You may have heard that tax deed investing is a way to purchase tax foreclosed properties for pennies on the dollar. And you may also know that now is a great time to start investing in tax deed properties because there?s more available now then there has been in the last few years. But did you know that there is a way to Cash in on tax deed properties without even bidding at the tax sale? How would you like to be able to buy tax sale properties for less than what they would go for at the tax sale? And because you are purchasing the property from the owner, before the tax sale, you don?t have to worry about clearing the title.

But that?s just the beginning of how you can cash in on tax deed properties without going to the tax sale. I?m going to tell you a little known secret about tax deeds that not all investors know. In many tax deed states, when properties are bid up at the tax sale, the county will make the ?excess proceeds? available to the owner of the property. The excess proceeds are the amount of money that is in excess of the back taxes and penalties, or the minimum bid. Many states give this back to the owner of record of the property at the time of tax sale, and you can use this knowledge to make money on tax deed properties without bidding on them at the sale.

Here?s how it works. You find the owner of a property that is going to be sold in a tax sale in a few weeks. You ask the owner of the property if they intend to let the property go to sale. And you ask them if they would give you the property since they are going to let it go anyway. Or you could offer them a small amount of money for it. You get them to issue you a quitclaim deed to the property. You record the deed at the county clerk?s office. You DON?T pay the taxes; you just let the property get sold in the tax sale. You track the property and find out how much it sold for at the tax sale, and then you apply for the excess proceeds.

The beauty of using the excess proceeds strategy of tax deed investing is that first of all you avoid the competition at the tax sale by purchasing the property directly from the owner and you don?t have to pay as much for the property as you would at the sale. Secondly, you don?t have to clear the title to the property and because you only own the property for a short time, your expenses are minimal.

There are a few things that you need to check out before you try this though. This process does not work in all deed states. Some deeds states do not give the excess proceeds back to the owner of the property, so you need to check that out first. The next thing that you have to check is that the property will be bid up at the sale. You have to make sure that the tax sale is competitive enough that the price of the deed will be bid up considerably higher than the starting bid if you are going to be able to make money at this. You can check this by checking on what happened at the tax sale last year, how high did properties that were in last year?s sale get bid up? But that doesn?t always let you know what will happen this year, since economic conditions may be a little different. So you might want to also check recent tax sales in nearby counties or nearby states with similar demographics to get a feel for what you can expect this year.

You also have to do your due diligence on any properties that you plan on purchasing before you buy them. You need to do this for two reasons. The obvious reason for checking out the property is to make sure that it?s worth enough money so that it will be bid up at the tax sale. But you also want to check and see if there are any liens or judgments on the property before you purchase it from the owner. Because you are purchasing the property directly from the owner and not at the tax sale or from the county, you would be responsible for any liens or judgments against the property at the time you purchased it. So if there is a mortgage on the property, you would be responsible to satisfy that mortgage. Therefore you want to stay away from properties that have any liens on them.
Since you have to do due diligence on tax sale properties anyway, for any type of deed investing, this strategy of tax deed investing is no more work than just purchasing properties at the deed sale. The great thing about using the excess proceeds strategy is that you need less money, so you can purchase more properties and make more money!

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Tax lien investing has been a tool used by the savvy investor and corporations for over 100 years to accumulate large profits.? This strategy is so easy that it is overlooked by many as not profitable.? Most of the Real Estate educators have limited knowledge of this as they have determined this to be an advanced strategy.? Most of the large companies that spend BILLIONS of dollars per year are happy to see this.

So why spill the beans now?

I have been promoting this strategy since I learned about it in 1998 while working as a paralegal in a law firm located in Parsippany, NJ under the guidance of the partners Mike P. and Ralph A.? I was just one of several paralegals preparing the foreclosures of tax liens held by our clients.? During my time there I began to see a pattern among our clients in that they were making large sums of profits in this area.? I began to look for books on the subject and found only one which did not provide much more than a few paragraphs on the subject.? Thus began the quest to learn more the old fashion way, doing it.

