The Low Down On Investing In Tax Liens
Investing in tax liens is the newest craze of making money real estate. Buying
up delinquent taxpayers property liens can be a wonderful opportunity for investors
with little real estate experience, it is virtually a risk-free investment opportunity.
Tax Liens offer investors a chance to either make a small amount of money very
quickly by lending delinquent taxpayers the money to pay off their tax debt
in the hope of saving their property from foreclosure, for a tidy sum of interest;
or the chance to buy decent properties for a fraction of their actual real market
worth, and making large sums of money when the property is resold. It's being
reported that savvy investors may be making as much as 50-75% on their initial
investment within weeks.
Are distressed properties the only ones being offered at tax lien sales? Absolutely
not! There are homes and land parcels all over the United States put up for
tax lien auctions daily. The range of quality is astounding. While some may
be fixer-uppers that have been neglected over the years, by the homeowner's
inability to pay for repairs, many more are top-flight homes that have been
seized when the property owner fails to pay the taxes due to a job loss, death
in the family, divorce, or other reason. Oftentimes, open land parcels are made
available because someone inherited it and didn't think it was worth much and
failed to pay the taxes.
Care should be taken, however, to research each property carefully before submitting
a bid. The odds are there will be no information offered at the time of the
sale, so all inspections and reviews need to be taken care of beforehand. There
have been reports of buyers purchasing property sight unseen at auction only
to discover that the new 3 acre lot they purchased with the hope of building
on it sits in the middle of a creek bed, or is landlocked with no way to get
to it. Others have anxiously gone to check out their new 4-bedroom home only
to find no more than a shack.
Tax Liens are generally offered at auction by the taxing authority in two ways:
either as a tax lien certificate; or a tax lien deed.
A tax lien certificate allows the investor to pay off the tax debt for the
homeowner, and receive a pre-determined amount of interest when the debt is
paid in full during the paying period established at the time of sale. Although
the profit margin may be small on this type of investment, the opportunity to
acquire a complete property for pennies on the dollar can be quite profitable
in the event the homeowner fails to pay the current debt on time. This type
of investment can yield a quick turnaround numbering thousands if the property
is in good shape and can be sold relatively quickly on the open real estate
market.
Tax Lien Deeds may garner a smaller profit, since the investor is paying for
the property upfront, but eliminates any ill-will with the current owner since
possession is immediate. Even so, many investors find that they can make quite
a bit of money on these types of property if they choose carefully and are patient
enough to wait for just the right "gem" to come up at auction.
One important thing to remember when buying tax liens: these investments can
not be financed. Cash is needed at the time of sale to complete the transaction.
Even so, most investors find their time, trouble and money well worth any risk
since profit margins are often so lucrative.
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