How does tax lien investing work?
If you have read past posts on tax lien investing then you've had these investing principles pretty well pounded into your head. But let's take another look. At the foundation of this incredible investment you have property taxes and the county to which those taxes are paid. The county uses those taxes to fund projects such as fire and police departments, school systems, and roads. More often than most people can imagine those property taxes are not paid. The county still needs that money, though, so they place a tax lien against the property. The county then creates a tax lien certificate in the amount of the delinquent taxes and offers that tax lien certificate for sale to investors. The county also attaches a high interest rate that goes to the investor. Because of the delinquency of the property owner they have to pay back their property taxes as well as this interest rate and any other fees. They don't pay the investor nor do they even know the tax lien investor exists. They pay the county and then the county pays the investor. The interest rates range from 8% on the low side to 50% on the high side. Oh yeah, the investment is backed by the real estate. We'll get into that in a moment.
What happens if the property owner never pays back the delinquent taxes?
Because the investment of tax lien certificates is backed by the real estate for which the tax liens are placed, the investor can have access to the property to make their money back. This means that the tax lien investor has the right to foreclose on the property. The property owner has a certain period of time to pay back the taxes plus interest during which the investor collects interest. If the property owner does not pay then the foreclosure option comes into play. This is an awesome opportunity to get properties for pennies on the dollar. This is pretty rare, though. It happens with abandoned homes, forgotten properties, etc. If you want the property then try tax deed investing.
I heard California is becoming a tax lien state, is this true?
Kind of. The laws were passed to allow counties to sell tax lien certificates but no one is doing it. As of right now it is purely a tax deed state.
How does tax deed investing work?
See "How does tax lien investing work." But instead of the county selling a tax lien certificate they hold onto the tax liens for the redemption period. This can be 1 year, 5 years, or more depending on the state and county. Once the time period has passed and the property owner has not paid the delinquent taxes plus penalties the county will foreclose on the property. Once that process is completed the county will offer the property for sell, usually with a free and clear title. The bidding starts where the property taxes were delinquent along with any fees, penalties, and costs incurred by the county to foreclose. This is an excellent way to get great properties for pennies on the dollar.
Is there a lot of competition in tax lien and tax deed investing?
This can depend on the location of your investment. The bigger the city, the more properties, and the more competition you will generally see. This is still a very hidden investment strategy, though. Compared to most real estate investing strategies there is hardly any competition with tax lien and deed investing. If you attend an auction you will probably see many people there but only a few will actually participate. This is most commonly what you will see at an auction. As far as we've seen it's wide open and ready for the taking.
Do you have to personally inspect all tax lien properties?
This depends on your investment strategy and the type of property you're purchasing. If you're the ultra conservative investor you may want to inspect but as you get more comfortable it becomes less necessary with tax lien investing. With most tax liens you check the basic criteria and if the requirements are met you can buy and get your money back plus interest every time. No inspection is necessary often times with tax liens. With tax deeds you're getting the property every time so inspection is recommended. If not by you then someone you trust. These strategies can be done from your home all over the country when you know what to look for and how to find that info.
How do I get started?
The most important thing you have to have to get started is knowledge. If you don't know the details of the strategies and the details of how things work where you plan to invest then it will be a rough road to travel. Learn the strategies, the ins and outs of the investments and then take action. No Risk Investor teaches and then provides the tools and resources to get members into liens and deeds faster than any other tool.
No Risk Investor is the ultimate resource and tool for Tax Lien Properties, tax deed, and real estate investors all over the world. No Risk Investor takes incredible pride in its ability to help students take action, get into properties, and begin the journey to financial freedom. No Risk Investor provides county lists, property lists, online auction lists, comprehensive training and education, an auction calendar, and online auction center, an investor community and much more for its members.
