Tax Liens are liens imposed on properties which has an
unpaid tax debt in it. The Internal Revenue Service (IRS) is a government body
who closely monitor the tax details of each and every property. If they found
any properties with outstanding tax amounts, they will remind the taxpayer to
settle the due within time by sending a series of notices. After the final
federal notice, if the tax amounts still be the same, they will put a lien
against the property. The IRS and the federal government have the legal rights
to place a lien on a property for the unpaid tax amount. Once the lien is
placed, the owner must pay the full tax amount with penalties and interest to
the investor to get rid of the lien.
Investment in Tax
Liens
Tax lien investing is one of the highly profitable
investment methods when comparing to other investment methods. If the investor
invests in a tax lien property, they will surely get their investment amount
back with the additional interest amount. The interest amount for a property
will be varying from 8% to 36% and it depends upon the county of the property
where it was located.
Tax Lien Certificate
If a property owner fails to pay the tax amount, the IRS
will place a lien on that property. After the lien issued, a tax lien certificate is generated with the value of the amount of tax owed by the owner
with penalties and interest. The price of the certificate will vary from 100
dollars for small properties to 100,000 dollars for large properties. These
certificates are then sent to the auction process. In the auction, the
investors will bid their preferred amount for the certificate. The investor who
bid the lowest amount for the interest or highest premium for the property will
become the winner.
Where to Start the
Tax Lien Investment?
First, choose the best property from the lien list. If you
are a beginner and going to invest for the first time, it is best to get help
from some lien networks. Then contact the county government to know the details
of date, time and place of the auction. They will also tell the rules and
regulations that you need to follow in an auction if you ask. Attend the
auction and bid on your preferred property. If you are the winner in the
auction, buy the tax lien certificate for the property. It is important for a
tax lien certificate purchaser to do the due-diligence process in a timely
manner.
