The simple answer to “what is a tax lien certificate” is: it’s an obligation a delinquent tax payer has to the local government (typically a county or other local municipality) to pay past due taxes on property. These are offered for sale to investors, typically at a tax auction. By law the local government must collect the money needed to provide public services from each property owner. For the investor this system provides a safe, secure and predictable investment in government issued certificates with maximum annual interest rates, set by the state government, which can be 18% or more annually.
In this video Ted helps answer the question:
When investing in tax certificates you are making an investment secured by the real estate on which the taxes are due. If property owners don’t pay their delinquent taxes, you can can make a legal claim on (get possession of) the property for only the past due taxes and fees… basically for pennies on the dollar! That means that if you bought the certificate and the property taxes are not paid, you could end up owning the property for just the back taxes and fees owed the local government.
So, what is it anyway? It is considered by many as the safest investment you can make. Here are some unique features about tax lien investing that benefit the investor:
- They are sold in about half of all the states in the USA; the other half sell tax deeds.
- The laws and regulations regarding the sale of tax lien certificates are defined by state law and the sales process is administered by local government.
- State laws set the maximum interest rate a tax lien certificate may pay, which can be 18% annually or more, depending upon the state law.
- There are no commissions payable to brokers when buying tax lien certificates or when they are paid off (redeemed) by the delinquent tax payer… no extra fees paid to a middleman, the investor gets back all the investment and all the interest.
- About 95% of all these certificates are paid off within three years of being issued.
- These certificates are secured by real estate. That means if this certificate is not paid off you can own the property for only the cost of the unpaid property taxes and fees after a foreclosure process.
When thinking about this question, investors take two approaches:
- Obtain a high interest rate passive investment, where the tax lien investor gets all the original investment returned plus a high rate of interest when it’s paid off, or
- A strategy of investing in tax liens with a likelihood of not being paid off, resulting in the buyer owning the property for pennies on the dollar value of the property.
Traditionally most tax lien certificates and tax deeds sales were held at a public auction. Today many of these government auctions are done on-line. Investors can buy tax lien certificates from almost anywhere in the world using the internet.
After over 20 years of instructing others on the secrets to successfully investing in government auctioned tax lien certificates and tax deeds, Ted Thomas has presented at hundreds of wealth building seminars, held over a hundred workshops and amassed thousands of hours of recorded material that he has edited into a comprehensive learning system. This system includes presentations from Ted Thomas and many other experts with first-hand personal experience investing in tax liens and tax deeds.
