Real Estate Notes | Tax Lien Certificate Investing – 16 percent return on your money or more

Tax liens are imposed on those individuals who do not pay their property taxes.  This failure to pay up gives the state complete authority to put that individual’s property up for sale in an auction. A tax lien certificate is issued to the bidder who chooses the lowest interest rate and pays in full to the government.  This certificate in return will help the investor earn a monthly or yearly profit.  The profit will be handed out until the original property owner pays back the obligation and once this occurs, the investor will be returned the original capital. If not, the property is transferred over to the investor’s name.  Understanding this simple concept should be the first step on how to buy tax liens.

The first thing you need to do is determine whether your state offers tax liens, tax deeds or both because not all states offer tax liens.  Once you have figured out whether or not your state offers tax liens, determine the interest rate they are willing to provide an investor.  Some states have fixed interest rates, while others deal within a specific range, which will require you to bargain and negotiate.  Remember, there is always a chance that you might come across someone in an auction that will agree to a lower interest rate just to get a hold of a tax lien certificate.  It is important to play the auction smart and understand that even with an interest rate lower than what you desire will help you earn major profits.

The next step requires you to get in touch with your country treasurer or finance department, whether via e-mail, telephone, or in person. Ask for a list of properties and liens that are going up for bidding, as well as the date of the next auction. Auctions used to be held in public places but as of recent, they are carried out online. Once you have received information on the properties that are going up for sale, you need to research the ones you might be interested in.  Making a personal visit to the property will help you better understand the resale value, facilities available and local rent rates, which may affect your final decision.

Try to avoid commercial and empty lands if you intend to resell the property. However, if you plan to keep it for yourself then it would make sense to inspect such real estate. You can even hire professionals to make an assessment of the property and its profitability. They can also check to see if there are any existing problems with the land. All this information and research should prove fruitful as it will help you greatly on the day of the auction. Follow these steps on how to buy tax liens and you will always come out on the right side of it. In addition, always educate yourself on the latest advances in the tax lien industry.