Tax Lien Investing Pros and Cons
What are tax lien investing pros and cons? You’re probably already aware of the benefits of tax liens, but are there any risks? Find out as Ted Thomas speaks in-depth about the realities of tax lien investing.
If you want to make big profits by investing in tax liens, you need to know about tax lien investing pros and cons. Equally important, you need to know how to do your homework and know the rules.
The best tax lien course will teach you how to do both – because they are equally important to be successful.
You can go just about anywhere online to read about property tax lien investing, but be careful. Ask yourself, do these people have years of experience in property tax lien investing? Do they have a proven record of making a profit in tax lien investing? Do they even know what a tax lien is?
I’m Ted Thomas, an expert in tax lien investing strategies. I started making a profit by investing in real estate tax liens in the 1980s, and I still do it. I’ve helped people all over the world make big money, retire early and live a life of leisure.
I still invest myself, and I teach people how to invest through a tax lien workshop. In this article I share some of the tax lien investing pros and cons I learned the hard way. Take my advice on how to invest in tax liens, and you will avoid making the tax lien investing mistakes so many other people make.
For over 25 years, Ted Thomas has been turning average people into real estate tycoons successful beyond their wildest dreams. Want to learn more about this little-known, 200-year-old way to create wealth investing in real estate?
Then you don’t want to miss this FREE class that reveals the secrets that had formerly only been known by the elite.
Tax Lien Investing Pros and Cons – What is a Tax Lien?
The first question is: what is a tax lien? A tax lien is what happens when someone does not pay their property taxes. Explaining what a tax lien is, is best done by explaining the process first.
This is the process:
- The county tax collector tries to collect the past-due taxes. The owner does not pay.
- The tax collector places a tax lien on the property. A tax lien is a legal claim that says the owner owes past-due property taxes. This lien is recorded in the county’s public records department, usually at the courthouse. These records are open to the public. These past-due taxes are your chance to invest by paying other people’s property taxes and make big profits.
- If the owner does not pay the taxes, the tax collector sells the lien at a public auction. At the auction, someone is paying other people’s property taxes and making a profit. It could be you. This is your chance to profit by investing in real estate tax liens
Tax Lien Investing Pros and Cons – How to Invest
Before getting deep into the tax lien investing pros and cons, I will explain how to invest in tax liens.
When the property owner still does not pay, the tax collector holds a public auction. Anyone can attend and bid on these liens, if they follow the rules.
The rules are critical to the pros and cons of tax lien investing. If you break the rules, you will lose your investment and you could be banned from attending future auctions.
Tax Lien Investing Pros and Cons -the Rules
A single tax lien investing course cannot teach you all the rules because there are too many counties and each county has their own rules (as does each state). A tax lien workshop will tell you where and how to find the rules.
The tax sale process in every state is different. The auction and sale process in every county in each state is also different. You learn about the specific lien and auction processes by talking to the tax collector’s office and reading what they have online.
Here is an example – The Gwinnett County, GA, tax commissioner explains the lien process for Gwinnett County here. Gwinnett County is a metro Atlanta county. Many people profit by investing in real estate tax liens in Gwinett County.
Tax Lien Investing Pros and Cons – Follow the Rules
Here is an example of one of the local rules you must know about tax lien certificate investing. At a recent tax lien auction in Ashburn, GA, the auctioneer told the bidders they had an hour to bring the money to the tax collector after the auction.
If the winning bidder did not bring the money, the tax collector would send a sheriff’s deputy to arrest them. When you know the rules, you do not have to worry about this.
Some rules for property tax lien investing are:
- Register ahead of time.
- Pay a deposit, if needed.
- Know the payment method accepted. Most tax collectors take cash, certified or guaranteed bank checks. Very few accept credit or debit cards and few allow personal checks.
Tax Lien Investing Pros and Cons – How Much Profit Can I Make?
Is tax lien investing profitable? Just paying other people’s property taxes is not going to give you a profit. You profit when you collect interest on your investment.
This is what makes paying other people’s property taxes a good idea. Imagine making 36% interest on your investment. Is investing in tax liens a good idea? Definitely!
When you take a good tax lien investing course, you learn tax lien investing strategies that maximize your profits.
When talking about tax lien investing pros and cons, the ‘pro’ category wins. As long as the lien stays in place, the property cannot be sold, transferred or refinanced. This is what makes property tax lien investing so secure. No bank or mortgage company will issue a mortgage on a property with a tax lien.
