If you are new to tax lien investing, you may be tempted to get your feet wet by purchasing cheap liens.
By cheap, I mean less than $500.
Understandably, it seems like a low cost way to learn the ropes and ease into this type of investment.
While it is possible to do very well, the reality is that you need to exercise extreme caution when it comes to cheap tax lien investing.
The main problem with cheap tax liens is that they are usually associated with properties which have little or no resale market.
A worthless lot, or one that is hard to sell is going to change that cheap tax lien from an asset to a liability.
This is not the type of investment you want.
Another downside is the fact that the types of properties mentioned above seldom get redeemed.
Usually, the owner of a property will pay their lien off within the specified period of time and take back ownership.
In the case of a worthless piece of land, the owner often doesn't bother.
You can get stuck with it.
How do you know if a property is worthless? First of all, do your homework well.
Research the property enough to know what you'll be getting into if you buy it.
For example, is the listing just a tiny lot that can't be used for anything? Perhaps it's nothing more than an access route for other properties, or has hazard wastes and like.
These are things you need to know to avoid ending up with them.
Typically, the more valuable properties have more expensive liens.
That makes sense of course, but shouldn't stop you from practising due diligence.
Check those properties out, too.
Your best bets are to look at liens over $500 or $600 with single family homes on the land.
They tend to have a lower incidence of the problems mentioned previously.
Armed with the knowledge of your research, you should be able to bid on a lien with a fair bit of confidence.
Don't be scared off cheap tax lien investing, just be cautious.
You will occasionally come across a good property for cheap, but that will be the exception not the rule.
By cheap, I mean less than $500.
Understandably, it seems like a low cost way to learn the ropes and ease into this type of investment.
While it is possible to do very well, the reality is that you need to exercise extreme caution when it comes to cheap tax lien investing.
The main problem with cheap tax liens is that they are usually associated with properties which have little or no resale market.
A worthless lot, or one that is hard to sell is going to change that cheap tax lien from an asset to a liability.
This is not the type of investment you want.
Another downside is the fact that the types of properties mentioned above seldom get redeemed.
Usually, the owner of a property will pay their lien off within the specified period of time and take back ownership.
In the case of a worthless piece of land, the owner often doesn't bother.
You can get stuck with it.
How do you know if a property is worthless? First of all, do your homework well.
Research the property enough to know what you'll be getting into if you buy it.
For example, is the listing just a tiny lot that can't be used for anything? Perhaps it's nothing more than an access route for other properties, or has hazard wastes and like.
These are things you need to know to avoid ending up with them.
Typically, the more valuable properties have more expensive liens.
That makes sense of course, but shouldn't stop you from practising due diligence.
Check those properties out, too.
Your best bets are to look at liens over $500 or $600 with single family homes on the land.
They tend to have a lower incidence of the problems mentioned previously.
Armed with the knowledge of your research, you should be able to bid on a lien with a fair bit of confidence.
Don't be scared off cheap tax lien investing, just be cautious.
You will occasionally come across a good property for cheap, but that will be the exception not the rule.
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