Property Condition is Important in Tax Liens Investing

Many people who wanted to invest in tax liens sometimes gets too excited that they forgot to check some of the things necessary when starting to invest.  They just jumped in to the conclusion of investing in a one property immediately especially if the cost is too low and affordable.  They just bid on it without any knowledge of the property’s condition.  They forgot their due diligence in securing their investment.  One of these is what we call property condition.  We couldn’t deny the fact that homeowners feel bad and angry if they face this situation, especially if they are in the state of financial struggle.  They have no choice but to give in their property to investors.  Some of these homeowners show their anger by damaging the house condition, especially if they knew that it will be impossible for them to redeem it.

Some homeowners punch holes in the wall, they gut the house and even remove some parts of it.  This would mean another expense for the investors in repairing the damages if he ends up owning the property.  We know that making necessary repairs to damaged homes can be very substantial.  This could be another problem to investors, and a deduction to the possible profit he can get on the property.  Upon investing, it is very important to always check the property condition before jumping into conclusion.  This is done in order to make sure we are really getting the right property for the money we are going to spend.

Over the Counter Tax Lien Certificates

There are investors who get tired and upset of competitive bidding. Since it will require much time for them to be in a certain county for the auction, without assurance of winning the bid on the property they bid on. Over the counter tax lien certificates or known as OTC, are the properties that were not sold during the live auction. These properties got stuck in the county.

It’s very simple to purchase one. All you have to do is to visit or call the county and ask for a list of all the OTC properties. It is even easier now since almost all of the counties have websites where they upload a list of all the properties. If they don’t have a website, some counties can also send you a list via mail or email. If it will be sent via mail, all you have to do is to send them money for them to mail you the list. It wouldn’t cost that much usually it will just range from $5-$20.

Despite of the convenience we should also bear in mind that since these OTC properties did not sell at the regular live auction, there are still some precautions that we should take to make sure we are getting a good deal. If we are purchasing it directly from the county it is 100% valid. However, if we are purchasing this from an individual, we should take our full due diligence to ensure that is valid and can be reissued to us.

What’s Good with Tax Lien Foreclosures?

Many people wanted to enter the world of tax lien investing since it is known to give more financial security than any jobs available.  Each of these investors has their own goal upon investing.  Whenever an investor wins the bid he gets a tax lien certificate as a proof that he paid something.  And upon investing an investor can either earn from the annual interest of what he invested, or probably become the owner of the property in case he wasn’t paid up.  Foreclosures are the most wished outcome of every investor because they profit a lot through this.  However, this is the most painful outcome for every property owner because they can watch how their property is being washed away to someone else’s hand in just a span of time.

Most people think that aside from the fact that they weren’t able to pay on the time given to them, it is also believed that it’s caused mostly of the lack of knowledge of the property owners to the rules and the process that’s why it leads to foreclosures. On the other hand, it is also said that due to this that other investors take advantage of the process.   Through foreclosures investors can get and end up owning the property with just a small amount and gain multiple times of profit.  This is a fortune to every investor while a big loss to the property owners.

Tax Lien Properties Make Good Investments

People often make investments by buying things which increases its value over time.  One good example of this is investing on land and housing.  However, during difficult times, some people hesitate to conduct such investments because of the risks involved.  Then, there are some who do not have the money to spend with.  There is still hope during these troubled times by making a wise investment on purchasing tax lien properties.

Tax deed or tax lien certificates are auctioned off by the government in order to recover lost income due to unpaid taxes from delinquent homeowners.  Every time you bid for a tax lien certificate, you’re actually paying for the back taxes of a property and at the same time competing with other bidders.

Investing in tax liens is back up by the law which makes it safe and secured.  Plus, you can gain ownership rights to it if the homeowner in debt does not pay in time.  You can sell it for a profitable amount or choose to live in it.  Just imagine all the potential income just by simply paying for the back taxes of a delinquent homeowner.

Buying Real Estate Properties through Tax Lien Certificates

The decline of the real estate market provides many wonderful opportunities for a property investor.  A wise investor can utilize various methods to earn money in today’s difficult times.  If you are a beginner to the real estate investment business or a seasoned veteran, consider investing in tax lien certificates.

Liens are made when a delinquent property owner does not pay his real estate taxes.  A tax lien is then issued in the municipality or county where the property is situated.  After that the tax lien certificates are sold at auction if the original owner fails to pay his taxes.

Purchasers of a government issued tax lien certificate would acquire the following after bidding successfully at an auction.  First is a state mandated yield from the lien.  The delinquent owner should pay to release the lien which usually comprises the taxes owed plus interest and other fees.  Second is the title to the real estate property in which the original owner must also pay his debts.

You must take note however; drawbacks are present if there is no proper bankruptcy and title research done correctly.  Due diligence is also very important when buying tax lien certificates.  Actual visitation of the property is also recommended in order to check its physical condition personally.  Doing these steps bring forth a substantial return of investment.

Property Tax Lien Sales

The government collects taxes for a number of reasons. This is done in order to provide services for schools, roads, peace and order, and other important things. They have been doing this for a long time now. The taxes go to these operating expenses. One way of making sure they have the money to do these services is to offer tax lien sales on real estate properties. Tax liens are put on an owner of a property who doesn’t pay his taxes on time. Another way is for the government to offer tax deed sales in which they would put into auction the properties to the highest bidder. At times the winning investors then have full rights and ownership to the properties for an amazing fraction of what the properties are worth.

Real estate tax liens and deeds guarantee the government would acquire their money one way or another. This fits well for investors who are interested in tax lien or deed sales. US states offer one, the other, or both at once.

