Investing in Tax Liens

Does anyone have experience investing in tax liens (i.e. you pay the county for a tax lien on a property, the owner then pays you back at a high interest rate or you can claim the property after a designated period)? It sounds like you can get a great return on your investment, and with due diligence you can minimize risk. If you are familiar with this type of investing, please describe your experience:

How consistent were returns? Was it worth the time involved? The state/county you invested in would also help, since the format varies by county. I would be especially interested in D.C. and Maryland.

I believe you should be able to find some information in the Foreclosures, Short Sales forum. Most county websites will have most if not all of the information you need to buy tax liens/deeds in that area. You can also go to your library and check out some books. I’d suggest the 16% solution and try to get the most up to date version.

I’ve really been looking into investing in liens/deeds but I live in the KC metro area and KS and MO aren’t the best states. I may or may not be going to the Missouri sale this August. I’d like to go just for the experience but I highly doubt I’d have the time to perform the due diligence necessary to buy anything. To be fair though it shouldn’t take long to perform the due diligence but my job has me working 6 to 7 days a week well over 70 hours. I’m so tired I wouldn’t trust any of my research =p

Tax liens may be released automatically after a pre-defined period or they can be discharged by just paying the tax owed together with charges or service fees that can be affiliated with having the lien discharged.

If you’re able to pay the tax before the 10 year release date period, you will get a Federal Tax Lien release note within 30 days of finalizing the debt.

So what happens after the tax auction. Can you just walk into the court or tax office and buy a property over the counter?

There are areas where you can purchase tax liens directly from the tax collector in a specific county. This usually happens with tax liens that have already been auctioned but no one bought. It is important to look into the property before buying.

Buying tax lien certificates or tax deeds at auctions is different from bidding at auctions. The bidding system can vary from county to county or state to state and is dependent on their unique rules regarding tax lien sales. Some may have strict bidding processes while other counties follow a more freeform procedure.

Tax liens like all investments present some level of risks. The biggest risk with investing in tax liens is that the homeowner may not pay the bill. Keep in mind that if the homeowner does not pay the bill you could lose out on your investment. In this financial market the trend with tax liens has been that the homeowner is not consistently making their payments.

The market is seeing an increase in homes going into foreclosure and the outstanding tax liens are being paid at fair market value not the inflated value, which means the investor is only receiving the principal amount without the interest. In certain instances the courts have discharged the tax liens in order to facilitate a less complicated sale in the future.

This will be thus better in terms of several things and we need to understand what exactly we can do to get this done.

Dave Reynolds, "Keep in mind that if the homeowner does not pay the bill you could lose out on your investment. "

I’ve invested in tax leans in Louisiana and from the way i read the above statement I would have to disagree. In Louisiana if a person doesn’t pay the tax bill after 3 years (you do need to pay the taxes from the first day you buy the lean/deed {LA is a hybrid state}) you don’t lose your investment because you then have the right to “sue” for the property (QUIT CLAIM)/control the title, and take full possession and do what you want with it (sell, hold, use as collateral, build (zoning permitted), or whatever). In the event you take possession of the property it’s paying penny’s on the dollar but the reward is only seen if you can actually sell the gain, which should be easy since you would have a huge amount of equity in it, you can flip it.

each state is different and I wouldn’t consider myself an expert in tax leans but there is very little downside investing in them. All of this is from my personal experience

In the business of tax liens there are only a few effective strategies used throughout the industry.

We all probably know by now the amazing interest rates which are tied to hip with tax liens. But until you begin your tax lien investing venture, you most likely won’t know about the true risks, the “alligators” of tax lien investing. There are a few questions you must ask yourself when buying liens which will truly save you from stress and burden:

Why would the property owner not pay the taxes?
If I got this property will I be able to resell it in this market?
Is the homeowner interested in the property? (This will determine the amount of time it will take to get your money back)
How long will it take for me to get my investment?
If it would sell, are the taxes due worth the property?

Over the years working with tax liens, I have seen several investors who get stuck with properties which are easements or long strips of land along a highway or in the middle of nowhere. These are the more dangerous properties you must look out for. Although you may be getting a high interest rate and think you will just have to wait until you get paid, you may be mistaken. Often times these strips of land and easements go unredeemed, racking up liens and debt in unpaid taxes and fines only to end up in the investors hands, losing his initial investment and requiring him to pay the property taxes for years to come.

Andrew N Smith

Before purchasing tax lien certificates, make certain that the property is worth more than the taxes owed. Inspect the property and check to make sure it is a profitable buy and of course know the rules of purchasing lien certificates in a specific county

Before doing it, make sure about what you are going to get. Sometimes they usually show that you won’t actually lost much neither them and that you will get more. But after dealing ,eventually the situation end upside down.