Eric as we start to look at investing in real estate, rental properties—tell me about the investment opportunities associated with rental properties. 

I have to tell you I really love rental properties, and for so many reasons. If you're in that realm where you're like: I don't know about rental properties. I'm only making a couple of hundred dollars, or $500 a month. If you don't understand or don't think there's value in owning rental properties—after our discussion hopefully, it will allow you to reflect on your mindset and look at what's possible. Because rental income will enable you to build long-term wealth and passive generational income, you can pass on to others. 

If you purchase a rental property, whether it's a commercial property or a single-family or multifamily—whatever it is. Imagine someone paying for that asset for you. They're paying it down over time, they're making the payments on it, and you get benefits by owning it. Now rental property, you have to dig into the nuts and bolts of what it is. 

Can you give us an example of some of your personal experience with rental property investing?

Sure! This was the very first property that I've purchased. It was a rental property. I was in a place where I had no money, and I had marginal credit at best when I first started—this was in 1994. So this is a long time back. And what happened was: I was like how could I figure this out, how could I make this happen? And so I went to the bank. The bank qualified me and said “we will give you a 60% loan,” and then I was in a place to where I had to figure out, well, how do I come up with the other 40%?

So I said: I can save it up, I can go get a partner, maybe I can talk to the seller and see if the seller might be the bank. And in this instance, the seller did. So what I did is I got a bank loan for 60%, I got the seller to finance 40% so the whole purchase was financed, and I walked into it with a $187 cash flow. Imagine that, no money into it and $187 a month cash flow. That's called an infinite return. And what happens is, every single month, that rent comes in and keeps paying down that property. Now I don't have this property anymore, but I will tell you it was a great foundational start for me because it showed me the benefits of rental properties. It's not just the cash flow, and there are so many other things that come from rental properties. And let's talk about it for a second. 

So what did you end up doing to solve this problem?

The first thing you have to be able to be really good at with properties that takes all of the fear away, is you have to be good at running the numbers. So you gotta be able to say you take the income, so if the rent is $1500 and you want to look at all your expenses. What is the management fee? 

Now here's the thing, you're not going to want to manage your own properties. You want someone else to do it for you. It's OK if it's like your first or second one, and you're just learning how to do it, but after that, you're going to want to maximize your time to build your real estate portfolio. And so having that person on your team will help out. 

So you look at the income that's coming in, and then you look at your expenses. You do take a vacancy allowance out of it. You do take the rent payment, the mortgage, the insurance, the taxes, all of those things. At the end of the day, you're leftover with a positive cash flow. Now one of the best things that you want to do, if you're ending up with a negative cash flow, and you're like, oh, I'd lose money if I buy this, now the actual definition of an asset is something that puts money into your pocket. The definition of bad debt, is something that takes money out of your pocket. So when you get into a deal, especially a rental deal, you want to make sure that the property puts money in your pocket on an ongoing basis. 

Otherwise, you're in a position where you're losing money and you're feeding that property. You don't want to be in that position. If you do find when you run the numbers, you're in a negative cash flow situation, change it. Either get a better interest rate, or offer a lower price, or find a way to make it work. And I'll tell you guys; the most creative amongst us in real estate investing are those that will be the most successful. So if you hit a dead-end, don't stop. Just figure out a way to make it work, so it works for you as you move forward with that process. 

What are some other positive benefits to owning rental properties in real estate investing?

Just think of this. So if you own a rental property for 10 years, right, and you're paying down that mortgage. Whether you have a 20 year mortgage, 30 year mortgage, whatever it is. Well, you have a tenant that's paying down that loan balance every single month. And so it's actually taking that loan balance down. That's another great benefit for you. And what happens historically? Suppose you look at the historical numbers when it comes to property values, and you look at appreciation over time you're gonna be in that place to where it's like guess what. In that case, properties go up anywhere between 3-6% annually and that's pretty awesome. 

Now we don't want to count on that necessarily, that's just another benefit of having a property. Because it goes up in value, we pay it down. And there's another unique feature about rental properties. And if you don't understand it, invest a little bit of time figuring it out. It's called depreciation. And there are different forms of depreciation. Now, what happens when you purchase a rental property? You have to establish what your cost basis is in the property. 

So, how much is it in the land, how much is it in the improvements? And the great thing is we're going to take those improvements—over a 27 ½ year time period, and then that's an allowance that you're going to go ahead and depreciate against the property. It's almost like a loss. Now, this does affect your cost basis in the property. That's why you need a tremendous tax CPA, someone who understands real estate, so that you can maximize these opportunities for yourself. So you have depreciation, you have an appreciation, you have loan paydown, you have cash flow, you have so many options to build wealth. 

Can you give us an example to help drive the point home?

Absolutely. Imagine what would happen. Would your life be any different? So let's say you started investing 10 years ago. And you decided to buy one property a year as a rental. And the cash flow builds up. And let us say each property is producing at this time $500, and over time, those mortgages will go down to zero and those rents will keep going up. That's another benefit that I failed to mention.

What do rents do? Rents go up. And if you ever have questions about rents, a great tool that I like to use, it's free it's a really cool tool to use, it's called 

You can put in the address, the bedrooms, bathrooms, and it will give you all the rents around in that area which is really great. Then, make sure you're using your other real estate software and those different programs that will maximize your opportunity to understand what's going on in that market. Rental properties, foundational rental wealth really will change your life. Let's talk about some action items you should be taking if you want to understand more about rental properties. 

First off, you want to be in a place where you understand how to run the numbers. When it comes to a cash flow statement, income minus expenses. That is the foundational key when you're looking at properties. Now there are other terms out there that are used on rental properties to kind of establish value. You may hear a term called cap rate, cap rate is just a function of the net operating income, divided into the purchase price and it gives you a percentage. 

Can you give us a little more detail about what cap rate is?

The higher the cap rate that we get as investors, the better for us. So you want to go out and find the general cap rate for your area. And it's different area by area, and you may find that investing in my local area may be a little tough on the cap rate and cash flow, so you go find an area that's very profitable and go ahead and do your market research. Maybe it's a certain area across the country; perhaps it's a specific area a few miles away from you. Just find those best opportunities for you. Now, this doesn't just apply to single-family homes, it applies to a duplex, a triplex, a four unit. Now when you cross over into the 5 unit, that's where you call it commercial property. You always have to be in a mindset that is: what can I do to improve this property. 

So you could build a lot of equity and wealth and increase the value of the property. If you go into a property and raise the rents, if you improve the condition, if you get it better managed, there's lower vacancy. Everyone asks when is the best time to get into buying rental property, and the real answer to that is: today. So you want to go ahead and take the time to understand your situation. Make sure you understand the income, the expense. Make sure you have a team member who can help you with the process to maximize your benefits when it comes to understanding everything and the benefits that come from rental properties. But let's talk about that for a second, what are those benefits again. You have someone paying for your asset. 

What about depreciation, how does that relate to cap rate?

You have monthly cash flow. You have benefits like depreciation. There's one other thing I wanted to talk about on depreciation. If you can improve a property, sometimes you can take it all within a year, or you can spread it out over 5 years depending upon what it is. But if you do a repair that's a little bit different, so that's why you're going to need a qualified CPA to help you determine what all those schedules are so you don't have to stay on top of it. But depreciation is an incredible value on owning rental property. So remember you also have an appreciation, we talked about that. What else do we have they paid on the mortgage and over time it puts you in a great place. Make sure you're getting the best interest rates possible. Now remember if initially it looks like it's not going to work, change the numbers until it does work for you. Again, I can't tell you how important rental properties are to your investment strategies as you move forward. So if you haven't considered it before, take the time to do it!

Eric, as I look at a property, a single family home, and I'm thinking wow this might be a rental property! How does that change my look at the rehab and what I'm gonna do to the property. 

OK so on rental properties, it's area-specific right? There's retail ready for someone who is going to purchase it to live in it. And then there's a rental ready for someone who will rent it, and pay the rent to you. Now what does your area tell you? If the market says that the rental properties have to be at that prepare level, then you have to make sure they are up to par. But a rental property is typically a little different from a property that you're selling for someone going to move into the property. 

And so there's kind of an anticipation that the renter might damage something or there could be flooring issues, so as I select those kinds of treatments in the home, it's about how long will these things last? And if there is something damaged how much do I care. 

