• Investing in tax liens is a process that involves purchasing liens directly from a county government. These liens are created when a homeowner fails to pay his property taxes. This is a relatively unknown form of investment that can provide large returns if you know what you are doing. There are several tips to keep in mind when investing in tax liens.
  
  

Focus on Small Sales

• Attending sales in smaller counties can often provide you with better results. When you attend tax lien auctions in large counties, there will most likely be a lot more competition. When there is a great deal of competition to work with, you may have to take lower interest rates than what you would like to get. More bidders means that the interest rates will get bid down lower. At smaller auctions, there are fewer bidders and you can generally get better rates.
  
  

Buy Leftovers

• Not all tax liens are purchased through a bid format. Even though many of the tax liens are sold through an auction, sometimes county governments will have tax liens left over after the auction. For example, if someone buys a tax lien at the auction and is unable to pay for it, it will simply go unsold. The county will most likely not have another auction for these and you can buy them directly from the county. In many cases, you can get these tax liens at the maximum interest rates that they allow, which makes them even more attractive.
  
  

Research

• Before you attend the tax lien auction, performing research can increase your odds of success with this type of investment. You can generally access all of the information about the tax liens that will be available for sale before the sale takes place. You can get information about how much is owed in taxes and what the assessed value of the property is. By doing this, you can make sure that you are buying a tax lien on a valuable property. Those who fail to do research before the sale generally end up making bad decisions.
  
  

Maximums

• Prior to attending the auction, you need to set a maximum spending limit for yourself. Know how much cash you have available and what the minimum interest rate that you would accept on an investment is. Some people get caught up in the bidding frenzy at the auction and end up investing in liens that they should have left alone.