I get the questions all the time…what are the best states to buy tax lien certificates in? Like all real estate investments, the natural answer to this is to only buy delinquent tax certificates in areas that you know best—your local market or areas you have other real estate investments in. However, the explosion of online auctions and wealth of due diligence information on the web has now given us the ability to invest in just about any state that sells tax liens. I’m not limiting my buying to just Arizona and Colorado which are near me, I now can buy anywhere in the nation.
So, now, there is competition among states for investors—what separates them are their statutes governing tax lien investing (do they favor the investor or the taxpayer?) and the ease of buying the liens (are the auctions online and is the assessor’s information up-to-date?). Feel free to post your comments and reasons why you think I’m wrong, but below are the only states I feel you need to invest in.
Florida tax lien certificates should be at the top of everyone’s list for many reasons: the ease of buying liens at the online auctions, the laws and processing of tax payments are very investor friendly and the online information from assessment data to tax data is very current and accurate compared to other states. Florida sets the bar for all the other states that sell their property taxes and will set the trend going in the future. The main downside that there is a lot of competition out there the bring rates down quite a bit—but with Florida being the largest tax lien certificate market out there, you can usually find a niche to buy at higher rates. You can also find out more about Florida tax lien certificates in my Kindle e-book called: A Beginner’s Guide to Investing in Florida Tax Lien Certificates.
Much like Florida, the ability to buy tax lien certificates in Arizona online in the biggest counties is the big draw here. The bidding process works about the same way as Florida with the interest rating getting bid down. It’s a large market and you can find great information about the underlying real estate online both at the assessor’s sites and thru other online resources such as Zillow. I only wish that the redemption period of three years were shortened.
A wonderful state to invest in tax liens – the most investor-friendly laws, a rate of 24% and a stable real estate market make this a must-go for investors. Unfortunately, you have to be a bit lucky to get a lot of these liens in the Iowa tax auction since the bidding is for the tax lien certificates is rotational (round-robin) meaning each lien is offered up to bidders in a specific order so you may or may not get the chance to buy the liens you want.
This state is great for fast returns and the real possibility of owning the property after one year. That’s right, it’s a one-year redemption period and then you receive deed to the property. Furthermore, all of the noticing and payment collection is handled by the county tax collector during that time period. It’s an overbid state, meaning that you have to bid an amount over and above what’s owed for taxes; but that just limits the competition for many properties. By the way, you can checkout my Kindle e-book on South Carolina tax liens called A Beginner’s Guide to Investing in South Carolina Tax Liens.
The garden state of New Jersey fills out my list not so much for the ease of buying delinquent tax lien certificates—it’s a lot of paperwork and hassle, but the returns are great when you plan to purchase subsequent taxes and the laws favor the investor. I can put a lot of my investment dollars to work there—not so much on the initial investment but I can continue to buy the delinquent taxes on the property and earn 18% on those taxes until it redeems. Plus, there is a lot of inventory to choose from. Rumors are that some of the jurisdictions may be going online soon.
So, that’s it. Those are the states that you should stick to unless you’re investing in your backyard neighborhood. I know not everyone agrees but feel free post your opinions!