You will be replacing carpet and paint more frequently, on a rental property than typically a homeowner will be. So just because it typically gets a little more wear and tear, you're not going to go to that high-end finish and have that be at that level. This brings up an excellent point, as part of your due diligence in having the right renter there, you don't want to do that. You want your property manager to qualify those individuals. You want your property manager to do those background checks and make sure they do all those things for you. So that way, you're in a place where you keep working on your real estate portfolio. 

That's a great comment there, because how can I tell if I have a good property manager? 

Love it! They have to be a licensed broker, they have to have a trust account, because that can be jail time. Reputation, get some referrals and recommendations. Another great way to do this and we'll talk about this, it's through meetup. Go in and talk to other investors in your area and find out who they use. Go in and find out who's the best and who produces the most. 

So as you look at the property there may be times when you realize: well I can keep this one rented myself. And there's some great ways to do billing and get everything automatic. But at the end of the day you have to look at yourself and decide: do I want to talk to a tenant? 

You know last week I was talking to an investor, he owns a four unit in the Midwest. And he is just like so on top of things, he knows everything about his tenants, and he knows all this stuff. He's so on top of the game and he spends so much of his time managing that property that he's failed to neglect adding new properties to his portfolio–which has held him back from his investing goals. And we've made some adjustments in that, so it's really hard for him to let go of: I have to have control over everything. But having that right team member in place, gives you that time and that flexibility to make that happen. 

So as I look at a single family home, I'm always doing that math in mind. Is this a flip, or is this a buy and hold. And my portfolio dries out a little bit, but I have to know those numbers and say do I want money now, or do I want to hold this over time. 

Well, the property will always tell you a story, OK. In that story, you have to have an exit strategy. It's great to have multiple exit strategies. And what is the best strategy for you based on your goals. 

Does that property rent, or does that cashflow meet your goals enough to make the purchase as a rental? Now if your goals are you have to build up that cash base and go through that process and flip a property, you turn the property you buy and resell it, and I would say look at the profitability of both. 

If you rent it, what is the cash flow? If you buy it, rehab it and sell it, what would you gain that way? Then based on those two goals which ones would you choose? And I'd recommend having a combination of these two elements in your portfolio. 

So Eric, tell us a little about your background and what makes you a Tax Lien Guru?

Welcome to your investing journey! Hi, my name is coach Eric, and I'm here to help you go through your own individual process to help you achieve your goals. Whether you are investing in real estate or tax liens

So, I've been a real estate investor for the last 25 years. I've seen the ups and the downs. And helping individuals like you grasp on what they really need to grasp on to have success towards their individual goals. 

So first off, again, congratulations on the choice that you have made to invest in yourself and to move forward with your investing strategies

So first off let's talk about something. Have you ever been around an individual where you feel like, wow, if I could just be like that person! Maybe it's a guru, perhaps it's someone you have met and you're like–they really have it together. And if you think about it, it's that word called: authenticity. And it's where someone's actions, their thoughts and their words are in alignment. You see it and you feel it! That's something that you want to focus on, as you move forward with your investing strategies as well. Because you want to increase your education, you want to have confidence. You want to have that authentic factor that's going to make all the difference to help you succeed.

Eric, how would you define authenticity? How does it manifest?

A big part about being authentic is your mindset. Have you ever thought about something where it's like: well, I don't know if I can do that. Well, if you think you can do something, you're correct! And if you think you can't do something, you're also correct. And so we need to be in a place where the mind adapts to the idea that we can do this. The hardest person to convince of anything that we do is ourselves. And so we have to be in that place to where we believe it. When we believe it, it comes across as authentic. Because that's who we are at our core. And so make sure we are focused on our mindset as we go through this process. 

One other thing I am going to address quickly. Whenever we start something new in our lives, we always get those people who say: “well you're investing in real estate? You're gonna lose money. That doesn't work. The market crashes. There are tons of things that can go wrong.” And they bring up: here's why it's not going to work for you. Here's the thing, if that's what they're focused on or what you're focused on is: what can go wrong, then that's what will grow. 

However, if you focus on making it work for you, that's where you're putting your energy, and that's how you will grow your real estate or tax lien investing business. And so focus more on the how can I vs. it won't work because: here's 20 reasons why. Well, you're just sabotaging yourself at that point. So let's move forward and focus on how you can make it work. 

What are the best ways to set goals for someone who is new to real estate investing?

Alright, so some quick tips as we move forward. You gotta have goals. Doesn't matter in any one of these sections we are talking about as we are moving forward. Goals are key. What is it you want to accomplish as far as a return? What is it you want to achieve as far as your education? All of those things. You need to make sure you set those goals. 

It would be best if you established a plan. Plan out your week, plan out your time and make sure you're in a place where you're taking control of your time and making the best decisions possible as you move towards your objectives. 

You will need a team. Now your team can be real estate agents, lenders, title companies, wholesale buyers. You want people to help you to succeed while you're doing other things in life. You want your team to help bring the best out of you, in helping you be successful. 

Alright, you also want to build systems to make it easy for you. Whether it's analyzing properties or analyzing tax lien certificates, you want to make sure you have the best options possible. 

It's all about taking action. I'm not talking about a little bit of action, I'm talking about massive action. If you are serious about your goals, you're going to have to take massive action to help you succeed in where you want to go. So remember those steps. 

Can you sum it up for us in a concise list?

  1. Be authentic
  2. Make sure you're feeding your mindset
  3. Make sure you're working on your goals
  4. Make sure you have a plan
  5. Make sure your team is apart of what you're doing
  6. Build your systems
  7. …and take massive action!

And you'll be on your journey to success!

Who are the most important people to consider when you are assembling a team for real estate investing?

Now we will talk about a lot of important information, and we're going to talk about some things that you are going to need to have the right team member in place for. We're going to talk about some things that involve taxes, and we're going to talk about some things that involve legal. Now you will need on your team, an attorney, a tax professional, to make sure that you are doing the right things according to your own personal situation. 

So the information that we are sharing as we move forward is for example purposes only and you want to make sure how it affects you individually when you work with your professional. 

So Eric, describe a real estate investment portfolio. I hear that all the time, what is it?

Well, that's just a really sexy way to say: what real estate do you own? And that's it! What are your total holdings? What do you have as far as rental properties, what are you doing as far as your fix & flips, do you have residential properties that are a part of this? Maybe you even have some air bnbs, or some timeshares that are a part of it. You could have some wholesale deals that are a part of this, and some commercial deals. So it really is the grouping of all of your real estate holdings. 

That's what a real estate portfolio is. 

A self-directed individual retirement account (SDIRA) is a type of individual retirement account (IRA) that can hold a variety of alternative investments normally prohibited from regular IRAs. Although the account is administered by a custodian or trustee, it's directly managed by the account holder—the reason it's called “self-directed.” 

Available as either a traditional IRA (to which you make tax-deductible contributions) or a Roth IRA (from which you take tax-free distributions), self-directed IRAs are best suited for savvy investors who already understand the alternative investments and who want to diversify in a tax-advantaged account.

A self-directed IRA (SDIRA) is a variation on a traditional or Roth IRA in which you can hold a variety of alternative investments, including real estate, that regular IRAs can't own.

In general, self-directed IRAs are available only through specialized firms that offer SDIRA custody services.

SDIRA custodians can't give financial or investment advice, so the burden of research, due diligence, and management of assets rests solely with the account holder.

Understanding a Self-Directed IRA (SDIRA)

The main difference between SDIRAs and other IRAs is the types of investments you can hold in the account. In general, regular IRAs are limited to common securities like stocks, bonds, certificates of deposit, and mutual or exchange-traded funds (ETFs). But SDIRAs allow the owner to invest in a much broader array of assets. With an SDIRA, you can hold precious metals, commodities, private placements, limited partnerships, tax lien certificates, real estate, and other sorts of alternative investments.

As such, an SDIRA requires greater initiative and due diligence by the account owner. With most IRA providers, you can only open a regular IRA (traditional or Roth), and can only invest in the usual suspects: stocks, bonds, and mutual funds/ETFs. If you want to open a self-directed IRA, you’ll need a qualified IRA custodian that specializes in that type of account. Not every SDIRA custodian offers the same range of investments. So, if you’re interested in a specific asset—say, gold bullion—make sure it’s part of a potential custodian’s offerings.

SDIRA custodians aren’t allowed to give financial advice (remember, the accounts are self-directed)—which is why traditional brokerages, banks, and investment companies usually don't offer these accounts. That means you need to do your own homework. If you need help picking or managing your investments, you should plan on working with a financial advisor.

