One of the best investments to come out of the C-19 virus crisis is buying properties for 30 to 50 cents on the dollar by paying back taxes. How? By investing in tax lien certificates and tax deeds. Both are related to paying back taxes on houses and property, and both are often overlooked investments.
In spite of that fact that C-19 has wreaked turmoil and havoc in the economy, the economic crisis that has emerged has also made these investment vehicles more attractive than ever.
It’s an economic rule that when crisis occurs, opportunity almost always follows. Unemployment may be at an all-time high, but that also means millions of people owe back taxes on houses and properties.
Why Governments Sell Tax Lien Certificates and Tax Deeds
While this is certainly unfortunate, there is an upside. You see, local governments depend upon property taxes to fund schools, as well as the police, fire departments, and all the other services necessary to keep cities running. Without tax revenue, local governments cannot function, and the normal daily lives of people would come to a screeching halt.
Their solution? They issue auction certificates, called tax-lien certificates, and tax deeds. Both tax liens and tax deeds are good investments, because they are a win-win solution to the problem. Both provide the counties and local governments with income to continue providing services, and both offer investors safe and often high returns on their investments.
What are Tax Lien Certificates?
Tax lien certificates, sometimes called “auction certificates,” or just “tax liens,” are investments that are issued by local governments. Although, technically speaking, there are Federal tax liens where the IRS. has a tax lien sale. For the sake of our discussion, we are mostly discussing investments issued by counties.
Tax-lien certificates are offered in almost half the states in the U.S. and the District of Columbia. For example, there are tax lien sales in Texas, California, and Ohio.
They are sold at auctions online or in person, but in both cases, buyers compete for the certificates by bidding. Once they win the bidding process on a home, the tax lien will pay them a fixed percentage on their investment. This consists of the amount of back taxes on the house due to the county and any administrative fees incurred.
Tax Liens vs. Stock Investments
While the percentage earned on the investment varies, once the bidder wins the right to purchase the tax-lien certificate, and does so, their return is guaranteed.
This is a huge distinction from other investments, like stocks. Stocks go up and down according to market forces and company performance. So, while stocks can, and often do, go down in value, tax-lien certificates do not.
This is a significant advantage of tax lien certificates over stocks; your income is guaranteed against losses on your investment. So if you are still asking, “Are tax liens a good investment?” The answer is they aren’t good investments, they are great investments.
In times like these, when C-19 has many stockholders desperate over their losses, tax-lien holders are sitting back looking at their 16% tax-lien certificates, or 18%, 24%, even as much as 36%, and showing solid returns on their investments acquired by paying back taxes.
What are Tax Deeds?
Simply put, tax deeds enable investors to buy properties by paying back taxes. It doesn’t matter if the back taxes are on a house, a multi-family building, or if the back taxes are on a property or land. Tax deeds have a long history in the U.S., as they were created by state governments over 200 years ago.
In the states where they are offered, the terminology for tax deed sales varies. In California and Ohio, tax deeds are sold at tax sales. In Texas, a tax sale could be referred to as back taxes land for sale. In all cases, purchasers bid for the right to buy a house or property by paying back taxes.
Whether you buy a home or property by paying back taxes, you end up with the potential for a substantial return on your investment. When using the right information and buying carefully, investors who buy houses or property with tax deeds often end up paying pennies on the dollar.
The nature of property is that its value goes up and down in cycles. Additionally, the actual deed buying process has more variables than purchasing tax-lien certificates.
So if you plan on buying houses or buying properties by paying back taxes, you will need more knowledge to invest in tax deeds. Obviously, there can be more risk associated with tax deeds than with tax-lien certificates, but with risk comes the potential for amazing returns on your investments.
If you’d like to get started today, you can begin now at no cost by taking advantage of Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax delinquent real estate investment.
The Hybrid States
There are ten states, called “hybrid states,” where the buyer of the tax deed can still have the back taxes paid by the person who owes the taxes.
So while you may end up buying a house or property by paying back taxes, in these states, there is a time allotment for the owner to pay them off. That time varies from state to state, and the purchaser would still be paid a percentage on their investment, usually quite a good return.
Paying Back Taxes: Conclusion
In conclusion, if you are not investing in tax liens and tax deeds, you are missing out on two amazing opportunities, especially in times of crisis and instability, like we are experiencing now.
Your tolerance for risk, your investment strategy, and your willingness to become hands-on will determine whether tax liens or tax deeds are the best option for you.
Of course, you have to learn how to buy tax-lien certificates. But often people who learn about tax liens and tax deeds combine the two and get both reliable and exceptional returns on their money.
Either way, any investor whose portfolio does not include one or both of these great investments is losing out on a fantastic way to build wealth or diversify their portfolio and insulate themselves from market volatility.
In fact, it’s often in times of crisis that tax liens and tax deeds perform the best, especially when compared to many other forms of investments like stocks.
So whether the thought of a 16 % percent tax-lien certificate (or more) sounds inviting, or if you want to buy homes or property by paying back taxes, and are willing to learn a bit more, then tax deeds are for you.
With that extra study and 7 to 10 hours a week of work, paying back taxes on houses, homes or properties, can earn you spectacular returns on your investment.
Either way, whether through tax liens or tax deeds, anyone who overlooks these two investment vehicles is missing out on some of the best financial opportunities available.
Ted Thomas is a Florida-based author and publisher who specializes in tax-defaulted properties. Visitors to Ted’s website will find FREE instructional videos. No credit card required. The video lessons will give you an excellent overview on government tax-defaulted real estate which is sold at public auctions for starting bid, back taxes for 10 cents to 20 cents on the dollar. You’ll also learn the secrets of tax-lien certificates which pay guaranteed returns of 16%, 18%, up to 36%.
If you’d like to get started today, you can begin now at no cost by taking advantage of Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax delinquent real estate investment.
All reasonable efforts have been made to ensure the accuracy of the information presented in this article. Laws and regulations may change and you must be knowledgeable in the current laws and regulations at any tax defaulted property auction. Website links may also have changed since this article was written.
