There are over 1,500,000 tax liens and deeds sold in the various 7,500 tax sales held each year in the U.S. Some states utilize tax liens and other sell tax deeds but the result is basically the same…to collect tax arrearages upon real property. Its important to note early on that the Cash Flow area of Tax Liens and Deeds is a lucrative area of investment and has no opportunity for those interested only in brokering transactions.
While you occasionally hear infomercials on this subject with the speaker touting it as a method of acquiring properties for pennies on the dollar, this is actually seldom the case. Tax lien / deed investing is, however, a good method of earning above average rates of interest upon investment with very moderate risk.
What is a Tax Lien / Tax Deed?
Because some people are unable to or simply do not pay their real estate taxes on time, the various states passed laws that give a city or county the right to sell off delinquent taxes in the form of a lien or actually sell the property with a deed. To slightly complicate matters, each state is a bit different and including the District of Columbia, there are 51 actual sets of statutes which set rules for such sales, making investor education a primary consideration in this Cash Flow area.
The most common method of collecting real estate tax arrearages are tax liens where a city or county tax collector sells the delinquent taxes through a public auction method to an investor. If the successful bidder, the investor receives a Tax Lien or Tax Sale Certificate. Under this method, the investor earns interest on the amount paid for the certificate and the homeowner is given the right to “catch up” during a redemption period which varies from state to state. If the taxes remain unpaid after the redemption period, the investor has the right to foreclose on the property and sell it.
In states using the tax deed method, investors are actually bidding on and buying the property so a great deal of research regarding existing loans, environmental issues, etc. must be done to participate in this type of sale. Investors who focus on investing in tax deed states are typically trying to acquire property below fair market value. Investors in tax lien states are simply seeking interest on their investment.
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Investing in Tax Liens and Deeds is an excellent method of earning safe, high yield returns on your investments and a product area that all Cash Flow brokers should be familiar with even though they might not be investors initially. It is a very broad area, however, that will require some study to acquire the necessary knowledge to become competent in the bidding and auction process. Becoming a tax lien and deed investor can also open many doors to private investors who can then also become mortgage note investors as you build your business.
Amazon has many good titles which can help you learn more and become proficient in this popular Cash Flow product area.