Self-directed Roth IRAs open up a large universe of potential investments. In addition to the standard investments—stocks, bonds, cash, money market funds, and mutual funds—you can hold assets that aren’t typically part of a retirement portfolio.

For example, you can buy investment real estate to hold in your SDIRA account. You can also hold partnerships and tax liens—even a franchise business.

However, the Internal Revenue Service (IRS) forbids a few specified investments in self-directed IRAs, whether it’s the Roth or traditional version. For example, you can’t hold life insurance, S Corporation stocks, any investment that constitutes a prohibited transaction (such as one that involves “self-dealing”), and collectibles.

Collectibles include a wide range of items, including antiques, artwork, alcoholic beverages, baseball cards, memorabilia, jewelry, stamps, and rare coins (note that this affects the kind of gold that a self-directed Roth IRA can hold). Check with a financial advisor to be sure you aren’t inadvertently violating any of the rules.

Typically, in a 401K or IRA account, investors pace money in retirement accounts and leave their investing up to an account custodian. The custodian is responsible for making investment decisions for retirement account holders. Sometimes they do a good job and sometimes they do not. Often they beat inflation by a couple points. It is nothing to brag about, but it is usually a good decision for people to set up retirement accounts early in life, contribute consistently, and let it grow over time.

Once the account is set up, the investor has no say on where their money is invested. The investor can choose if the account is traditional or Roth and can determine the risk level and general portfolio of trades. There is an alternative to this which is called a self-directed retirement account.

With a self-directed retirement account, the investor takes the responsibility of trading. This means the investor directs where to invest the retirement account money. The investor can choose the mutual fund or stocks, or they can direct the account to invest in real estate. Some accounts are checkbook controlled, so the investor can write checks directly from their retirement account.

The advantage of using a self-retirement account to invest in tax liens and deeds, rather than using a personal bank account, is that taxes defer the same way the original retirement account was set up. With a Roth IRA, the investor is taxed on the front when the money is placed in the account, but not when the money is pulled out of the account maturely. Another advantage is that the investor can use retirement funds that they would not usually have access to. These funds might be idle or barely making any money. The investor can choose to direct some of that money to tax deeds or tax lien investments.

Set Up

You may have a 401k through your current employer and an IRA account. You need to see if these accounts are self-directed and if they allow real estate investments. Some accounts limit where you can invest money. If your account is not self-directed, or does not allow for real estate investments, you can move that money to an account that is self-directed, or that allows for real estate investments. You may be charged with a fee or penalty to make the transfer. If you can move your money into the right type of account, you might be able to avoid these fees.

If you start from scratch, you need to decide where to set up your account and what type. The most common is a self-directed Individual Retirement Account (IRA). To find companies that offer self-directed retirement accounts, refer to our website or speak with one of our support agents. You can also set up a company, like an LLC, and set up your IRA through your LLC. That is quite simple to do in most states.

Types of Accounts

The primary IRA you can choose from are traditional IRA accounts and Roth IRA accounts. The difference between these accounts is the point in time where the investor is taxed. Contributions to Roth accounts are made with after-tax assets. Contributions to traditional IRA accounts are made on pre-tax assets. All transactions within both IRAs have no tax impact, and withdrawals are usually tax-free. Roth IRA withdrawals are usually tax free. Traditional IRA withdrawals at retirement are taxes as income. Roth accounts have become popular because you are not taxed for the growth made in the account, where traditional accounts tax you when you pull money out of the account, but you are not taxed before putting money in the account. When setting up your account with the custodian, have an open dialogue to discuss which option is best for your situation.

Once you have set up your account, you will need to fund it. The investor has a limit on the amount they can contribute to the account yearly. It is possible to set up multiple accounts to get more money in retirement accounts each year. Once the investor funds the account and has checkbook control, they can make investments in their LLC name.

Once the investment matures, the money is put right back into the IRA. Since the investor never takes that money into personal accounts, they are not taxed with normal income. This is how the investor avoids being taxed on the money right away. The investor continues the process of making investments through the self-directed IRA, depositing money directly back to the IRA, and then reinvesting repeatedly to maximize the return.

Potential Risks

SDIRAs have lots of benefits. But there are a few things to watch out for. Prohibited transactions. If you break a rule, the entire account could be considered distributed to you. And you’ll be on the hook for all the taxes, plus a penalty. Make sure you understand and follow the rules for the specific assets you hold in the account.

Due diligence. Again, SDIRA custodians can’t offer financial advice. You’re on your own. Make sure you do your homework and find a good financial advisor if you need help.

Fees. SDIRAs have a complicated fee structure. Typical charges include a one-time establishment fee, a first-year annual fee, annual renewal fee, and fees for investment bill paying. These costs add up (and cut into your earnings).

Your exit plan. It’s easy to get out of stocks, bonds, and mutual funds: just place a sell order with your broker, and the market takes care of the rest. Not so with some SDIRA investments. If you own an apartment building, for example, it will take some time to find the right buyer. That can be especially problematic if you have a traditional SDIRA and need to start taking distributions.

Fraud. Even though SDIRA custodians can’t offer financial advice, they will make certain investments available.

Over-the-counter investing refers to when an investor makes a purchase relating to the tax sale. This happens after the auction has already taken place. Investors buy tax liens and deeds that were not purchased at the auction. There are advantages and disadvantages.

An individual retirement account (IRA) is a perfect way to supplement a work-based retirement vehicle. Individual taxpayers can open either a traditional individual retirement account (IRA) or a Roth IRA. For 2020 and 2021, annual contributions to either type of account max out at $6,000 per year, $7,000 for those 50 or older.

Only the traditional IRA allows a tax deduction when it's opened. It also has no income restrictions limiting who can open one, though the ability to deduct contributions can be limited for those with a retirement plan at work (or a spouse who has one).

  • An IRA is an investment vehicle that earns money tax-free until funds are withdrawn.
  • The IRS allows taxpayers to deduct the amount of their traditional IRA contributions from their taxes.
  • An IRA can hold equities, bonds, real estate, and other investments.

Finding further information on the traditional IRA isn’t difficult, but a few important factors aren’t overly apparent. Here are five.

1. There Are Limits on Investments

An IRA is a type of investment vehicle that earns money tax-free until funds are withdrawn and is not an actual investment. For example, the custodian—the financial company that offers and oversees the traditional IRA—will also offer a choice of investments varying in return and risk, such as Treasury bills, money market funds, mutual funds, stocks, and bonds.

You can't invest in just anything, however. Certain types of investments are prohibited from being in IRAs, such as life insurance and antiques or collectibles.

2. The Beneficiary Form Needs to Be Kept Updated

The beneficiary form tells the custodian what to do with the funds should the account holder die. Without the form, loved ones run the risk of not receiving the money quickly or in full. This form also needs to be kept updated, especially if the account holder goes through a divorce or other major life changes.

3. There Are Mandatory Withdrawals

Not all retirees need to rely on an IRA for living expenses. Unfortunately, because the IRS imposes required minimum distributions (RMDs), account holders must begin withdrawing money from their traditional IRA generally by April 1 of the year following the year in which they turn age 72 (or 70½ for individuals who reached that age during 2019 or in a prior year). Failing to do so results in hefty tax penalties—50% for every dollar not withdrawn. This is one area where Roth IRAs are a better alternative—they have no RMDs until the account holder dies.

4. No Borrowing is Allowed

Some retirement plans allow short-term loans, but the traditional IRA isn’t one of them. Borrowing from a traditional IRA incurs taxes at the account holder's income tax rate, possibly on the entire value of the IRA, if the account is pledged as collateral. According to the IRS, “If the owner of an IRA borrows from the IRA, the IRA is no longer an IRA, and the value of the entire IRA is included in the owner's income.”

One option is to withdraw money from an IRA and roll it over into either the same or a new IRA within 60 days. This is not considered a loan; rather, it is a distribution and rollover. This option can be done only once a year, and care is needed with deadlines.

5. Real Estate Is a Valid Holding

An IRA doesn’t have to hold only equities, bonds, and other Wall Street-type investments. The account can hold real estate, too. The catch is that the real estate has to be a business property; the account holder can’t purchase a second home or pay off a current home. A house can be bought and flipped as an investment property.

The IRS has strict rules regarding real estate in an IRA. Because of the higher dollar value and the less liquid-nature of real estate, this option is only for the more sophisticated investor and requires having a self-directed IRA (SDIRA), a type that allows you to have a wider range of investments. Talk to the appropriate experts before considering adding real estate or opening an SDIRA.


