Real Estate Tax Liens Certificates

Tax Liens Certificates

Tax liens are basically loans to individuals who had failed to pay their property taxes. In return for paying those back taxes off, they got paid interest plus depending on the state additional penalties. What happens is this: A homeowner, for whatever reason, fails to pay his property taxes. The taxing authority (the state or county) then puts a lien on his property.

In the case of property taxes, a tax lien has top priority in terms of being paid back. Generally speaking, it comes before the mortgage and before any other lien as well. If the owner wants to sell his property, he must pay off the tax lien first.

The back taxes are owed to local governments, but to stay out of the collection and liquidation business, counties sell these liens to private investors. They do so through “tax lien auctions.”

Investors buy these obligations, in the form of tax lien certificates, at auctions from the counties selling them. Investors are acting like private bankers and getting private-banking returns.

Tax lien investing is highly profitable and relatively safe, and surprisingly easy if you do your research beforehand. The key is to research the property, perhaps even do a title search yourself at the courthouse; after all you want the homeowner to pay the lien off.

The interest varies but can easily be as high as 18 % depending on the property. Property with a home on it will be more desirable than a vacant lot.

I suggest you do a bit more research on the educational side before attempting to purchase a tax lien certificate. The more information you have on this type of investment the better, like any other type of investment, one should be well informed before committing any money to this form of investment