foreclosures are a passive income strategy with minimal paperwork and
low cash outlay, making it perfect for Beginning, Intermediate, &
Experienced Investors. Plus, the investor does not pay for maintenance,
insurance, or the mortgage on the property.
With tax foreclosures, there's less competition. Due to a lack of knowledge, most real estate investors are terrified of this strategy and do not understand the high yielding opportunity and benefits. The few who know the secrets, tax lien properties present a semi-passive means to establish short-term benefits with long-term goals.
Tax foreclosures are a low-risk strategy, and your investment is protected by the law and backed by the government. It's a solid investment strategy that's been around for 200 years, even longer than the stock market. Our government initially created the system (Love the USA) to help local municipalities collect taxes.
Plus, the government does most of the work, the accounting, notifying, and collecting the money. You sit back and wait for your check from the county government to arrive.
When everyone hears foreclosures, they immediately think of a mortgage foreclosure. It's the same principle but different rules and laws because this is a foreclosure of past-due property taxes not paid in full.
When this happens, a tax lien certificate is issued, and the county sells off the certificate at auction to the highest bidder. The property owner must pay back the lien holder, plus interest, or face foreclosure.
The property tax sales auctions occur at different times, and large counties have weekly auctions. It's not only residential family properties that end up as tax foreclosures; you can also bid on vacant land, cell towers, warehouses, docks, easements, and right of ways. Corporations sometimes forget to pay their property taxes, which can be quite lucrative for the investor who recognizes the opportunity.
All the information about property tax sales is public knowledge. And can be found on the county's tax assessor website. Almost all counties hold their auctions online, which makes the process convenient for everyone.
Do your due diligence, research, and evaluate the property. Always double-check the information for IRS liens, bankruptcy, code violations, environmental and other issues before you bid. If you live out of the county, use Google earth to view the property and surrounding neighborhoods. Or have a Realtor run comps. Also, please pay close attention to the sales bidding and redemption rules; they vary from county to county.
With a tax lien certificate (TLC), you are NOT buying the real estate; you are purchasing the first position lien on the property. The real estate becomes the certificate's security, which transfers the government's right to receive the tax money owed over to you - including fees, interest, and penalties.
When the property owner pays the tax lien certificate, the investor gets their money back plus interest. Depending on the state, fixed interest rates can range from as low as 15% per year to as high as 32%.
97% of all Tax Lien Certificates are paid off within two years.
And the other 3% of the time? The investor still makes out because if the owner does not pay back the money owed on the tax certificate, the investor gets the entire property free and clear. All the investor has to do is file some paperwork.
Our faves are tax deed sales (TD) because it's then that the government will sell the actual property to the highest bidder regardless of any mortgages, liens, or anything else owed on the property.
Almost all existing liens get wiped out automatically, giving the investor the property for the past-due taxes' price. There are some exceptions; check your state. IRS liens and student loan judgments are two types of loans that will not be dismissed.
The drawback: all sales have a right of the redemption period; check with the county for the specific length of time.
Tax foreclosures are a predictable and secure real estate investment strategy that will generate passive cash flow and build your investment business.