Tax Sales: Excellent Returns for Minimum Principal- By: Karim El Sheikh
Paying someone else’s taxes may not seem like the smartest thing to do, but when it comes to foreclosed properties you might consider making the investment. This is one of the ways government agencies like your local county try to collect on back or delinquent taxes. While there are a few risks, many consider tax sales to be a win-win situation no matter which type you invest in.
Tax sales come in two different forms: tax lien sales or tax deed sales. If you buy a property this way, you offer to take over the payments from a homeowner who either cannot afford to or has gone delinquent. Your county government normally offers tax sales at public auctions. Why do this? The outcome is you either buy the property for a tiny part of its market value or collect a higher interest rate when the lien is paid off.
Making a well informed decision can turn this into a great investment and moneymaking opportunity for you. You are looking at modest, yet profitable returns on what can be a small investment. If the delinquent homeowner pays off the taxes in time, then you receive your principal back including interest. Depending on the credit situation of the homeowner in default, it can take anywhere from 6 months to 5 years. This is known as the redemption period for the back taxes.
If you are looking for the former, look for tax deed sales. This means that the tax comes with ownership and full possession of the property (or in some cases properties). Either way, you win.
Check your with your local country, newspaper listings or around the web for a listing near you. Rules and regulations vary per county but a little bit of research should help you get started. In many cases, the delinquent taxpayer pays what he or she owes and you get your money back with interest. In others, you get a house.
It is important to remember that rates of return differ per state. Iowa, for example, offers 2% per month guaranteed (that is 24% a year). Florida’s maximum is 18%.
If you decide to purchase a tax lien, you do not get the deed when you pay the back taxes. However, if the debt is left unpaid, you can go ahead and get a tax foreclosure on the property or deed of sale to return the investment. These are safe and viable investment opportunities if you know where to look. Just remember what kind of sale you decide to bid on and do research so you can invest smartly. Arming yourself with a little knowledge can help you not just outbid competitors, but get the best rates.
One thing you have to remember about tax sales is that they never need brokers. You buy the taxes directly from your city, county or government. Many auctions are now held through the Internet, making investing as easy as clicking a link. You can make a steady, sizable income simply from a few well placed dollars through a tax sale.
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Taxliens.com is your #1 source to finding tax sale properties on the market. Search all tax liens for sale in your area.