LEARN HOW TO INVEST IN REAL ESTATE TAX LIENS
Learn how to invest in real estate tax liens, and find out why tax lien certificates are one of the safest high-yielding investments available.
I’m Ted Thomas, and I’ve been investing and helping other people buy tax liens and teaching how to buy property with delinquent taxes for decades. Today, I am going to answer your question about how to invest in real estate tax liens.
Also, in this lesson, I’ll show you how to avoid the 2 biggest mistakes that newcomers make at tax lien auctions, online and offline.
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HOW TO INVEST IN REAL ESTATE TAX LIENS – A REAL ESTATE REALITY CHECK
It seems that everyone wants to make money with real estate. Late night television is filled with Get Rich Real Estate courses where people go from rags to riches in a 30-minute infomercial.
It looks easy and probably is, if you have 30 years working in the trenches, and it never rains. When the TV show ends, everyone is rich. I’m not saying you can’t do it. I’m realistic enough to tell you that you need to be educated, trained, and very motivated.
HOW TO INVEST IN REAL ESTATE TAX LIENS – PROPERTY TAXES
To learn how to invest in real estate tax liens, it’s important to understand some foundational information.
All privately owned property is taxable. The state you live in will authorize the county to levy taxes and collect taxes.
The local county will put all properties on a tax roll with a tax number and your name on it.
If you fail to pay your share of the property tax, the county will put the property on a default list. Which means, they will send an official notice of default.
HOW TO INVEST IN REAL ESTATE TAX LIENS – TAXING ENTITIES
Local governments, counties and municipalities are taxing entities. They are approved and authorized to levy and collect property taxes.
Once the property is on the default list, there is no getting off the list, until the taxes are paid. If you’re on the tax lien properties list, a short time later, the county government will take action to collect taxes.
In all 50 states, the local county government will move to send default notices. This is called due process of law.
HOW TO INVEST IN REAL ESTATE TAX LIENS – TAX LIENS
In the states that sell tax liens, they will issue a tax lien certificate. These are sold at auctions, held offline as well as online. These days you can conveniently buy tax liens online.
Purchasing a tax lien certificate at auction does not give the purchaser of the certificate any rights in the property. The purchaser only gains a piece of paper; they do not gain possession of the property.
The tax lien is the local county’s lien on the property. Once again, it’s only a piece of paper.
So how do you buy property for back taxes? If you’re interested in buying tax defaulted property outright, then tax deeds would be more up your alley, though it is still possible to get a property with a tax lien, which I’ll explain.
HOW TO INVEST IN REAL ESTATE TAX LIENS – TAX LIEN INTEREST RATES
Can you make money investing in tax liens? Yes, if you purchase the piece of paper, you now have a right to earn a high, almost outrageous, interest rate.
Depending on the state and local county, the purchaser could earn 16%, 18%, 24%, up to 36%.
The purchaser has a right and the county has an obligation to see to it that the purchaser receives the money.
Tax liens are the result of a property owner not paying taxes, and the county has a right to require payment of a late fee on taxes.
HOW TO INVEST IN REAL ESTATE TAX LIENS – TAX LIEN REDEMPTION RATE
Records and history reveal that 95% to 97% of all tax liens will be redeemed. That means they will be paid. Many are paid late and will be required to pay late fees.
Tax lien certificate purchasers earn money based on the late fees, 18%, 24%, 36%. The lowest I have seen is 12% in New York.
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HOW TO INVEST IN REAL ESTATE TAX LIENS – WHY BUY TAX LIENS?
A common question asked by newcomers is why would anyone buy a tax lien on a defaulted certificate? If the property owner does not pay the county, why would they pay the tax lien certificate purchaser?
The answer to that question is, this is a viable, secure and predictable investment. This is predictable and secure because the county guarantees the purchaser a big promise if they are not paid.
The big promise is that the purchaser of the certificate gets paid the interest rate, or they receive the property with no mortgage. Yes, the property is awarded by law to the tax lien purchaser with no mortgage!
This answer shocks the average investor and on the surface appears too good to be true.
HOW TO INVEST IN REAL ESTATE TAX LIENS – A GOVERNMENT-BACKED INVESTMENT
The truth of the matter is this collection system is over 200-years old. It was invented by local government and to this day is administered by local government.
To assure investors, the local government will ensure that tax lien certificate purchasers either receive payment or receive the property with no mortgage.
Once again, if the property owner fails or does not pay the tax lien holder, the property owner forfeits the property to the tax lien certificate purchaser.
HOW TO INVEST IN REAL ESTATE TAX LIENS – A BUSINESS OF ABUNDANCE
The USA has over 3,000 local counties and approx. 1,400 municipal governments. These are taxing entities, authorized by the legislature to levy taxes, collect taxes and confiscate properties for unpaid taxes.
This is a business of abundance. Many counties have 25,000, even 50,000 tax liens available, which the county will sell at public auctions for back taxes and late fees.
Generally speaking, property owners do not lose the property at a tax lien certificate auction. They maintain possession for 1 or 2 years. The tax lien certificate buyer does not get immediate possession. They must wait to collect 16%, 18%, 24%, or 36% interest.
Tax liens and tax lien certificates are a win-win investment. The program is government controlled and mandated and administered by the county. The money collected by tax lien certificates is used by the county to pay for police, firefighters, and county employees.
By purchasing tax lien certificates, you’re also helping property owners. You’re buying them more time to resolve whatever crisis in their life caused them to fall behind on their property tax payments.
HOW TO INVEST IN REAL ESTATE TAX LIENS – COMMON MISTAKES
In closing, I want to give you a heads up on the big mistakes that tax lien certificate and tax defaulted property investors make at auctions.
Big Mistake #1
They don’t look at property. This opens them up to big time problems. For example, what if a hurricane blew the property away, a flood washed it away, or a fire burned it to the ground?
Big Mistake #2
Most investors are extremely excited and very eager to be successful. Unfortunately, they bid on properties and have no exit strategy.
TAKEAWAY
We hope you enjoyed Ted’s lesson, “How to Invest in Real Estate Tax Liens.”
Tax lien certificates are a safe and profitable passive investment. The rate of return is high, and the certificate is secured by real estate. Tax lien certificates pay interest rates as high as 36%.
95% to 97% of the time, the tax lien is paid, and the certificate holder gets all their money back plus the high rate of interest. On those occasions when the certificate is not redeemed, in other words not paid, then the certificate holder gets the property without a mortgage.
Tax liens are government-backed and guaranteed. You buy tax lien certificates from local government, and you’re paid by the government.
If you want to know where to buy tax lien certificates, check local newspapers and county websites for tax lien properties for sale.
How much do you need to invest in tax liens? There are tax lien certificates available to fit every budget. Whether you have $100 or $10,000, you can find a tax lien within your price range.
This is also a win-win-win investment. You receive an excellent return on investment. The tax delinquent property owner is not immediately evicted, but instead given more time to pay the back taxes, which the vast majority will do. And the county gets the money it needs to keep running the local government and pay the county employees.
The risks are very low and the rewards are highly lucrative if you know the rules and do your homework.
If you’d like to learn more, there’s no one more qualified to teach you how to invest in real estate tax liens than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
Ted Thomas is the only one who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops & web classes, and personal one-on-one coaching.
Get started today at no cost with Ted’s FREE Master Class, that reveals the incredible opportunities available in tax lien certificates and tax defaulted property. The class is only about 1 hour of streaming video and contains life-changing information! You can’t afford to miss it!
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