  • Maximum Rate
  • Comfort of Home
  • Avoid the Auction
  • Foreclosure Opportunities

Advantage: The investor receives the full interest rate when buying over the counter. When an investor purchases during the auction, other investors can purchase the same tax lien. The most common bidding method used by tax lien counties to determine the winner, is to bid down the rate of return until no one will bid lower. Investors essentially bid away their return based on the level of competition on that certificate.

When purchasing after the auction, the investor is not bidding against other investors, but simply picking the tax liens wanted and sending secured funds to the county to make the purchase. The county sends a receipt back to the investor, which shows the full interest rate – which is not reduced in any way – for that state.

Advantage: Investors can invest from the comfort of their home. As an over-the-counter investor you do not attend the auction, so there is no reason to leave your home. This process is simple: You acquire the over-the-counter list (can be done online), research the list to find investments you like, send in certified funds to the county along with a description of the tax certificate you want to purchase, and wait for your receipt from the county. At this point, you can sit and watch The Price is Right, until the county sends you a check with your initial investment plus interest.

Advantage: Avoid the hustle and bustle of the auction. Some investors really like the competition and excitement, or they want to be able to buy all available tax liens. Most people prefer to avoid the auction altogether. As mentioned earlier, over-the-counter investors do not need to attend the auction. Instead, they can make all investments from the comfort of home or from anywhere with Internet connection.

Advantage: Foreclosure opportunities on over-the-counter tax liens can be greater. The redemption period usually starts at the time that the tax lien is offered at the auction, whether the certificate is sold at the auction or not. Investors can time the purchase of the tax lien, so they buy after the redemption period ends or right before it ends and begin the foreclosure process right away. If you are interested in foreclosing on tax lien property, then buying over-the-counter toward the end of the redemption period may be a great solution.

  • Leftover Opportunities
  • Accessibility
  • Not Always Available

Disadvantage: Investment quality on over-the-counter lists. Investors that attend auctions have a shot at every tax lien certificate listed. If they were diligent, they would have fought hard to get properties most people consider desirable. For example: Single-family residential homes with significant values. Chances are the investors that attended the auction picked up properties you would get excited about. Did they buy all of them? Probably not, but it is less common finding an awesome single-family residential home when over-the-counter.

You will typically find vacant land, improved lots, commercial properties, and single-family residential homes with lower values when looking at over-the-counter lists. That is not always the case but tends to be the norm. Nevertheless, those options can all be fantastic investments.

Disadvantage: List accessibility. More and more counties are putting over-the-counter lists on their website, usually listed as County Held Certificates, or something of that nature. Some smaller, or slow counties will not post the list online, so the investor would have to seek out the list by contacting the county directly and making a request. In some cases, counties may charge a small package fee and send the physical list to the investor, depending on the size of the investor. Though, in many cases the county will describe how to acquire the list through the county website.

The final disadvantage is that some counties do not offer over-the-counter investments. This is more common for tax deeds than tax lien certificates. In that case, the county holds onto the investment until the next auction date, and then the county offers leftover investments back to investors. Most of the more popular counties and states will offer over-the-counter investments such as Arizona, Florida, and Illinois.

An interesting thing to consider is the secondary market. As you attend auction you will notice institutional investors that buy large numbers of tax liens. They will spend millions at some of these auctions. It has become more popular to buy directly from these institutional investors. Let us know if you are interested in this since we can help you. There is potential for you to get even better deals from them than you would from the county.


Investing over the counter is simple and also similar to preparing to invest at the auction.

  • Select a State/County
  • Find the List
  • Quickly Narrow the List
  • Perform Due Diligence
  • Pick and Invest

Since we have gone over these steps before, we will not do that here. We will go over the Pick and Invest step because it is different than purchasing at the auction, as was shared before.

After going through the list and finding investments meeting your criteria, you would reach out to the county. You can find the contact information by searching google, or by tracking down the information from You would first make sure that the investment is still available since there may be other investors going through the list. Once you confirm availability, you should find out the amount you need to pay on that date since some interest may have built up since the over-the-counter list was issued. Then you should ask if there is anything else you must do before making the investment. They will probably need to issue a bidder number after you fill out some quick forms so they can keep you on file as an investor of their county.

The last thing you need to do is send certified funds to the county and wait for your certificate or receipt. Once you have your receipt, all you need to do is wait for you check in the mail or the redemption period to end, so that you can foreclose on the property.

There, a brief overview of over-the-counter tax lien investing. Please let us know if you have any questions.

A Plan investor develops to discover a profit on their investment. Exit strategies range from selling a property to having a property owner redeem on a tax lien certificate.

We encourage investors to invest with the end in mind. This means that before the investor even makes the purchase, they need to already have formulated how he or she will make a profit on the deal and how to execute that exit. The surer the exit strategy and details surrounding it, the better off the investor will be and the fewer hiccups. Something to consider on every property before thinking about any of the following exit strategies is the property type, property value, and the condition.

What Is an Exit Strategy?

An exit strategy is a contingency plan that is executed by an investor, trader, venture capitalist, or business owner to liquidate a position in a financial asset or dispose of tangible business assets once predetermined criteria for either has been met or exceeded.

An exit strategy may be executed to exit a non-performing investment or close an unprofitable business. In this case, the purpose of the exit strategy is to limit losses.

An exit strategy may also be executed when an investment or business venture has met its profit objective. For instance, an angel investor in a startup company may plan an exit strategy through an initial public offering (IPO).

Other reasons for executing an exit strategy may include a significant change in market conditions due to a catastrophic event; legal reasons, such as estate planning, liability lawsuits or a divorce; or for the simple reason that a business owner/investor is retiring and wants to cash out.

Business exit strategies should not be confused with trading exit strategies used in securities markets.

Understanding Exit Strategies

An effective exit strategy should be planned for every positive and negative contingency regardless of the type of investment, trade, or business venture. This planning should be an integral part of determining the risk associated with the investment, trade, or business venture.

A business exit strategy is an entrepreneur's strategic plan to sell their ownership in a company to investors or another company. An exit strategy gives a business owner a way to reduce or liquidate their stake in a business and, if the business is successful, make a substantial profit.

If the business is not successful, an exit strategy (or “exit plan”) enables the entrepreneur to limit losses. An exit strategy may also be used by an investor such as a venture capitalist to prepare for a cash-out of an investment.

For traders and investors, exit strategies and other money management techniques can greatly enhance their trading by eliminating emotion and reducing risk. Before entering a trade, an investor is advised to set a point at which they will sell for a loss and a point at which they will sell for a gain.

Money management is one of the most important (and least understood) aspects of trading. Many traders, for instance, enter a trade without an exit strategy and are often more likely to take premature profits or, worse, run losses. Traders should understand the exits that are available to them and create an exit strategy that will minimize losses and lock in profits.

Exit Strategies for a Business Venture

In the case of a startup business, successful entrepreneurs plan for a comprehensive exit strategy in case business operations do not meet predetermined milestones.

If cash flow draws down to a point where business operations are no longer sustainable and an external capital infusion is no longer feasible to maintain operations, a planned termination of operations and a liquidation of all assets are sometimes the best options to limit any further losses.

Most venture capitalists insist that a carefully planned exit strategy be included in a business plan before committing any capital. Business owners or investors may also choose to exit if a lucrative offer for the business is tendered by another party.

Ideally, an entrepreneur will develop an exit strategy in their initial business plan before launching the business. The choice of exit plan will influence business development decisions. Common types of exit strategies include initial public offerings (IPO), strategic acquisitions, and management buy-outs (MBO).

The exit strategy that an entrepreneur chooses depends on many factors such as how much control or involvement the entrepreneur wants to retain in the business, whether they want the company to continue to be operated in the same way, or if they are willing to see it change going forward. The entrepreneur will want to be paid a fair price for their ownership share.

A strategic acquisition, for example, will relieve the founder of their ownership responsibilities, but will also mean giving up control. IPOs are often considered the ultimate exit strategy since they are associated with prestige and high payoffs. Contrastingly, bankruptcy is seen as the least desirable way to exit a business.

A key aspect of an exit strategy is business valuation, and there are specialists that can help business owners (and buyers) examine a company's financials to determine a fair value. There are also transition managers whose role is to assist sellers with their business exit strategies.

Other Possible Exit Strategies


If an investor got property through a tax lien certificate or low-priced tax deed, they could sell quickly to another investor or property owner.

