I'll be the first to
admit that I am often one of the people who watch these infomercials or
browse these tax lien sites. The headlines and promises truly intrigue
me. Sure, I'd like to earn 50% on my money. Sure, I'd like to buy real
estate for pennies on the dollar. But the sad reality is that all the
promises you hear about tax liens are often just huge marketing ploys
that no one can back up with any substantial evidence to the contrary.
Let's take a look at the three biggest myths that are often used to selling points concerning tax lien investing.
Myth # 1: Your money is guaranteed by the government.
This
is an absolute false statement in every sense. When you invest in tax
liens your money is never guaranteed by the government. If you invest in
a tax lien and the defaulting tax payer fails to repay that lien the
government isn't going to stroke you a check. Your recourse then becomes
foreclosing on that lien, which is backed by some sort of real estate.
In this situation let's hope you did great due diligence and that the
lien isn't backed by some worthless swamp land.
The true statement
is that the process is guaranteed by the government, not your money.
State statues dictate what exactly happens when property owners fail to
pay their taxes. None of these statues include that the government is
responsible if you make a bad investment.
On a side note, I'm not even sure I'd want to invest in anything guaranteed by the government!
Myth # 2: It's a great way to get properties for pennies on the dollar.
One
of the two ways to make money through tax lien investing involves
foreclosing a tax lien when the property owner fails to pay the
delinquent taxes, which could lead to you becoming owner of the
property. This obviously sounds like an ideal situation. You pay for one
year's worth of taxes and then you get to foreclose that lien if the
owner doesn't pay? I suppose it could technically work like that. But it
typically isn't quite that easy.
Statistics have shown that less
than 5% of all tax liens even make it to the point where the lien holder
is able to foreclose. That means for every 20 liens you invest in, you
might have one that could potentially end up as a lien you could
foreclose.
Then, once it reaches this point you don't
automatically assume ownership of the property. We must remember that
you own a lien on the property; nothing more. Your lien is just like a
mortgage lien or a mechanic's lien. If an owner fails to pay a mortgage
company they don't just take over the property without additional
action. They must do it through the court system with a judge's order.
Getting that judge's order will require a substantial amount of time and
attorney's fees... which I can assure you will be much more than just
"pennies."
Myth #3: Earn 50% interest on your money!
Again,
this could technically happen, but it is nearly unheard of to receive
50% return on any tax lien investment. If this was the case, don't you
think every investment broker in the country would be investing in tax
liens?
Many states have maximum interest rates allowable by law
for tax liens, which are set by state statue. Sure, these rates are
extremely high compared to many investments and most investors would be
thrilled to get a 50% return on their money. But that very, very rarely
happens.
Let's take a look at the state of Florida for instance.
The maximum interest rate allowed by law is 18%. Pretty good, right?
Here's the reality: In 2012, the average interest rate on tax liens in
the state of Florida was just 2.37%. That's a far cry from 18%. If tax
lien investing was your only income source and you had $500,000 to
invest every single year, you would be living below the poverty level!
Smart investment? Think again.
What's a better answer?
So,
obviously I didn't write this article because I'm a negative person. My
goal wasn't to disappoint you and kill your dreams of becoming a
millionaire. I wrote this article to inform you about the realities of
investing in tax liens.
What most experts fail to tell you is that
the true money is made by investing in tax deeds... not tax liens. Many
states offer an outright sale of the property if the taxes aren't paid.
Other states use a hybrid system that combine tax liens and tax deeds.
Regardless, either type of these systems allow you to actually invest in
real estate, instead of just liens.
The sky is the limit.If you are interested in learning more about Tax Deeds and Liens, you should click on the link below. It is a great place to get started if investing in real estate is what you are looking to do. Yes, you can still make a fortune in Real Estate with this Ultimate Real Estate system. >>> http://bit.ly/1ukjzFZ
The sky is the limit.If you are interested in learning more about Tax Deeds and Liens, you should click on the link below. It is a great place to get started if investing in real estate is what you are looking to do. Yes, you can still make a fortune in Real Estate with this Ultimate Real Estate system. >>> http://bit.ly/1ukjzFZ
And yes, it is possible to buy a house for very little money sometimes as low as "pennies on the dollar." Head over to http://www.TheTaxSaleAcademy.com to view a few actual examples and to learn more about investing in tax foreclosures.
Casey Denman is a tax sale investor with over a decade worth of
unparallelled experience investing in over a thousand properties in
numerous states. A very active investor to this day, he is the founder
of http://www.TheTaxSaleAcademy.com which teaches proven tax sale investing strategies and methods.
Article Source:
http://EzineArticles.com/?expert=Casey_Denman
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