Investing in Tax Liens a Profitable Investment

Investing in tax liens is one way to be sure of getting a return on your investment; that is if you understand how tax liens work. When property taxes are not paid the government can auction off the lien to investors. These liens are an accumulation of fees including delinquent property tax, interest charges, penalty fees, legal costs and administrative charges. The total amount due is figured out and if the homeowner doesn’t pay within a specified amount of time the lien can be auctioned off. Liens can go at or above face value. There are no restrictions on who can bid on tax liens. You are, however, expected to make your payment soon after the auction closes.

Investors Get Maximum Profit When Liens Go Unpaid

Once you purchase a tax lien you own the rights that the government owned. This means you are now the first lien holder on the property. The home owner has a specified amount of time to pay the tax lien before losing the property. These rights vary from state to state, some as little as six months others as much as four years. Most are close to two years. If the homeowner does pay off the lien then you are paid the amount of the lien and the amount of interest set by the state.

Tax Lien Investing Give Investors the Opportunity to Purchase Homes for Pennies on the Dollar

Buying the tax lien at face value insures you are going to make money on your investment. The interest owed on the tax lien is automatically owed to you. If the homeowner doesn’t pay the lien the home is yours. It is rare for a homeowner to let the debt go that long. Usually, homeowners pay the lien plus fees before the set period.

Tax Lien Investments are Most Always Profitable

Tax liens are always a profitable investment because there are no ways possible for you to not get back at least the amount of the lien plus interest. Tax liens are either paid off, or the property is forfeited to you. Either way you make money. The only ways possible for you to not make money is if you pay too much for the lien at the auction or if the home isn’t worth as much as the amount owed in taxes.

Avoid Overpaying for Tax Liens

If you bought the tax lien at an auction you could have paid more than what was owed by the homeowner. After you buy the lien the homeowner still owes the original amount for the lien, not the amount you bought it for. The homeowner must pay the lien and the interest or forfeit rights to the home to you. You would then own the home free and clear. If the homeowner pays off the lien quickly you only get the interest for the time between buying the lien and the payment from the homeowner. If this happens you may end up losing the amount you overpaid for the lien.