Best Kept Secrets on How to Make Money Through Tax Lien Investing Revealed

Posted on: June 28, 2011

Categories: Buy, Profit

Author: lbuen

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Tax Lien Investing Image by John C Abell via Flickr

Don’t Be Alien to Tax Lien Investing

If you think you can make money in real estate investing only by buying, selling, fixing and renting houses, think again. Take the time to explore the vast field of real estate investing and you will discover other earning opportunities that involve minimal risk and require little capital since you do not actually pay for a piece of the real estate. One of which is through tax lien investing.

What is Tax Lien Investing?

The local government, the state or the county collects various forms of taxes so that it can provide services and benefits to its citizens. One kind of tax it collects is property tax, which is typically paid to the county where the property is located. In the event that the property owner misses a tax payment, the government imposes a tax lien against the property. Despite this move, the county still did not receive the amount of the tax, and thus cannot be used to add to the funding for the delivery of services and benefits of the county. So to solve this problem, the local government sells at public auction either a Tax Lien Certificate or Tax Deed.

2 Ways to Make Money Through Tax Lien Investing

1. When the homeowner repays his taxes. As a tax lien investor, you temporarily shoulder the tax owed by the owner to the government so that the government can use it to fund its obligations to the people. The owner has to repay the taxes within a set period. Once the owner makes his payment, the government will give you a check to pay back your investment including interests and penalties mounted up within the repayment period. Here, you can gain between 16 to 30 percent depending on the state the property is located in. The actual amount earned may not be as substantial as when buying and selling houses, but the beauty of it is it is virtually risk-free, unlike other investment vehicles.

2. When the homeowner cannot settle his taxes. When this happens, you gain first position on the deed to the property through the tax lien. With this, you are legally authorized to foreclose on the property even if there is a mortgage against it. This means that by just paying for the tax deficiency, which is just a few thousand dollars in most cases, you can obtain the property free and clear. Now compare that amount to the actual value of the property and you will see how much money you can make.

You must realize that the second scenario does not take place often since most homeowners who have liens against their properties are able to repay the county within the set time. But there is still the possibility that you can own a property for such a ridiculous price especially now with the ailing economy.

Not everyone knows about this investment vehicle as it does not receive much publicity. The government has not given banks and brokerage firms the impetus to inform people about it. Because it is lucrative and is relatively easy to do, most investors who are already into tax lien investing are not eagerly telling others about it for fear of competition. Lucky for you, you came come across this post.

Tax lien investing is another way real estate investors make money. Not many people know about it but now that you do, you need to do more research on how to get things done especially in the specific county or counties you intend to operate in before you buy your first tax lien certificate.

 Best Kept Secrets on How to Make Money Through Tax Lien Investing Revealed
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