How to Choose a Good Tax Lien Fund

What makes a tax lien fund a good choice for one investor may make the same tax lien fund a poor choice for another, but just as a tax lien investor should research the potential properties prior to purchase, so too a potential client should research tax lien funds prior to giving them control over their investments. Here are just a few things to consider when choosing your tax lien fund.

Minimum and Maximum Investments. Whereas there are no restrictions on your budget when investing in tax liens on your own, tax lien funds set a minimum investment amount in order to make their efforts on your part worthwhile. Occasionally you may find funds with a minimum investment of as little as $5-10,000, but more frequently you should expect to invest at least $25,000 and up. Also, if you are a power investor be aware that there are limits on how much you can invest as well. The better tax lien funds allow individual clients to invest into the millions.

Other Requirements. Some tax lien funds have client requirements that go beyond your investment capital. The most common qualifiers are age and income related. For example, tax lien funds usually require their clients to be legal adults. Additionally, they may request that their clients have a provable income of several times the minimum investment or comparable liquid assets. In some cases, tax lien funds may even do a credit and background check to verify the legitimacy of the investor.

Experience. Look for tax lien funds that present themselves and their key staff as an open book. If you wanted your money invested by an amateur, you could do it yourself and save the commission. A good tax lien fund will be fronted by staff with extensive experience in investing and real estate. They should also be able to provide solid statistics on past performance and annual revenue. You should be just as discerning when selecting your tax lien fund as they are when selecting their client investors.

Coverage. If you have a real interest in being part of the process, then consider tax lien funds that cover your area so that you can see the purchases they are making for you. By playing a more active role in the investment process, you will have a better understanding of how good tax lien investments are made should you choose to invest on your own in the future. By choosing a fund that covers several counties, you can also rest assured that they are pursuing as many avenues as possible to secure the best investments for their clients.

Staff. As mentioned earlier, the qualifications of the staff should be key in determining which tax lien fund is right for anyone. Only professionals should be entrusted with your money and the future of your investments. Also, be wary of tax lien funds who are difficult to communicate with. You deserve an agency that appreciates your business, takes your investment seriously, and will always supply you with quick and complete answers.

Average Rate of Return. This is an important number for you as the investor. Be aware that most tax lien funds pay on an annual basis, issuing yearly reports along with payments to all of their clients at the same predetermined time. Most funds focus on long-term investing, which means a single investment may yield returns for several years until the lien is redeemed or the property is foreclosed upon and sold. For short-term investments, you should expect to receive no less than 80% of the proceeds from interest collected and no less than 75% of the profits from the sale of a foreclosed property. For long-term tax lien investments, look for a tax lien fund that promises annual returns above 20% a year.