I’m Ted Thomas, and today I’m going to answer your question about how to buy tax lien certificates in Illinois. I’m also going to give you some inside tips on how to make money with these certificates.
Now let me show you why Illinois is unique and why it’s so popular with investors.
Want to learn more about bargain real estate? Would you like to buy mortgage-free homes for pennies on the dollar? Or earn outrageous interest rates secured by real estate? Then you don’t want to miss this FREE class.
Illinois Counties
Here’s a little background on Illinois in case you didn’t know. The state has 102 counties, and the tax rate that they pay is absolutely phenomenal!
The largest county within Illinois is Cook County followed by DuPage, which is Chicago and the north end of Chicago.
They’re going to have thousands of tax lien certificates. I’ve seen over 100,000 certificates in Cook County in years past.
In those 102 counties, if someone doesn’t pay property tax and you pay the tax for them, they’re selling you a tax lien certificate that can pay up to 36% interest.
The Process For Buying Tax Lien Certificates in Illinois
All the counties in the United States will have either a tax lien certificate or a tax deed to sell. However, it’s always the same process.
They first put the property into default. If the property owner doesn’t pay when they go into default, then they’re going to carry out a process.
In Illinois, the process is tax lien certificates. When you raise your hand at the auction, they’re going to sell you a tax lien certificate. You will not get possession of the property.
Property Tax
What is the county doing? They’re trying to generate revenue to pay the county bills because the property owners owe payment for all of those bills.
What kind of bills are they? Well, property owners owe revenue to fix the roads, fund the police, the fire department, and the schools. So, property taxes must be collected to pay for this.
Illinois Tax Lien Certificate Interest Rate
How do tax liens work in Illinois? If the property owner defaults in the state of Illinois, investors can earn up to 36%.
Are all counties going to pay 36% in Illinois? Yes, but they’ll pay it at a monthly rate that’s called an annualized rate of return. Think about 6 months at 3% a month. That’s 18% in 6 months, a powerful rate of return!
You invest directly with the local government.
The county is going to charge the property owner a fee for every single month that the property tax payment is late. Then when the property owner comes in to pay the tax, the county will inform you and send your tax certificate back to them.
Tax Lien Certificate Rates in Other States
These certificates have been around for 200 years. There’s nothing new about this, but these outrageous interest rates are paid in some of the states.
For example, Illinois is paying up to 36%. Right next door is Iowa, and they pay 24%.
Compare that with Florida which pays 18% or a place like Phoenix, Arizona where they only pay 16%.
Tax Lien Certificates: A Passive Investment
Remember there are 102 different auctions in Illinois. Any one of those counties will advertise that they have tax lien certificates available for you to buy.
When doing an Illinois tax lien search, you can find auction announcements and tax delinquent properties for sale lists published in the local newspaper or online on county websites.
When you purchase a tax lien certificate, you give your money to the local government. Then you just wait. You hold onto the certificate.
It’s a passive investment. That means you sit on your rusty-dusty, and you just hold the certificate.
Foreclosing on a Tax Lien Certificate
If you’ve taken possession of that certificate, you’ll end up with possession of the property if the property owner doesn’t pay.
What is the Illinois tax lien redemption period? If they don’t pay after the first year, in other words, if they have not redeemed the certificate, then you can start a foreclosure action.
When you bought the certificate, you purchased the number one lien on the property. The property tax is the first lien.
So now, if you do not get paid, you own the first lien on the property, which means you can foreclose.
A Mortgage-Free Property
If you foreclose, you could wipe out the mortgage that’s on the property. Additionally, you could wipe out any government liens on that property.
Since you own the first lien, you can remove subsequent encumbrances.
My point is you would get a property free and clear of a mortgage. Not a bad deal.
If you want more information, I created a mini course for you. It’s free. All you have to do is decide that you want it. The mini course teaches you about tax liens and tax deeds and takes about an hour. Be sure to take advantage of it.
What is a Redemption Rate
Know that these certificates are usually redeemed.
95% to 97% of the time the property owner will come in and pay. They don’t want to lose their property over a 1% or 2% tax bill.
Your chances of not getting paid are very low. However, if you don’t get paid, you’re going to end up with the property.
What is a Scavenger List
If they have an auction and can’t sell all of the certificates, then they have to do something with it.
Some states call it a “forfeited lands commission,” and others call it “surplus land.”
In Illinois, they call it a “scavenger list.” That means the tax lien certificate was not purchased, but you can go right into the county office and buy those tax certificates over the counter.
States With the Highest and Lowest Rates
Is Illinois the highest paying tax lien state? Yes, Illinois, to my knowledge, pays the highest rate that you can earn on a tax lien certificate.
There are tax deeds that will be higher, but Illinois pays the highest interest rate.
The lowest rate I’ve ever seen is 8%, and currently I think the lowest is 12% in Suffolk and Nassau counties out on Long Island. They pay about 12%, although New York is primarily a tax deed state.
Securing Your Retirement With Tax Lien Certificates
Who buys tax lien certificates? Pension plans buy them. Anyone who has an IRA, an individual retirement account, or a Roth IRA or 401K loves tax lien certificates.
Most individuals who are buying tax lien certificates are 40 plus years old because they want predictability, certainty and security.
Doing the Math
Let’s think this out for a second. If you paid $2,000 for a tax lien certificate that’s not redeemed, you’re going to end up with that property.
Wouldn’t you love to end up with a property for 1% or 2%, which generally speaking, is the amount of taxes on property?
Conclusion
You can purchase tax lien properties in Illinois at county auctions, both online and offline. Illinois pays a phenomenal interest rate of up to 36%, and if you don’t get paid, you get the property mortgage-free!
If you’d like to learn how to earn lucrative profits easily, painlessly, and safely, you can get started today at no cost by taking advantage of Ted’s FREE Master Class and discovering how you can capitalize on bargain real estate.
So act now and learn the secrets of tax lien and deed investing.
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