Profit by Investing in Tax Liens
I’m Ted Thomas, and how to profit by investing in tax liens is a subject that everyone wants to learn.
Tax liens sound like a problem, and they really are if you’re a real estate owner in default on your property taxes.
However, if you are an investor, tax liens are an opportunity to help yourself and your community and keep a property owner from being evicted while they wait to recover from sickness or a job loss.
Today I’m going to answer your question about how to profit by investing in tax liens at tax lien sales. You are in the right place. For 30 years, I’ve been investing in tax liens and tax deeds, and I’ve helped hundreds of people make money with this system.
Want to learn how to make big profits in bargain real estate? Would you like to buy mortgage-free homes for pennies on the dollar? Or earn double-digit interest rates secured by real estate? Then you don’t want to miss this FREE Mini Course.
What Are Tax Liens?
The business of tax liens has been practiced successfully by local county governments for 200 years, and the county government knows exactly what to do when a property owner fails to pay property taxes.
The state legislature has authorized the county treasurer to levy and collect taxes. If the property owner fails to pay taxes, the treasurer will give multiple notices to the delinquent property owner explaining the consequences of unpaid property taxes.
The treasurer will explain to the owner of the property that the owner is forfeiting their rights and the county will issue a tax lien certificate.
The county does not want the property. The county wants and needs the tax revenue that the property should be producing. Ultimately, the treasurer will confiscate the property if the owner fails to pay taxes.
What Are Tax Lien Certificates?
Here’s how to find tax lien properties free. The treasurer will announce in the newspaper and on the county website that they have issued a notice of default and that a tax lien certificate is available.
The tax lien certificate will be in the amount or slightly above the delinquent taxes due. The bidder at auction will know exactly the amount due to the county.
The United States has over 3,000 counties and approximately half of the counties will sell tax lien certificates at public auctions. The auctions could be oral bids if it’s a live auction, or it could be online and you’ll make digital bids.
How Much are Tax Lien Certificate Interest Rates?
Auction buyers could expect interest rates on tax lien certificates to be as low as 12% and as high as 36%, depending upon the state and county rules.
Here’s how to make money with tax lien certificates. To begin, choose a state.
For example, Arizona pays 16% highest bid, Florida pays 18%, Iowa pays 24%, and Illinois pays 36%. Of course, there are many others.
After you choose the state, it would be wise to determine which county within the state. Keeping in mind, counties with large populations may have thousands of tax lien certificates available while rural counties with lower populations will have hundreds of tax lien certificates.
Tax lien certificate buyers will not receive immediate possession of the property.
Are Tax Liens a Low-Risk Investment?
Keep in mind, your objective is to make the highest interest rate possible in a safe and secure environment.
Here’s a typical example. With a $2,000 invested principle in Arizona, which pays a maximum rate of 16%, your return on the certificate will come from the government.
If you have a 16% certificate, the math might look like this. If the property owner redeemed exactly on the 365th day since your purchase, you will have earned 16%. The county will return your $2,000 plus the 16% interest or $320.
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Long-Term Investing in Tax Liens at 16%
The key is to create some sort of an estate or savings program. The investment should be long term.
The suggested next step is to take the principle and the profit, reinvest once again and attempt to get 16%.
In a perfect world, you would continue to invest principle and interest, and at the end of 20 years, your $2,000 would now be closer to $40,000. Remembering of course, this is an example of how everything always works in the classroom.
Long-Term Investing in Tax Liens at 24%
Another example could be the same $2,000 investment in the state of Iowa, which could earn 24%. In the first year, $2,000 at 24% adds $480 in interest.
If you’re thinking long term, you invest the $2,000 plus $480 and receive 24% once again. The reinvestment process over 20 years would now take a $2,000 investment up to over $147,000.
I’ve just given you a textbook example that assumes you are paid off from the local government on day 365, and you immediately reinvested your principal and interest.
In the real world, life doesn’t work that way. There are many interferences. Life changes, markets change, and rules change.
Investing in Tax Liens with an IRA
The whole point of the example is that you can control your destiny with a little planning. There’s a real opportunity to make safe, secure government checks.
The wise investor will research, learn about and ultimately create a self-directed IRA. This allows the investor who’s just beginning a safe haven for retirement funds.
IRA accounts could be traditional or Roth accounts. These are separate and different with different objectives and huge positive no-risk tax benefits. High volume accounts generate no taxes.
Profit by Investing in Tax Liens: Conclusion
We hope you enjoyed Ted’s lesson, “How to Profit by Investing in Tax Liens”
Tax lien certificates pay interest rates of 16%, 18%, 24% or even up to 36%, and long-term investing in tax liens can compound into massive returns.
Tax liens are a low-risk investment secured by real estate. If you don’t get paid, then you get the property mortgage-free.
If you’d like to know more about how to buy property with delinquent taxes, 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 can learn how to reap the huge rewards from tax lien and tax defaulted property investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!