I’m Ted Thomas. Today I’m answering your question about how to buy a house with a tax lien, and I’ll go through the process step by step.
The topics I’m going to cover are:
- Online Tax Lien Auctions
- The ROR on a Tax Lien Certificate
- Tax Lien Investing Is Not a Get-Rich-Quick Scheme
- A Case Study of How to Make Money on Tax Liens
- Do Your Research Before Buying Tax Liens
- Tax Liens Are a Secure Passive Investment
- Should Your First House Be a Tax Lien Property?
- Profiting From Tax Delinquent Property Investing
Once you understand it, you’ll see a lucrative way to make a lot of money. I’m also going to give you some ideas on making money that you won’t get anywhere else.
Want to learn more about bargain real estate? Would you like to buy mortgage-free homes for pennies on the dollar? Or earn outrageously high interest rates? You can live the life of your dreams. Learn how with this FREE mini class!
Online Tax Lien Auctions
The rules of the game have changed. In the old days, if I wanted to go to a tax auction, I had to drive to the county and beg them to give me a tax delinquent properties for sale list.
It’s all changed now. They’ve put most of this online. That means we can access every tax lien auction and every property, and we can do all of that from where you’re sitting.
You can do a property tax lien search and buy tax liens online to take advantage of the internet and start making money.
You’re not going to get rich by Friday. This takes a little time to learn.
The ROR on a Tax Lien Certificate
The rate of return (ROR) on a tax lien certificate depends upon the state, or in some cases, even the county. Tax lien certificates interest rates by state will vary.
If you bought a tax lien certificate in Florida, you might earn 18% annually and own that certificate for 2 years. That’s the length of time a tax certificate could be outstanding.
If you bought one of those certificates in Iowa, it could be 1 year, and in a year, you could earn a return of 24%.
Now, if you bought a redeemable deed in Texas, well, Texas is ruthless.
Here’s a tidbit on how to buy tax liens in Texas. They want the taxes paid and give that homeowner 180 days, so at the end of 180 days, you would own the property.
Tax Lien Investing Is Not a Get-Rich-Quick Scheme
If you need money today, this is not your business. If you’re an investor, you want to put time and the effort into learning this.
This is a business you can learn in 4 weeks to 4 months depending on what you want to put into it, and you can make money in this business for the rest of your life.
I don’t care whether the county is going straight up or straight down, there are always going to be tax liens and tax deeds.
I’ve been involved in this business for over 30 years, and it was around 170 years before I started. Nothing lasts like the tax lien and deed business.
An Case Study of How to Make Money on Tax Liens
So, what does it mean when a house is listed as a tax lien? Here’s what happens.
Counties sell tax lien certificates. So, let’s take Phoenix, Arizona as an example.
Let me tell you about a young couple who became students of mine and wanted to know how to buy a house with a tax lien. They’re having babies and have got every dime tied up, and they’re both working in tech.
They’re doing fine. However, they’re working 10 to 12 hours a day, and they want to be careful with their money.
So they started looking for tax liens.
An Insider Tip on How to Buy a House by Paying Back Taxes
I said, “Look for tax liens that are owned by people from outside the country.”
They asked, “What are you talking about?”
I replied, “Well, don’t people from countries like Canada, Brazil and Singapore come to Phoenix and buy a property? What if they forget to pay their tax?”
They got it. I told them to look for properties with owners who lived in other countries because where does a tax bill normally go? Does Maricopa county and Phoenix send tax bills to Vancouver, Canada? Or Montreal or Rio de Janeiro? No. They send them to the property.
What if the owners had the tax lien going to the property and they didn’t know about it? The tax collector doesn’t care. All the tax collector has-to say is, “Look. You pay the tax or you lose the property.”
Getting a Tax Lien Property for Pennies on the Dollar
This young couple bought a tax lien certificate for $11,000, and they ended up buying a condominium.
I had told them, “Don’t buy a tax certificate until you look.”
So, they drove out there, and they couldn’t believe it. The property was on water, and in Arizona, having water is a big deal let me tell you.
The condo was worth $180,000, and they bought the certificate for $11,000.
What’s the risk? If they don’t get paid, they get the property. In this case, that’s exactly what happened. If they had been paid, they would have made 16%.
If you want to know how to buy a house with a tax lien, you buy the tax lien on a property owned by people who live outside the country, or buy where people are always paying late.
Do Your Research Before Buying Tax Liens
How would you know if people are always paying late? It’s really easy. All the records on every property in the United States are accessible from your computer.
100 million properties can be accessed online.
So what if someone always pays their taxes late? Well, that tells you something, doesn’t it?
They are people who habitually don’t do things on time or don’t follow the rules. All they have to do is miss once, and if you own the certificate, you’re going to get the property.
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Tax Liens Are a Secure Passive Investment
Is that going to happen very often? I don’t think so. For 95% to 97% of all tax lien certificates, you’re going to get paid your money.
Whom do I tell to invest in tax liens? All you old folks with gray hair like me. You’re worried about your money, and this is a perfect place for you to invest.”
You invest with the government, and you get a check back from the government.
Should Your First House Be a Tax Lien Property?
If you’re looking for a property that’s going to be your first house, don’t depend on the tax lien auctions. If someone didn’t pay the taxes, they probably didn’t take excellent care of the property.
We’re not buying “A” properties when we buy tax lien certificates. So, don’t plan on getting a beautiful property at a tax lien auction.
There are going to be hundreds and thousands of properties available. For example, at an auction I attended in Cook county, they took 35 days to sell all the tax certificates. 90% of them were on single family homes.
However, I would not depend on getting your first property that way. This is not where you’re likely to find your dream home.
Yes, sometimes people end up with nice properties, but most of what you buy is going to be on the “B” or “C” side of the grading system. “A” properties tend to be bid up quite high, or a broker will buy them.
So if you want to buy a property for yourself, find a real estate broker.
Profiting From Tax Delinquent Property Investing
Tax liens have been available for well over 200 years. It works for the county, and it works for investors.
This is really a money business. You do this to get a payday. There’s nothing glamorous about it, but investors love the numbers.
Investors who really want to get property should go to tax defaulted auctions, which are tax deed auctions. There they sell the properties outright.
There will be about 5,000 auctions this year. There are over 3,000 counties, and each is authorized to do an auction. They can sell tax liens or tax deeds. So, they’ll probably do both.
There are also 1,400 municipalities. Most people don’t even know about these municipalities, but municipalities are also taxing districts. Sometimes a tax will be due there.
What if people don’t pay? I’ve seen people buy properties with no mortgage for less than $500. They didn’t even resell the properties, but rented them for $700 a month.
If you got all of your money back in 1 month, how would that feel? It’s happening everyday. You just have to learn how.
Tax lien certificates pay interest rates of 16%, 18%, 24%, or even as much as 36%, but what if you’re looking to acquire the property?
If the homeowner doesn’t redeem the house and you’re not paid the interest, then you will get the property without a mortgage.
There are ways to increase your odds of getting the property, like looking for a homeowner who lives overseas or one who’s consistently late on paying property taxes.
If your objective is to purchase a home for yourself, this may not be the way to do it since tax lien properties tend to be grade “B” and “C” real estate rather than grade “A.” However, tax liens are an excellent way to invest for lucrative profits.
If you’d like to learn more, there’s no one more qualified to teach you than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
Ted Thomas is the only one who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops & web classes, and personal one-on-one coaching.
Get started today at no cost with Ted’s FREE Master Class, that reveals the incredible opportunities available in tax lien certificates and tax defaulted property. The class is only about 1 hour of streaming video and contains life-changing information! You can’t afford to miss it!
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.