If the owner wants to sell the property, he has to pay you first. In the pros and cons of tax lien investing, this is certainly a positive. A quality tax lien investing course will teach you even more.
You can do tax lien investing for less than $100 or spend more than $100,000. For example, Bennie Smith Jr. bought a property for $600. CNBC interviewed him about his success story and he wholeheartedly believes you should be investing in real estate tax liens & deeds.
Tax Lien Investing Pros and Cons – Know the Difference Between a Lien and a Deed
Investing in real estate tax liens and deeds also means knowing the difference between a tax lien certificate and a tax deed. Your tax lien investing strategies will be different for each one. My tax lien investing course can help you decide which is best for you.
What is a Tax Lien Certificate
What is a tax lien certificate? When you buy a tax lien certificate, you are paying past-due taxes and premiums added by the tax collector. You do not get possession of the property right away. This is both a pro and a con of tax lien investing, depending on your tax lien investing strategies.
It is a pro in property tax lien investing because you do not own the property. If you want to buy real estate, it is a con in property tax lien investing.
To keep his property, the homeowner has to pay everything the tax collector is owed, plus the interest at a state-mandated rate you collect.
When the owner pays these fees, this is called redeeming the property. He pays the county tax collector. The tax collector sends you a check for what you paid plus your earned interest.
Is investing in tax liens a good idea? Yes, because your investment is secured by the property.
What is a Tax Deed
In a tax deed auction, you buy the property. Depending on your tax lien investing strategies, owning property is again both a pro and a con. If you want to buy property, it is a pro. If you want to make money without owning property, it is a con.
When you buy a tax deed, the owner cannot redeem the property. The county tax collector completes the paperwork and sends you a deed. This can take from a week to a few months, depending on the tax collector. This delay must be part of your tax lien investing strategy.
A tax lien workshop can help you realize big profits from the property you now own. Experts in a tax lien investing course will teach you about selling and renting your new property.
What is a Hybrid?
A few states offer hybrid auctions, combining elements of tax deeds and tax lien certificates. The redemption rules are different in each state. A tax lien workshop will teach you how to find the rules for any auction in any county.
Tax Lien Investing Pros and Cons – Know the Rules
One of the most valuable pieces of advice you can follow is that you need to know the rules so you can start investing in real estate tax liens & deeds.
Do you want to earn interest on your investment? Find a tax lien certificate auction.
Do you want to own property? Find a tax deed auction. Know what kind of auction you attend before you go.
Tax Lien Investing Pros and Cons – What to Know About the Auction
Bidding is another area of property tax lien investing where you must know the rules to profit by investing in real estate tax liens. If you do not follow the rules, you can lose your money. In tax lien investing pros and cons, that is definitely a con!
Here are four critical items you must know:
- When the auction starts
- How to register for the auction
- How to pay for a winning bid
- The condition of the property
To find out when the auction starts should be simple enough, but some people do not pay attention. They show up late and the property they wanted is already sold. Tax lien auctions are fast-paced. Properties are sold in under a minute.
Registration is important and the rules are different in every state and every county. Some auctions require in-person bidding. You must attend or have a representative bid on your behalf.
How you pay for a winning bid is the most important of the three rules here. Some auctions give you time to pay. Some demand payment when the auction is over.
If you do not make the payment on time, you lose your deposit and you can be banned from attending future auctions in that county. How do you pay for a winning bid? You call the tax office and ask for a copy of the auction rules. Follow the rules carefully.
Tax Lien Investing Pros and Cons – The Pros
Tax lien investing pros and cons are what sets this apart from other kinds of investing. By tax lien investing, I mean buying a tax lien certificate or a tax deed or buying something in a hybrid auction. Calling it a tax lien keeps things simple. You are making a profit by investing in real estate tax liens.
The biggest pro is property tax lien investing is based on the government’s need to collect taxes. Local governments MUST have taxes to provide services. When a property owner does not pay his taxes, the local government has to collect that money somehow. The collection process ends with the tax auction.
Court decisions from the Supreme Court on down say these auctions are legal. The pros and cons of tax lien investing have to include the positive note that courts say this process is legal and necessary.
Tax Lien Investing Pros and Cons – Secured by Real Estate
If you are a conservative investor, the idea of paying other people’s property taxes gets better. The property secures your investment, which means it’s safe.
You are investing in real estate tax liens & deeds and getting in real estate for a fraction of the real market value.
Is investing in tax liens a good idea? You tell me. How many other investments can you name that are guaranteed by something you can see and touch?
Tax Lien Investing Pros and Cons – Mortgage Free Property
Here is another bonus for tax lien investing pros and cons. Your investment comes before any mortgage or other lien, which is a demand for money on the property. That may be hard to believe, but it is true. My tax lien workshop will explain this in detail.
If the owner tries to sell the property, you must be paid first, including the interest you collect. If the property has a mortgage, that mortgage takes second place to your investment.
In a tax deed state, the mortgage is eliminated. Many courts have ruled on this over the years and all say this is legal and proper. Are tax liens a good investment? When the courts rule in favor of the collection process, yes, it is a good investment.
Here is a great example for you. Ben Baker learned about tax certificate investing through a tax lien investing course I offered. He bought a property with a mortgage on it. The mortgage company did not pay the past-due taxes and Ben got the property for about a half-percent of what the home and land is worth.
Tax Lien Investing Pros and Cons – Foreclosing on a Tax Lien
Here is one of my best tips from a tax lien workshop. When you have to foreclose, as Ben did, hire a real estate attorney. Tax lien investing strategies must include a way to foreclose.
Foreclosing means you take legal steps to actually own the property. In the list of tax lien investing pros and cons, this is neither. It is just part of the process.
Since foreclosure is a legal process, your attorney will make sure every T is crossed and every I is dotted in the paperwork. If the paperwork is wrong, you can lose your investment. My tax lien investing course that explains how to invest in tax liens covers this and more.
Knowing how to invest in tax liens means investing just a little more money to secure your property, your investment and the big profit you can make.
The great majority of tax lien certificates are paid, so you never have to foreclose. You just collect your profit.
Tax Lien Investing Pros and Cons – Property Title
The title, or deed, is your legal proof you own the property. When you get a property following a tax deed sale, you own it. If you have to foreclose on a tax lien certificate, you get the title to the property.
Foreclosure rules vary in every state. My tax lien course teaches you how to find the rules.
The next part of your tax lien investing strategies kick in when you own property by paying other people’s property taxes. Managing the property is part of learning about tax liens. My tax lien course teaches you ways to make a big profit from the property.
The lifestyle you always wanted could be yours, so don’t miss out. Act now and take my FREE Tax Lien Investing Course to learn how to profit safely, securely, and predictably from tax liens and tax defaulted property.
Tax Lien Investing Pros and Cons – Be the Owner
This is part of the pros and cons of tax lien investing. If you buy tax lien certificates often enough, eventually, you will buy a tax lien and the owner will not redeem it.
If that happens, you foreclose. You get legal title to the property. This is rare. More than 95 percent of tax lien certificates are redeemed. The tax lien certificate foreclosure process is different in every state.
Tax Lien Investing Pros and Cons – The Cons
What could be the risks of buying tax liens?
Tax Lien Investing Cons – Risk of Losing Money
When discussing the pros and cons of tax lien investing, most people will not tell you that you can lose money.
People lose money when they do not understand how to invest in tax liens. They wonder, is investing in tax liens a good idea? They read a story or two online and decide to try it.
They never take a tax lien course. They do not learn how to do their homework. My tax lien workshop teaches you everything you need to know about your homework. Your homework is knowing everything you can about the property.
You must know as much as you can about the property before you invest. My tax lien investing course teaches you to use the real estate website Zillow and more.
My tax lien course covers the pros and cons of tax lien investing by telling you some of the warning signs that say the property is not a good investment. Some examples are:
- Sagging roof. A sagging roof means the roof has problems. Unless you are willing to spend money if you get the house, go to the next one. The pros and cons of tax lien investing means you will spend some repair money from time to time.
- Boarded up windows. A house with all the windows boarded up is a good indicator more things are wrong with it.
- Multiple years’ past-due taxes. Pay close attention to the tax notice on the property. If it shows one, maybe two years (or cycles in states where property taxes are paid quarterly), that is a good indicator the property owner wants to keep it. If the tax information shows several past-due bills, then the owner is not interested in keeping the property. Other investors saw the property in previous sales and let it go. Follow their lead. This is a solid tax lien workshop tip.
