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Tax Lien Sales

Investors often avoid tax lien sales because they can be complicated. However, with a little research and detective work this strategy can pay off handsomely. At the very least, it's a good way to generate profits or acquire low-cost investment property.

As with most investments, tax lien sales can be risky. Becoming educated about the process is vital. A good place to start is local real estate investing networking groups. Check organizations like LinkedIn or MeetUp to find meetings in your area.

A simple explanation is tax liens are placed against property owners who fail to pay their taxes. Owners are given a certain amount of time to pay delinquent property tax. If they fail to do so in the allotted timeframe, tax collectors put the lien up for auction.

There are a few ways to buy tax liens. For the most part, investors who place the highest bid win the auction. However, other states use a bid-down process in which investors bid on the amount of interest they will accept on their investment of paying off the taxes. Whoever places the lowest bid wins the auction and is given a lien on the property.

Investing in tax liens is guaranteed to provide a return on investment. In order for owners to redeem their property they must pay the delinquent amount along with penalties and interest. Depending on the state statutory interest rate, investors could earn between 8 and 18 percent.

Most often, property owners fulfill their tax obligation and investors make money from the lien. However, if owners aren't able to pay delinquent taxes then investors can commence with a lawsuit to take ownership of the property.

The process of taking possession of tax lien properties can be tedious and costly. Investors must be aware of the risk and understand the process of taking possession. Otherwise, their experience will be far from favorable.

This investment opportunity requires detective work to ensure properties are worth the risk. Investors who spend time becoming educated can avoid the pitfalls associated with tax lien sales.

A smart approach is to start out in your local area and get familiar with current market values. Staying local also lets investors conduct a drive-by to assess the property and review records at the tax collector's office.

Just as with all investments, it is vital to investigate the situation before handing over cash. Always check tax liens to ensure the municipality complied with statutory procedures and that all payments have been applied to the account.

The economic downturn that began in 2008 has led to countless homeowners becoming delinquent on property taxes. Another cause of tax lien sales is the abundance of foreclosure homes.

Suffice it to say, there is no shortage of tax liens. Savvy investors can take advantage of the situation and generate a decent return on investment. If it's not your cup of tea there are numerous other investment opportunities.

Our blog provides a wealth of information regarding investing in real estate, tax liens, structured settlements, and cash flow notes. Click here to start learning about the various ways to develop a solid investment portfolio while keeping risks to a minimum.

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Published on March 15, 2013 at 01:17 PM

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