What to Expect from Purchasing Tax Liens
What to Expect from Purchasing Tax Liens
For new investors and for those who are just starting, purchasing tax liens is also one of the great opportunities in real estate. Many see this as an easy way to get a huge profit for a fraction of the actual property price. New investors should take a look at this as an opportunity to grow their small investment.
But what is a tax lien?
Every property owner has to pay the taxes and they fail to pay it on time, the government has the right to take possession of your property. They can have it sold instantly or put up an auction for tax lien certificates. The highest bidder will then have to pay for the owed taxes of the property owner.
This means that you, the certificate holder are not the owner of the property yet. You are just loaning the money to the owner until they can pay you back in a specific timeframe. This is generally how you will profit from purchasing tax liens. The owner will have to pay you the amount you paid for their taxes and the "interest" given to the owner as a penalty charge.
The mode of payment and schedule was established at the time of purchasing tax liens. If the owners can pay off the loan within the time given to them, then they can keep their property. This can be quite frustrating for those investors who are really aiming to own the property.
The only time the certificate holder can claim ownership is when the property owner still fails to pay back what they owe you.
The apparent drawback of this investment is that you will have to wait for the possibility for the owners who can't keep up with their payment before you can own the property. So if your only desire is to get a property immediately, well this investment is not for you. But if you don't mind waiting or it's okay for you if the owner may get to pay what he owes you in the long run, and you can just be contented with what you earn from the interest, then you are on the right path.
Assuming you get the property, the outright benefit is that you only paid a fraction of the actual price. Although, many owners will be able to pay their taxes, there are still some who cannot. So the evident profit if you invest in purchasing tax liens is gaining the property at a lower price.
It is still up to the investor whether he is willing to take a few challenges or steps for success or if he is willing to risk or not. No matter what will come out of this, the investor gets the upper hand in purchasing tax liens because he either gets interest in loaning money, or he may get the property at a lower price.
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