Beginner's Guide On How To Buy Houses For Back Taxes

A tax lien is a legal claim that a government entity places on an individual’s property when the owner has not paid their property tax debt. This notice usually comes before harsher actions, such as a levy, where the IRS or other governments can seize someone’s assets to pay off the outstanding balance. After a city issues a tax lien to a property owner who has not paid taxes, it creates an official tax lien certificate that indicates how much in taxes is owed as well as interest and any penalties.

In order to get the delinquent tax dollars back, towns can sell the certificate to private investors, who pay the tax debt in exchange for a license to collect that money plus interest from property owners when they pay it back. So, to learn how to purchase a tax lien property is actually far easier than most people might suspect.

How To Buy Houses For Back Taxes

When most people think of buying property, they think of buying a home or a piece of land. However, there is another way to invest in property – by purchasing tax liens. Tax lien properties can be a great investment opportunity, but it's important to understand how the process works before you get started.
So, what does it take to purchase a tax lien property? The process is actually quite simple, and can be accomplished in just a few steps:

1. Research the market and find properties that have tax liens placed on them. This information is available online through your county’s website or Tax Assessor’s office.

2. Once you have found a few potential properties, research the owners to see if they are likely to redeem the property (pay off the outstanding balance) or if the property will be offered at auction.

3. If the owner is likely to redeem the property, you can negotiate with them directly to purchase the lien. If the property is going to be offered at auction, you will need to attend the auction and bid on the lien.

4. Once you have purchased the lien, you will need to wait for the redemption period to expire. This is typically one year but can vary by state. If the owner does not redeem the property during this time, you can begin the foreclosure process.

5 .The foreclosure process can vary by state, but generally speaking, you will need to file a notice of default and then a notice of sale. Once these steps have been completed, the property will be auctioned off and you can become the new owner. And these are the basics on investing in tax lien certificates for beginners.

Conclusion

When you are ready to purchase a tax lien property, you don't need to read up on courses like, tax lien investing for dummies - just be sure to do your research and due diligence. Remember, buying a tax lien property is an investment, so always think about what is in the best interest of your portfolio. When purchasing a tax lien property, always consult with an experienced professional to make sure you are getting the best deal.

There are many things to consider when you learn how to buy a tax lien home - like mentoring. Making this type of investment and having someone who knows the process inside and out can save you time, money, and frustration. Purchasing a tax lien property can be a great way to invest in real estate with minimal upfront costs. However, it is important to do your research to make sure you are getting a property that will be worth the investment. 

How To Purchase a Tax Lien Property: What's the best deal for the 1st  time investor (with little cash)?

Short answer: Investing in tax lien certificates for beginners, would be the better option.

In 21 states, an investor can purchase a tax lien certificate from the county to pay delinquent property taxes owed. The tax lien certificate (TLC) earns high interest, 10% to 24% or more, guaranteed by state law, until the property owner pays the back taxes owed, plus interest. The property serves as collateral.

The property owner has a limited amount of time, known as the redemption period, to pay the back taxes owed. After the redemption period ends, the TLC investor can apply for the deed to the property. You purchase the property for the cost of back taxes plus administrative costs, much lower than buying at market value.

Interest is earned whether the property value goes up, down or stays the same. There is no debt, no tenants, no vacancy risk, no maintenance or repairs, no liability risk of someone getting injured on the property - this is one way how to purchase a tax lien property.

Depending on the type of property, such as raw land, a TLC investment might be as low as $100. You can buy a portfolio of TLCs to create a diversified portfolio, of different property types in different locations, rather than risking all your money on one deal.

In other states, you can buy a tax deed, rather than a tax lien. Tax deeds also earn a high interest rate.

You can buy TLCs inside an IRA account to earn interest tax deferred or tax free. You can buy in any state or county, not just where you live. Many counties now provide online information for research and online sales.

Some investors buy tax delinquent properties at tax sales and then sell the property at market price or a discount to other investors or buyers. Other investors sell the property with seller financing to generate monthly income.

There are courses available to learn how to invest in tax liens and tax deeds.

Source: [Quora.com]

How to buy a tax lien home: What are the steps?

You show up at the tax lien auction with proper documentation showing you have the resources to complete the purchase. Generally that means a letter from a bank but, the local government will provide their requirements.

Then, you be the high-bidder on that property.

Then, you pay the lien and any other associated costs.

Now, you own the property, possibly subject to additional claims. You should have done a title search ahead of time.

Then, you have a waiting period during which time the previous owner may pay off the debt to you, you get no interest during this period.

Then, if you are not paid off, you wait. In my state it was about 10 years on one that made the news, after which the buyer of the lien walked away with nothing but reimbursement for paying the taxes, nothing for improvements he made. Apparently the taxing body failed to properly notify the original owner as required by law.

To learn more, please read Tax Lien Investing For Dummies.

Source: [Quora.com]