Discover the Truth About Tax Liens

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

Counties and municipalities depend on money from property taxes to meet their budget. When property owners don’t pay their taxes, the county or municipality will sell the taxes to an investor. The investor is not buying the property but paying the taxes on the property and putting a lien on the property. Why would an investor want to do this? Two reasons: first they are getting a good interest rate 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 property owner does not pay their taxes, instead of selling a lien on the property, the county or municipality will sell the property at a tax deed sale. In states that sell tax deeds you are actually buying the property. In some states the property is sold for back taxes and penalties, in other states the property is sold for a certain percentage of assessed value, and in other states the property is sold at market value. A tax deed can be a good investment, especially in states that sell the property for the back taxes because the investor has a chance to buy real estate at under market value.

Some states sell redeemable tax deeds, in which the county does sell the deed to the property at the tax sale. But there is a redemption period in which the delinquent taxpayer can come back and redeem the property. In order to redeem the property the delinquent taxpayer must pay the investor either a penalty or interest on their investment. Some redeemable deed states have a penalty and some have an interest rate. In some states the penalty or interest can be quite high, making it very attractive to the investor.

Because people have been told that tax liens are a great investment and that they can make such good interest rates, they assume that interest is paid out by the county or municipality on a regular basis. The truth about tax lien investing is that you do not get paid a cent until the delinquent property owner decides to redeem the lien. If they do not pay during the redemption period (which is different for every state) then you can foreclose on the property in order to get paid on your lien.

Another misunderstanding about tax lien investing is that after the redemption period is over, the lien holder will automatically get the deed to the property. The truth about foreclosing on a tax lien is that in most states you need a lawyer in order to foreclose and get the deed to the property, and in other states (Florida for example) the property will be sold in a tax deed sale, and will be auctioned to the highest bidder, so your chances of coming away with the property for what you have invested in it are not good.

Some people have the misunderstanding that tax lien investing is a good way to buy properties for pennies on the dollar. This does not happen very often. Especially in states where the value of real estate is very high, the tax lien will almost always redeem sometime during the foreclosure process. Tax lien investing is a way to get a high return on your money. If you are interested in buying property for under market value, you are better of with tax deeds or redeemable tax deeds.

Joanne Musa is a Tax Lien Investing Coach and Consultant who works with investors who want to learn how to buy profitable tax lien certificates and tax deeds. She is the president of Tax Lien Consulting LLC, a consulting firm for tax lien investors. She is the author of the e-books: Tax Lien Investing Secrets and Tax Lien Lady's State Guide to Tax Lien and Tax Deed Investing, available at http://www.taxlienconsulting.com For more tips on investing in tax lien certificates send an e-mail to MoreTips@taxlienconsulting.com

Article Source: http://EzineArticles.com/?expert=Joanne_Musa
Buying Tax Liens

Seven Steps to Creating A Profitable Tax Lien Portfolio

Depending on whether you are investing in liens or deeds and which state you are investing in, these steps may include; recording your lien or deed with the county clerk, paying subsequent taxes, Clearing the title to the property, and foreclosing the right to redeem a tax lien.

OK, so you've followed the first six steps to building your profitable tax lien portfolio and you've purchased your first tax lien certificate or tax deed. Now what do you do to insure that your investment is a profitable one? The seventh and final step to building your profitable tax lien or tax deed portfolio is protecting your investment and maximizing your return.

Regardless of whether you purchased a tax lien, a tax deed, or a redeemable tax deed, the first thing that you need to do is record your lien or deed with the county clerk. Unless it is recorded, all you have is a worthless piece of paper. In some states this will done for you, and you will be charged a recording fee when you purchase your tax lien certificate or tax deed.

In many states, it is the investors responsibility to do this and you are given a specific time frame in which it needs to be done. In some redeemable deed states, like Texas for example, the redemption period does not start until the deed is recorded, so you’ll want to do that right away. It is to your advantage to check out ahead of time what the procedures and laws are in your state for recording a tax lien or tax deed.

When you purchase a tax lien, some states will allow you to pay the current unpaid taxes (remember that the taxes you paid in order to get the lien are most likely last year’s taxes) and any subsequent taxes that the property owner doesn’t pay. I recommend that you pay the subsequent taxes (refered to as "subs") , if your state allows it, as soon as possible. Some states will give you the maximum interest on your subs and some will only give you the interest that you bid at the sale, but most states that allow you to pay the subs also allow you to collect interest on them. This is one way that you can maximize your profit in a tax lien.

When you buy a tax deed, in most cases you will getting a non-warranty deed. That means that there is not warranty as to the condition of the property or the condition of the title to the property. Basically you are buying the property without clear title and if you want to resell it, you will need to clear the title. Very few states issue a warranty deed at a tax sale.

You can clear the title to the property in one of two ways. You can either hire an attorney to do a quiet title process or you could hire a title company to do a title certification process. Which one of these processes are more cost effective and quicker than the other will depend on the state. I have heard that in Texas it is easier and cheaper to use a title company and I know that here in Pennsylvania it can be more cost effective to use an attorney. I do recommend that if you use an attorney that you find one that does a lot of this type of work.

If you purchase a tax lien and it is not redeemed within the redemption period, than you may need to foreclose on the property in order to get paid. In my experience this happen very seldom, but when it does you will need a lawyer to handle this for you. It may seem like a simple process, but there many steps that have to be followed exactly or you could loose your right to the property. I also recommend that you only use a lawyer who specializes in tax lien foreclosures. Lawyers who specialize in this area are familiar with the difficulties that come up and know how to handle them. Because they are very familiar with the prcess they will be able to get through it faster than a lawyer who does not do many tax lien foreclosures.

This is the last article in this series. For more information about how you can build your own profitable tax lien or tax deed portfolio, I invite you to sign up for the free preview teleseminar to my new 8 week coaching course, "Build Your Profitable Tax Lien Portfolio." To register, go to http://tinyurl.com/f2hy4.

Joanne Musa is a Tax Lien Investing Coach and Consultant who works with investors who want to learn how to buy profitable tax lien certificates and tax deeds. She is the president of Tax Lien Consulting LLC, a consulting firm for tax lien investors. She is the author of the e-books: Tax Lien Investing Secrets and Tax Lien Lady's State Guide to Tax Lien and Tax Deed Investing, available at http://www.taxlienconsulting.com/ For more tips on investing in tax lien certificates send an e-mail to MoreTips@taxlienconsulting.com

Article Source: http://EzineArticles.com/?expert=Joanne_Musa

Where Do I Buy Tax Liens

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