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Tax lien auctions and tax liens on sale – these concepts may be complex to someone who does not know anything about real estate nor has no background in finance, management or economics. On the flipside, you will realize that countless business owners of today have diverted their focus to real estate knowing that investing on properties can reap huge income.
So, what is behind tax lien certificates that many entrepreneurs are interested in? Before proceeding, here are some frequently answered questions from investors, such are:
What is a tax lien?
Before we delve further, as a type of debt awarded due to the property owner’s failure to pay taxes. If this failure continues, certificate is produced and this legal document either will be for sale or placed in an auction where investors will bid on.
When an investor buys a tax lien certificate, he pays taxes to the local government. This will be beneficial to the county as this can lead to the enhancement of various establishments like schools, hospitals, police stations and many more.
Upon paying the taxes, the investor can earn as much as 36% interest rate when done properly. Interest rates and penalty fees are paid by the property owner and a redemption period will be given to pay all the fees. Once the redemption period has lapsed and the owner still fails to pay the required amount, a foreclosure on the property will take place and the investor is now the new property owner.
Who can buy tax lien certificates?
Anyone who has the budget can purchase certificates. Of course, each county has its own system when it comes to these aspects. For instance, if you’re residing in the same location of the county, it’s mandatory for you to pay the property taxes in full before you’ll be allowed to bid on other estates.
Is there a high possibility to have full ownership of the property?
While it is possible to be the new property owner, surveys revealed that the rate of foreclosures taking place is less than 5%. Therefore, foreclosing on certificates rarely happens.
When can you get your money back after purchasing a tax lien certificate?
Your money will be sent back to you once the delinquent taxpayer is able to pay back the taxes. This is most likely unpredictable though. Some will only take a month while others will take two to three years.
What if you want to have your own property?
If what you’re after is to fully own a property, you should opt for tax deed sales. As mentioned above, you can only own a property if you foreclose a tax lien certificate and that seldom occurs.
Is it possible to transfer your tax lien certificate to another person?
Fortunately, most states allow the transfer of a lien certificate to someone else. This process is known as assignment. You may need to pay an additional fee though.
What are the most effective strategies when buying and investing on tax lien certificates and acquiring huge return of investments?
For starters, it’s best to attend a training course that teaches the right ways on how to make money buying tax liens. This kind of business requires careful planning and critical thinking and it is always best to ask for assistance from someone who has already succeeded.
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