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Real estate investing tax lien certificates

Please forward this error screen to 173. Please forward this error screen to 50. Big profits can be made buying liens on homes with real estate investing tax lien certificates property taxes.

Jean Norton’s first foray into tax lien investing was hands-down a lucrative one. Norton, who was a marketing director at a tech firm at the time, had bought and sold real estate for years. She had heard about investors who were making nice profits buying liens on homes with overdue property taxes. So in 2009, she attended a seminar to learn how to put her own skin in the game. Within two years, she got her entire investment back, plus double-digit returns. It was always a nice surprise to get a check in the mail,” said Norton, now 55.

Now big institutional investors have joined individual investors. But like any investment offering tempting yields, the potential pitfalls of tax lien investing are pretty huge: Those who lose out could either end up saddled with a worthless property or with nothing at all. 10 billion in property taxes go delinquent each year, according to Brad Westover, executive director for the National Tax Lien Association. For many state, county and local governments, the failure to collect on these debts weighs heavily on their already-overburdened budgets. In 29 states, plus the District of Columbia, they turn to investors for help. In these states, investors buy tax lien certificates at auctions, effectively owning a claim against the property until the homeowner pays the county or municipality back or until they default on the debt entirely.

In return, the county gets the money it needs to fund schools, pave roads and pay for other infrastructure and services. Homeowners who pay back what they owe, pay the county, which then repays the investor the principal, plus whatever interest rate was set at auction. The interest is where the real money can be made. Larry Loftis, an attorney, tax lien investor, and author of “Profit by Investing in Real Estate Tax Liens. There are several different kinds of tax lien auctions. In one of the most common methods, the winning bidder is the one who will accept the lowest interest rate. That can lower the rate to far below what state laws allow, but it can still be much higher than other investments.

The big gamble: Most homeowners pay off their back taxes within a year and nearly all of them pay what they owe eventually. Donald Dinan, general counsel for the National Tax Lien Association, said generally holds true for the nation as a whole. Lien holders may have to pursue a foreclosure, and, if that doesn’t get the homeowner to pay their taxes, then the investor will likely have to take possession of the property. That means going through a legal process that often includes getting a sheriff to evict the old occupants. If an investor fails to do either of those things, the lien will eventually expire and it will become worthless. Foreclosures go through the county, which has to notify the delinquent taxpayer that a foreclosure sale is pending and advertise the sale, usually online and in local newspapers. In many states, the tax lien holder can get full title free and clear on the property in a foreclosure: The bank gets nothing.