Can someone explain to me like I’m a 3rd grader how this type of investing works?
Every state that I know of has some form of tax lien or tax deed sales.
NO state generates revenue…they all depend on the taxes collected from their citizenry.
If that citizenry fails to pay the taxes then the state is either broke (Like CA now) or they sell the liens or tax deeds to get the $$$ now.
Tax Liens…in this scenario you are merely lending the state the money for the taxes due. You are actually paying the delinquent taxes for someone else. The taxing jurisdiction will collect them and pay you when the property owner pays up.
YOU have NO property rights, NO ownership, NOTHING but a lien.
If the property owner, or anyone else interested, fails to pay the taxes and the redemption period runs the taxing jurisdiction will issue a tax sale deed.
Redemption periods vary from state to state. Some very short and some very long…check on your state.
CAVEAT EMPTOR…this is just a form of quit claim deed and in order to perfect title you MUST go through a “Quiet Title Action” in the courts.
You may or may not get the property as a result. Most judges will lean over backward to give the property back to the original owner and all you will get is the interest and penalties. You probably WILL NOT get back your attorney fees, etc., expended for the Quiet Title Action.
Chances of getting a very valuable house or land for mere taxes is about the same as hitting the Powerball Lottery.
Buy tax liens for the interest and penalties and use those funds to buy property.
Tax Deeds…Many states do not use tax liens and instead go straight to a tax deed. In this case you actually get the deed to the property at the end of the sale. This deed MAY or MAY NOT be subject to a redemption period. Again CAVEAT EMPTOR…Investigate BEFORE you invest.
Nothing hurts worse than to put good $$$ into something and then learn that the owner has the right to redeem and your good $$$ are out the window.
This is about as simple and 3rd gradeish as I can make it.
I advise, go to your local courthouse and go to the law library and ask the librarian to assist you. Get all the statutes on tax sale investing…go home…read them at LEAST three times…legalese if confusing at times…then go and put them to use.