What is the difference between investing in tax lien certificates and tax deeds?
A tax lien certificate is a certificate of proof given to an individual for paying off delinquent property taxes. When investing in tax deeds, instead of receiving a certificate as proof of payment, you are awarded the actual deed to the property. If not redeemed, you keep the property free and clear.
Are there risks investing in tax liens or tax deeds?
There are always risks when investing in real estate in general, however, tax liens are extremely low risk. With that said, the main risks are that is takes longer to get paid because you have to foreclose on the property. The other risk is hazardous material that is found on the property that needs clean up.
What are the best states to invest in tax liens or deeds?
There are many things you need to consider when selecting the best states like, redemption periods, interest rates, how often the auction occurs, the number of certificates or deed available, etc. As states are concerned, a few of the good ones are Arizona, Illinois, Maryland, Iowa and Texas.
How do I know when the tax lien and deed auctions are?
Each county determines when and how often tax sale auctions occur. The majority of them only happen once a year. There are a few states that have auctions regularly which means you don't have to wait another full year to invest. To find out the auction dates, call up the local county treasurer and they will let you know.
What do I need to bid at an tax sale auction?
You need money and you need to make sure you've done your due diligence on the properties themselves and the auction. There are a few different methods of bidding, be familiar with each. If you are the winning bidder at the tax sale auction, they will expect payment usually the same day. You need to find out what method of payment they prefer. They usually give you a few hours to get the necessary funds, but they expect payment immediately.
What are the different bidding methods?
Can I buy tax lien certificates or tax deeds over the Internet?
More and more jurisdictions are jumping on the bandwagon and offering this option to investors. They find is more cost effective and efficient. If you're not sure this is an option with the county you want to invest in, call up the county treasurer and ask. Then all you need to do is register online, fill out a W-9 and pay a registration fee to bid. You will obtain a list from the county and after your research you would bid on the property and take possession of it.
How much money do I need to invest in tax liens or deeds?
Tax liens and Deeds vary in price. As low as $100 up to whatever someone would be willing to pay for the right to own the property for the back taxes; hundreds of thousands of dollars. Generally speaking you can plan on $500 - $5000 to start.
Are there any creative ways to buying tax lien certificates or tax deeds?
You can always find creative ways to buy real estate. You can always find a partner with money, use a HELOC that has a lower interest rate than your certificate, family, etc. At the end of the day, it still requires someone's money, even if it's not your own.
How do I research or find the available tax liens or tax deeds?
There are a number of ways to get lists of available tax liens or deeds. First start with the county treasure. They usually keep a current list and will provide it to you upon request. Ask them to send the list with all the tax defaulted properties. Usually they are free unless it's a big county. More and more counties are now posting this information online, again just talk to the county treasure and see if they post them online on the county website.
A Tax Lien is exactly what is sounds like... it's a lien on a piece of property to ensure taxes are paid each year on the property. If you own real estate, you know that you have to pay taxes on the property you own each year, regardless if there is a house on it or not. Much like a mortgage company will place a lien against your property when you borrow money to purchase a home, the government will put tax liens on properties as a way to ensure they get paid. Failure to pay your property taxes could result in the issuance of a tax lien certificate.
Most homeowners don't realize that if they fail to pay their property taxes, investors can actually bid at county tax lien auctions for the right to pay the property taxes in behalf of the homeowner. The highest bidder receives a tax lien certificate. In return for paying the delinquent property taxes, the property owner agrees, by it's states mandated laws, to pay a specific penalty. This penalty ranges anywhere from 16% to 24%. In one state, the penalty gets as high as 50%, which is a huge return for paying someone elses property taxes.
Tax Certificates are extremely safe! Property taxes help pay for most of the government and local county operations like fire and police depts. You and I both know when it comes to the government, they don't mess around when it comes to money. If they don't receive money to fund their services, they find ways to get paid. Unpaid property taxes cut to the front of the line when we speak of lien priority, ensuring that they ALWAYS get paid first. Yes, even before the mortgages no matter when those liens were recorded. Bottom line... you will get paid!Are there any risks by Investing in Tax Lien Certificates?
There are always risks when investing. Investing in Tax Lien Certificates is no different either. There are two main risks one that very seldom occurs however it's always good to know as much as you can when you start investing in tax lien certificates. The main risk (which very seldom occurs) would be that the home is located in the middle of some hazardous waste material that requires more money to clean up than what the property is worth and so there was a good reason the homeowner decided to leave the property and not pay the taxes. So you might end up with a property you don't want. The other risk is that your money is tied up longer than expected. If the homeowner declares bankruptcy or the property goes into foreclosure, the tax lien stays with the property, but you may not get paid until after the foreclosure auction.
Can I own a Property Free and Clear through Tax Lien Investing?
YES! However, very rarely does this ever happen and I'll explain why. All the late night infomercials and gurus will tell this is what makes tax lien investing so exciting because you could end up with a property free and clear for only the back taxes. I would venture to say 1 in every 100,000 tax liens does this ever happen and here's why. Chances are if a property owner is not paying his property taxes, he's also not paying his mortgage. Mortgage companies know that tax liens are senior to even their position. So in the event a property is going to auction and property taxes have not been paying, the mortgage companies will forward money to pay the taxes and secure their position. They will NEVER let a property go for just the back taxes. So the only chance you have is when a homeowner owns his home free and clear... no mortgages.
This property list is super duper awesome and more! get it now for free!