Tax Lien Investments Pay Big Checks!

Owning a few tax lien investments can provide you with a way to reap up to 16% ROI. As a tax lien certificate owner, you usually are in first place to be paid, even before banks and other mortgage holders.

Imagine owning some tax lien investments. You can earn high interest rates, as much as 16% in some states. The county collects the delinquent real estate taxes and penalties and sends you a check! You don't have to even talk to the property owner.

Would you like to get in on this gravy train? Many investors have found that owning tax lien certificates is a reasonably safe investment. But you do need to know what you are doing.

Don't worry! Even if you have never invested in tax liens before, you can easily learn the basics of tax lien investments. I took two seminars on the subject. The best one was John Lane's Tax Sale Workshop ( or

It was a two day seminar. John Lane has probably bought more tax liens than any other investor. He also sells tax lien lists from all states. You can buy these or go to the county courthouse treasurer's office for a list.

Joel S. Moskowitz, J.D. wrote the book The 16% Solution: How to Get High Interest Rates in a Low-Interest World with Tax Lien Certificates, Revised Edition This is an excellent starting point for your research and education on the subject.

Tax Lien Investments - Basics

As you know, real estate owners must pay annual property taxes to fund government costs. When a property owner fails to pay his or her taxes, the county will assess penalties. The rate will differ by state.

For instance, Arizona charges a 16% rate of interest on their tax lien certificates. Iowa charges 24%. Alabama charges 6%.

Since most counties prefer to get their money sooner rather than latter, they will hold auctions for these tax lien certificates. You, as an investor, can register as a bidder, and bid at these auctions.

Check the county websites for bidding requirements or go to the county courthouse and ask in person at the treasurer's office. Some counties prefer to wait and collect the high interest penalties. Mine does.

The tax lien auction procedure will vary from county to county. Usually you are bidding the tax lien interest rate down. That means the bidder who is willing to receive the lowest interest rate, wins the bid.

A certificate that bears a 16% interest rate may be bid down to say 8%. In order to receive the highest rate, you will most likely need to attend a non-populous county where there are few bidders. A major city will attract more investors as they have more property taxes that are delinquent.

Research The Properties

In order to buy quality tax lien investments, you must do some research. First, you must also drive by the properties. I have found junk properties, a land fill, and brand new homes. Which would you prefer to buy?

Driving by the properties will weed out undesirable properties and locations. Remember, though, you do not have any right to inspect the property. Going on the property without permission is trespassing. You can be arrested if you are caught!

After you have found a few properties that you would like to bid on, research the county property records. You will want to know if there are other tax liens, like an IRS tax lien, that would have a higher lien position.

If you find a property that doesn't have any clouds on the title that could give you grief, then register as a bidder. You may not be able to bid on all the properties you like. It will depend how the auction is conducted. Therefore you should have several properties in mind before attending the auction.

Congratulations if you are able to successfully bid on a few tax lien certificates. Check with a real estate lawyer to see if you have any obligations. It would be best to spend an hour with a lawyer before the auction to discuss the risks and obligations you have.

In some situations, you may need to foreclose to get paid. You will need a lawyer for this. Usually, you wait until you get paid. When the taxes are paid, the county will send you a check for the amount you are due. The tax amount plus interest.

Should the taxpayer fail to pay his taxes for a second year, you will want to buy that tax lien too! You don't want another investor having claims against the same property. Again, talk with a real estate lawyer before bidding on any property.

Owning a few tax lien investments is an excellent way to earn high interest on your money in retirement. It requires a few hours or days of research and waiting to get paid. You may need to wait a year or more until you get paid. So if this is an issue, then try another investment that has scheduled payments like bonds or discounted real estate notes.

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