Like we mention above, answer the following question: “What is the condition of the property?” Is it in need of repair or rehab? If it needs repair, you have to price the property lower to sell it. There are investors that specialize in fixing homes and reselling them, so connect with them and sell to them at a discount. Let them deal with the repair.

What is the investor’s margin on the investment? If the property is worth $50k and was purchased at a tax deed auction for $25k, the investor may want to consider selling it for $30k – $35k to sell it quickly to another investor or someone wanting a fixer upper. If the property is in great shape, the investor can sell it closer to market value.

The best scenario would be having the buyer lined up before the investment is made. If you have contacts in a specific area interested in a fix and sell, show them the property and line up the deal.


Maybe rehab is not needed on the property at all, or maybe it is land that is ready to build on. Either way, you can sell it near or at retail without any work. What now? You can put the property on the market and wait for a buyer, or price it low to sell it faster. This is called selling at wholesale price. Property that is worth $150k in good condition, that the investor bought for $50k, could be sold at wholesale price of $100k to sell quickly. An investor would want to do this if they wanted to cash out quickly and get their money into another investment as fast as possible.


If the property needs work and the investor wants to sell the property at retail, the investor will use this strategy. Before purchase, the investor should take a close look at the work needed and get accurate estimates on rehab. The investor needs to work those numbers into the equation when considering the investment. A $25k investment worth $50k that requires $20k in rehab might not be worth it due to tight numbers. The best way to work this deal having rehab contractors, cost structure, and a buyer lined up before making the investment.


This is similar to fixing and selling, but the investor plans to rent out the property. Before investing, the investor should know what comparable properties are renting for in the area and what costs are required to do rehab on the property.

One important thing to consider when you are thinking about renting is your break-even point, cash flow, and investment return. Example: If you are buying a home for $25k that requires $15k in rehab, you are spending $40k. What kind of return do you need to make for that deal to be worth your time and money?

Let us say the home will rent $700 a month. $700 times 12 months is $8,400 a year, which is about 25% of the cost the investor incurred. It is fair to say that is a 25% investment return. Your break-even point on that investment is about 4 years and then the rental property will all be cash flow.


The standard exit strategy for tax lien investors is to collect when the property owner redeems on the property. When planning this exit, the investor must consider the interest rate promised by that state and the maximum time the investment will be out, also called the redemption period.

When the property owner redeems and the investor receives money back plus interest, the investor has exited. Sometimes, the investor’s exit will not come until after they have foreclosed and executed one of the previously mentioned strategies.

There are other creative exit strategies, but the main ones are mentioned here. Pick an exit strategy that makes sense for any particular investment before you buy. If you have any questions let us know.

Power teams are composed of players that specialize in a specific area the investor does not specialize in or that the investor would prefer not to spend time doing. Since most investors invest in the same geographical areas year after year, they develop a power team in each of those counties. The investor does not need to be an expert in all investing aspects in every count. The investor needs to become comfortable with a few states or counties that work for them and surround themselves with experts.

A History of the Term Specialist

In order to give some context to the term, it’s important to define the history of how the specialist term was developed in the context of real estate.

At one time, a specialist was the term used by the New York Stock Exchange (NYSE) to refer to a member of the exchange who acted as the market maker to facilitate the trading of a given stock. The NYSE now refers to these individuals as designated market makers (DMM).

The specialist's duties in the past were very similar to the duties performed by today's designated market maker (DMM) on the New York Stock Exchange (NYSE). A specialist held an inventory of a particular stock, posted the bid and ask prices, managed limit orders, and executed trades. If there was a large shift in demand on the buy or sell side, the specialist stepped in and sold off their own inventory as a way to manage large movements and to meet the demand until the gap between supply and demand narrowed.

Most specialists traded five to 10 stocks at a time on any given trading day. There was usually one specialist per stock who stood ready to step in and buy or sell as many shares as needed to ensure a fair and orderly market in that security. Each specialist had a particular spot on the floor of the exchange, called a trading post, where the buying and selling of stock occurred. Floor traders, who acted on behalf of customers who bought and sold the stock, gathered around a specialist's trading post to learn the best bid and ask for offers for a security or a stock. Specialists executed a trade when bids and ask orders matched.

Specialist Roles

Specialists also bought or sold the stock when it reached a certain price. If a floor trader's bid was above the ask price, but then the ask price rose to match the bid price later, the specialist would then fill the order. Before the stock market opened for the trading day, specialists attempted to find a fair opening price for a stock. If a specialist couldn't find a fair opening price, they might delay trading on a particular stock as part of their overall role.

Specialists had four major roles to fill. Specialists acted as auctioneers to show brokers the best bids and offers. Specialists also continually updated floor brokers to act as a catalyst for buying and selling. They placed orders on behalf of brokers and placed orders for customers ahead of their own. Despite all of these duties, the number of specialists declined over time, thanks to electronic trading.

Power Team Players

Here are potential power team players we will go through:

  • Support Team
  • County Officials
  • Real Estate Agents
  • Real Estate Attorney
  • Real Estate Investors
  • Property Appraisers
  • Contractors


You will have questions along the way, which is why we are here. Although we cannot give you legal advice, or tell you exactly what to do, we can provide a guideline to help you make a wise decision.


The county official knows the county processes better than anyone. If the investor can develop an amicable relationship with county officials, all the better. Our students have created these relationships that the county officials call them to give our students a shot at potential investments before the county releases the list publicly.

County officials can provide insight into their systems and sales procedures. County officials and workers are not allowed to invest in their county since it would be considered an unfair advantage. They know a lot and learn the best ways to make investments in their county.

Create relationships with county workers and county officials in counties where you would like to invest and profit from those relationships.


Having quality real estate agents on your power team serves a couple of purposes. The first help with evaluations. What would it be like buying a tax deed across the country without a way to evaluate the property personally. A way to get an educated guess is getting one from a real estate agent in the property area. This can be done by going to and viewing properties being sold near the one you are interested in.

Along with a description of the properties, Zillow will show you the agent for those properties. You can call the agent and make a simple request. Tell them you are buying property nearby that you would like to sell quickly, and you might like them to sell it for you. Ask them to look at the property, see how it compares to others in the area, and what it may need to sell at retail price.

You may want to get a couple of agents to quote it for you. Once you invest in the area a few times and call back the agents that did a good job for you, you suddenly have a real estate agent or agents on your power team.


When it is time to foreclose on a property or to clear a title, you may want assistance from a real estate attorney in the property area. They can help with foreclosure notices for financially interested parties. The attorney will represent you to those parties and in the court system to clear the title. Your attorney will appear before the judge to clear the title to have a warranty deed issued on the property. Once you use a real estate attorney you like and trust, you can stick with them whenever you invest in the area. That real estate attorney becomes a player on your power team and someone you can call on for help.


A significant group for your power team is other real estate investors. You can find these investors through our Investor Forum, local real estate clubs, or web-based real estate clubs.

We may use these investors as mentors, but it is more critical to aid you in your exits. When attending real estate clubs or chatting with other students, you may find out that one investor is interested in buying beat-up homes to rehab and sell, and another investor likes to purchase raw land and develop it.

Knowing investors in the area can be powerful since you can invest with those investors in mind. You could speak to the one interested in land and find out where they like buying land and what they avoid. Then you can find property specifically for that person. Call the investor and share images of the property and information, including historic values and the neighborhood, then work the deal before making your investment.

Having other real estate investors can provide the investor with a constant buyer for investments. The investor can reach out to people and invest with the end in mind much easier, knowing that other investors are anxious for the investor's deals.


Property appraisers determine the property value. Sometimes these values are higher and sometimes lower than anticipated. Having the right appraiser on your power team is crucial to evaluate your investment properties properly. It is vital to have accurate values if the investor wants to take money against the property or when the investor wants to sell the property.

This is especially important for investors that have spent time and money to rehab the property. The investor needs to get a new appraisal after work is done. Otherwise, the investor hardly has grounds to argue a higher price than the previous appraisal. Once you find an appraiser that provides excellent and accurate results, hold onto them, and call on them in the future as a new team member.


When an investor wants to perform extensive rehab on property, the investor will need assistance from a contractor in the area. A contractor will complete work and source professionals to get your rehab done well and on time. Having an honest contractor that can stay under budget and get the job done within the deadline is a great asset. Once you find one in the area, keep that contractor, and go back to them every time.

