Thousands of people around the country are looking into tax lien investing as a way to either supplement their usual income or open up a new career path. With unemployment at unsettling levels, the average person is starting to understand that depending on a big company for your weekly bread isn’t always the best idea. If you can make money on your own wit and ingenuity, without answering to someone in middle management, you can forge a path towards independence, both personally and financially. Of course, not everyone is successful in their investments. Here are some of the mistakes they make and how you can avoid them.

Nonexistent Properties

While auctions are the most common way for people to get into tax lien investing, they aren’t the only way. Some people prefer to bypass the auction scene and buy over the counter from the county. While this is a legitimate way to do business, you need to make sure you exercise the same diligence you would at auction. That means doing your research. It’s certainly not unheard of for a mistake to show up on a list or for a property to be misrepresented. Don’t take anyone’s word for what you’re purchasing. Visit the address yourself to make sure it’s actually there.

Bidding Too Much

You aren’t going to make any money in tax lien investing if your primary purpose is to simply outbid everyone else. While there are times where you should be willing to expand your budget a bit when making a bid, this should be done with calculation and knowledge. Otherwise, you’ll want to make your bids mean something. Know the property. Know the situation. If you’re outbidding everyone else, are you doing so because you know something they don’t or because they know something you don’t? This is something you’ll need to consider carefully if you expect to make a profit.

Bankruptcy

Tax lien investing when the owner of the mortgage is going through bankruptcy can be a big mistake. The priorities could be rearranged by a judge, which can make it challenging or impossible for the holder to get back any of his investment. Depending on how much you spent on your lien, this could be the first and last investment you’re ever able to make. This is why you’ll want to avoid purchasing anything within a shouting distance of bankruptcy. While there are tricks that can still work in these instances, you’ll need to know a lot more about the game before you employ them.

By Anonymous