Tax Lien Certificates and the Opportunity to Profit

Tax lien certificates provide a nice way for anyone interested in real estate investment to get into the game with relatively little capital and an enormous opportunity for profit. As the owner of the lien, you have the option of working with the owner or setting hard deadlines--whichever you feel will help you get the most out of your investment.

Tax lien certificates provide a nice way for anyone interested in real estate investment to get into the game with relatively little capital and an enormous opportunity for profit. The profit can come in one of two ways. Either the owner of the property fails to come up with the back taxes and interest and the house becomes yours to sell, or they do manage to come up with the money, which will in itself net a tidy profit. As the owner of the lien, you have the option of working with the owner or setting hard deadlines--whichever you feel will help you get the most out of your investment.

Tax lien certificates come available because property owners fail to pay the taxes due to the government on their homes or estates. When this happens, the government can and will put a lien on the home.

If the owner fails to pay back the missing taxes in a specified period of time, the government can make the choice to sell off the debt in the form of the lien, or simply foreclose on the house and sell the deed at auction. If they choose the former route, it gives investors the chance to pick up that debt and take over control of the lien.

As an investor, you are typically better off looking for properties that are only behind a single year or so on their taxes. If years of unpaid taxes have already accrued, it will not only make getting any money out of the current property owners nearly impossible, it will drastically reduce the potential profits from purchasing tax lien certificates. This is because it will be much more expensive to win the bidding in the first place. The point of investing in this manner is to keep your capital investment low, something that can be difficult to do when the back taxes are too immense.

If you're interested in investing in tax lien certificates, you need to know when and where the auctions will be held. These auctions are typically advertised publicly, but it helps to have some sort of inside source who can tell you about upcoming listings.

This either means having a personal source inside the government, or turning to websites that make it their business to provide listings for properties around the country. Using the latter method will not only give you access to properties in your area, but will make it possible for you to bid on liens on a broader scale.
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