Looking to capitalize in a down economy? Consider purchasing a tax lien in a tax lien sale. Unsure of what exactly that is? Here's a general overview to arm yourself with enough information to make an informed decision on whether this investment strategy is appropriate for you.
Homeowners can have tax liens imposed against them by local municipalities in the event that they become delinquent on their property taxes in a particular year. Property tax liens and foreclosures are often inherently linked, since the majority of people who fail to pay their property taxes are also in default on their home mortgages. As a result, taking advantage of tax liens sales will allow a savvy investor to earn interest each year from the purchased tax lien. Properties that have gone through foreclosure might also be able to be taken ownership of by an investor.
The process is different from state to state, so potential investors should research the relevant statutory law in their respective jurisdictions. Most states guarantee a return on your capital, plus any interest that the lien has earned, should the homeowner end up redeeming the property by catching up on mortgage and property tax payments. The rate you can earn on interest, however, varies from state to state, as does the time allotted for the homeowner to redeem the property.
In the event that a homeowner is unable or unwilling to redeem the property, a practical investor may stand to earn even more; by filing a lawsuit, an investor may seek title to the property in question. This process can often be lengthy, complicated and expensive, but if completed properly, the investor can take official ownership.
Obtaining a tax lien is not without risks, however. Before an investor considers purchasing a tax lien, it is crucial that the property be inspected to ensure any home not only still exists on it but also remains undamaged. An investor should also take measures to verify that the appropriate municipality followed proper statutory guidelines when imposing the tax and lien on the property. Additionally, if the state in which the tax lien was purchased has a redemption period that is longer than a year, an investor should continue to pay the required taxes each year in order to obtain another lien.
Consequently, a tax lien purchased at a tax lien sale can be a great investment opportunity for an investor who makes sure to understand the risks, as well as the tax lien sale process as a whole. In sum, patience is ultimately the key to capitalizing on the great investment strategy a tax lien can be.
Homeowners can have tax liens imposed against them by local municipalities in the event that they become delinquent on their property taxes in a particular year. Property tax liens and foreclosures are often inherently linked, since the majority of people who fail to pay their property taxes are also in default on their home mortgages. As a result, taking advantage of tax liens sales will allow a savvy investor to earn interest each year from the purchased tax lien. Properties that have gone through foreclosure might also be able to be taken ownership of by an investor.
The process is different from state to state, so potential investors should research the relevant statutory law in their respective jurisdictions. Most states guarantee a return on your capital, plus any interest that the lien has earned, should the homeowner end up redeeming the property by catching up on mortgage and property tax payments. The rate you can earn on interest, however, varies from state to state, as does the time allotted for the homeowner to redeem the property.
In the event that a homeowner is unable or unwilling to redeem the property, a practical investor may stand to earn even more; by filing a lawsuit, an investor may seek title to the property in question. This process can often be lengthy, complicated and expensive, but if completed properly, the investor can take official ownership.
Obtaining a tax lien is not without risks, however. Before an investor considers purchasing a tax lien, it is crucial that the property be inspected to ensure any home not only still exists on it but also remains undamaged. An investor should also take measures to verify that the appropriate municipality followed proper statutory guidelines when imposing the tax and lien on the property. Additionally, if the state in which the tax lien was purchased has a redemption period that is longer than a year, an investor should continue to pay the required taxes each year in order to obtain another lien.
Consequently, a tax lien purchased at a tax lien sale can be a great investment opportunity for an investor who makes sure to understand the risks, as well as the tax lien sale process as a whole. In sum, patience is ultimately the key to capitalizing on the great investment strategy a tax lien can be.
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Looking for your dream home in Colorado, but can't decide if you want to buy real estate in Golden Texas or purchase Boulder real estate? You may consider letting a real estate agent help you in your property search.