There are different ways to invest in real estate. Some people prefer investing in single family homes, while some prefers multi-family homes or apartment buildings and some may even prefers commercial buildings.
However there is a type of real estate investment that has the best bargains and yet the least known in the industry. It is tax lien investing. There are some investors who had made millions by focusing only on tax lien investment.
A tax lien is made possible when a real estate owner had not been paying taxes on his real estate. This could be due to several reasons.
- Abandoned properties
- The owner had passed away
- There are several years of unpaid taxes
When this happen, the county will put a lien on the real estate for unpaid taxes and put it up for public bidding. This is when investors can seize the opportunity to invest in the real estate and start collecting the unpaid taxes with interest from the real estate owner. And if the lien is not paid after a certain period of time, the investor can take the opportunity to foreclose and take over the property for just the price of the unpaid taxes which is usually at a fraction of the total construction cost. As a new owner, the investor can now choose to sell the property in the market and profit from the sale or choose to refinance the property to purchase more properties.
Risks of Tax Lien
Despite being a very lucrative investment, there are however several points to note with regards to investing in tax lien because foreclosures can be very difficult or cumbersome in the following scenarios:
- If the property owner files for bankruptcy,
- If the property owner is a military personnel,
- If the property owner lives overseas,
- If the property owner is a minor,
- If the property owner is mentally challenged
Therefore due diligence has to be done prior to any investment in tax lien to prevent falling into any of the above awkward situations and other owner problems because lots of public information about the owner of the property is available at the county assessors’ office. Additional information like bankruptcy filing or other outstanding liens is readily available at the bankruptcy court or country treasurer.
Bear in mind that real estate investment is not a race. Always take time to do your due diligence.
We wish you massive success in your tax lien investments.
Many factors should be considered when choosing on where to place your hard-earned money. And among them would be your appetite for risk and financial knowledge and skills. Before putting money in some form of investment, better make sure that you know the ins and outs of that investment option.
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