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Real Estate Investors, If You Could Buy Single Family Homes With No Mortgage For 20 Cents On The Dollar, How Many Would You Buy?

By Ted Thomas

Here’s the secrets of a little known but highly lucrative business of purchasing tax defaulted properties at auction for 10-20 cents on the dollar.

For many, the question is, what’s the difference between a tax lien certificate and a tax defaulted property (tax deed)? Before you begin investing, it is vital that you understand how a tax deed works, once you know you can purchase tax-defaulted real estate for pennies on the dollar but it’s only profitable if you know what you are getting when you bid.

What is Tax Defaulted Property (Tax Deeds)?

In a very basic sense, every piece of land in the United States is owned by the federal government. The government allows you the right to own the property as long as you pay taxes on it.

Many years ago, the U.S. Congress enacted laws that allowed individual states to handle governmental duties and obligations at the local level. The states further designated counties to handle the property taxation part of those duties and obligations. When you pay property taxes to the treasurer or assessor’s office, those funds are used to pay for public schools, police and fire departments, and any number of other civic services. The local government that manages and operates these services is primarily funded by property taxes.

Every year hundreds of thousands of property owners neglect to pay property taxes for various reasons. So what happens then??

The remedy for local government is to confiscate that property and resell it at a tax defaulted property auction for only the back taxes with no mortgage. The majority of these auctions use a public oral bid system. To quality as a bidder is simple; you just need to register before bidding. The starting bid is the amount due to the local government for back taxes plus penalties and interest. If you win, in most instances, you must immediately pay for your purchase.

It doesn’t matter where you live; county governments in all 50 states are authorized to hold auctions to recover delinquent back taxes. Some states offer tax lien certificates, other states offer tax defaulted property auctions (tax deeds) which are used to collect the past due property taxes owed. The difference? A tax lien certificate entitles you to collect the amount of tax you paid plus the interest penalties; a tax deed purchased at auction allows you to become the owner of the property for the price you bid at auction the mortgage is extinguished, that is deleted by law.

The secret to becoming a successful investor in tax defaulted property (tax deed) real estate is to know the who, what, when, where, why, and how these tax auctions take place.

Golden Rule #1

Know what you’re buying. This includes the size of the parcel, how many buildings are on it, zoning, restrictions, easements, the annual amount of property taxes, the appraisal value, previous sale prices, and current condition.

Taxes are usually assessed at 1 to 1.5 percent of the property’s value. So a piece of real estate valued at $100,000 will be assessed somewhere around $1,000 in taxes each year. Three years of back taxes would equal $3,000 and the local county will probably ask for a minimum bid at the tax defaulted property auction of $3,500 -the county will add late payment penalties to the back taxes.

The next question that must be answered is where and when are the auctions taking place? Normally auctions are conducted at county offices, but not always. Regardless of the location, it will be announced in advance of the auction. Some counties hold one big annual event while others schedule tax defaulted property auctions monthly, annually in the United State of America there’s over 5,000 tax defaulted auctions.

Secondly, you must know how the bidding process works. Rules vary from state to state, taxing district to taxing district. Some counties use an online bidding process which is becoming more and more popular, but the majority still hold live auctions you may attend in person.

At the auction, each parcel number is announced in turn; then the auctioneer asks for opening bids. It works much like any other auction; the bidding goes up until there are no more bids. The person who wins with the highest bid is awarded a Treasurers Tax Deed from the county treasurer. Make note there’s dozens of unique bidding processes, this is only one.

Real Estate For 20 Cents On The Dollar

There’s big money to be made buying tax defaulted property at auction Tax defaulted property (tax deed) auctions allow you to buy low and resell for a quick profit. Do your research, and you’re bound to find success!

Ted Thomas is famous for showing newcomers and investors how to earn 6 figure incomes within 1 year of completing his training program. Conservative investors love tax lien certificates because they are predictable, certain and secure and sold by local government. Tax defaulted properties are sold at oral big auctions and online. Starting bid, only the back taxes…. More information at TedThomas.com

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Savvy Investors Earn 16%, 18%, Up To 24% On Government Tax Lien Certificates

The Question Is; What Is A Tax Lien?…It’s Not What You’re Thinking

By Ted Thomas

Across America, investors like you are discovering a safe, secure, predictable way to invest directly with the local government and then get checks back from the local government… here’s how..

