Are tax sale properties good investments? This is a question that you are probably thinking of every time you hear of tax liens and deeds. Well, whether or not these properties are good investments, would depend on each situation and different factors to consider.
Every piece of property in a tax sale is sold as is. This means that you would be taking whatever perks and imperfection the real estate has. Any damages to the property that need repairs would be paid for by you. Also, there is no guarantee yet if the place is livable. So, if you are a wise investor, check over the properties in the list again and again before signing the documents.
Whenever you invest in tax liens and deeds, remember to stick to your goals. Are you looking for homeowners that would likely default on their tax debt which makes you the new owner? Or maybe want to earn extra income? Both are possible to do but would take research and skill to achieve either of them. Look for a real estate professional or mentor that can give you helpful advice and share some experience on tax lien and deed investing.
In a tax lien and deed sale, many buyers tend to forget to stick to their plan in the end. This is because winners of the sale are required to pay up after the event however, some of them forget. When this happens, you might be able to grab those properties at a cheaper price. Then, in some cases there are additional properties that are open to anybody who wants to claim them which you can get after. Either way gives you a nice opportunity to make profits.
If you do not like the idea of owning a property at a tax sale but just want to aim for massive profits, then tax overbids is the way to go. Tax auctions produce this gem that can give you 40 – 50% in money finder’s fee. Due to a legal loophole, you can charge for the assistance you give to the property owners in helping them collect the overbid.
Overbids happen when investors at the auction bid more for a property’s lien than is owed in back taxes. The overage is originally due back to its owners. Unfortunately, most property owners do not realize they are entitled to this money and just move on with their lives. This is where you’ll step in and help them collect the money, and in return you would get a percentage of what is collected. There are many foreclosures happening today and these overbids worth a lot so look for them and earn profits.
It is quite common for the local taxing authority to attach liens to properties of homeowners who default on their property taxes. The liens are sold at tax lien sales to the highest bidders. Whoever wins gets the lien certificate, and would pay for the unpaid tax balance of the homeowner. Property owners need to pay the investors within the redemption period or lose their homes. The good thing however, investors would earn interest, depending on the state, after the homeowners redeem their properties.
People have different opinions of these investors. Some see them as saviors of debt ridden property owners, while others view them as taking advantage on the weak. Nonetheless, the whole system of tax sale is intended to be mutually beneficial and fair to both parties. The investors earn profits while the property owners keep their homes.
What are tax deeds and tax lien certificates? They are basically issued by the federal government to delinquent homeowners who do not pay their tax debts. The tax collector’s office of the local county issues a lien wherein homeowners must pay their tax debt within 1 to 3 year period. Failure to do so would result to liens and deeds sold off to property investors.
Lien certificates and deeds are auctioned to interested buyers at a public auction. This is where investors coming from various parts in the United States would compete and bid in order to get the properties they want. The winners then pay off the tax dues of the homeowners. The homeowners in return must pay their debt within the redemption period, or face the consequence of losing their properties. If they do pay up, it must also include interest and other fees so that they can take back their home.
Tax liens and tax deeds both help investors and property owners. Also, it helps the government in giving out the needed public services to its people. In a way, it benefits all.