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Where is the Best Place to Invest?

Where is the best place to invest in tax lien certificates or tax deeds? Most people are concerned about which lien states have the highest interest rates and which deed states start bidding at back taxes. I believe that the best place to start investing is in your own backyard. I think that it's best to invest in an area that you know, because you'll know what the property values are and you'll know what to look out for. Each state has different problems that you have to be aware of, especially if you're purchasing raw land.

In Pennsylvania where I invest in tax deeds, for example, I have to worry about whether a property will perk or not. If I buy a lot in a deed sale that doesn't perk I won't be able to get a septic design approved and won't be able to build on the property. Its resale value will be a fraction of the price that I could get for it if it had an approved septic design. In another state you might have other concerns. In dry states, like Arizona for example, you may have to be concerned about water rights.

Don't be too concerned about which state has the highest interest rate. In states with high interest rates, the interest is typically bid down extremely low. What you should be concerned about is will you have the opportunity to pay the subsequent taxes, and will you get the maximum interest rate on your subs, and are there other penalties that you are entitled to.

In New Jersey, for example the interest rate is typically bid down to 0% and then premium can be bid as well. The reason that investors do this is because they know that once they have the lien, they can pay the subsequent taxes and get the maximum interest rate on their "subs," which is 18%, and they will also receive a penalty on the certificate amount of the lien.

In Florida where the maximum interest rate is also 18%, the interest is typically bid down to as low as

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