Why is tax lien investing widely considered by many people as a good
property investment? Also, why are there misconceptions about it? Would
you like to know more? Then, continue reading below.
The states, municipalities, and counties depend on property taxes in
order to have the needed budget to spend on public services. These
services include the maintenance of public roads, schools, hospitals,
police department, fire department, and many more. Counties are going to
sell the lien of an unpaid property to an investor in order to regain
lost taxes. To put into simple words, the investor is going to purchase
the back taxes of a delinquent property. This type of investment is
attractive to investors because they are assured of getting good
interest rates on their money. Plus the investor is sure to be paid
because tax liens come before any other liens. Investors are guaranteed
of earning profits with this in mind.
There are states in the US wherein they sell properties at tax deed
sales instead of selling liens. Investors are actually purchasing the
properties right away. Furthermore, properties are being sold for its
back taxes and penalties. Then, there are others that sell properties
for its assessed market value. This is good news to investors who wants
to buy properties at under market value, thus making tax deed a very
good investment to make.
One of the common misconceptions about tax lien investing is that
some investors expect that the interest is going to be paid immediately
by the county. Well, the truth is that investors would only be paid once
the delinquent homeowners redeem the lien on their properties. However,
investors can foreclose properties and get paid on their lien if the
homeowners still do not pay during the redemption period.
There is another misconception on tax liens. Some investors think
that they are going to get the property's deed after the redemption
period is over. This is not the case because investors would need the
services of a lawyer in order to foreclose a property and get its deed.
Majority of US states require this. Others however, conduct a tax deed
sale and auction off the properties to the highest bidder.
It cannot be avoided that tax lien investing is sometimes
misunderstood. Some people believe that they can right away make money
with this type of investment, but the truth is that lots of patience is
needed in order to achieve such things. Also, purchasing properties for
very low prices does not happen always, which is true for states where
the real estate values are high. Furthermore, some tax lien properties
are certain to be redeemed by their respective owners. Still, investing
in tax liens is one of the sure ways to get guaranteed profits through
interest.
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