United Tax Liens Blog

How to Figure Out Your Real Estate Investment Criteria

How to Figure Out Your Real Estate Investment Criteria

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.

About The Author


United Tax Liens is a group of experienced, active investors providing everyday people with access to one of the best Real Estate Investment vehicles available today.

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