference