Today I’m answering your question about how tax lien auctions work, and the topics I’m going to cover are:
- Many People Are Unaware of Tax Lien Property Investing
- Tax Delinquent Property Is a Big Problem for Counties
- Tax Lien Certificates Are Safe and Pay Generous Interest Rates
- Why Would It Be a Good Idea to Pay Someone Else’s Taxes?
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Many People Are Unaware of Tax Lien Property Investing
I’m Ted Thomas, and I‘ve been involved with tax lien certificates and tax defaulted property for more than 30 years.
How tax lien auctions work is a common question when investors and people discuss tax lien certificates and tax defaulted real estate.
It’s a mystery for most of the public to simply describe tax lien auctions because the United States has a robust and very traditional real estate business where homes, vacant residential lots, small apartment buildings, small farms, and vacant acres are bought and sold.
Many people are unaware of tax lien property, which is an alternative real estate investment, so I’ll provide a little background on this.
Tax Delinquent Property Is a Big Problem for Counties
The legislature in all 50 states mandates that property owners must pay tax or they will lose their property to the government. However, a percentage of property owners have difficulty paying their property taxes and enter into a default situation.
The local county needs the tax revenue to pay county employees and maintain infrastructure. If property owners do not pay property taxes, the county could go bankrupt.
Therefore, if the taxes are uncollectible, the treasurer will ultimately seize the property. They have the power to remove the property owner from the property and sell it at auction with a starting bid of just the back delinquent taxes.
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Tax Lien Certificates Are Safe and Pay Generous Interest Rates
If this is your first experience learning about tax lien certificates, you will be surprised and delighted. This investment is a predictable, certain, and secure alternative to the risky stock market and low-return investments like passbook savings accounts and bank CDs.
Tax lien certificates have a long history. They’ve been available for hundreds of years. In a nutshell, buying tax liens is really a matter of paying delinquent back taxes on someone else’s property. Why would investors want to pay someone else’s taxes? The answer is money! Tax lien certificates pay generous, almost outrageous, interest rates to investors who purchase a tax lien certificate.
Each state authorizes the county to set an interest rate that’s favorable to the tax lien certificate purchaser. It’s different from state to state and county to county. For example, in Arizona the legislature allows the county to pay 16%. In Florida, it’s 18%, Iowa 24%, and Illinois 36%. I’m sure you are getting the idea.
Approximately half of the counties across the United States will sell tax lien certificates. These counties are benevolent and allow the tax delinquent property owner to stay on the property even though the property is in default.
These states and counties collect much-needed dollars by selling a tax lien certificate for the full amount of the taxes to anyone who is willing to pay the full taxes that are delinquent.
Why Would It Be a Good Idea to Pay Someone Else’s Taxes?
Savvy investors learn to research and understand tax lien auctions. Many investors new to tax lien certificates will ask the big question.
That question is, “Why would I pay someone else’s property taxes? If they won’t pay the government, why would they pay me?”
The answer is the local county will allow the delinquent taxpayer to remain on the property until the tax lien matures. It matures when the redemption period expires.
After the redemption period expires, a foreclosure can take place, and the tax lien certificate holder will get the property as a result of a legal process. Additionally, the county will extinguish the mortgage or deed of trust loan.
We hope you enjoyed Ted’s lesson, “Why Investing at Tax Lien Auctions Is a Good Idea”
If you purchase a tax lien certificate, you will either get paid the high-interest rate or you will get the property. It’s the law.
Imagine for a moment, buying a property for just the back taxes with no mortgage and no deed of trust loan!
If you’d like to know more about tax lien property investing, 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.
Learn how to reap huge rewards from tax lien and tax deed 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!
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.