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The Perfect Investment…One Of Real Estates’ Best Kept Secrets

By Reggie Brooks

When we look at the investment opportunities in the marketplace, we see the same old patterns. “The greater the risk, the greater the reward”. To see where this is played out, look at the stock market. While fortunes have been made in the stock market, fortunes have also been lost in the stock market. Well, if you’re anything like me, you’re going to want to invest where you can gain an edge over your competition. You’ll want to earn higher interest than you can get from anywhere else, and you’ll want to have your investment guaranteed by the strength of our government. Well, hold on to your hats! Such an rare animal actually does exist. It’s investing tax sale instruments. I’ll explain.

We use so many services that are provided by our various counties that we tend to take them for granted. For instance, our firefighters, our police departments, some hospitals, and our school districts are all services that would strongly affect us if they were to suddenly loose funding. So, where do they get their funding? I’m glad you asked. They get it from “property taxes”. But you have to understand this part. This is where you and I as entrepreneurs can make money…

Our government is smart. They know that the average person has an aversion to paying their taxes. That’s why the various state and local governments have enacted laws that provide for very heavy penalties when a person does not pay their property taxes. Then, the government will allow us to pay up the owner’s back property taxes and whatever other fees that have accumulated, and essentially step into the government’s lien position (this is BIG)! Now, the delinquent property tax payer has to pay you instead of the government. And they’ll pay you big! I’ll explain.

When you invest in tax sale instruments, be aware that there are certain states that are tax certificate states, and other states that are tax deed states. A tax certificate state essentially sells to an investor the right to collect interest on unpaid property taxes. The state law sets the amount of interest that the investor can collect. On the other hand, a tax deed state will let the interest and penalties pile up against the delinquent tax payer. If the delinquent amount is not paid within a certain period of time (this is the Redemption period. We’ll talk about the Redemption period in a few minutes) the property will be sold at public auction.

This is our opportunity to possibly acquire property for pennies on the dollar, or make significantly higher than market returns on our investments. These high return on investment interest rates are guaranteed by law to stay high. They don’t adjust based on what any market is doing. They are set by law, and they don’t change. If you invest in Arizona for instance you will earn 16% on your money. Even if you tell them that you only want to be paid 12%, they’re going to pay you 16% anyway.

The only thing that can change the amount of money you make in your investment is a change in the state law. What are the chances of that happening?? Many counties will allow you to invest in these tax instruments by simply mailing in a check. Some will allow you to pay with a credit card, and some will even allow you to invest in these money making tax sale instruments over the internet! Can it get any better?

Here’s something else you need to know. A delinquent tax payer will be given a short grace period where they can pay their taxes without having to pay a penalty. When the grace period expires, the Redemption period starts. The Redemption period can run anywhere from 6 months to 5 years, and will allow our delinquent tax payer to pay the delinquent taxes, accumulated interest, and penalties, and they would then redeem their property. If payment is not received by the end of the redemption period, the local taxing agency will generate a list of liens to be offered at the next tax sale, a “Notice Of Sale” is advertised in a newspaper of general circulation, and the “public auction” scenario is initiated. In some cases the notice of sale will appear in the newspaper 2 to 3 weeks before the auction date. This period is to allow the delinquent tax payer a little more time to pay the back taxes, interest, penalties, etc. If these amounts are not paid, and after many public and private notifications to the delinquent owner, the property can be seized and sold at public auction.

You can greatly reduce your risk by diligently doing your research. It might be wise to do a title search just to make sure there won’t be any unpleasant surprises. Watch out for property that have an IRS lien, or that might be going through bankruptcy. These can become nightmares.

Are you ready for some more exciting news?? This is the part that I like best – all of the junior liens get wiped out! Understand just how big this is. Some of you might not know that in a foreclosure sale, liens that were recorded after the lien that initiated the foreclosure, will be wiped out. Keeping in mind that the laws can differ considerably from state to state, a tax lien is usually considered senior or ahead of the first lien. If you foreclose on a delinquent tax lien and you end up with the house, you’ll own that house free and clear of any liens!!

If you’re looking to improve on the meager little return you’re getting at your local bank, how would you like to earn 18% interest on your money guaranteed, and your checks come straight from the government? If you wanted to invest in tax certificates in West Virginia, you’d earn your 18% return! And if the property is not redeemed within 18 months, you could foreclose and end up with the property.

Maybe you’d like Delaware a little better. Delaware is one of the best places to invest on the East Coast. Investing in Delaware can get you a big 20% return, and if the delinquent tax payer doesn’t redeem his property within 12 months, you get the deed.

In Maryland, you can earn 24% on your money, depending on which county you decided to invest in. The Redemption period is usually 1 year, although it can be as little as 6 months.

If you want to go to Illinois, you can do pretty well. Depending on the type of property involved you can get 18% return if the delinquent property owner redeems the property within 6 months, and 36% return if the property is redeemed after the 6 month period.

Or, maybe you might like to invest in Texas. As an investor, you’ll earn a 25% return on your money if the property is redeemed within the first year. If the property is redeemed after one year and one day, you’ll earn 50% return on your money. Depending on the type of property, the redemption period can be as little as 6 months.

Investing in tax deeds and tax lien certificates can be a fun, risk free strategy to create big income, or an opportunity to capture investment properties for pennies on the dollar. Remember, when you take over ownership of one of these tax delinquent properties, you own them free and clear. There is no better way to get your money working super hard for you than by investing in real estate secured tax sale instruments.

 

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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