We are always looking at more alternatives to making money that is related to Real Estate. One of those ways is by investing in Tax Lien Certificates. In tax deed states we could look at buying properties for good deals at the deed auctions. With tax liens it is using less to invest with and banking on making a good interest rate on the money that is invested.
Partnering with the County Government:
Tax liens deal with those land owners that failed to pay their property taxes on time to their local county government. The county starts to charge them an interest rate on top of the back taxes owed to them. We as investors help the county with their budget costs by paying the taxes the property owners failed to pay on time.
A good interest return on our investment money:
As we pay the back property taxes for others we can gain a good return. Depending upon the state and county providing the tax lien certificate investment, we can gain anywhere from 9% to 36% on our money. When the owner of the property pays back the county for the past delinquent property taxes, they pay the penalty interest as well. Since we helped out the county by provided the tax money in advance, the county pays us back our initial investment including that interest gain that the owners had to pay.
It requires a minimum of research:
When looking for a tax lien one needs to just pinpoint a property that has some value to it. This can be done by doing a Google search of the address of the property if it is a single family home. Call the local Chamber of Commerce to verify that the neighborhood is a nice one that holds its value. We don’t want to pay the taxes for a piece of desert or swampland that the owner won’t want to pay back the taxes.
Someone pays us back:
Even if the owner is not paying the mortgage as well, we will eventually get paid. The bank at some point will foreclose on the property. As part of the foreclosure process, the bank has to pay off the county in back property taxes and penalties. We know that when the county gets paid, we will then get paid off too.
Many benefits:
Every county that has tax liens has a redemption period. This is a time when things change. If we have been the sole payer of the back taxes during that period we will still get paid. It depends on the county, but after the redemption period is over the county will foreclose on the property and pay us off. Or, there are states where we have to file a quiet title suit which allows a Judge to make us the new owner of the property and all of the other liens are closed out. This can be the most lucrative but the least likely to happen. Overall, tax liens are a good way to diversify in investing in Real Estate.
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