The biggest stumbling block people face with tax liens is figuring out where to start.
Never mind the technical aspects of investing — which I cover in depth in this course. Even before that — where should you invest?
So many states offer tax lien certificates — which ones should you focus on?
Should you chase the highest yield or go to the state with the tamest competition? Should you worry about the demographics of a state or is a lien a lien?
Today, we’re going to dive right into these issues — and at the end, you should have a pretty good idea of how (and where) to narrow down your search.
Follow the Baby Boomers
Most people want to invest in and around where they live. While that makes intuitive sense — after all, you can check out properties in person! — often it’s not the best choice.
Your state might have a complex process for buying (or redeeming) tax liens. It might offer a poor return on your investment — either because the yield is low or the bidding process is fierce.
Your state might not even offer tax liens!
The good news is there’s a better starting point. And it all began back in the ’40s and ’50s…
You see, my mantra is “Follow the baby boomers.”
For decades, baby boomers from northern states have migrated to warmer climates, especially during the hard winter months. They invest in second homes or purchase lots, hoping to winter south or retire in their dream locale.
Unfortunately, there are two major factors that come into play:
- First, most retirees have not properly planned for retirement. They cannot afford to pay property taxes on two properties. Especially since when they sit down to do their calculations (if they do at all), they may assume taxes are similar to where they already live (they aren’t) or that property taxes are small enough to qualify as a rounding error (nope)
- Second, as people age, they want to live closer to their children. Say there is a couple that owns a lot in Arizona but lives primarily in Ohio, near their kids. If they only have money to pay the property taxes on one property, rest assured they are going to pay the property taxes on the roof over their head in Ohio. Next thing you know, they’ve got a tax lien on the property in Arizona.
Historically, Florida and Arizona have sold more tax liens per capita than any other state. Because of the plethora of tax liens in these states, the tax lien system is more technologically advanced, making research easier and much more efficient.
This is why I refer to three states — Florida, Arizona and Colorado, another popular retirement destination — as “investor friendly.” Purchasing tax liens in these states requires you to invest less time for a higher return on your time invested.
With that in mind, I recommend starting by focusing your search on Florida, Arizona or Colorado when looking for your boomer states.
Nebraska is another locale that is gaining traction. It doesn’t have as streamlined a system as the trio of states mentioned above, but it’s gaining in popularity amongst retirees. And it’s doing so under the nose of tax lien investors — so you face less competition in the bidding process.
Here are the state-mandated minimum rates of return and redemption periods for these four investor-friendly states:
Yes, there may be states that have a higher interest rate or a shorter redemption period, but for now let’s focus on the simplicity of the process — and the wealth of opportunity.
Other factors to consider when choosing a target area:
- Focus on areas you’re familiar with, like where you like to vacation, were raised or have previously lived. Where do your children or other family members live? These are just a few examples — basically, if you know something about the area, it’s a major plus.
- Look for news articles on topics such as:
- “The 10 Best Cities in the U.S. for Retirees”
- “The 10 Worst Cities in the U.S. for Retirees”
- “The 10 Fastest-Growing Cities in the U.S.”
- “The 10 Most Desirable Destination Cities in the U.S.”
- “The 10 Best Real Estate Markets in the U.S.”
You see articles like these all the time. Read them. They will help you keep your finger on the pulse of your target areas as well as give you ideas for potential target areas. Even better, these pieces show you where the next wave of homebuyers and investors is headed.
- Most importantly, more densely populated areas have more tax liens, creating more opportunities for you, the investor.
- There will be more competition in what I refer to as “the crown jewel cities” of any particular state. For instance, if I asked you to name five cities in Florida, most likely your answer would include Miami, Fort Lauderdale, Tampa, St. Petersburg or Orlando. That’s how other investors are going to think as well. It’s not that you can’t find good tax liens to purchase in these areas; it’s just that there will be more competition.
Before you move forward in your search, I’d like you to choose a target state and then pick three counties as your potential target areas. Don’t worry — there are no right or wrong choices. Where you start may not be where you invest.
If you find there is high competition in a county you selected as a potential target area, look to a surrounding county.
Your goal is to find one or two target counties that will ultimately become your personal “gold mine” for investing in tax liens.
Once you’ve completed this step — congratulations! You’ve just leapt over the biggest hurdle that stops most investors from ever getting started.
Not only that, but with this course, you’ll have all the necessary tools for the rest of the journey.
Expect the best,
Mark R. Walter
P.S. Tax lien investing is easy — once you know what you’re doing. You could spend years figuring it out on your own, the way Mark did — or you can shortcut the process by following Mark’s advice, learned from years building his fortune using tax liens. If you want to get the guaranteed, steady returns that tax liens promise, you should check out his course today.