Tax Lien Investing Pros and Cons – Other Taxes
Check on other taxes. In many states, more than one local board collects taxes. For instance, in Texas, the county, the city, the school board, and special tax districts can collect property taxes on real estate. You need to know about these other taxes. Pay those taxes too.
This may make you wonder, is investing in tax liens a good idea? The answer is yes. You get to collect interest on those taxes too, without going to an auction and bidding against other people.
Also, if you do not pay the other taxes, someone else can attend the next tax lien auction and pay those taxes. This jeopardizes your investment. Learning about tax liens includes learning about other taxes.
Tax Lien Investing Pros and Cons – How Much Money Do I Need?
Investing in tax liens takes money. Everyone wants to know how much. What’s the average cost of tax lien certificate? Tax liens can sell for less than $100 and more than $100,000. The great news is when you profit by investing in real estate tax liens, you can reinvest that in another tax lien.
The second question people ask is, “How much is the property worth?” The answer is “do your homework to find out.” My tax lien course teaches you how to do your homework. You need a tax lien investing course to teach you to do this because every home has a different value.
Put a house in one community and it is worth $50,000. Move it 25 miles and it suddenly is worth $200,000. The taxes on the $50,000 home are less than the taxes on the $200,000 home.
This is another reason why I keep saying you must do your homework. Learn as much as you can about the property. This is key to tax lien certificate investing. Take a tax lien workshop and learn more.
Regardless of how much money you have for property tax lien investing, the important parts to remember are:
Do your homework and know the rules by learning about tax liens. You can start investing in tax liens with just a few hundred dollars.
Work your way up to investing in bigger and more expensive properties, learning about tax liens every step of the way.
You now know what is tax lien investing. You just need the fine details. Be a savvy investor and you can have $100,000 to invest in a tax lien sale.
Tax Lien Investing Pros and Cons – Where Can I Learn More?
You want more information. Are you looking for a tax lien investing course or tax lien workshop? Do you need to know more about tax lien investing pros and cons? That is what I do now. I teach people how to make big profits. You can learn from my 30 years of experience.
If you are wondering are tax liens a good investment, see the free videos and information on my website. You really can profit by investing in real estate tax liens.
Visit my website for much more information on to how to invest in tax liens. Let’s get you started on the road to big profits.
Tax Lien Investing Pros and Cons – Conclusion
In What Are the Tax Lien Investing Pros and Cons? Ted Thomas draws on his decades of experience to provide a realistic perspective of this lucrative real estate niche that’s been the best-kept secret of the wealthiest investors for far too long.
On the tax lien investing pros and cons downside, you can lose money if you don’t do your homework on the property before you buy it.
You also need to be prepared to end up owning the property.
When you purchase a tax lien certificate, over 95% of the time, you end up with a passive investment that pays you an excellent interest rate, but it’s also possible that you could end up with the property and dealing with all that property ownership entails.
So you should have an exit strategy in place before you purchase the tax lien in case you do end up owning the property.
It’s also important to know the rules because not following the rules could get you into trouble.
Those are the cons of tax lien investing pros and cons, but here are the upsides, and they are powerful.
Tax lien certificates are secured by real estate. You won’t find a safer investment that pays such outrageously high rates of return, as much as 36%.
Even if you don’t have a huge bank account, there are tax lien certificates for every budget. You don’t need to be rich to begin investing. Whether you have $50 or $50,000, there’s a tax lien certificate out there for you.
Tax deed investing is a way to purchase properties for pennies on the dollar. You won’t find better bargains consistently available anywhere else.
Additionally, with tax lien and tax deed investing, you get the property without a mortgage.
Ultimately, when weighing tax lien investing pros and cons, Ted has determined that the pros far outweigh any cons. The lion’s share of what could be called cons are actually easily resolved through proper education.
For over 25 years, Ted Thomas been teaching students how to successfully invest in tax lien certificates and tax defaulted property, and many of Ted’s students have gone on to become financially independent.
Ted Thomas offers full support and a complete training with home study courses, Q&A sessions, live tutorials, workshops & web classes, and personal one-on-one coaching.
Once you’re a member of the Ted Thomas community, you’ll have access to attorney contact information, county contact information, state statutes and due diligence processes. Everything you need at your fingertips.
If you want to learn more about how to make lucrative profits from tax lien and tax deed investing, you can get started today with Ted’s FREE Master Class. It costs you nothing, so why wait when you can change your life now?