Buying Tax Liens – Know the Risks Before You BeforeYou Buy! – Video

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What are the risks to purchasing Tax Liens? As with any investment opportunity, risks can always emerge before or after a deal has been made. Learn from the expert, Ted Thomas. Click here to access your free gift 👉

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Ted Thomas

Key Moments In This Episode
00:00 Intro – Are There Risks in Buying Tax Liens
00:31 Early tax lien redemption
02:03 Property tax lien priority
02:43 What about the bank loan?
03:24 Learn more about tax liens

What To Watch Next
Why Tax Lien Investing Works

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The Interest Rate Won’t Be As Much As You Thought.

The first risk you can run into when buying a tax lien is the circumstance in which the owner of the property pays off the taxes in the same month that you purchased the certificate. By the owners paying the taxes in full, you will get the money you spent back without earning much from interest.

A monthly interest rate could be anywhere from 18% up to 36%, which starts to accumulate once you purchase the tax lien certificate. You will still get that interest rate once the owner pays the taxes, but it will be for one month instead of multiple months or even longer.

The Property Is Not Worth Your Time Or Money

Another risk is that the property could be worthless. A property could be deemed useless due to several different factors, such as environmental problems, code violations, and more. In most cases, many property owners stop paying their property taxes because they know their home is useless and not worth their time or money. You want to be able to identify properties that are not worth your time or investment.

Foreclosure Risks

Another burdensome risk for tax lien investors is foreclosure. When a real estate tax lien is bought in most municipalities, a statute of limitations is required for when the lien will expire. Unfortunately for investors, foreclosure is not a fast process.

The municipality extinguishes the tax lien once you begin the foreclosure process and the owner pays off the debt. You will typically recover your debt principal in this situation, but you may not gain any interest on the debt.

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