How to Invest in Tax Liens

Tax liens are an agreement between a lienor and a lienee in which an owner of a property grants a form of security interest over the real estate in order to ensure payment of a debt or another form of obligation. Literally taken from words that mean "bond," "restraint" and "to bind," this type of legal title ensures payment of taxes according to state and federal law. If a property owner is delinquent on their personal or professional property, a lien may be imposed in order to ensure payment is made. As the United States continues to suffer through economic turmoil and financial unknown, there have been many tax liens instituted by federal agencies against personal and professional property owners.

If a lien is imposed and the individual still cannot pay the amount due, then he or she may have to sell the property. Buying real estate is a lucrative investment and many individuals and corporations make a lot of money by purchasing tax liens that have defaulted. Federal counties will set up regular auctions during which they sell off many of these purchase agreements when the owner cannot pay. This benefits the county because they receive much needed funding and it benefits the buyer because they are able to purchase lucrative real estate for much cheaper than otherwise expected.

If you are interested in purchased in tax liens in your county, the first step you must take is to contact your county office and determine what is for sale and when. Each county across the country has its own way of organizing the sales and monitoring the process. Some have online auctions while others have traditional in-person auctions. There are a number of well-written books on the subject of this type of real estate investing and many are worth your time and hard-earned dollars.

Basic information you will need from your county treasury department includes details such as when the next sale is, where the next sale is, how to obtain a list of the properties or liens for sale, information about rules that govern the sale, interest rate on the sales, as well as information about unsold tax liens from previous sales. This information is a good starting point for individuals and corporations that are new to this type of investing and looking to get started. From there, experience will help teach you the ropes and finer details of this type of real estate investment. If you can get in touch with individuals that are familiar with this sort of process and potential investment, it may be in your best interest to find a mentor. Experience is the best way to learn about something new and tagging along with someone that knows what they are doing can be a great way to learn first-hand the ups and downs of this type of industry. When in doubt, find a mentor that you can freely ask questions and express your concerns. This type of industry encompasses everything from real estate to mathematics.