When a delinquent owner hasn’t paid off his debts to the government, they would put up his property with the lien for auction to the public. They sell it to the highest bidder. After winning the auction, you would agree on paying the back taxes of the delinquent property owner. If you do this, the government is going to give a tax lien certificate showing proof of payment. Furthermore, it gives you the right to collect debt plus any interest owed from the previous owner.

When the time comes that the delinquent owner finally pays up the government for taxes owed, they would contact you, the investor who holds the tax lien certificate, to turn it over to them. You would then get your initial investment plus the late interest penalty. This is the reason why tax lien sales are one of the best opportunities today.

Do I Really Want This Property?

Tax Lien and Deed Property

Before you start spending more and more cash on notices and attorneys, you have to ask firmly, “Do I really want this property?” While you might think that your answer right now is yes obviously as you are getting it at just the taxes’ cost, you have to note that half of the tax liens that have not been redeemed are usually never taken to tax deeds. Why? Did the lien purchasers just forget about them? Well, possible some of them did but actually, most of the liens that were not able to go to deed is because their lien buyers simply realized that they did not want the property.

What are the common reasons lien buyers didn’t want the properties?

1.) They made a mistake on buying the tax lien in the first place. Now, they are regretting about this mistake and they are paying off for it by writing off a hundred percent of their investment. So always remember to do proper due diligence so this will not happen to you in the future.

2.) The property may have burned down.

3.) The property, usually commercial, may have gone through an environmental incident.

4.) The property may have been demolished by the taxing jurisdiction.

5.) The property you bought the tax lien for a year ago may have become a meeting place for trading, selling, or distributing controlled substances.

6.) A sinkhole may have grown and the said property was swallowed.

Some of the reasons above may be impossible for you, but do believe, these things can happen!

To get to the main point, just look on the property and think twice, “Do I really want this property?” before you spend your time and money on the tax lien for noticing, attorneys, title searches, etc.

10 Most Common Tax Lien Questions Answered

Here are the answers of the 10 frequently asked questions about tax liens:

Tax Lien Questions Answered

1. Who are able to buy tax lien certificates?

Anyone who is interested and who has the cash to pay the auctioneer can purchase tax liens.

2. When I buy a tax lien certificate, am I evicting someone from his or her house?

No, you’re not. You are only paying off the property owner’s delinquent taxes; you are not foreclosing on them.

3. Will I get to own the property in the future?

It is possible, though it is scarce that the owner of the property will forfeit their real estate. In Arizona, for example, 99% of all the property owners pay off their taxes owed to the county. The county then in turn pays you the interest plus a specific high rate of return. The property owner redeems 95% all over the country, tax lien certificates sold.

4. Why won’t people pay their property taxes?

There can be a lot of reasons, 3 of the most common ones are: 1 – the property owner died and no one paid his taxes though the heir can pay the tax later. 2 – the property owner run out of cash or just become unemployed. 3 – There are just people who would not want to part their money until the very last minute.

5. What would happen if the property owner dies?

In this case, the county will begin to forward tax notices to the last known address. The county will then advertise the tax sale. Usually, family members or the heirs pay the owner’s taxes.

6. How many tax lien certificates can I buy?

There is actually no limit on how many tax liens you want to have. You can bid and buy as many as you think your money will allow.

7. To whom do I pay?

You will be paying to a government agency, as there will be no brokers or intermediaries to pay.

8. Who will be paying me my returns?

The owner of the property will be paying you when they pay off their owed taxes. The county, municipality, or the government agency that collected cash from you will contact you and will ask to have the tax lien certificate returned. They will then send you a government cheque upon receipt.

9. Do I need to contact the homeowners?

You do not need to contact them; you do business with the government agency.

10. When do I get paid?

The municipality or the county will notify you once the owner of the property pays up his owed taxes.

If your friends or family has questions regarding tax liens, you now know what to answer.

How Do Tax Lien Certificates Work?

How do tax lien certificates work? Well, lien certificates are utilized by real estate investors to bring in large-scale profits by claiming possession of properties at a fraction of its worth, or bid on low-profit loans to help householders hold on to their properties by giving them more time to bring up funds required to pay off their tax debts.

Tax Lien Certificates

When these property taxes have been missed for a certain period, the county then has the right to confiscate the property and can either have it auctioned or sell it.

Some of the municipality governments forfeit properties during the first year of delinquency hence making larger profits, while other counties allow even years of unpaid taxes to accumulate before making any action. The back taxes being owed have a distinct effect on the landowner’s power to pay off back taxes and of course, the investor’s chance to bring in profit.

When buying tax lien certificates, it is crucial that you must understand that you are not actually purchasing the property. You are loaning the householder cash to pay the back taxes, with of course the assurance of repaying the loan with the fixed amount of interest.

Investing in tax lien certificates is considered to be absolutely risk-free and simple, especially to those investors who fully understand the process.

The Importance of Subsequent Taxes

Subsequent taxes are due on or after the tax sales are held. But did you know the importance subsequent taxes or more known as “subs” have on you being the tax holder?

There is actually no legal power where you are able to go to a deed and get its real estate if the subsequent taxes are not yet fully paid. But really, what would be the consequence of not being able to pay off the subsequent taxes when they are in due?

Well, there is quite a number of jurisdictions wherein your neglect to pay off the subs can put you at risk as a tax lien holder especially if the property has not yet been redeemed. Take the state of Arizona for example, failure to pay off your subs can surely hurt your position and a new tax lien will then be sold and its buyer will then have the right to redeem which will eventually remove your opportunity to get the property if the lien won’t be redeemed. This is just one of the most common cases.

Now, there are also situations where the preceding owner has the right to purchase the sub lien which will then give you the chance to trade up the return. Let’s take an example: If you buy a tax lien in NJ at a 6% yield and you have the prior lien at the next year, it is then okay to purchase the new lien at 18% by custom. This system works at several states where bidding is for the ownership percentage.