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tax lien investments, investing in tax lien certificates

Building Wealth with Tax Lien Investments

Written by: Robin Springer

Tax Lien Investing is a New Concept for Some Investors
The majority of citizens have no idea about the existence of tax lien investing as an investing tool since it is such a new concept. Because of this, very few people actually understand and are able to invest in a tax liens successfully. One of biggest hurdles is that there are different laws in each state and different procedures per county.

Investing in Tax Liens Can Be Time Intensive
Let's talk about the time involved in investing in tax lien certificates first. Tax lien sales in most states are usually held on weekdays at normal business hours, so you will need to have the time to go to the sale to bid on the properties that you are interested in. Even though in some states you may be able to mail in your bid, it's to your advantage to be at the sale.

Assess Every Tax Lien Property Before Investing
The first thing that you have to do is look up the assessment information on the property and find the address. You'll want to physically look at the property to be sure that the assessment information is up to date. You want to make sure that the property is worth considerably more than the amount that's owed for back taxes. Keep in mind that you may have to pay the taxes on this property throughout the redemption period (if it doesn't redeem) before you can foreclose on it or apply for a deed.

Tax Deed States Offer the Potential to Purchase the Actual Tax Lien Property
In a tax deed state the county will sell all of its rights to the property at a public foreclosure auction or through a later assignment process. The sale will generally occur 3 to 5 years after the first tax payment becomes delinquent. Property is sold for the back tax amount plus any fees, interest charges, and court costs. Since property taxes are a small percentage of market value, investors can acquire full property rights at a fraction of the market price. The purchaser will generally obtain full ownership rights or at least all rights held by the county. In these states, the purchaser generally has the customary rights of a landowner, namely to possess and/or occupy the property.

Tax Lien Investments Offer Two Potentials for Profit
The tax lien investor earns profit in two scenarios: 1) if the delinquent taxpayer or another lien holder pays off the late taxes the investor will receive the principal paid for the lien plus any interest which has accrued, or 2) if the late taxes are not paid by a certain date after the sale, the tax lien investor can foreclose and take title to the property.

 

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