Finding these team players can be quite straightforward. It can be done by searching the Internet for that particular skill set. Go to and search “real estate attorney Pima county, AZ” or “property appraiser Hernando County, FL.” You can find players through other tax lien and deed investors that have invested in that area.

Do not worry about finding all the people before you need them. When you get to the point where you need a new appraisal, then find an appraiser. Please let us know if you have any questions.

There are always potential risks when you invest in tax liens and deeds. Below we will carefully explain how to avoid them. Tax lien investing is exceptionally safe. The government made it that way, but there are some risks. We want to make you aware of these risks and how to avoid making a mistake easily.

What Is a Default?

Default is the failure to repay a debt, including interest or principal, on a loan or security. A default can occur when a borrower cannot make timely payments, misses payments, or avoids or stops making payments. Individuals, businesses, and even countries can default if they cannot keep up their debt obligations. Default risks are often calculated well in advance by creditors.

Default Explained

A default can occur on secured debt, such as a mortgage loan secured by a house or a business loan secured by a company's assets. If you fail to make timely mortgage payments, the loan could go into default. Similarly, if a business issues bonds—essentially borrowing from investors—and it's unable to make coupon payments to its bondholders, the business is in default on its bonds.

Defaults can also occur on unsecured debt, such as credit card debt. A default has adverse effects on the borrower's credit and ability to borrow in the future.

Defaulting on Secured Debt vs. Unsecured Debt

When an individual, a business, or a nation defaults on a debt obligation, the lender or investor has some recourse to reclaim the funds due to them. However, this recourse varies based on whether the debt is secured or unsecured.

Secured debt

If a borrower defaults on a mortgage, the bank can reclaim the home that secures the mortgage. Also, if a borrower defaults on an auto loan, the lender can repossess the automobile. These are examples of secured loans. With a secured loan, the lender has a legal claim on the asset to satisfy the loan.

Corporations in default or close to default usually file for bankruptcy protection to avoid an all-out default on their debt obligations. However, if a business goes into bankruptcy, it effectively defaults on all of its loans and bonds since the original amounts of the debt are seldom paid back in full. Creditors with loans secured by the company's assets, such as buildings, inventory, or vehicles, may reclaim those assets in place of repayment. If there are any funds left over, the company's bondholders receive a stake in them, and shareholders are next in line. During corporate bankruptcies, sometimes a settlement can be reached.

With that said, here are a few more pitfalls to look out for:

  • Liquidity
  • Emotional Bidding
  • Low-Value Properties
  • Environmental Issues


Liquidity: The ability to sell an asset and convert it to cash.

This is only risky if the investor's cash invests in a tax lien or deed is tied up for an extended period of time. An investor's money is tied in a tax lien until one of two things happens:

  1. Property owners redeem liens by paying the county the delinquent taxes, penalties, and fees in full.
  2. Redemption period passes, and the certificate holder forecloses and sells the property.

A tax deed investor's money is tied up until they execute their exit strategy. The investor might want a cash flow property. Each month the investor receives a check from the renter, or the investor may want to sell it, then exit when the property sells. For some investors, this is important to consider, but it is not a risk. If you need money in the near future for things such as buying food or gas, you should not invest that money unless you know you will cash out quickly.

If an investor needs to exit a tax lien certificate, they can sell it to another investor. We have seen them listed on eBay.

The main thing to look at for a tax lien, tax deed, and redemption deed investors is the redemption period. Consider the most prolonged time period your money will be out of pocket. If you are fine with it, go for it.

Emotional Bidding

Emotional bidding can be described as a state of mind in an auction setting where a bidder gets emotionally caught up to the point where they bid away their returns.

Example: A tax deed investor that is interested in a $50,000 property sets a maximum bid limit of $25,000. Another bidder in the room is competing with the investor and continues to bid higher. The bidding reaches beyond $25,000 and the investor bids until the return is gone.

There are two ways to lose money in tax deed investing: Bid away return through emotional bidding (or bidding too high due to a lack of due diligence) or buying a property with little or no real value. Researching before attending the auction and sticking to your limits will help you to avoid making both of those mistakes. To avoid bidding away your return:


  • Research beforehand
  • Make sure property values are solid
  • Set maximum bid limit after considering your exit strategy and after you know the maximum amount you can spend to make a sufficient return
  • Stay cool at the auction

Low-Value Properties

This is quite simple to avoid but is the risk you need to keep in mind more often than the others.

What are low-value properties? Useless land such as a lot in the middle of the desert, far from access to civilization, might be considered low value. We only consider it low value because your options after purchase are limited. Beware of land with easements on it since they can prevent the investor from making changes to the property. 

A good indication of useless land is the assessed value. If the land has an assessed value of $1,000, move on to another investment. Even if the land has a high assessed value, check the location of the land. A piece of land with an assessed value of $500,000 might be in the middle of the Texas desert when no one can reach it.

Other properties you may want to avoid are:

Flood or swampland: May come up in Florida or other southern states.

Landlocked properties: Surrounded by other land and lack public access. To access your land, you have to get permission.

You can avoid both of these property types by looking at a mapping service in the assessor's office or Google Maps.

To avoid making a purchase on a property with low to no real value:

  1. Check the assessed value and look at the property using a mapping service.
  2. Do not buy a property based only on the legal or property description.
  3. Do some due diligence, so you know exactly what the property is.

Environmental Issues

This is uncommon, but something you need to be aware of. U.S. Code Title 42 Section 9601 states property owners are responsible for contamination even if it existed prior to ownership. This is not a problem for tax lien holders since the investor is not the property owner unless he or she forecloses on the property but should be considered a tax deed investor.

This is easy to avoid since all you have to do is look at county records and in most cases, these issues are undeniable. If you are buying an old gas station that experienced underground erosion, you probably have environmental issues. A safe way to avoid environmental problems is sticking to residential land and homes. Residential homes and improved lots usually lack environmental issues.

Other Risks

You may want to consider bankruptcy and federal liens. They will not wipe out a tax lien certificate but can postpone repayment. In some cases, the foreclosure will not wipe out a federal lien. If you are buying a tax lien or deed on a property you want to own, avoid federal liens.

One way to check for any risks we have discussed is through the county records. If you do not find what you need, you can do a title search. You will do a title search if you have questions about a particular property you want to buy. A title search can cost from $25 to $150, depending on the required detail.

There are links on this website's resources page to some online title search companies if it comes to that. If you have any questions about potential risks, please give us a call, and we would be happy to help.

Marketplace Pro Software

You will have to complete the amount of due diligence before bidding on tax lien certificates, or deeds will vary from deal to deal. You can get an idea of how much due diligence may be needed when you evaluate the property description, and this is when Marketplace Pro software comes in handy. 

Suppose you are familiar with the Multiple Listing Service platform used by real estate brokerages. In that case, you will love the intuitive user interface of Marketplace Pro, which is the first step tax lien investors should take when evaluating investment opportunities. 

Contact our office today to arrange a free demo of Marketplace Pro; once you get the hang of it, we can start discussing due diligence strategies.

It is essential to set up your investment criteria before diving into your first tax sale list, or you will not know what to look for and avoid.

When you look at a list you typically see the following:

  • Property Owner and their Address
  • Identification Number (Parcel Number)
  • Amount Owed (Tax Delinquency Amount)
  • Property's Legal Description
  • Assessed or Taxable Value Property
  • Physical Address
  • Property Type

The primary things we want to look at is the amount owed, assessed value, and property type. We can look at them if we need, but it is usually unnecessary, especially in the beginning.

How much do you want to invest?

Decide how much money you have set aside you want to invest. We have had investors start with $100 and students with $1,000,000. This number should not be what you want to invest, but the money you have set aside right now. This will decide which investments you can make. Even if it is a small amount, it is okay since we start somewhere.

What is the property worth?

After you find out how much you can invest, decide what the property value should be for your potential investments based on that investment amount. Investors usually look at the return on investment (ROI) or property value percentage to find this out. If you are investing $5,000 and want your investment to be 15% of the property's value, divide 5,000 by 0.15. This gives you a property value of a little over $33,000. If you are investing $5,000 your base should be $33,000.

What kind of property is it?

The final category you should set is the property type. Are you only interested in a property with a home (single-family residential), or are you looking for raw land or commercial property? Deciding this beforehand will save research time.

Understanding Lists

The investment process can be broken into four steps. Find and read the tax sale list, make investments, and perform an exit strategy.

We will now talk about reading a list once you acquire it and sift through the list to find qualified investments.

