Tax Sales and Tax Liens - Pros and Cons of Investing in a Tax Sale/Lien

http://www.REIClub.com - Are Tax Sales a Good Investment For Real Estate Investors? Here Is A Quick Video On The Pros And Cons Of Investing in a Tax Sale

Hi, this is Frank Chen with REIClub.com, the only site you need as a real estate investor. Today I've got quick video on the Pros and Cons of Investing in Tax Sale Properties.

Tax Sale vs. Tax Lien

- Tax Lien:
A lien in general is a claim or security of interest placed on personal property to secure the repayment of debt. Therefore, a tax lien is a lien imposed by Federal or state law to secure payment of back taxes.

As the investor: You buy the rights to the money owed in taxes and the interest and penalties that have accrued.

- Tax Sale: (also known as a a 'Tax Deed Sale')
Refers to property, in this case real estate, being sold by a taxing authority or the court to recover delinquent taxes. This is commonly done by Auction.

As the investor: You are buying the rights to the property itself.

- Return on Investment

Tax Lien: Allow you to earn high interest rates on your investment - When delinquent property owner "redeems" the lien you get your initial investment PLUS a guaranteed percentage interest. The interests vary by state. - Average 12-24% interest per annum - as high as 50%

Tax Sale: Deed sales transfer full property rights to your name. - Average Purchase Price 30-60 cents on the dollar - Tax Value = Purchase Price

- Right of Redemption: Gives the right to the original homeowner to reclaim their property during a specified time. If they are unable to pay it, the current lien holder can start foreclosure proceedings

Tax Lien: 1 year to 3 years - redemption period - Delinquent pays the lien plus interest and any other fees (accrues monthly)

Tax Sale: - Delinquent pays back interest plus the costs incurred to foreclose

Tax Liens / Tax Sales Pros

- Pennies on the Dollar - Buy properties for a fraction of the cost
- State Authorized Returns - awarded to the investor at 16% - 25%
- Volume - auctions are typically held at the first of EVERY month - VARIES BY REGION
- First In Line - Tax liens have precedence over other liens or encumbrances, such as mortgages, judgments, trust deeds and different liens
- County collects the fees owed - not you
- No Maintenance Responsibility
- No Landowner Liability
- Free and Clear - possibility
- Guaranteed Return on Investment

Tax Sale /Lien Certificate Cons

- Specific Regulations - Failure to comply precisely with these rules could make the lien completely worthless.
- Homeowner Bankruptcy - IRS or other creditors may have other claims on the property, rendering your tax lien worthless.
- Worthless Property - you invest in a tax sale with no potential - uninhabitable, structurally unsound, previous owner tried to sell it and stayed on the market for a long time, etc...
- Additional Liens - must pay off all previous liens before you can clear the title
- Competition - public auction - lots of other interested investors
- Lien Laws - vary from state-to-state - strategies may not work in some states

Tax lien investing is a significant opportunity which also requires some specialized knowledge. Always remember, when investing in tax sales or tax lien certificates, almost all risks can be averted by doing minimal analysis before purchasing. Due diligence is the key to success in this niche of real estate investing.

Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you'll be automatically notified when we upload more quick video tips for you. Take care and good investing.
http://www.youtube.com/watch?v=St17i8I_6xM

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[HEEKTA]

THANK YOU SOOOOO MUCH FOR SHARING THE PROs & CONs of tax sales/liens...NO ONE TELLS THAT PART...THANK YOU SO MUCH FOR THE MUCH NEEDED INFORMATION TO TRIGGER THE RESEARCH. DO YOU HAVE A PODCAST......THE INFORMATION ON TA LIEN IS SO HELPFUL

[reiclub]

@HEEKTA - We actually do have podcasts for REIClub. You can find us on iTunes.

[MrFrenchfriesman]

what if i live in Australia do i still have a shot cause it 's hard 2 manage ur property and paperwork overseas.

[reiclub]

@MrFrenchfriesman - I wish i could be of more help, but i'm not too familiar with overseas management. Let me see what I can find out for you.

[aslangroudi]

I don't get it....could you perhaps use some numbers to illustrate a typical tax sale for 100k or some way to make it clearer how these properties are sold for such a discount at 30-60 cents on the dollar? Perhaps when you add that 30-60 cents to the existing loans it is typical to the price of buying other deals on the market? Thanks in advance for any help.

[reiclub]

@aslangroudi - We actually have a TON of articles on our website that cover Tax Sales/Foreclosures. I guarantee you will find your answer there. If you use the "search" feature in the top right, simply type in "Tax Lien Articles" or "Tax Foreclosure Articles". Thanks for your question!

[ydolla2k]

Thank you I loved your video. Helped me decide to become a tax lien investor

[Subnbellle]

i'm seein' a loophole here. get limited power of attorney from the current homeowner making you the owner when you claim the difference between the county taxes & expenses, (auction costs the owner incurred, interest, etc.) negotiate a $ amt or % of the usually unclaimed $ you're gonna claim as the "homeowner." cash the check, fork over their cut, toss the POA in the toilet, flush.. you both got paid, they have their house, and you're free of any future expenses. (how'm i doin' here?) BAM?!?!?

[onlinemom111]

Love your video it seemed to really release most of any doubts I would have. I would gather have a decent bank account to be prepared for any unknowns but the recommendations to do your research on the property really helped as well. Send any other info you think would help. oh yes Do you have to have any special licenses to do this activity.

[ministermiguelt]

great stuff Frank ! This is good stuff.

[HEEKTA]

THANK YOU SOOOOO MUCH FOR SHARING THE PROs & CONs of tax sales/liens...NO ONE TELLS THAT PART...THANK YOU SO MUCH FOR THE MUCH NEEDED INFORMATION TO TRIGGER THE RESEARCH.

[asiya72]

Great Video!