Tax liens and tax deeds investing is one of the most overlooked, yet very lucrative area of real estate investing. When taxes on property go unpaid for a given period of time, very profitable opportunities are created for the wise investor who is well trained and has a keen eye for identifying a potentially lucrative deal. What really happens when someone doesn’t pay the taxes?
Basically, when a property owner does not pay the required taxes for their property, the local government will issue a lien against the said property. This serves as notice to the property owner to rapidly take care of the unpaid taxes. For most people, though, the bill is often so high that even after being given a grace period they cannot be able to offset the accrued taxes. Because the local government will not want having such a burden on its records, they will often “get rid of the property” by holding an auction but depending on the state the county would just take the payment from the tax lien investor and when the taxes are caught up the investor would receive a percentage in return or if not paid the deed of the property.
This opportunity is what is referred to as tax lien investing. Investors will attend these auctions and bid on the certificates in the hope that should they emerge successful, they will get the right to claim the taxes back from the property owner. Here is how you can determine effective and lucrative offers for properties available at tax lien/deed sales.
First and foremost, you should start looking at your local county. While in future you may be able to expand to other counties and even other states, you are advised to start locally. If not for anything else, most counties today would insist that the property investors be local, so at least you will have an upper hand. Visit the treasurer’s official website to determine the certificates that are up for sales. Because most sales take place annually, you will have enough time to put your acts in order. Should there be a certificate up for sale, you might want to start by familiarizing yourself with the terms and conditions and rules and regulations governing the bidding process.
There are two main ways of making money out of tax lien investing – the most common one being the above mentioned bill collector. Because you will have the certificate, you can collect back the taxes from the property owner, plus the interest of course (which is your ROI). On the flip side of the coin, although a bit rare, the property owner may not be able to raise the money, and you may end up becoming the new owner of the property in question.
Needless to mention, when researching on the certificates that are up for sale, you should ensure that the property in question is one that you care to own. Should it end up to be yours, you don’t want it to become more of a burden than a lucrative venture, so you should ensure you do a thorough research beforehand. Armed with all relevant information, you should attend the auction and place your bid on the certificates you are interested in.
Everyone has a first time that’s why its called the first time and things can go in your favor or against your favor. One thing that you should keep in mind is that the local government expects payments immediately after the bid is won, so you should ensure after you have done all the research and stuff, there is ready money in your account.