Which is better? Tax Liens or Tax Deeds?

By dhinternational  /  February 14, 2011 / Comments Off on Which is better? Tax Liens or Tax Deeds?

Choose Tax Liens or Tax DeedsWould tax liens be more profitable than tax deeds? Or is it vice-versa? Well, it actually depends on the state that you are residing and your goals. You see, you should go with tax deeds rather than tax liens if you plan to pick up a property under its market value. Chances of foreclosure are actually low with purchasing tax liens on good properties. Also, you have to take note that though the lien may not be redeemed, you are still not able to end up with the property in some states.

Let’s take Florida, for example. If your tax lien isn’t redeemed during redemption period, the property will go into a tax deed sale to satisfy the lien. If you have done due diligence and you have purchased the lien of a good property, you will still need to bid against other bidders at the tax deed sale to get the property. So in short, if you want to obtain a property in Florida, go with tax deed investing instead. Now if you want to get higher returns on your cash rather than own a property then you’re better off with tax lien investing.

On the other hand, if you’re in the West Coast, you will want to choose tax deeds instead of tax liens. Why? It’s because, West Coast states are deed states not lien states. You can travel to the nearest lien state but that will sure cost you a lot. You can also bid at online auctions but you will have to face many other online bidders and higher fees. Besides, you will still need to do an actual due diligence which means physically viewing the property so as not to be disappointed.

If you live in or near redeemable deed states and you are also interested in either obtaining the property or getting good returns on your investment, consider choosing redeemable deeds. These redeemable deeds are actually tax liens and tax deeds in between. You buy the tax deed at the tax sale but there will be a redemption period wherein the previous owner can return and redeem the tax deed from you. They will have to pay off a hefty penalty in many redeemable deed states and the penalty is based on the amount that you bid on at the tax sale. Georgia has a 20% rate while Texas has 25%. Bigger counties with larger cities can also hold tax sales a couple of times in a year.

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