Tax Lien Certificates

Buying tax lien certificates can be one of the best investment decisions of your life as you stand to earn extraordinary returns with investments that are completely safe and secure.

Who Can Buy Tax Lien Certificates?

The great news is that anyone can take advantage of this investment vehicle. Although tax lien investing is based in the United States you don’t have to be a US citizen or even live in the US to participate.

To buy a tax lien certificate you have to bid in a tax lien sale which is run in an auction format. Some of these auctions are held online and some you have to attend in person.

Each State in the US has its own unique system, protocol and set of rules then the various Counties within each State have their own way of interpreting these. Sounds confusing? Well yes admittedly it can be a bit daunting when you first start out but the substantial rewards available make it worthwhile going through the initial learning curve.

Why Do People Buy Tax Lien Certificates?

The first reason is that they can earn fantastic returns from very low risk investments. The second reason is the possibility of acquiring a property at the fraction of the full market value. This is because it really is possible to acquire properties for cents on the dollar.

Let’s take a close look at the potential of tax lien investing. Ask any seasoned tax lien investor and he or she will tell you that this is a safe form of investment. It is secure and also gives high returns.

Tax lien certificates are safe because they are backed by the US Government. Tax lien sales are controlled at County level and offer a win-win-win situation for the Counties, the investors and the property owners alike.

This is because when you as an investor buy a tax lien certificate you are effectively making a loan to pay somebody else’s property tax arrears. So when you make your purchase you are putting funds back into the County’s coffers to pay for things like schools, policing, firefighting, roads and so forth – in fact everything that property taxes go towards. This is how the County wins.

You as an investor win because you are paid an extremely attractive  rate of interest on your loan – typically between 18 and 36% per annum. The interest rate is fixed by the State in which you purchase the tax lien and it does not fluctuate. It is not affected by market conditions or economic factors.

Your loan plus the interest on it is repaid to you when the property owner pays his or her property tax arrears plus the interest due. When the tax lien is issued the property owner is given a fixed amount of time within which to make the payment. This varies from State to State and typically ranges between 6 months and three years. This is known as the Redemption period.

Now here is why this form of investing is so safe – your loan is secured by the property on which the taxes are due, the value of which should be many times more than the total of your investment! Should the property owner fail to pay their property tax arrears by the end of the Redemption period you as the tax lien certificate holder are entitled to foreclose on the property and take ownership of it.

It is not only safe but also easy to buy tax lien certificates. You simply have to choose a lien placed against a property and bid for it. If your bid is accepted you win. Whilst liens are issued against those properties which have not had their taxes paid it is essential to understand that your winning bid does not automatically entitle you to the property rights. You have simply earned the right to receive interest on your investment at the rate set by the State.

It is only if the property owner fails to pay their arrears within the allotted timeframe that you get the property. This only happens around 5% of the time. There is a way that you can guarantee getting the property though. You can do so by investing in a Tax Deed as opposed to a Certificate. For more information about this check out Tax Lien Certificates and Tax Deeds Compared.

Watch the video below as Tax Liens expert Saen Higgins discusses how investing in tax lien certificates can be exciting as well as lucrative:

What Can Go Wrong When Investing In Tax Lien Certificates?

Things can go wrong if you do not do your homework correctly and thoroughly.

This starts with you educating yourself fully on how the tax lien system works in general and then how it works in the particular State then the particular County in which you intend investing.

This includes learning from the County exactly how their auction system works and what your responsibilities are as a bidder. Failing to do so could end up costly. If you win the bid you must have immediate access to the funds to cover payment in full.

You should also thoroughly research the property on which you are bidding for the tax lien. Remember that if the property owner fails to pay their property tax arrears you could end up owning it. You need to check its condition and the realistic open market value of it. You need to take this into account when deciding on the maximum amount you are prepared to bid.

You also need to check what type of property it is. For example it could be a single family residence, a condo, a commercial business property or a piece of land. If it is a commercial business property such as a gas station and you ended up owning it would that be a benefit or burden to you?

You should also give some thought to your exit strategy should you end up owning the property. For example would you sell it as is, fix it up then sell it or hold onto it and rent it out?

How Much Do Tax Lien Certificates cost?

You don’t need a fortune to buy tax lien certificates. First time investors as well as experienced ones can buy them for as little as ten or twenty dollars (depending on the property). If you wish to invest heavily you can go upwards from there into hundreds, thousands, tens of thousands and even hundreds of thousands of dollars. Remember that you can bid for more than one at a time.

That’s the beauty of investing in tax lien certificates. It suits all purses.

Buying Tax Lien Certificates – Conclusion

Like any form of investment you must do proper research and preparation in order to make your investment successful. There are procedures you have to follow and if done correctly you can make your investment virtually risk free and at the same time reap fantastic financial rewards.

Remember that buying tax lien certificates is simple but to ensure success and to avoid disappointment you have to conduct the investment in the most appropriate way. That starts with taking the time to learn thoroughly how this amazing investment opportunity works.