Tax Liens and Tax Deeds are a way to get property for just pennies on the dollar where you can own a property free and clear of all liens and encumbrances.? Just think of going out and purchasing a home valued at say $80,000.00 for only $3,000.00. You could keep the property, fix it up and rent it out and make a great ROI over time. You may want to clean it up and sell to a homeowner for $50,000.00 to $60,000.00 and receive a huge profit. Some may just want to sell it immediately (aka flipping) to another investor for $20,000.00 and pocket a good profit without ever getting your hands dirty.

You may have seen the late night ads on TV and wonder if they are true.? cannot speak for TV, but I am here to tell you it does works and I have been making money at this since 1999, just one year after learning about it from the law firm I was employed at. Oh. One more thing. I was doing so well at this that I stopped working as a paralegal and became a full time investor after only 2 years. Over the years I have purchased thousands of tax liens with property values in the millions of dollars.? I have taught thousands of students to invest in tax liens and tax deeds in the US and overseas.

So how can the average person get started now?? This is the best time to start in over 10 years as the market is perfect for getting very high interest returns.? So let?s see what you can do. First you need to find out where the next tax lien auction will be held. If one is online then that will be great as you can do it right from your computer. In the first week of May thru the first week of June there are tax lien auctions in the state of Florida. Of the 67 counties, more than 23 of them had internet auctions to sell off their delinquent tax liens. I had registered for 19 internet auctions and 1 live auction.? I had set limits to how much I would spend and how low I would bid the interest rates down.? While many investors had bid the interest rates down below 5%, I stood fast at 18% and never allowed my position to be compromised.? When all was said and done, I walked away with several hundred tax liens with ALL at 18% interest earned.? The method I used was no different than the system I used when I bid for ATF in the early stages of my investing career where I was known as one of the most aggressive bidders in the circuit.? It is the same system I used to get the advantage over the large corporations and is what I teach students all over the world.

So what is the secret and how can you do the same thing.? First you will need to establish your budget and have the funds available before you make your first bid.? If you do not do this and get in the bidding and do not pay for your winning bids the county will not be happy with you at all.? They will first not permit you to ever return to the auction and they may even go after you in court for breach of a purchase agreement.? So now that I have scared some of you away, let?s look at the good side.? I like to review the list of properties that have the tax liens on and group them.? Separate the land, homes, commercial buildings and agricultural properties.? With homes you may have to separate structures from mobile homes.? While I was bidding in Collier County Florida at the end of May 2009, I used a different strategy then for other counties.? Typically I stay away from the mobile homes and pass, but this time I bid.? The value of the mobile was around $3,000.00 but the land had values over $200,000.00 which had me interested. I decided to bid on these as well as single family homes with values of $250,000.00 and higher.? At the auction I anticipated a room full of bidders and yet found the room to be only 1/3 attended and many of the liens went for 18% while the players still fought over a few and bid them down to 1% or less in some instances.? I probably spent over $60,000.00 in two hours and by lunch time and exhausted my budget I had to set before the auction and once placed could not be changed.? I found the results here were typical of all the counties around Florida.? Everywhere I bid I saw the results the same, I was getting more than 30% of all my bids of 18% accepted.? All I had to do was a little research and place the bids to make money.

So, you missed out on the greatest auction results I have seen in over 10 years and now what can you do. The answer is simple; many of the liens were not sold because the funds ran out.? Typically they are left over because they are junk and no one wanted to bid on them.? Now all you have to do is contact the tax collectors office and ask for the over the counter liens list and pick the ones you want. In Florida all you have to do is hold the tax lien for 2 years and then request the tax deed sale and one of two things will happen.? One is that it will be paid off (redeemed) by the property owner or it goes to sale.? If it goes to sale and its bid on you will get your money plus interest at 18% per year pro rated till it?s sold.? If no one bids on the property then it will be deeded over to you the tax lien holder. Out of the 67 counties I am sure most of them have tax liens that were not sold and you can just buy them and wait for the checks to roll in.? I get checks often as I have been buying for a long time. When you first start out it may be a few months before the first check arrives and may be a few years before you can invest enough to make a living off of.? You just need to get out there and buy your first lien.? It may not be your best deal ever, but it will be your first of many that will ultimately help change your life.

