Alright, so I can’t cover everything there is to know about tax lien investing in this article but I can give you what you need to know to get started. ANyone can nvest in tax liens from any where in the world!
What is a Tax Lien Anyway?
To begin with let’s start with defining just what a tax lien is. When property taxes are not paid on time (delinquent), the county can either sell your land right out from under you – that’s called a tax deed, or they can sell the late taxes to an investor so the county gets their money needed to pay for school, police, hospitals, and parks etc. this then gives the land owner extra time to pay what is owed, and giving the tax lien investor the interest and penalties that would normally be paid to the county. Everybody wins.
Why Would You Want To Buy A Tax Lien?
Depending on the state, the returns collected when the lien is paid off (redeems) can range from 5% to 36% per year. This totally smashes the interest that you get from a bank, and even the stock market can’t match that usually! Although the money you invest in a tax lien is not protected the FDIC, the return is guaranteed by government law, and your investment is secured by the property. It’s called a “tax lien” because there is a lien put on the property for the tax amount – which is really the amount of taxes owed plus penalties accrued up to the date of the tax sale.
Do Your Due Diligence
Because the liens are guaranteed by the property, of course you should check all the details (doing the due diligence) on the property before you invest in a lien on it. In most states a tax lien comes before a mortgage or other non-governmental liens (is in first position) it comes before a mortgage or other non-governmental liens, a title search is not necessary, and could cut into your profit if you did a title search on all the liens that you intent to invest in. But you do want to ensure that the property is worth a few times what you will invest for the tax lien. You need to check the value of the property. You should look at the tax assessment data for the property and have somebody look at the property to assess its value and the quality of the area where the property is located.
That is the least due diligence that you should to do for residential properties.
Afterwards, you want to make some kind of judgement of its market value before competing for a lien at the tax sale. You’ll also have to know the method for competing at the sale. Is the price of lien bid up (premium bid) or is the interest rate bid down, or is something else being bid. You’ll have to know the bidding rules and procedures and the procedures for registering to bid at the sale.
Other Things You Need To Know
You’ll also need to know how and when you are expected pay for any liens purchased, and what is given to you when you make a purchase. Will you be sent the tax lien certificate and need to record it with the county clerk? Or will you just be given a receipt of all your tax liens and with the recording be done for you. What will you have to pay for the subsequent taxes until the lien redeems? What procedures will you have to follow to receive the deed if the lien doesn’t redeem?
Because in each state the rules and procedures are different, we cannot give you a step-by-step procedure in this short article. You can also get more detailed information and answers to your questions about tax lien investing from my favorite resource:
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