What You Need to Know About Tax Liens Investing

When it comes to tax liens investing, you need to be aware that it is more than simply going to a sale, where you purchase some property confiscated because of delinquent taxes and expect to make some money off of the transactions within a few months. If the process was easy, you can be assured; more people would be taking their hard earned money and flipping it to make a decent amount of profit. In order to make sure that you are not getting the bad end of any deal, you need to do some research before you even think about participating in this type of auction. There are several things you need to be informed about before you can start tax liens investing successfully.

Keep in mind that laws regarding tax liens investing vary from state to state. What applies for one area may not be legally valid in another. That is why it is so important for you to make yourself familiar with the laws, rules and regulations in any jurisdiction. In some jurisdictions, you can bid on interest rates to lower them. There may be a default interest rate in place and if you can bid the rate down to zero percent, then you can do a premium bid for a tax lien. Basically, there is no interest being compounded on the premium. If you become the owner of a tax lien property, then you are the title-holder. If the redemption period is for a certain number of years and the original owner does not pay them, you are contractually liable to pay them. If there is too much owed in arrears, you may also have to deal with penalties. Keep in mind this scenario varies greatly from state to state.

In other states, if you bid on a property and win, even though there is a redemption period, if the original owner fails to pay the arrears, you are not on the hook for the bill. Instead, the property will end up in another sale. As you can see, tax liens investing can get very complicated, and you may want to have someone who is well versed in this area to help guide you through the process.

If you take the time to learn all there is to know about tax liens investing, you will be able to put together a very diverse and profitable portfolio. Make sure that before you get started you have enough money to cover any property bids you win. If you don't, have your finances in place before the start of the proceedings, in the event that you are the highest bidder. If you can't provide payment by the deadline, you run the risk of having any certificates that were issued cancelled, you lose the property, and may end up banned from future proceedings.