Tax deed sales are also an area not to be overlooked.? Just like the tax liens have had low attendance, so has the tax deed sales. Tax deed sales work almost the same way the tax lien sales work in that you have to bid for the property against other bidders. Instead of bidding on the interest rate you would like to receive, you are bidding on how much you want to pay for the property.? If you do your homework and have a network in place to help you move the properties, you can make several thousand dollars per property if you want. I show investors how they can make back part of the losses from the major hit we had with real estate values with tax deeds. If they just forget about the negative and work on the positive, they can recoup the losses and make a profit.? Here is an example, let?s suppose that you have a loss from a deal of $40,000.00 and you want to make that back.? Even though you have not sold the property, it is a loss in your mind and we can work with that.? If I were to buy a property at a tax deed sale for say $4,000.00 that has a market value of $8,000.00 and then sell it for $6,000.00 I would see a profit of $2,000.00.? What if I were to do 2 of these deals per week and profit $4,000.00 total each week.? By doing this for 10 weeks I would have accumulated $40,000.00 in profits and thus would have offset the loss from the other deal.? I have taught this simple yet effective strategy to many investors that see the benefit to small profits that take only weeks to complete instead of months to be completed.

If you had a small amount to invest, then get into the tax deeds. Take part of the profits and buy tax liens from the county till the next tax deed sale.? After you have purchased 5 tax deeds, keep one in your portfolio.? I like to use the method of buy 5, sell 4 and keep 1.? If you can do this every week for one year you will have about 50 properties that were paid for from the profits.? If the properties increase minimally to just $10,000.00 each you will have a half million dollars in your portfolio.? If you did this for 4 years you would have two million dollars ($2,000,000.00).? At this point you could do many things. Invest only in tax liens at 18% and make $360,000.00 a year in interest, or ?. Loan the money out as a hard money lender at 25% and make $500,000.00 per year, or ?. Be safe and invest in bonds or other secure vehicles at 8% and make $160,000.00 per year.? But either way that should be enough for one to retire and maintain a very good quality of life.

Recently someone contacted me with a very “valuable” lien that they had for sale. They didn?t have the money to foreclose on the lien and wanted either to sell it or partner with someone on foreclosing it. (Have someone else hire a lawyer to foreclose on the lien and share in the profits). When I checked into the property, I found out that it was a vacant piece of land with little value, and the lien holder had already invested more than $16,000.00 into this lien. They had paid subsequent taxes over a few years and when they stopped paying the taxes the lien was struck off to the municipality.

Because this was not a good property the municipality never foreclosed the lien as well. The original lien was purchased back in 1993. The municipality picked up the lien in 1997 and the back taxes owed on this property now are probably more than the property is worth. I had to give her the bad news that her lien is not worth foreclosing on and she won?t be able to sell it. If she only knew when NOT to buy a tax lien, this bad investment would have been avoided.

So here is a list for you of a few reasons not to buy a tax lien. Be sure check the items on this list for tax sale properties before you purchase a tax lien certificate on the property and you?ll avoid taking an un-necessary risk with your money.

? There are very low annual taxes for the property (lower than usual for the area)
? You can?t find the property on the tax map
? You can?t locate the property to look at it
? The property has an unknown owner
? The property is land locked with no right of way
? The property is not large enough or not the right shape to build on (check zoning)
? There are prior tax liens on the property and the prior lien holder is at the tax sale
? The property is or has been contaminated (check the state environmental web site)
? The property is condemned or about to be condemned (eye-ball the property or check with the municipality)
? The grade of the property is too steep to build on
? The property is in a flood zone

These are just some reasons not to buy a tax lien certificate. I don?t want to give you the wrong idea. Investing in tax liens can be very profitable. I believe that it?s an excellent way to invest your money safely if it?s done properly. You can find out all the reasons why I like in tax lien investing in my article Why Do I Invest In Tax Lien Certificates.