What Is A Tax Lien Certificate?
A tax lien certificate is a way for smaller real estate investors to either make a large-scale profit by acquiring property at a fraction of its value, or offer low-profit margin loans to help struggling homeowners keep their property by giving them more time to raise the funds necessary to pay off tax debt.
When property taxes go unpaid for a certain period of time, the county or state government has the right to seize the property and either sell it outright, or offer it at a tax lien certificate sale to regain any lost tax revenue owed.
Some municipality governments seize properties within the first year of delinquency making the potential for large profit turnaround high, while others may allow years of unpaid tax revenue to pile up before taking action, which can drastically reduce an investor's profit potential. The amount owed in back taxes can also have a distinct effect on the property owner's ability to pay the back taxes, and the investor's opportunity to make a decent-sized profit on the investment. Making a tax lien certificate available on a house or land parcel, it is a way for real estate investors to acquire properties for a fraction of what they are worth. It can also give desperate property owners much needed time to raise the necessary funds to save their property from foreclosure. When purchasing a tax lien, it is imperative that the investor understand that they are not buying the property - at least not yet. They are, in essence, lending the homeowner the money they need to pay their back taxes, with the promise of repaying the loan - with a specified amount of interest -- in accordance to a set payment schedule established at the time of the tax lien certificate sale. If the homeowner is indeed able to pay off the tax lien certificate on time, the deed to the property reverts back to them. They have saved their home, and their credit rating. If, however, they fail to pay back the lien loan as required by law, ownership of the property is transferred to the lien certificate holder, who is free to keep, renovate or resell the property as he sees fit. Either way, the certificate owner is bound to make a profit. How much, depends on whether or not the property is acquired and resold at market value, or whether the investor only reclaims their initial investment -- with interest -- of course. Either way, investing in tax lien certificates is a relatively safe, easy and profit-driven way to invest in real estate for those with the knowledge and capital to keep a sharp eye out for profitable lien opportunities.
Tax Lien Certificate Investment
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