The Truth About Tax Lien Investing

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What is tax lien investing anyway and why is it such a good investment? What is the distinction in between tax lien and tax deed investing and what are some of the misconceptions about this type of investment? Study on the discover the answers to these questions…

Counties and municipalities rely on money from house taxes to meet their budget. When property proprietors do not pay their taxes, the county or municipality will offer the taxes to an investor. The investor is not buying the house but paying the taxes on the property and placing a lien on the house. Why would an investor want to do this? Two reasons initial they are getting a good interest price on their money and secondly a tax lien comes before most other liens, so the investor is likely to get paid.

In some states, when a house proprietor does not spend their taxes, instead of selling a lien on the house, the county or municipality will offer the property at a tax deed sale. In states that offer tax deeds you are actually purchasing the house. In some states the house is sold for back again taxes and penalties, in other states the property is offered for a certain proportion of assessed worth and in other states the property is offered at marketplace worth. A tax deed can be a good investment, particularly in states that offer the property for the back again taxes because the investor has a chance to purchase real estate at beneath marketplace value.

Some states offer redeemable tax deeds, in which the county does sell the deed to the property at the tax sale. But there is a redemption time period in which the delinquent taxpayer can come back again and redeem the house. In buy to redeem the property the delinquent taxpayer must pay the investor both a penalty or interest on their investment. Some redeemable deed states have a penalty and some have an interest price. In some states the penalty or interest can be fairly higher, creating it extremely appealing to the investor.

Simply because individuals have been informed that tax liens are a great investment and that they can make this kind of great curiosity prices, they presume that interest is compensated out by the county or municipality on a regular basis. The truth about tax lien investing is that you do not get compensated a cent till the delinquent property owner decides to redeem the lien. If they do not spend during the redemption time period (which is different for each state) then you can foreclose on the property in order to get paid on your lien.

An additional misunderstanding about tax lien investing is that after the redemption time period is over, the lien holder will instantly get the deed to the house. The truth about foreclosing on a tax lien is that in most states you require a lawyer in order to foreclose and get the deed to the house, and in other states (Florida for example) the house will be offered in a tax deed sale, and will be auctioned to the greatest bidder, so your probabilities of coming away with the house for what you have invested in it are not great.

Some individuals have the misunderstanding that tax lien investing is a great way to buy properties for pennies on the dollar. This does not happen extremely often. Especially in states exactly where the value of real estate is extremely high, the tax lien will almost usually redeem sometime during the foreclosure procedure. Tax lien investing is a way to get a high return on your money. If you are interested in buying house for beneath market worth, you are better of with tax deeds or redeemable tax deeds.