Tax lien investing is one of the best methods to establish a steady stream of income in the real estate market. However, it would take research to learn the ropes but would be well worth the effort afterwards. This is the reason why investors are diving in for the opportunity that guarantees profits through interest rates.
With tax lien investing, you can easily gain as much as twenty percent on your initial investment with little risk. This differs for every state of course. Plus, there’s an opportunity to flip the property later on for more profits. These and more, makes investing in tax lien a very attractable investment in the U.S. nowadays.
Investing your hard earned money in tax lien is one of the best methods to build a constant flow of good income in your real estate plans. It would take a lot of research though to learn the ropes however, your efforts are rewarded well enough. You can easily earn up to twenty percent on your investment with almost little to zero risk whatsoever.
Basically, counties in the United States raise money by taxing the property of a homeowner. If the homeowner fails to pay his taxes, the tax amount becomes a lien against the property. The great thing about this is that the lien supersedes any other judgments against the property. This also includes the mortgage. This simply means that if the homeowner does not pay property tax, then you as the holder of the lien acquire the title to the property. Ahead of the bank that holds its mortgage. With this, the bank itself would pay the lien off just to protect their investment, even with any interest.
In the first place, why do the counties sell these liens? It is because they need the money from taxes, in order to pay for schools, police, hospitals, and other public services. Each and every county is authorized to collect the taxes due by statute, which remains unpaid by selling at public auctions. It is either a tax lien or tax deed. So, invest in tax liens because the income is real and can provide a lasting flow of cash in your pocket.
When there are more bids for a property at a tax deed sale than is owed in back taxes, the funds or overage amount is originally due back to the owner of the property. Unfortunately for these owners, many have ignored communication with the government. They miss the notice of the overages and just move on and leaving them behind. The outcome is that the overages are permanently lost to the government.
There is a legal loophole that exempts these funds from having finder’s fee caps. You can locate the homeowners and charge 50% in finder’s by helping them get the unclaimed funds. With this method, you can earn a five-figure income just be connecting the homeowners with their overages. The profits are possible especially with the number of foreclosures rising up every year.
If it is your first time to get into the lucrative investment of tax deeds, then try to visit as many websites on tax sale information as you can. Also, check out every book on the subject that you can get your hands into. There are many great resources that you can take full advantage of with the free information they can give.
The key to a successful tax deeds investment is to conduct your homework on the properties you’re interested. Then, talk to someone who has vast experience in purchasing tax deed properties. Having an experienced real estate investor’s tips, strategies, insights, and knowledge would also help you reach that investing goal further.
The economy is in trouble which as a result turned many financial balance sheets to a downward spiral. Tax deed sales, tax lien auctions, bankruptcies, and foreclosures are getting common than ever before. Why are homeowners going down these paths? Here are some explanations:
Bankruptcy is a legal action by the government where a delinquent taxpayer is going to eliminate his tax debts. This usually happens after a job loss, divorce, or medical payment problem.
Tax deed sales are quite different in the case that it is not the bank that’s the holder of the bad debt but the government instead. The amount due is a percentage of the assessed value of the property and is paid annually. Payments do not only include taxes but insurance as well. If the homeowner fails to pay his tax debt, the government steps in to seize the property after the redemption period. The property is then put up for sale and sold to the highest bidder.
Tax lien sale is similar to tax deed. Homeowners who fail to pay their tax debt also lose their property to the government. The winning bidder at the auction gets the deed to the property free and clear.
Many people think of buying foreclosure properties as an old house that needs to be fixed up overall. Try to understand that foreclosure means the homeowner cannot make the mortgage payments, resulting to the lender taking the property. That is why the government puts a tax lien on the property. You can purchase the foreclosed properties at an auction. However, it is strongly advised to wait until the bank places the foreclosure back on the real estate market.
There are percentages of the interests to be earned set for every state. The interest determines the average return of investment on the tax lien certificates. Tax deeds with a right of redemption also have its rates of return listed. You can find this information in many websites including your local county office.
In many places in the United States of America, a homeowner owes the government a yearly tax on their property. If the homeowner does not pay this in the specified deadline, the Internal Revenue Service or IRS has the authority to issue a tax lien on that property.
If the homeowner fails to pay the required taxes after the redemption period, the government would seize the property and sell it to the public. The prices of the property included in the tax lien sale would almost be dirt cheap in these circumstances. This allows a wise investor to come in and buy low, then sell high later on.
If you plan to purchase a tax lien property at a public auction, understand that in some states, the law sets a specific time frame called redemption period for foreclosures to become finalized. Now, if you consider investing money in these types of properties, it is recommended to find out how the laws would affect the ownership, and possession of the property in your area.
You may end up thinking of owning the property, when in fact you’re just paying for the tax debt of the homeowner. You are the tax lien certificate holder as of the moment. You would only get ownership if the homeowner fails to pay his debt. So, study the laws of the tax lien states where you’re planning to invest in liens, and how much interest you get when the homeowner pays up.
Same with other businesses, there are some risks associated with purchasing tax lien properties online. However, you can reduce these risks by conducting some important things first. Make sure the seller would issue a warranty deed on the property you’re going to purchase. Ask him if the title has any liens, back taxes, and judgments. It won’t be that bad if there are any. Just analyze the amount owed into the property’s price. Lot of times, the seller would lower the price of the property in order to get move on before the assessment of more penalties.
You need to be prepared also of another risk. There are times wherein sellers won’t have any photo of the actual property for sale. Sometimes, this happens with parcels that are cheaper. Maybe because the seller do not live in that area, and is not financially reasonable to travel there just to take photos. When this is the case, better check if the property exists. Do some due diligence on the area to confirm.
Bidding on a tax lien certificate is the first step in acquiring its benefits. Knowing how to bid correctly is important to the success of getting the property you’d like to own. Tax lien certificate auction is quite different from the usual sale of tax delinquent properties. It is because the certificate being on bid is the amount of tax debt to be paid by the homeowner and not the property itself.
With tax lien certificate investing, you win either way. You get a profit from the interest rate accumulated after the homeowner redeems his property, or acquire rights to ownership if he fails. Plus, it is secured by the government. You gain the assurance that all transactions made are safe. You really get your money’s worth.