How to Buy a Tax Lien Certificate

Tax lien certificates can serve as two ways to an investment. You can either receive the taxes owed on the property plus interest, or after a specified period of time, receive the deed to the property. You can purchase the certificates cheaply and the returns are well worth the hassle.

Instructions

1. Find an auction. Government entities must advertise the auction; so first check the local newspapers in the legal announcement section of the classifieds. You can also call the agency that handles the taxes such as the county assessor. In addition, the sheriff's department handles the notices, and may be able to lead you in the right direction.

2. Research the property and its history. Drive by if you can. In most cases, buyers cannot tour the home before the auction, which adds a certain risk to the transaction. However, doing any research on the property and its history can negate some of that risk.

3. Have financing available. Each government has its own payment requirements, so be sure to follow them. If securing a loan for the tax lien certificate, bring a loan approval letter from your bank or mortgage company.

4. Set a price limit for the property that you are bidding on, so you don't overbid during the excitement of the auction.

5. Bid carefully, adhering to those limits.

6. Receive your tax lien certificate on the property after paying for a winning bid. You will also receive information on the mandated time-period before obtaining the title.