Zero Risk Real Estate: Creating Wealth Through Tax Liens and Tax Deeds

Setting Your Bids

The last step, after performing all your research, is deciding how much to bid for the tax certificate at auction. While much of this is more art than science, you should have a good idea of the value, property features, and history once you’ve completed the research steps above.

Bids on tax liens will go for less than tax deeds. This is because the potential profit is much greater with tax deeds, although the risk is greater as well. For a tax lien, remember that the bid should be in the 3 to 5 percent range of the value, although I have gone a bit higher than that depending on the quality of the property. You will have to use your judgment here, but don’t get carried away.

For a tax deed property, I will go as high as 30 to 40 percent of the ultimate value, again depending on the type of property and how fast I think I can turn it. There are other expenses involved with the purchase of a tax deed, and those need to be factored in.

Once you set your bids, then make a commitment to stick to them! If you are getting outbid on every single tax sale item, then you know you will have to adjust your formula a bit. You do not want to win every single one! I attended an auction once where a gentleman kept bidding up almost every single property. He ended up with 17 houses, but the more experienced investors in the room knew he had overpaid and was going to take a loss on many of those properties. Don’t be that person. I would rather you attend an auction and walk away ...