Tax Liens: Investing Wisely For Improved Returns
When you started getting interested in making good investments
, you probably looked in all the obvious places: the stock market, real estate, startup companies and so forth. But the real money can often be found in the most unlikely of areas. One such area is tax liens. The local government issues these when a property owner fails to pay his taxes, but they represent a good investment for anyone who wants to take a chance. Governments want these notes off the record as soon as possible and will often sell them off for nothing more than the back taxes. The property owner now owes the investor the back taxes, plus interest. Over time, this can make you a lot of money.
Start Locally
There are websites and investment strategy guides that can help a burgeoning investor start buying tax liens all across the country. To begin with, however, you're better off looking to your local government to get your feet wet. This will allow you to visit the properties in question before you start picking up the notes. Why is this important? You are buying a lien on that property. If the owner fails to take care of his financial obligations, that house could very well become yours. But is that something you want? If it's a dilapidated shack in the middle of a bad part of town, it might not be.
Additional Parties
You don't want to get involved with properties with more than one party with a vested interest in the owner's financial obligations. Yes, there will likely be a mortgage, but if the bank is in the final stages of foreclosure, this isn't something you want to get involved with. The same goes for any tax liens that may have been issued by the IRS. In fact, the IRS is who you really need to be cautious with. If you have a claim to a piece of property due to taxes, a mortgage lender's interest in the property may not supersede yours. The IRS, however, likely will. Don't wind up in a situation where you own a house that is now in debt to the federal government.
Stay Realistic
If you're interested in tax liens primarily because you think you can buy a house for pennies on the dollar, you might be in the wrong racket. While it does happen from time to time that an owner simply can't come up with the money, most will pay off the back taxes eventually. This is still a good investment opportunity, especially when you get to the point where you can do it with a lot of volume, but you're not going to wind up owning a bunch of houses.
by: Alfred Ardis
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