Starting out in tax lien investing? You're probably excited—and maybe a little nervous. That's completely normal. The thing is, while tax lien investing can offer some interesting opportunities, newcomers often stumble into the same traps that could easily be avoided with a heads-up.
Let's talk about the most common mistakes we see and how you can sidestep them from day one.
The Auction Fever Trap
Picture this: You're at your first tax lien auction, adrenaline pumping, and suddenly you're bidding on a lien just because it “feels right.” Sound familiar?
This is probably the biggest mistake new investors make—getting caught up in auction excitement without doing their homework first. It's like buying a house based solely on the front yard photo. You might get lucky, but you're essentially gambling rather than investing.
Here's what seasoned investors often do instead: they research properties long before auction day. They'll check out neighborhoods, look at comparable sales, and sometimes even drive by properties to get a feel for the area. The boring stuff? That's where the smart money gets made.
The auction should be the final step in your process, not the first time you're really thinking about whether a property makes sense.
The “It'll Redeem Quickly” Assumption
New investors often think, “Hey, someone will just pay this off in a few months, and I'll get my interest.” Sometimes that happens. Sometimes it doesn't.
Here's the reality: redemption periods can stretch much longer than you might expect. We're talking months, sometimes years. That money you thought you'd have back by Christmas? It might be tied up until the next Christmas—or the one after that.
Many experienced investors suggest treating tax lien investing like a longer-term play rather than a quick flip. Some even recommend only investing money you won't need for at least a year or two. It's not the most exciting advice, but it can save you from cash flow headaches down the road.
The Title Surprise Nobody Wants
This one can be a real gut punch. You think you're getting a clean investment, but then you discover the property has other issues that your lien doesn't magically fix.
Maybe there's a federal tax lien that takes priority. Maybe there are mechanics' liens you didn't know about. Maybe there's some other complication that makes your investment less attractive than you thought.
It's like buying what you think is a clear path to the front door, only to find out there are several other keys that also open that same door. Not exactly what you signed up for, right?
Many investors we've talked to emphasize doing title research upfront—or working with professionals who can help with this. It's not the most exciting part of the process, but it beats unpleasant surprises later.
The “I'll Figure It Out as I Go” Approach
Look, we get it. Sometimes you just want to jump in and start learning by doing. But tax lien investing has enough moving parts that winging it can get expensive fast.
Think about it this way: would you perform surgery after watching a few YouTube videos? Probably not. While tax lien investing isn't quite that high-stakes, treating it too casually can still cost you.
The investors who seem to do well long-term are usually the ones who took time to understand their local market, learned the rules of the game, and maybe even connected with others who've been doing this for a while.
Building Your Success Foundation
Here's the thing about avoiding these mistakes: it's not about being perfect from day one. It's about being thoughtful and systematic in your approach.
Some investors start small—maybe with just one or two liens—to get comfortable with the process. Others spend months researching and learning before making their first investment. There's no right or wrong timeline, but there is value in being prepared.
Consider connecting with local investment groups, attending auctions as an observer first, or even working with professionals who understand your specific area's rules and quirks.
The Bottom Line
Tax lien investing can be interesting, but it's not a get-rich-quick scheme. Like any investment strategy, it comes with real risks and requires real knowledge to do well.
The good news? The mistakes we've talked about are all preventable with some upfront work and realistic expectations. The investors who treat this as a business rather than a hobby tend to have better long-term experiences.
This blog is for informational purposes only and should not be relied upon as financial or investment advice. Real estate investing carries risks, and individual results will vary. Always consult with your team of professionals before making investment decisions. The authors and distributors of this material are not liable for any losses or damages that may occur as a result of relying on this information.
