In the world of investing, due diligence can be described as the collection of good practices related to the investigation of any financial asset. If you are considering tax lien investing, due diligence before buying is important. The due diligence process involves evaluating the property, determining its value and comparing it to the selling price of the tax lien. You do not want to pay more for a tax lien than what the property is worth in order to make an investment profitable. If you are not sure about the due diligence process, fully explain it to a tax lien sales representative from whom you wish to purchase a tax lien.
Who is Selling and For What Price?
When purchasing tax liens, you will need to know who is selling them and for how much. The investor should be informed about the due diligence process and who is selling tax liens. Generally, the investor will do the due diligence research him or herself. He or she can obtain a list of all expired tax lien certificates from his local county's auditor's office.
Due Diligence in the Information Age
Due diligence in the world of tax lien investing has taken on a new meaning in recent years due to the growth of technology. Online due diligence is an integral part of any online tax lien sale. This due diligence allows potential investors to spend hours researching each issuer prior to making their decisions. So how does one go about due diligence? By following a few simple steps, you will create due diligence practices that rival the due diligence followed by many of the world's top investors.
First identify your criteria for due diligence and document them to create due diligence practices. This should include items such as credit, experience, net worth or assets, state tax lien limits or thresholds, and due diligence period. Once these due diligence practices are identified, document them so the due diligence may be followed each time you invest.
Next determine if you will require an investor packet or due diligence report for all investment opportunities. If not required, due diligence should still be performed manually by reviewing documents online based on due diligence practices. If due diligence packets are required, due diligence should be performed automatically by reviewing due diligence reports. These steps will save time and assure due diligence is properly performed.
We recommend thorough due diligence practices in order to review all tax lien issuers prior to investing. This means visiting each issuer's online public records pages regularly (at least once per month) to review due diligence reports and due diligence packets. If due diligence packets are required, due diligence should be performed automatically by reviewing due diligence reports. These steps will save time and assure due diligence is properly performed.
Investor Tip: Consider using a tax lien due diligence service to help you with your due diligence efforts. A tax lien due diligence service will help you due diligence on each issuer for free.
Want to learn more? Check out our investor workshop demo: https://www.tlwbevents.com/workshop