Some investors may have mastered the concept of investing in tax lien properties. They already have ideas and strategies on how to bid for tax liens. Nevertheless, for those who don’t have any clue yet in real estate, this topic may appear unfamiliar. And as far as application of the process is concerned, it can be difficult for them to do the actual process.
It is crucial to be informed on the aspects of tax lien prior to investing because money is involved. To be a smart investor, one must be aware on each penny spent, otherwise lose financially. That is why research and analysis, coupled with due diligence, is a must in order to achieve profits and return of investment.
Currently in the real estate market, there are lots of properties that face foreclosure due to unpaid taxes. While this is a bad situation for the owners, on the other hand it is good if you are a tax lien investor who is looking for a property at a bargain price.
Here are some tips to take into consideration when you’re thinking of joining a tax sale, and purchasing tax lien properties:
a. Make sure you do due diligence or research ahead of time.
b. Look for an experienced real estate mentor who fully understands the tax lien sale process.
c. Know how long it takes to redeem the lien certificate for each state so that you can collect return of investment.
d. Conduct a title search.
e. Keep in mind that properties in the tax lien sale are “as is”, which means that some may need repairs.
The most basic rule when investing in real estate is conducting a complete investigation process. This would greatly help in knowing the auction process which includes terms of payment, forms needed, schedule of the sale, location of the properties advertised, and fees.
You must also find out if the properties can be bought online or in person, people in charge of the sale, and availability of over the counter liens. Remember that these are mandatory information that must be accomplished before you are ready to invest in tax lien properties.
There are times wherein you can find gems in left over tax liens. It is because tax sales sometimes have so much competition that it would be best to forego the auction, and buy left over liens instead. The county has plenty of left over liens which were not sold during the sale, and buying them can give you the best returns.
Left over tax lien investing is a practical way of avoiding the competition. The big investors sometimes overlook those tax lien properties offered during the sale. It is now up to you to grab those properties. You just need to be keen in doing your own research on those sold over the counter. Get the most maximum interest rate from these properties, and make a decent return on your investment.
Ever heard of tax lien? How can it affect you financially? A lien can affect your assets, both present and future that you may acquire. This would include mutual funds, stocks, bonds, property, securities, and even vehicles. Your capacity to gain new credit is greatly affected, once an IRS tax lien search is conducted against you. Creditors may deny you new application for credit and increase interest rates or the current ones.
Furthermore, if you are a businessman, the Internal Revenue Service would lay claim against your business. This includes accounts receivable. You would not receive profit even though your business continues to operate.
Now that you’re the holder of the tax lien certificate, you need to know the following in order not to waste precious time and effort. If the homeowner is able to pay promptly, you can earn the interest rate set by the county. The interest is counted monthly. So, the amount of interest you’re going to receive would depend on how many months you’ve waited within the redemption period. Wait until the homeowner has paid off his tax debt.
In the event that the redemption period has come to pass, and still the homeowner hasn’t paid, you can foreclose the property and apply for the tax deed. This way you can get your return of investment.
There are a couple of reasons to lose your home to a foreclosure. The most common is not paying the mortgage. Remember that financial struggles can jeopardize your right to stay in a property. However, the law states that you cannot be evicted right away.
Do take note that the lending institutions would serve notices to you before an actual foreclosure can proceed. Also, some states would allow you to stay up to the last day, until the deed is transferred to the new owner.
Failure to pay the taxes can also cause you to lose your property. If you owe money to the Internal Revenue Service, they can seize your property as payment to the IRS tax lien debt owed.
One of the keys to a successful investment in tax lien properties is conducting a proper home inspection before investing. Banks in most cases owns foreclosed properties and would ask for a home inspection report. However, just in case it does not, you must acquire a home inspection report for your money’s worth and benefit.
Up-to-date home inspections are crucial as it informs you of any defects and present modifications to the property. The home inspection also helps you convey future prospects of the property. Aside from getting the services of a home inspector, you need to visit the property together with your real estate agent. Do this in order to avoid wasting your money in a property with bad capital appreciation rates.
When investing for tax lien certificates, do not forget that some counties and jurisdictions in the United States require large deposits from investors at the start of the auction. It is regardless of the tax lien certificate amount that you are looking to purchase. Moreover, payments of these liens are usually in cash and due on the spot. Failure to pay the full amount can potentially result in barring you from future tax lien sales.
Do take note that lien certificates are almost worthless, until the designated time frame provided for the original property owner to pay up his tax debt. Furthermore, lien certificates cannot be traded for cash. So, keep it or until the fees are settled by the property owner.
Tax lien certificates as a superb investment strategy for young and old alike, have seen a rise in popularity over the years. Many see the potential in it because of how to easily to acquire one. Plus, the opportunities of getting high returns which is very attractive.
However, you need to know that there are always risks involved in this type of investment. But the negative effects of these risks can be avoided by doing your research. It also pays to be smart in your decisions when it comes to choosing the tax lien properties included in the auction. Learn as much as you can and get information available no matter how small it is. Study thoroughly the properties you want to bid. Take note that some investors bid blind. They often end up with properties worth nowhere near the money they bid on it. So, take advantage on this situation too.