You might have asked this before, “Is it possible to invest in tax liens and tax deeds tax free?” Well, the answer is yes. It is entirely possible to use cash from a self-directed IRA to invest tax free in tax lien certificates and tax deeds.

You see, if you use the cash from a regular self-directed IRA to invest in tax deeds and tax liens, your cash will grow tax free until you decide to withdraw from your own account after you retire. However, if you plan to use the cash from Roth self-directed IRA and you did not withdraw until you retire, you will not pay your profits’ taxes! Sounds great, isn’t it?

Though a lot of brokerages may say that they contain self-directed IRAs, these may not be true. A true self-directed retirement account can permit you to invest anything as long as it is not prohibited by the law. Investments that are allowable are tax deeds, tax lien certificates, notes, real estate, and other usual investments. True self-directed IRAs are not allowed to sell investments but they suggest investment types that you can utilize your self-directed IRA account for and may even teach you in doing the paperwork but they cannot make any commission.

Now, retirement account specialists say that you are only allowed to roll-over the money from your 401k if you are not working anymore for the company where you set up your retirement account from. But you can roll over the money from a regular IRA account into a self-directed IRA.

Just a heads up, there will be fees when you open and maintain a self-directed IRA but they are of minimum compared to taxes that you will be paying for the government for your capital gains and investment income.

Many people from all over the world ask this question, “Can anyone outside the United States invest in tax liens and tax deeds?”

Well, the answer is a yes.

All that person needs is a US TAX Identification or ID number, which is fairly easy to get from the IRS. What’s even great about it is – even foreigners have the opportunity to invest in tax liens and deeds. But of course, an investor not from the United States has to have all the needed due diligence in order to join the bidding. Here are a few samples of the most significant things one must have:

• Location
• Value
• Property Condition

Since international investors are away from the subject properties that are to be placed in auction, one cannot be in person near the site.

There are two choices that a potential buyer outside the country can do:

1. Have the due diligence through phone. With advanced software tools like Google Earth, counties can very well provide picture databases and map quests or MSN Live Search
2. Hire a Real Estate professional who can very well visit the property for you, take some pictures for you to check out, and do research for the investor.

Now, there are also cases wherein counties or states hold their auctions online and investors, inside or outside the country, can attend to. But again, the investor needs a real estate professional to check out the property or have the due diligence over the phone prior to bidding. Remember, it is always needed to see the property you plan to invest in.

The international investor can also just wait for the actual auction to be over and then ask for the list of the leftover properties known as over-the-counter tax liens. These tax liens are commonly available without the need to bid but by just mailing a cashier’s check with the details of the Tax Lien ID, the investor’s Tax ID, the Property ID, and Bidder ID. The county will then send the investor the Tax Lien Certificate of the property.

With today’s technology, investors from all over the world can now purchase tax liens and tax deeds in the United States.

These days, winning a tax deed auction may not be as easy as before as more and more people attend this exciting event.

As more and more people realize the great opportunities that lie behind buying tax deeds, the competition proves to be fairly difficult.

Here are some tips to winning a tax deed auction:

1.) Attend live tax deed auctions instead of online tax deed auctions. Most people prefer to bid in online auctions as it is more convenient.

2.) Choose a county that has a worth-it property that is not in a metropolitan area. There are chances that institutional investors prefer populated areas than rural.

3.) Choose to sit in front and in the center or near the isle so auctioneers can see you quickly.

4.) Attend live tax deed auctions even if the weather is bad. A lot of people are not really that serious that when the auction day turns out to be a bad-weather day, they prefer to not go and just stay home instead. This heightens the chances of you getting good deals.

Any more tips you might want to add?

A lot of people who are interested in buying tax deeds may wonder how do tax deed sales function. Here is a short but detailed walkthrough:

Before a scheduled tax deed auction takes place, the state or the county posts a list of all the properties that will be auctioned. Usually you can find it in newspapers but these days, posting a list in the internet has also become rampant. So if you are resourceful enough, you will be able to get a copy of  the list online (commonly in the county’s webpage). If you want the easy way, you can just contact the county and ask for a list that may come in CDs,  however, this usually comes with fee.

After posting, the public gets at least four weeks to decide and research about the the properties to be auctioned.

During bidding, the interested person will fill out a required form and will  have to claim a bidder number. There may be counties that will allocate these requirements few days before the auction while other counties prefer them during the actual auction day.

Some cases also require a proof of funds while there are also others that require bidders to have at least $2500 cash on hand or a cashier’s check that are to be submitted to the county. The money will then be refunded by the county if somehow the bidder does not win.

There are also some counties which are a less strict wherein they require you to have cash on hand during the auction. Note that counties have specific requirements so it’s always best to contact them and ask about these vital information.

During the auction, the bidding often begins at the amount that is being owed in taxes and goes higher from there. The highest bidder wins and will then receive a Treasurer’s Deed or a Sheriff’s Deed within a couple of weeks from the county.

It is then that the winning bidder becomes the official owner of that property and has the right to take possession of it or sell it.

What is a tax deed sale? A tax deed sale is not similar to a foreclosure wherein it is held by a financial institution because of unpaid mortgages. With the tax deed sale, the sale is being held by the government agency as it takes a real estate as a possession due to the non-payment of the owner of his back taxes. So the house will be sold in an auction wherein its minimum bid is calculated based on the amount of tax that is owed to the government, the interest that is accrued on back taxes, and of course, the cost of the sale.

Now a tax deed is nothing like a tax lien since a tax lien certificate is issued for the amount with interest while the owner’s tax refund checks can be garnished so as to collect the back taxes. There are states wherein the owners can get arrested or can get fines for failure of payment of the property’s taxes. If these tactics won’t work, the government will then ask permission to have the property on sale at an auction.

Take note, each state is different as some states are tax lien states while the others are tax deed states. There are even states that are a mix of both. So if you are indeed interested in purchasing properties at auctions, always conduct research into the procedures and rules of the specific state or county.