How to Buy Tax Lien Certificates

Omkar Phatak Jan 5, 2019
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Read ahead, you will find an explanation of what tax liens are and how they can be bought as investments.
For any property that is owned in the United states, there are certain local taxes that need to be paid every year. In the event of non-payment of these taxes, for a substantial amount of time, a county government or municipality has the right to seize the property from the owner.
To give an opportunity to the owner, to pay his tax dues, a county may sell tax lien certificates for the property. It is a provision for the owner to secure a loan to pay his taxes.
The person who buys a tax lien certificate is providing a loan to the real estate owner. This provides the owner with some time to repay the tax debt. A holder of such a certificate must be returned the principal amount, along with a fixed interest, within a fixed period of time.
Failure to repay the loan, provides the certificate owner with a right to acquire the property, outright, in some states. It is like a tax debt relief instrument.
It all depends on whether the real estate owner is able to pay back. In any case, an investor who has bought a certificate, will make a profit, based on the interest paid back to him. Many people, looking for a real estate investment, go for tax liens, as they provide an opportunity to acquire properties, at a fraction of market prices in some states.

How to Buy Them?

To buy these certificates, you need to know which states and counties offer them. Scan online for information about which states allow tax lien certificates to be raised. The data regarding houses that have been seized due to tax default debt, can be acquired from county courts.
You may have to visit these courts in person, to get detailed information. Inquire in your own local county court. Create a database of lien certificates offered and the price of each one of them. Calculate the amount of risk involved, when buying the certificate. Check out the property itself and its tax records.
Know about the method of sale, for the lien certificate. They will mostly be sold in the form of auctions. Certain state counties sell these certificates online, through their official website. One example is Arizona. Before buying them online, make sure that you are assured of the website's authenticity.
You need extensive research and follow up to find tax liens, that are worth investing in. Though the interest rates are high on these certificates, there is no point in investing with small amounts that are repaid easily. Before you go ahead and buy one, make sure that you know what you are getting into.
There are chances of foreclosure on a home due to tax non-payment and the laws will decide whether your future objectives of taking over the property will succeed. So check out the local county laws before you proceed, and invest wisely.