The younger generation is banking on the economy rebounding by investing in the time to invest is here and people from the age of twenty-five to sixty-five are looking to pick the perfect strategy. stocks, bonds, and 401k plans offered by employers while older professionals are using their best judgment by investing in real estate and self directed IRAs. Choosing the correct investment strategy can be the difference between a happy or frustrating retirement. One overlooked investment strategy that is applicable in many states is tax liens. This strategy allows people to purchase liens on houses to own them outright or gain a state mandated yield to release the lien. Purchasing tax liens can be a good investment strategy that can be used by younger and older generations to take advantage of the struggling economy.
Before one can purchase a tax lien one must understand a tax lien. When a property owner is late on paying real property taxes, the county or municipality will issue a tax lien on a person’s property. The lien allows the county or municipality to gain some of the money owed on the property since they are not gaining any money from the property’s owner. Certain states allow the tax lien to become a first lien on the property, which is then turned around and sold at auction as a tax lien certificate. Why spend hundreds of thousands of dollars on a brand new home or property when one can spend under twenty thousand dollars on a tax lien. Most people ask “if these auctions are such a good deal then how come I have never heard of them”? Auctions are generally attended by bank representatives and upper class investors but most of the auctions are open to the public depending on the laws for the state. Unfortunately, finding the place and time for these auctions is not so easy. Attendees usually pay upwards of $150 to be placed on a mailing list for the year that releases the information or spend extensive time contacting county court houses and other avenues to obtain information. Even though research can be extensive or costly it is a small price to pay to obtain a highly valued property at a low price.
Since the county is determined to obtain the taxes owed on the property, bids usually start below what is owed. After placing a successful bid, buyers of a government-issued tax lien certificate will then get either a state mandated yield on the lien or the title to the property. The state mandated yield must be paid by the delinquent tax payer to the release the lien and turns into a profit for the investor. If the delinquent tax payer is unable to pay the state mandated yield, in the amount of time set forth by the jurisdiction, the investor gets the title to the property. Once the investor has the title to the property they can strike a deal with the delinquent taxpayer or foreclose on the property. 75% of the auctions result in the existing owner paying the mandated yield allowing the action winner to gain substantially on their investment quickly. A fixed percentage rate mandated by a government agency or the title to property at a substantial discount are incredible benefits rarely seen with other real estate investments.
Even though tax liens seem like a perfect investment strategy, a lot of research must go into the process. First, investors must find out which states allow citizens to attend the auctions and what are the fees and taxes assessed on the auction winner. Next, one must find out when and where these auctions will take place. You can pay to be put on mailing lists or spend time and effort obtaining information from the county of your choosing. Subsequently one should go to a few auctions to see how the proceedings work before jumping right into action. Gain an understanding of how the program is carried out so you will feel comfortable in the audience and atmosphere. Next, one must research the lots on the docket. Take time to see the properties and the neighborhoods in which they are located. This will give you an idea of the value of the property and gain a sense of what the lot may be worth down the line. The last and most important step is to be patient. As an investor you do not want to get stuck with a house or property in poor or unsellable conditions. Make the most of the research and time put into every endeavor.
Tax liens can be a good way to get a highly valued house or property at a low price. Time and effort must be used to research the right property but the benefits can be better than any other real estate endeavor. It might be worth considering taking advantage of the economy and trying to make the most of your investment with tax liens.
