Forgot your password?

The Truth About Tax Lien Properties

By Edited Nov 13, 2013 0 0

Tax lien properties? Never heard of it. Sounds complicated. Anything to do with taxes couldn't possibly benefit me. Buying properties for pennies on the dollar only happens in those late night infomercials. These thoughts were mine regarding tax lien properties until I discovered the truth about these properties. There is a huge return on investment (ROI) on these properties if you are willing to put some time and energy into researching the properties.

Institutions, like credit unions and banks, and large investors have the resources to research and purchase tax lien certificates which in turn can become tax lien properties. But, they would rather keep this 'gold mine' to themselves to keep lining their pockets with properties they acquired for pennies on the dollar or guaranteed ROI of up to 50%. You will rarely hear your financial adviser telling you about this opportunity, but it's worth your while to see if this stream of income is something that you'd like to pursue. If your dream is to own real estate, this could be the best way to make your dreams come true.

As most of you know, state, county and local governments raise money to provide services, such as law enforcement officers, paramedics and other first responders, through revenue from property taxes. Homeowners understand the concept of property taxes well, as most pay this tax once or twice a year. This tax is based on the fair market value of the property multiplied by the current tax rate. Property taxes should be paid in full when they become due by all homeowners. Fortunately, or unfortunately, however you look at it, some homeowners fail to pay their property taxes on time. Laws and time lines for property tax delinquency vary by county, but when the property owner becomes delinquent on their taxes, the amount of the tax becomes a lien against the property. This lien does not help the state, county and local governments provide the services necessary to keep their entity running, so they are authorized, by state statute, to collect taxes due by selling the amount that is unpaid at public auction, either through Tax Lien Certificate or Tax Deed.

When an investor buys a Tax Lien Certificate at auction, they are essentially paying the back taxes of the property owner. The state, county and local governments can continue to provide the services to their community and the tax lien certificate holder is now owed the full amount of the taxes plus a penalty to be paid to them, not the county assessor (although the county assessor will receive the payment and then pay the investor). The penalty is a fixed amount set at auction (some with state imposed maximums of 50%). Yes, that would be a 50% return on your investment. This is the part where I tell you to do your due diligence on the property BEFORE you buy the Tax Lien Certificate. There is a risk involved if you don't research the property to make sure there are no additional liens or claims to the property.

Tax lien auctions are usually advertised in the local paper or through research on a county's website and anyone that can legally own property in the United States is allowed to attend and buy tax lien certificates. Many auctions are held throughout the year, so if you plan on tax lien properties becoming a part of your portfolio, you should attend one of these auctions, in the county or state you plan to purchase tax lien certificates in, BEFORE you actually decide to purchase a tax lien certificate. This will give you invaluable insight as to how the auction is run, who are the major players and if you would benefit from buying UNSOLD tax lien certificates after the auction is over.

Tax lien certificates are the first lien on the property in many states. What does this mean to you? If a property owner fails to pay their back taxes and penalties within a certain time frame, you, the tax lien certificate owner can foreclose on the tax lien and take ownership of the property. This is how a tax lien certificate investor becomes a tax lien property OWNER. Real estate taxes trump all other liens on a property, including all mortgages, so the tax lien certificate investor owns the property 'free and clear'. Once you have the deed in your name, the tax lien property is now YOUR property and you can flip it for an enormous ROI.

Tax Lien Properties, if researched properly, can become a valuable money making tool for you. While most property owners do pay their back taxes and penalties, there are those that don't, so why should others take advantage of this situation. Take yourself down to your County Tax office, read your local paper, research on the Internet, but do yourself a favor and learn the property tax laws in your county and see if there are any properties you might be able to acquire. Learning in your own backyard is the best way to master research and purchasing of tax lien certificates. Acquiring Tax Lien Properties is not a get rich quick scheme or a become a millionaire overnight ploy, but with some research, some cash and a favorable downturn in the economy, this is a great time to become a real estate investor. Happy property hunting!!!



Add a new comment - No HTML
You must be logged in and verified to post a comment. Please log in or sign up to comment.

Explore InfoBarrel

Auto Business & Money Entertainment Environment Health History Home & Garden InfoBarrel University Lifestyle Sports Technology Travel & Places
© Copyright 2008 - 2016 by Hinzie Media Inc. Terms of Service Privacy Policy XML Sitemap

Follow InfoBarrel