As mentioned in the training video about determining your investment criteria, there is a lot of data on tax sale lists. Still, we only care about the amount we invest, the property value, and the property type. To quickly sift through to find items that meet the criteria we set up; we use the Quick Glance Method.

Quick Glance Method

We quickly skim through a tax sale list to narrow the list based on our criteria:

  1. We look at the amount owed on each investment and quickly mark the ones that qualify.
  2. We go through and check off the ones that have a qualifying property value and mark them.
  3. You scan those to mark the ones that are the right property type.

We did not look at the parcel description or other codes. Once you do the Quick Glance Method you can do deeper due diligence if necessary.

Due Diligence Definition

Due diligence is an investigative review performed to confirm facts or details of a matter under consideration. Due diligence requires an inquiry of financial records in the financial world before entering into a proposed transaction with another party.

Due diligence became a common practice in the United States in 1933 with the passing of the Securities Act. With that law, securities dealers and brokers were responsible for fully disclosing material information about their selling instruments. And the failure to disclose this information to potential investors also made both dealers and brokers potentially liable for criminal prosecution.

The writers of the act also realized that requiring full disclosure left dealers and brokers vulnerable to unfair prosecution for failing to disclose a material fact they did not possess or could not have known at the time of sale. The act included a legal defense: as long as the dealers and brokers exercised “due diligence” when investigating the companies whose equities they were selling, and fully disclosed the results, they could not be held liable for information that was not discovered during the investigation.

Performing due diligence means researching potential investments to ensure they are good, which means they will perform well and return as estimated. If you perform due diligence and set up a good deal, there should not be too many questions. The first-way tax lien and deed investors research potential investments is using tools on the particular county assessor's website. There is usually a parcel search tool to plug in the identification number for a property and see detailed information. Due diligence is a systematic way to analyze and mitigate risk from a business or investment decision. An individual investor can conduct due diligence on any stock using readily available public information. The same due diligence strategy will work on many other types of investments. Due diligence involves examining a company's numbers, comparing the numbers over time, and benchmarking them against competitors. Due diligence is applied in many other contexts, for example, conducting a background check on a potential employee or reading product reviews.

Due Diligence Basics for Startup Investments

When considering investing in a startup, some of the 10 steps above are appropriate, while others aren't possible because the company doesn't have a track record. Here are some startup-specific moves.

  • Include an exit strategy. More than 90% of startups fail. Plan a method to recover your money should the business fail.
  • Consider entering into a partnership: Partners split the capital and risk, so they lose less if the business fails.
  • Figure out the harvest strategy for your investment. Profitable businesses may fail due to a change in technology, government policy, or market conditions. Be on the lookout for new trends, technologies, and brands, and get ready to harvest when you find that the business may not thrive with the changes.
  • Choose a startup with solid, marketable products. Since most investments are harvested after five years, it is advisable to invest in products with an increasing return on investment (ROI) for that period.
  • In lieu of hard numbers on past performance, look at the business's growth plan and evaluate whether it appears to be realistic.

Specialized Due Diligence

In the mergers and acquisitions (M&A) world, there is a delineation between “hard” and “soft” forms of due diligence. “Hard” due diligence is concerned with the numbers. “Soft” due diligence is concerned with the people within the company and in its customer base. In traditional M&A activity, the acquiring firm deploys risk analysts who perform due diligence by studying costs, benefits, structures, assets, and liabilities. That's known colloquially as hard due diligence.

Increasingly, however, M&A deals are also subject to studying a company's culture, management, and other human elements. That's known as soft due diligence. Hard due diligence, which is driven by mathematics and legalities, is susceptible to rosy interpretations by eager salespeople. Soft due diligence acts as a counterbalance when the numbers are being manipulated or overemphasized. There are many business success drivers that numbers cannot fully capture, such as employee relationships, corporate culture, and leadership. When M&A deals fail, as more than 50% of them do, it is often because the human element is ignored. Contemporary business analysis calls this element human capital. The corporate world started taking notice of its significance in the mid-2000s. In 2007, the Harvard Business Review dedicated part of its April issue to what it called “human capital due diligence,” warning that companies ignore it at their peril.

What Are the Types of Due Diligence?

Depending on its purpose, due diligence takes different forms. A company that is considering an M&A will perform a financial analysis on a target company. The due diligence might also include an analysis of future growth. The acquirer may ask questions that address the structuring of the acquisition. The acquirer is also likely to look at the target company's current practices and policies and perform a shareholder value analysis. Due diligence can be categorized as “hard” due diligence, which is concerned with the numbers on the financial statements, and “soft” due diligence, which is concerned with the company's people and its customer base.

What Is a Due Diligence Checklist?

A due diligence checklist is an organized way to analyze a company. The list will include all the areas to be explored, such as ownership and organization, assets and operations, the financial ratios, shareholder value, processes and policies, future growth potential, management, and human resources.

What Is a Due Diligence Example?

Examples of due diligence can be found in many areas of our daily lives. For example, conducting a property inspection before completing a purchase to assess the investment risk, an acquiring company that examines a target firm before completing a merger or acquisition, and an employer performing a background check on a potential recruit.


Due diligence is a process or effort to collect and analyze information before deciding or conducting a transaction, so a party is not held legally liable for any loss or damage. The term applies to many situations but most notably to business transactions. Due diligence is performed by investors who want to minimize risk, broker-dealers who wish to ensure that a party to any transaction is fully informed of the details so that the broker-dealer is not held responsible, and companies who are considering acquiring another firm. Fundamentally, doing your due diligence means that you have gathered the necessary facts to make a wise and informed decision.

Though many small or rural countries do not have websites, counties make property information available online. This makes research much more manageable. It is possible to skim through physical records and find what you are looking for, but we find using county web tools much more straightforward.

Here are a few main points about county property records.

The county assessor's records contain information the assessor uses to find the value of every. This information can help investors determine the value of properties they are interested in buying.

Counties are not required to put the property record information online but make it available to the public. Over the past 10 – 15 years, counties have increasingly become more tech-savvy. Many counties have websites where they post the assessor information, and you can view the records online. If a county website is not available, the investor can go to the county building to view the records or call the county official in charge of property records for information.

Using county officials is an excellent tool for tax lien investors that often goes untapped. Make sure to use them when you have specific questions about their records or county information. The county office is our team's hotline support. When we have a question, we call the county official.

How Does Recording of Real Estate Records Work?

Just as in any transaction, keeping an official paper trail and record of any sale or change in ownership is an integral part of verifying a given property or purchase history. Recording – the act of putting a document into official county records – is a necessary process that provides a traceable chain of title to a property. More than 100 types of documents can be recorded, depending on the type of property and type of real estate transaction. The most common forms are mortgages, deeds, easements, foreclosures, estoppels, leases, licenses, and fees, among other documents.

The most important real estate documents list ownership, encumbrances, and lien priority. These are used to maintain proper real estate transactions.

Real Estate Recording Systems

In reality, recording systems vary by state and are established by individual state statutes. Not all states use a process of instrument recording to track title; some states use land registration systems instead. In any case, it is the local county's responsibility or state to make sure that these official documents are kept on file.

Recorded documents do not establish who owns a property–this is instead of a title that demonstrates the asset's legal owner. Instead, recorded documents are made public to resolve disputes between parties with competing claims to a property. For instance, if two different claimants have conflicting deeds to a property, the date of recording can be used to determine the ownership timeline. In most cases, these public records provide clarity, and typically the owner with the most recent deed would be considered the rightful owner. If there are any issues, it would be wise to seek legal counsel.

In the case of mortgage liens, courts use a recording date to determine the priority for which liens should receive payment first.

To understand which documents have been or must be recorded, check with your state and county recording division. Some states have also passed recording acts, which are statutes that establish how official records are kept.

Ultimately, recordings provide information for both government authorities and the buyers and sellers of real estate property.

What Is a Recording Fee?

The term recording fee refers to an expense charged by a government agency for registering or recording the purchase or sale of a piece of real estate. The transaction is recorded, so it becomes a matter of public record. Recording fees are generally charged by the county where the transaction occurs since it maintains records of all property purchases and sales. The amount of the recording fee varies from county to county.

Understanding Recording Fees

The purchase and sale of real estate come with closing costs. These are expenses that buyers or sellers pay to complete the transaction. In some cases, both parties may agree to split the costs. Closing costs include appraisal fees, loan origination fees, title searches and insurance, surveys, taxes, and recording fees.

