What Are Tax Liens?

Tax liens are a beautiful thing, but they have lost effectiveness as an investment vehicle for most in recent years. This is yet another way one can get into the business of investment properties.

What is a tax lien?

Everyone who owns property must pay property tax. The government is the real owner of the property you are on, and you pay him for the right to say it is yours. If you pay, then you can keep it. However, if you don't, the government will come knocking on your door, demanding its property back. This is where tax liens get their basis.

Obviously, there is a problem when somebody is about to lose his or her home from not paying taxes. Chances are, he or she would like a second chance. Perhaps this was due to a recent layoff, or maybe it was from a bad investment. Usually, somebody who can afford a home can continue paying on it. Sometimes, however, there is a hiccup, but this doesn't mean the person won't be able to pay on the home in the future; this just means they cannot pay it right now. Rather than lose their home, investors have made their way in to this situation and said "Hello Mr. House-owner, I see you're in trouble and are about to lose your home from not paying your property tax. I'd like to propose an offer that can keep you and your family in your house. I'll pay the property tax off for you in full, and you can pay me back in an installment plan over a period of time." This is a good option for most people, as most homeowners can afford the mortgage payments as well as the tax lien payments after their temporary setback is resolved.

This is a good deal for investors, too. The interest rate charged on tax liens can be as high as fifty-percent, but it is usually more in the range between ten and twenty percent. This is quite a bit better than savings accounts.

What if they don't pay you back?

Then this is an even better deal for the investor; the investor gets to take the house in the case that he or she does not get paid by the homeowner. This assures the investor that his or her investment is safe, and provides a guarantee that he or she will make a profit. Tax liens receive priority over most other forms of debt, so the investor usually gets paid first. It is important, however, to check the history of the property just to make sure there isn't a lien on there that would receive priority over yours.

An almost free house!

While it is true that this results in an extremely low cost house sometimes, it is not usually the case. Most people are unwilling to lose their home for a few thousand dollars, so they find ways to pay the tax lien. It helps, instead, to view the interest rate received on the liens as your profit.

Where can I get a tax lien?

Tax liens are available in county court auctions which occur at various dates throughout the year. The problem with tax liens is that many businesses are built on finding these tax liens and winning them at auctions. This makes it difficult for small investors to find good deals. Beginning investors are advised to look for tax liens in more rural counties. Still though, the travel expenses may end up eliminating the benefit gained from tax liens. However, if one is located already in a rural county which offers tax lien sales, he or she may benefit by buying these rather than putting his or her money in a savings account.
 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 

Cody Scholberg is an expert author on real estate investment strategies. Read more at investment properties guide [http://www.investmentpropertiesguide.com].

Article Source: http://EzineArticles.com/?expert=Cody_Lloyd_Scholberg

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