The most common question I hear is “What is a tax lien certificate?” It is truly amazing how many people are not aware of this centuries-old investment vehicle.

The United States is a country where the majority of citizens own real estate, either residential or commercial, for many the most valuable asset they own is real estate.

Even though the housing bubble in recent years forced many people out of their homes, real estate ownership is still the goal to which most Americans aspire.

One of the costs of real estate ownership which cannot be avoided is the payment of property taxes. Local governments demand property taxes so that they may pay for civil servants and for roads, library, schools, police and fire departments to name a few. These property taxes are usually levied annually. In the U.S. there are 3,000 counties and over 1,400 municipalities that are classified as tax entities, sometimes called districts.

Tax Default

What happens if the property tax bill is not paid? The county government authorities do have remedies. They could repossess the property, but unlike vehicles or other goods, real estate can’t be moved. Instead, the government places a lien on the property.

A lien is similar to a mortgage, meaning that until the amount due is paid, the property is not owned free and clear. A delinquent tax lien is considered a senior lien – the local government must be paid before any other debtors if and when the real estate is transferred or sold. The lien is not beneficial to the municipality because it doesn’t fill their treasury with the money needed to pay for city and county services. In order to get their money right away, the municipality will offer tax lien certificates for sale to the public. This simply means, the defaulted taxes are sold at auction to willing investors. Investor’s purchase tax lien certificates because the county gives the investor a high interest rate and a secure position on the real estate.

The local government challenge is…

To collect property taxes. This is usually accomplished with an annual, or more frequent tax lien certificate auction or a tax defaulted property auction, today we’re talking about tax lien certificates. When the tax lien certificate is sold, the government collects their revenue from the investor and the property owner receives a notice of lien against their property, giving the property owner time to pay the delinquent bill. The purchaser of the certificate gets the lien certificate, which is secured by the actual real estate.

In order to remove the lien, the property owner must pay the amount of the unpaid taxes plus any applicable interest and penalties. When this revenue is received, the government authority sends a check to the tax lien certificate holder for the face amount plus the amount of interest accrued.

What If The Tax Isn’t Paid?

Sometimes the property owner just doesn’t pay the tax lien certificate which represents the taxes due, for one reason or another, it may be that the real estate became part of an estate and the heirs don’t want the property – or can’t afford it. How much time elapses between the taxes going unpaid and the municipality deciding to give up on ever receiving the revenue varies by tax district.

According to county treasurers across the United States, 95 to 97 percent of all property owners pay the delinquent tax in 24 months or less. It’s rare that a property owner fails to redeem (pay) the Tax Lien Certificate, but it does happen, nationwide, every year there are thousands of buyers who end up with property for only the cost of back taxes which they purchased at a tax defaulted auction. In a subsequent article, I’ll have more about tax defaulted property auctions, meanwhile, if the property owner fails to pay taxes, the tax lien certificate holder is awarded the property in exchange for paying the taxes, the county or municipality sends the tax lien certificate purchaser a deed, giving them the fee simple right to keep or sell the real estate.

Where To Find Tax Lien Certificates

Where can you find tax lien certificates that are up for auction? Local governments compile a list of delinquent property owners on a regular basis. This list can be found in one of three places: published by the newspaper, published online, or a printed list available directly from the government office. When you obtain the list, you can also get instructions and the date of the next auction of tax lien certificates.

To review, only two things may occur if you purchase a tax lien certificate. Number 1, the property owner gets their act together and redeems the certificate, that is they pay the certificate and when they pay you’ll receive all the money you invested plus a high interest rate which could be 16, 18, up to 36%. Number 2, the property owner continues the default and does not pay and the time limit runs out and you end up with the property free and clear. The mortgage is wiped out by an act of law, that is, the mortgage is extinguished by law in every state and every county in America.

Advantages of Tax Lien Certificate investing

Tax lien certificates pay interest rates up to 16%, 18%, 24% even 36% depending on the county where you purchase, each county has its own rules and amounts they pay. Conservative investors really like tax lien certificates because they are passive investments with very low risk. In short, they are predictable, certain and secure. Watch for more details in the future…

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Ted Thomas is famous for showing newcomers and investors how to earn 6 figure incomes within 1 year of completing his training program. Conservative investors love tax lien certificates because they are predictable, certain and secure and sold by local government. Tax defaulted properties are sold at oral big auctions and online. Starting bid, only the back taxes…. More information at TedThomas.com