Investing In Tax Liens

Investing in tax liens

There are more and more people investing in real estate these days. This is made extremely easy with all the foreclosures taking place in the market. There is something else taking the real estate market by storm and this is tax lien certificates. Many investors are buying tax lien certificates because of the benefits they have to offer.

Tax liens are created when a home owner becomes delinquent in their property taxes. The local agencies are allowed to put a lien on the property until the back taxes are paid. These liens are then sold to the highest bidder at a tax lien auction. These liens are given first priority in some states. This means the lien is the first one to be honored if the property is sold or taken for the back taxes.

This means the holder of the certificate can gain possession of the home for pennies on the dollar. There is another benefit to the tax lien certificates. The government guarantees a yield which is state mandated. You are actually guaranteed a return on your investment.

More and more people are finding out about these lien certificates and snatching them up as soon as they are available. There is a down side to this. If the property owner files bankruptcy then the IRS and creditors take precedent over the tax lien. This means the certificate could be worth nothing more than the ink on the paper.

The other pitfall some investors run into is not being able to inspect the properties before the purchase. If the properties are located some distance away, you may be buying sight unseen. Just because you think you are getting a deal, you may in fact be getting a money pit. It is wise to try a little investigating before buying a tax lien certificate.

You can do a bankruptcy search on the property to know if the owner is filing bankruptcy or not. This can cover one avenue of misfortune. The other would be to do a title search. It may cost a little but it is worth investigating before buying. You may also enlist the aid of a real estate agent who knows the area. He or she can tell you more about the property than you think. Because many of the lien auctions are sold as lots, the buyer does not know what he or she is buying. Through the aid of a qualified real estate agent, the property can be assessed to determine if it is worth the effort.

There are many on line auctions which specialize in tax lien auctions. Some county agencies have learned the Internet will give the property the best exposure. This can generate a higher bid than keeping it in the local market.

Someone who is interested in investing in real estate can do so with out the hassles of loans, tenants, or other worries. By doing a little leg work, you may find you can get some real steals in the real estate market with the purchase of a tax lien certificate.

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