Today I’m answering your question about how to buy tax lien properties, and the topics I’m going to cover are:
Delinquent Property Taxes and Tax Liens
For hundreds of years, the payment of property taxes has been a difficulty for many owners. It’s not that they don’t want to pay property taxes, but what happens when you lose your job and you have a family to feed? Or maybe the family has a sick son or daughter; I’m sure the doctor gets paid before the taxes.
I’m Ted Thomas, and I’ve been involved in traditional real estate for more than 30 years. This is the world of tax liens and tax deeds. In just a moment I’ll give you real examples of investors purchasing tax liens and earning over $100,000 on one deal.
The Consequence of Unpaid Property Taxes
Nationwide over 3,000 counties will have some type of tax defaulted auction.
About half of the states will sell tax lien certificates if the property owner fails to pay the local property taxes. The unpaid taxes will cause the treasurer to generate a default notice, and if the taxes remain unpaid, ultimately the treasurer will seize and confiscate the property.
The local county depends on the revenue from the property taxes to pay bills and the salaries of county employees. So what is the consequence for unpaid taxes?
The county will act to enforce the tax bill whether it’s a tax lien certificate or tax deed. In either case, the county will auction off the tax lien certificates or auction the deed to the property.
The county will place a lien on the property. That lien is an encumbrance.
Investing in Tax Lien Certificates Is Profitable
The county advertises on their website and local newspaper the addresses and parcel numbers of properties that are for sale and the rate that they are authorized to pay the investor, which could be 16%, 18%, 24%, or all the way up to 36%. These rates are established by the state legislature, and the county is mandated to follow those statutes.
At a tax lien certificate auction, the county sells tax liens to anyone who will purchase at auction. The new buyer now owns the lien on the property and has replaced the county.
For over 200 years the county has been selling tax lien certificates and tax-defaulted properties. Anyone with money is authorized to buy.
The starting bid at the tax lien auction is the back taxes owed. You can buy tax lien certificates at auction in amounts of $50, $500, $5,000, or even $500,000 – it depends on the value of the property.
Tax Lien Investing Is Low Risk
Today I’m answering the question on how to buy tax lien properties. Before I answer that question, I want to emphasize that the county motivates and encourages new buyers by paying outrageous interest rates compared to local banks.
What’s your risk? Of course, you may be saying to yourself if the property owner won’t pay the county, why on earth would the homeowner pay me?
Records reveal that 97% to 98% of defaulted tax lien certificates are paid. Why are they paid? Because the legislature of the state has ruled that if you pay the back taxes owed and the property owner doesn’t come in to pay, you will own the property
Additionally, the county treasurer is authorized to cancel the mortgage or deed of trust loan. It’s the law in every county in the United States.
In a nutshell, if the defaulting property owner pays the certificate, the buyer will receive 100% of the money they invested plus an interest rate in return. However, if the property owner fails to redeem, then after a legal process, the buyer will receive the property free of mortgage and deed of trust.
An Example of Tax Lien Property Investing
For example, my students in Phoenix researched delinquent property and paid the back taxes, and they were rewarded significantly.
Before I get into the details, investors need to understand how to buy tax lien properties. The process takes research, work, and following the rules and government procedures. This is a process, and like everything the government does, the rules protect the defaulted owner. The defaulted owner has rights.
My students learned from the detailed instructional materials, then they followed the step-by-step process to foreclose on the property that had defaulted taxes. To make life easy, they employed an attorney to make sure they gave the step-by-step due process notices. They followed all the rules required.
Students Made a $169,000 Profit on a Tax Lien Property
Prior to making payment on the defaulted taxes, they visited the location of the property and found a 2-bed, 2-bath condo situated on a lake in a better than average building.
Keep in mind they are not purchasing a property at the tax lien certificate auction. They are purchasing a piece of paper that allows them to take the property if the property owner defaults.
My students paid $11,000, including attorney fees, for the tax lien property, and after going through the process, the defaulting homeowner never paid taxes. The step-by-step process allowed them to end up with a condominium valued at $180,000 with no mortgage or deed of trust loan.
They sold that property, and after commissions, generated $169,000!
Conclusion
We hope you enjoyed Ted’s lesson, “How to Buy Tax Lien Properties”
Tax lien certificates are sold at county auctions and pay interest rates of 16%, 18%, 24%, or even as much as 36%, and they’re secured by real estate. You either get back all the money you paid plus the high rate of interest, or you get the property without a mortgage.
If you’d like to know more about how to buy tax lien properties, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
You too can learn how to reap the huge rewards from tax lien and tax defaulted property investing!
Want to learn how to purchase bargain real estate? Would you like to buy mortgage-free property for pennies on the dollar? Or earn double-digit interest rates secured by real estate? Then take advantage of this FREE Gift and begin your education on how to buy tax lien properties.
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.
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