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Have you heard about tax lien certificates and tax deeds? If you have then you are one of a few. Some people refer to them as the best kept investment secret.

Introduction

These are great investment opportunities that are extremely lucrative. Many investors even consider these to be the safest investment instruments around, provided you have a good understanding of them. Of course there is a difference between tax lien certificates and tax deeds. You need to learn this distinction before investing in either type.

First of all you should recognize that investing in tax liens and deeds is not a get rich quick scheme. Nor do they offer automatic wealth accumulation – you must be prepared to put in the time and effort to understand how this form of investment works then to invest time in implementing it all.

Investing in tax liens and tax deeds are two different processes. You need to understand the definition of each one, the difference between the two and the procedures involved in investing in each. Both look similar but there is a difference. If you live in the United States the State in which you reside can play a determining role in influencing your decision as to which system you opt for. Some States offer Tax Liens, some offer Tax Deeds and some offer a combination of both.

Check out the different Tax Lien Certificates and Tax Deeds States.

So, let’s find out what differentiates tax lien certificates from tax deeds.

Tax Lien Certificates

When you buy a tax lien certificate you are in effect paying the property tax arrears on someone else’s property in return for an attractive interest rate which typically ranges between 18 and 36%. Each State decides upon its own interest rate. The property becomes your security until the owner repays the entire amount owed plus the interest and penalties as applicable.

It is the government backed local Council which places a tax lien on a property when the owner defaults in paying his or her property taxes. County auctions are held at regular intervals during which the tax lien certificates are sold to interested investors. If you as an investor manage to win the bid then you acquire the lien placed on the property.

Meanwhile the property owner is given a time period (known as the Redemption Period) to pay off the taxes he or she owes along with the interest and penalties and you, the investor, are entitled to all of this. The property owner pays it to the County and the County in turn pays it to you. Redemption Periods vary from State to State and typically range between six months and three years.

Should the property owner fail to clear this amount by the end of the Redemption Period you have the right to then foreclose on the property and become the owner. The reality is that only about five percent of liens end up in this manner, i.e. with you the tax lien holder owning the property. Nevertheless you will still make a hefty gain in the form of interest on the amount you paid for the certificate.

One of the main things that most investors find attractive about tax lien investing is that there is very low risk involved because their investment is safe and secure. This is because on the one hand the US government backs and guarantees the tax lien certificate system and on the other hand their investment is backed up by a substantial security, namely the property on which the property taxes are overdue.

For more information check out What Are Tax Lien Certificates.

Tax Deeds

Now let’s check out how a tax deed is different to a tax lien.

When you buy tax lien certificates you are actually buying a lien but with tax deeds you buy the deed to the property. The deed started out as a lien then it got to the end of the Redemption Period and so became a deed.

During a deed sale organized by a County if you bid successfully then you can purchase the deed to the property and in the process you purchase the property itself.

A tax deed is a non-warrantee deed. Although there are no liens on such a property you don’t get warrantee on the title. In order to get title insurance issued you have to get the title cleared. However, as soon as the deed is recorded the property reverts to you. Should there be people living in the property you have the option of offering them a tenancy or of evicting them.

Compared to tax lien certificates dealing with tax deeds can be quite complex because there is more involved. However the big plus point is phenomenal returns, provided of course you did your homework beforehand to check out the realistic open market value of the property and you took that into account when you bid for the deed.

You become the owner of a property when you win the bid for a tax deed. You stand to acquire complete legal ownership of the said property. It is indeed a great investment option because you are paying a small amount in comparison to the actual market value of the property.

When you bid at a tax deed auction you are actually bidding to become the owner of a property. If you win the auction the property becomes yours. Needless to say it is essential that you do proper research before bidding for tax deeds. This is imperative because you cannot afford to invest in a property that is worth less than you paid for the deed.

A common question asked about tax lien certificates and tax deeds is ‘How many are there’. Watch the video below as Tax Liens expert Saen Higgins answers that question:

Do Your Homework

There are certain other things that you have to keep in mind. Rules and procedures vary from State to State then within each State the various Counties tend to interpret these differently. It is essential therefore that you check out the protocols of respective counties where you plan to bid. Failing to do your homework thoroughly in advance could be costly.

Also you should conduct a thorough research on the property that you are bidding on.

With tax lien certificates this still applies because there is always the possibility that you could end up owning the property, albeit a slim one (around 5%).

Conclusion – Investing in Tax Lien Certificates and Tax Deeds

There is no doubt that you stand to make substantial gains by investing in tax liens and tax deeds but before you do so it is essential that you develop your knowledge about these investment vehicles. You should not be hasty and you should avoid grabbing the first deal that is offered to you.

If you are prepared to educate yourself thoroughly about tax lien certificates and tax deeds and discover how to make informed decisions about both of them then you can reap substantial rewards from these amazing investment opportunities.

