Tax Lien Investing

Beginner’s Guide To Tax Lien Investing

The other day when I was in Texas, I bumped into an old friend who was worried about what would happen in case he purchased the tax lien certificate for a property which was already under a mortgage. It seems that lack of proper information about tax lien investing and Texas property tax is what causes most of the people to make mistakes. Either they walk out of tax auctions with totally shady deals, or they abandon a great deal in their ignorance.

They are something like basketball and football. The only thing common in both cases is the ball. Here it is the tax. All of us know that the government needs tax money to function properly. In fact, the people who own property in the state or county fail to pay taxes; the departments start to lose funds.

The standard option is that the government puts up the property under state tax liens. This restricts the economic mobility of the capital. The government can now sell the property to any person in an open auction. The tax lien certificates sold at the sale allow the person who purchases it to claim the tax amount which is repaid by the owner of the property. In case the repayment does not occur within a set period, the certificate holder can claim title to the park.

The auction is generally made at the amount of taxes and applicable penalties that are due. In some cases, the sale may be according to a percentage of the market value of the property. Whichever be the choice, tax lien investing is an excellent avenue for the purchase of real estate. The investor only has to pay an amount that is way lesser than what he would have had to pay if he traditionally purchased the property.

Also be sure to check if the certificates that you purchase have a date of redemption or not. In most of the states in the US, there is a set time slot, known as the period of recovery. During this period, the owner of the property can come and claim his ownership. He has to pay the money that was funded by investor and some more money. This extra money above the investment amount may either a penalty or and interest.

Because in some cases, the owner has been able to repay his dues people came to think that it is the county government who pays the interest. In reality, it is the owner of the property who may or may not want the feature back.

Now that you have a fair idea about tax lien investing, here is a pleasant surprise. This investment is also counted as a tax shelter in some states. I hope that you shall be able to make wiser decisions in this regard

Author: James Taylor

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