Not only can you make a lot of money from tax lien investing, but it is also a great way to find some really cheap properties that you can do whatever you like with. But before you jump into this, you really need to understand the process.
How Tax Lien Investing Works
If a homeowner falls behind in their payment of property taxes, local governments have the responsibility to hound and penalize them until their debts are paid. But in 35 of the 50 states in the US, local governments are allowed to sell this responsibility in what is called a tax lien. How can buy these liens? Ordinary citizens like you and I are able to purchase them.
After you begin tax lien investing, you are given the responsibility of collecting the back taxes owed on a property. Plus, you are allowed to collect a set interest rate that can sometimes be up to 25% in some states. You are also given the right to foreclose on the property if you are not paid the full amount within a certain period.
The period during which the home owner is allowed to pay you (before you can foreclose) is called the ‘redemption period’. This is sometimes one year and can go up to three years depending on the state and local laws. If the amount owed has not been paid by the end of this redemption period, the tax lien investor has the right to foreclosure on the property.
Tax Lien Investing Can Yield Huge Profits
Tax lien investing like this is a great way to make some money, since you will be paid interest on what you have invested. Also, if the amount owed is not paid, you can take title to the property. This means that you OWN the property – making this a great way to get extremely low cost properties to rent out or fix up and sell. Just be prepared for the long road ahead.
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