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Buying Tax Liens Can Yield Huge Returns

Written by: Scott Jackson

Buying Tax Liens is Unknown to Most Americans
Buying tax liens is a very well hidden real estate investing secret. Many Americans are still not aware of the profit potential of such investment. Depending on the state where you buy the tax lien you can more often than not earn 18% to 50% or more per year. And if the delinquent taxpayer does not fall through the repayment, you still have the court backing the foreclosure of the property. Therefore, buying a tax lien allows you to have either the higher yield from repayment of tax or the actual title to property at a substantial discount.

Automating Your Tasks Can Make Buying Tax Liens More Profitable
If you invest in tax lien certificates, there are certain things that you need to do in order to keep your investment profitable. By automating your business, you won't miss any deadlines that might reduce your profit on your tax lien portfolio. You must keep track of when you bought your tax lien certificate, when subsequent tax payments are due, and when the redemption period ends. You will also need a system for recording liens with the county, sending out 30 day notices at the end of the redemption period, sending out requests to tax collectors for taxes due and tracking the profitability of your liens.

Understanding Tax Lien Certificate Investing
Once you know the return that you want, you then have to know how many tax quarters are open at the time of the sale and what the annual taxes are. Let's assume that you are going to a tax lien sale in August and that the municipality is on a calendar year. As of August 10th, you will be able to pay 3 quarters of open (subsequent) taxes on any tax liens that you buy.

Buying Tax Liens Requires Minimum Investment to Be Worthwhile
If investing in tax lien certificates is something that you want to do, then I recommend that you have at least $2000 that you know you will not need to meet any of your expenses to use for this purpose. I also think that you will need to have at least a few hours that you can invest in doing due diligence and bidding at tax sales. If you only have $2000, you may only be going to one or two sales each year and spending a few hours of your time every six months or so. If you really want to pursue tax lien investing aggressively, it is even better if you have $5000 - $10,000, and at least 10 hours per week that you can invest. This way you can attend more sales and purchase a few liens per year instead of just one or two. The more money and time that you can invest, the greater will be your return.

 

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