Counties record mortgages and other liens against a home or other piece of property as well as its title. These government agencies generally charge a fee to do so. This is known as the recording fee. Counties charge a recording fee to make the information easily accessible to the general public by covering the costs of the clerk or recording agency's services that must maintain complete and accurate copies of official documents. These documents may be used for legal and transactional purposes, such as when title searches are conducted as part of a sale.

In many instances, the buyer pays the new mortgage and deed recording fees to be entered into a legal record. The amount depends on the type and complexity of the real estate transaction. The recording fee may cost $12 in one county, while another county charges buyers $15. Costs may also vary depending on the size of the document. For instance, a land record instrument may have a $60 fee for the first page, then $5 for every subsequent page. Another agency may charge $84 for the first page and then $1 for every other page after that. The fees may also change over time as the agency and county deem necessary.

Documents that generally incur recording fees include affidavits, leases, mortgages, corner certificates, uniform commercial code filings, changes of title, deeds, registration of trade names, boundary surveys, powers of attorney (POAs), bills of sale, and other contracts. Depending on the jurisdiction and guidelines, transactions such as bank mergers may need to be documented with recording fees.

County Record Tools

Parcel Search: This is the top tool used by investors. They contain all real estate records that investors use to evaluate potential investments.

Owner information: Legal owners on the deed.

Legal Description: Description the assessor uses to describe the parcel. Unless you are a real estate guru, the legal description is rather difficult to read.

Parcel number: Similar to a fingerprint for each property.

Site Address: Physical location of parcel. Once you have the physical address you can do much more research, drive by etc.

Tax Information: View past years assessed value.

Assessed Value: What the county says the property is worth. The assessed value and the market value may be different.

Improvement Info: Sq. ft. bedroom, bath, year built, lot size etc.

Tax records are also available to investors. Having access to that information can allow you to review all past tax owners, payments, assessed values, and amounts owed. Many counties provide an essential feature on their website is a map, which shows the actual property and its boundaries. This is included with the information returned from the parcel search in most cases, but the mapping software is sometimes a different feature.


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Foreclosures are the legal process in which a property owner's right to redeem or retain the property is removed. It's pertinent to define what a foreclosure is before moving forward. 

Foreclosure can be defined as the legal process by which a lender attempts to reclaim the amount owed on a defaulted loan by selling the mortgaged property. Usually, default occurs when a borrower misses a number of payments. But it may happen when the borrower fails to meet other terms in the mortgage document.

The foreclosure process forms its legal basis from a mortgage or deed of trust contract, which allows the lender the right to use a property as collateral if the borrower fails to confirm the terms of the mortgage agreement.

Even though the process varies by state, the foreclosure process is established when a borrower defaults or misses at least one mortgage payment. The lender will then send a missed payment notice that demonstrates they haven't received the payment.

If the borrower misses two payments, the lender sends a demand letter. While this is more serious than a missed payment notice, the lender may still be willing to make arrangements for the borrower to catch up on the missed payments.

The lender sends a notice of default after 90 days of missed payments. The loan is handed over to the lender's foreclosure department. The borrower typically has another 90 days to settle the charges and reinstate the loan (this is called the reinstatement period).

At the end of the reinstatement period, the lender will begin to foreclose if the homeowner has not made up the missed payments.

The Foreclosure Process Varies by State

Each state has laws that govern the foreclosure process, including the notices a lender must post publicly, the homeowner's options for bringing the loan current and avoiding foreclosure, and the timeline and process for selling the property.

As in the actual act of a lender seizing a property, a foreclosure is typically the final step after a lengthy pre-foreclosure process. Before foreclosure, the lender may offer several alternatives to avoid foreclosure, many of which can mediate a foreclosure's negative consequences for both the buyer and the seller.

In 22 states—including Florida, Illinois, and New York—judicial foreclosure is the norm. This is where the lender must go through the courts to get permission to foreclose by proving the borrower is delinquent. If the foreclosure is approved, the local sheriff auctions the property to the highest bidder to recoup what the bank is owed. The bank becomes the owner and sells the property through the traditional route to recoup its losses.

The other 28 states—including Arizona, California, Georgia, and Texas—primarily use non-judicial foreclosure, also called the power of sale. This type of foreclosure tends to be faster than judicial foreclosure, and it does not go through the courts unless the homeowner sues the lender.

Let us look at a tax lien investing scenario when foreclosing is an option.

Remember, the redemption period starts on the day of the sale during the year the certificate was issued. If the property owner has not redeemed by the end of the redemption period, the tax lien holder can initiate the foreclosure process.

Second, the investor sends out notices to everyone with a financial interest in the property. This includes a mortgage company or another lienholder, like a mechanic's lien holder. It is possible to have the county help you do this for a small fee, hire a real estate attorney, or do it yourself if you know what you are doing.

Utilizing the foreclosure process is only necessary with tax liens since the county has already foreclosed tax deeds. With redemption deeds, the deed does not get filed until the redemption period expires. The lienholder is required to send out notices at the beginning of the foreclosure process. This gives the property owner one more chance to pay off the lien.

For example: it has been two years since you purchased a tax lien certificate and the redemption period is two years. Legally, the certificate holder can now foreclose on the property. Notices are sent out to the property owner and other interested parties, which have 30 – 90 days to respond.

If you are foreclosing yourself, the county can provide steps to complete the process. For example, they will require you to use certified mail for the letters, and the time period in which financially interested parties have to respond may differ. If there is a mortgage on the property, the mortgage company will likely respond to the notice with payment of your investment plus earned interest. If the mortgage company does not respond, the property reverts to the lienholder, free and clear of mortgage obligation.

Once you finish the foreclosure process and become the property owner, the property does not have any mortgages or liens against the property since they were cleared during the foreclosure process. When you send out notices, and no one responds, you show a judge your certified mail delivered and show they did not respond during the allowed time period, and the judge will issue a clear title.

Types of Foreclosures 

If a homeowner has defaulted on his payment, then the mortgaging bank will start the pre-foreclosure process. A tax lien will then be issued for the property so that the right to retain the property can be gained. You can do real estate investing in tax liens for a certain property that has been issued a lien and put out for an auction sale. You can earn profit from this because the state will pay fixed interest on a tax lien, and others will start the bidding price at auctions in the amount of the lien. Suppose the tax lien is unpaid during the duration of the redemption period. In that case, all other mortgages and liabilities on the house are extinguished, and the title to the property will be cleared. The investor will now own his or her new property with a clean title. However, if the owner can pay the property's liability, the investor can still earn through interest earned on the lien. Real estate investing in this manner can lead to profits in both ways.

Determining Real Property Values

People tend to overvalue or exaggerate the value of things they own. It is important to keep your emotions in check and value potential investments objectively. This session will discuss how to do that.

A proper value assessment ensures investment security. The number one thing to research is the property value. Different investment strategies require varying degrees of research. The more money invested, the greater the research that needs to be done. Tax lien investing typically requires an external evaluation, but tax deed or redemption deed investors need to know more specific information.

A few formulas used to determine property value are:

  • Comparable Market Formula
  • Net Operating Income Formula
  • Replacement Cost Formula

The only one you will likely use is the Comparable Market Formula.

To use the comparable market formula, the investor will price similar homes that have recently sold, and homes for sale within proximity to the home being valued. These similar homes are “comps” and should have the same features and characteristics as the current property being valued.

Appraised Value: A licensed professional real estate appraiser will determine the appraised value of a property. The appraiser will consider similar properties that have recently sold in the area. They might use properties that are currently for sale and properties that were for sale but have expired.

Wholesale Value: Wholesale value is usually on investors' properties and tends to be the lowest estimated price. Wholesale pricing usually means the property will sell for below market value. This is done for quick profit. These properties typically include foreclosure tax lien and tax deed properties.

Tax Assessed Value: Assessed value will be the value placed on a county tax assessor's property. This is an excellent way to check property value when working with tax liens and deeds. Though, this should not be your only way to determine what the property would be. Tax assessed values can fluctuate above or below market value. Generally, they run about 20 percent below the current market value.

Insured Value: Insured value is what insurance companies place on property improvements and structures. This is usually the amount it costs to replace or rebuild the system.

Mortgage Value: Mortgage value is what a mortgage company loans on a property. This value is generally close to the appraised value.

Retail Value: Retail value is what a homeowner or property owner places on the property. This is the price they feel their property is worth. This value is usually above market value and is the highest value place on real estate.

Real Value: Price someone is willing to pay for the property.