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Does this sound like you?.. you’ve heard about tax lien certificates and don’t know too much about them. Like other less-savvy investors (there are many) you have been in two minds regarding where to put your money. Yes, nowadays choosing a safe investment that gives a decent return can be difficult yet tax liens can put your investment worries at rest.

However, before delving into the definition of a tax lien certificate let’s first check out some primary investment choices that are considered to be safe…

Alternatives To Tax Lien Certificates

The most obvious choice that comes to mind instantly is opening a bank account. It is safe, no doubt about that but the returns come in the form of paltry interest and with rising inflation these days things are getting worse. You may end up losing money instead. So are tax lien certificates a better choice? Read on…

Taking the bank account option a stage further you could open a deposit account. This is just like a bank account but the difference here is that you get a bit more interest. The disadvantage of this type of investment is that it has zero liquidity because the trade off for the higher interest rate is that you have to keep your money tied up for a period of time (lock-in period). For better liquidity you can opt for a money market account but with these you get less interest. Moreover while issuing checks if you go above the pre imposed limit you end up paying a penalty.

A few years back investing in US Treasuries was considered to be the safest investment around. However with the country’s mounting debt and the resulting lowering of its credit rating even this now carries certain risks.

Investing in real estate the traditional way has become risky and many investors have lost money in recent times on what was considered previously to be a ‘safe bet’.

Then there’s the stock market. Have you read about the way the markets have been performing recently? Many investors have seen the value of their portfolios breaking even or going down in recent times.

About Tax Lien Certificates

So do you really have a choice? Yes you do with tax lien certificates. It is an investment option where you can get high returns irrespective of what is happening elsewhere in the economy. If you want to earn high returns with minimum risk then tax lien investing can be the best bet for you.

Now let’s find out what exactly is a tax lien certificate. It all starts with the basic premise that property owners in the United States have to pay property taxes to the county in which their property is located. If a property owner defaults in paying his or her taxes then a lien on the said property is issued by the county after a period of time.

These liens are auctioned by the county in order to get paid the owed taxes. Interested investors can buy such tax lien certificates at a price that meets the owed back taxes.

When you buy tax lien certificates you can expect returns which typically range between 18 and 36 percent. This is a deliberate attempt on the part of the county to encourage erring property owners to clear their taxes as soon as possible and at the same time entice investors to buy a tax lien.

How Safe Are Tax Lien Certificates?

Your advantage with tax liens certificates is that these are underpinned by a valuable asset, namely is the property on which the taxes are owed.

The way it works is that when the property owner eventually pays the outstanding property taxes plus the interest due all of this is reimbursed to you by the County. Should the concerned property owner not pay back the taxes that he or she owes then you the holder of the lien will get the property free and unencumbered.

Investing in tax lien certificates is therefore very safe and profitable. You can ask any investor who participates in tax lien auctions and he or she will tell you that investing with this strategy can be very lucrative. Although nowadays there are many savvy people who are involved in tax lien sales this form of investing remains widely unknown.

What might also surprise you is that you don’t have to be an American citizen or live in the United States to get involved in tax lien investing. This amazing opportunity is open to anyone.

If you are a newbie then you may wonder how safe this form of investment really is.

Well, tax liens enable the US Government, or to be more precise individual Counties, to easily recover revenue owed by property owners. So when you take advantage of this investment opportunity you are getting involved in a Government backed scheme.

Once a lien is issued the property owner loses control over his or her property. It is mandatory on the part of the owner to pay back the debt in full in order to regain ownership.

How Do Investors Benefit From Tax Lien Certificates?

After buying tax lien certificates investors stand to gain in two ways. You earn a substantial amount in the form of interest in cases where the original owner manages to clear the debt on time. You release the lien and the original owner regains his or her ownership. In case the owner fails to clear his or her outstanding taxes within the specified time then the property goes to you. You automatically become the new owner of the said property.

To reiterate, investing in a tax lien certificate is not only profitable but also safe because the entire process is under the control of the government. If you want more information about how all this works then you can get in touch with the respective county. Each State has different procedures then each County within the State handles things their own way

If you are planning to invest this way then it is recommended that you discuss the matter with a real estate or tax attorney. These professional guys are well versed in tax lien certificates and are therefore qualified to point you in the right direction. Keep in mind that you have to get your finances in order before bidding at an auction because successful bidders are required to pay in full immediately or the latest 24 hours after the auction.

Investing in Tax Lien Certificates – Conclusion

This form of investment certainly yields handsome returns and the great thing is that it is 100% legal. If you want to make large profits in a legal, safe and secure way then go for these government guaranteed certificates.

As an investment instrument tax lien certificates can be an excellent choice because of their low risk factor. Since the government backs and guarantees these certificates your investment remains safe. Moreover the yields typically range between 18 – 36% which is hard if not impossible to beat. So if you are looking for the best return on investment (ROI) this vehicle should not be overlooked.

Watch the video below as Tax Liens Expert Saen Higgins explains how investing in tax lien certificates benefits everyone – the County, the property owner and you the investor:

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Tax Lien Certificates information coming soon!