Yesterday, I posted on my blog the basics of tax delinquent investing. If you haven’t read the post yet, check it out here. Today, I want to continue the conversation talk about tax liens.
Tax deeds, if you recall, are created when the county confiscates a tax delinquent property from an owner and sells the deed at either a public auction or a private sale. Tax liens (which are sold in about half of the country) operate a little differently.
In tax deed states, counties have to wait several years (often up to five) before they can sell the deed to the public. But tax lien states take action right away. They sell a certificate to investors for the amount of the back taxes owed, and the investor renews his or her certificate with each passing tax year. The county gets the taxes owed, and can continue functioning.
What’s in it for the investor? The investment can have one of two outcomes:
1) The tax delinquent property owner pays their back taxes (plus interest and fees) to the county. The county will give all that money to the investor. Interest varies from 12% to more than 30% per year, plus fees.
2) The tax delinquent owner never repays their debt, and the bearer of the tax lien certificate can foreclose on the property and receive a deed and clear title to it.
In either situation, the investor kind of puts themselves in the position of the county. The collect the taxes paid to the county or are legally entitled to foreclose on the property – just as the county would do. Depending on your goal (growing your money or getting the real estate) tax lien investments can be a great passive way to make it happen.
There are different ways to purchase tax liens, and if you are interested in learning more check out my program “Tax Lien Secrets” athttp://www.jackbosch.com/products/.