Why Buying Tax Liens May Not Be a Fabulous Investment

Buying tax liens is the latest, hottest real estate investing craze. Online courses, late night infomercials, the latest real estate guru's "systems" to make millions buying tax liens - they're cropping up all over the place. Unfortunately, all these products only sell you on the bright points of investing in tax liens. They rarely include the very real downsides of tax lien investing, and before you get your heart set on investing this way, there are a few things you should know.

First of all, you're going to need a lot of cash when buying tax liens. You are generally required to pay the entire amount of your bid at tax sale. If you're thinking all you need is the amount owed for the back taxes, think again. You'll be bidding against many other bidders at the auction, and most of the time, the properties you're bidding on will be bid up to close to the retail value of the home.

Also, you'll be lucky if you are even able to make a successful bid. You'll likely be bidding against agents for large tax sale investing firms, for whom buying tax liens is a full-time business. Since these companies have more to invest, they can afford to take a smaller return on their investment, leaving you out in the cold much of the time.

If you're buying tax liens with the intent to hold and then foreclose, you'll hit a few roadblocks there. You won't be able to inspect the properties before you bid, so there's a sizable risk that you'll bid on a property that has major repair work that needs to be done that you don't know about. Also, you'll have to wait a year or more to foreclose in most cases, since in most state the delinquent owners have that period of time to bail the property out of foreclosure. Then you'll have to go through the lengthy "quiet title" process to notify other lien holders before you can get the deed to the property.

The flip-side of that is, if your intention is to purchase tax liens for the purpose of collecting a great interest rate when the owners pay off (and they do, most of the time), then great-- that will be the best way to be successful. However, there's no way to know if the owners will actually end up paying off the lien. You may very well end up owning a property that is a money pit and wipes out any of your previous gains. The truth is, buying tax liens isn't a great way to invest.

The best way to invest in tax foreclosure property is to carefully select the right properties, and then seek out the tax delinquent owners and offer to purchase directly from them. Frequently, owners of tax sale property are not desperate owners that can't pay their bills, but absentee owners who aren't aware of the tax sale situation, or who have given up on the property and decided to let it go.

Are you getting excited? These owners are an investor's dream: highly motivated to sell (time's running out!), and often resigned to losing the property and getting nothing (read: willing to sell for cheap). Find these absentee owners-- former landlords, unwitting heirs, failed investors, people who bought land planning to build on it, etc.-- and you've potentially found a source of investment property that you actually can get free and clear for pennies on the dollar.
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    

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