1The Definition of a Tax Lien

Also known as a tax certificate, a tax lien is a taxing unit made available for purchase by a county in which a certain property owner is delinquent on taxes. A county will sell these certificates when it deems it necessary to collect monies that will help it to maintain its budget. Tax liens are sold to the public via auctions and as a result of the transaction, the county gets its cash while the buyer obtains a potentially rewarding investment. With a tax lien in hand you as the buyer are entitled to collecting interest, serving notice for foreclosure, and to finally acquire the property when doing so becomes applicable.

2Where Can You Find a Tax Lien?

To invest in tax liens you must first find them. Many counties and states sell these tax certificates but a couple of them only offer tax deeds and these represent a totally different investment. As one who’d like to invest in tax liens you must first find a county that sells them and then proceed to ascertain whether the property attached to the same is worth risking your money on. Nowadays, many counties have established websites on which descriptions for these properties are offered, sometimes including photographs. This is a good website to use when making such searches: www.naco.org. Tax liens have traditionally been sold in physical auctions but now the trend is changing to the online platform. This means that you can make an online search for the same in an area of your preference.

3What is Required to Buy Tax Certificates?

The first step in buying tax certificates is to make a bid for the same. As an investor you bid down from the interest rate guaranteed in that particular state or county. If this rate is 16%, for example, you can bid down to 13%. If the bid wins you will be entitled to the principle and the 13% interest. The extra 3% is what the state/county receives.

So as to successfully buy a tax lien you have bid on, you need to provide the respective county with the required payment as a matter of urgency – the limit is often set at 48 hours after the sale is done. This requirement often locks out tax lien buyers who have self-directed IRA accounts because the release of funds is delayed by the preceding approval process. If you are one of those who hold such accounts it will be a good idea to make prior arrangements to create an escrow account into which you’ll deposit a sum of money equal to what you anticipate to spend in a forthcoming lien auction.

4With the Tax Certificate in Your Possession...

The next step in investing in tax liens is to hold the certificate awaiting the settlement of the delinquent taxes. In the event that these are not paid you will receive the first right of refusal for the following year’s delinquent taxes. A tax payer is legally entitled to three years of delinquency before a tax lien holder can enforce a foreclosure. This equally means that you as the holder are bound to paying three years’ worth of owed taxes before your investment can make you a return.

Only when the taxpayer has remained delinquent for the entire three years can you obtain the property via a foreclosure. It is in these situations that the full advantages of these investments are enjoyed and they prove very phenomenal indeed.

5Assessing the Investment Worth of Tax Liens

Investing in tax liens has been described as being a win-win situation. In the event that a delinquent tax payer manages to pay his bills you as the investor are entitled to receive interest on your investment and this can be quite a significant sum. If the taxpayer is unable to settle the bills you are entitled to the property.

You can search for tax liens via the search box on www.foreclosure.com. Helpful information on tax liens is available at www.real-estate-online.com.