I heard a speaker talk about these at a seminar last weekend.
The speaker suggested it’s an idiot-proof way to make money; you buy the lien, watch the money roll in, maybe end up with a deed. Another article I read said it was actually a high-risk endeavour.
What does everyone think?
The truth about real estate investing no matter what strategy you use or form of investing you may seek the only easy part of this game is loosing money.
You will find that the majority of property owners do redeem their tax lien but occasionally, the property owners don’t redeem their properties and this is the home run in this form of investing.
Any time during the period an investor holds a tax lien certificate, it is subject to redemption by the property owner, his agent, assignee, attorney or by any person having legal or equitable claim therein, including a purchaser of a certificate of a different year
What I like about this form of investing is that travel expense to buy a tax lien is an acquisition cost, the expense is normally tax deductible after the transaction is completed or should I say redeemed.
You will find that in a lot of cases you will need to obtain what is called a Judicial (Judgment) Deed to the property if it is not redeemed. In some cases, you must hold the tax lien certificate for a minimum period of time and in some jurisdictions you could be talking years from the date, the certificate was first offered for sale.
You must understand that you are not purchasing property. Instead, as an investor you are purchasing a tax lien (certificate of purchase) in the amount of all taxes due, interest charges and related fees. A certificate of purchase or CP is defined as a lien document signifying payment of delinquent secured property taxes by an “investor.” The lien against the property is sold in an open competitive bidding process based on the lowest interest rate to be received by the investor.
You need to treat this as if you are making an actual land purchase, you should inspect chain of title, being aware of all liens, inspecting the property if you can and an evaluation of it’s value vs your expense.
Keep in mind if you end up with the property, will you have the means to manage the foreclosure?
Just a few 101’s on this form of investing.
Good luck,
“…will you have the means to manage the foreclosure?”
Hmmm…what do you mean by managing the foreclosure?
Any time you take control of a property you have to be able to manage it!
Can you manage:
The sale of the property
The rehab of the property
The holding cost
Things like above as a start.