Tax Lien Investments

Anytime you have a major move in a market there is the opportunity to make money if you are smart, knowledgeable, willing to take risk, and …. yes, maybe lucky too. This is certainly true with the opportunity now provided by investing in real estate through the purchase of tax lien certificates.

Investing for Estate


We all know how real estate prices have plunged over the past couple years in many areas. The result has been that many people have found themselves "upside-down" on their mortgage. In other words they owe more on their mortgage than the house is worth. This is an exceedingly rare event in American history, but it is here today.

One of the results of this has been a tremendous increase in foreclosures and also people not paying their property taxes. Real estate tax delinquencies are often satisfied by the local government selling a "tax lien" on the property. The piece of paper the investor receives is often referred to as a state tax lien certificate.

Tax liens are claims or a charge that the governmental entity owed the taxes places on the property for the tax delinquency. The agency will then sell the lien, usually at auction, to investors willing to buy it.

The rules vary from state to state, but essentially, once a tax lien is won by a respective bidder, the buyer (lienholder) will eventually get one of three things.

  • First, he could possibly obtain the property itself if the property owner fails to pay the back taxes within a set timeframe.
  • Second, he might get his investment back, plus interest, if the delinquent property owner pays the back taxes.
  • Third, the lienholder might get nothing. How would that happen? Well, if the property the lien is on is essentially worthless, then it’s owner may never pay the back taxes and the lienholder may never want to take title to the property. This is why "due diligence" is essential before bidding on a tax lien. Many people have lost money buying liens on an undesirable property that could not be built on, or had an IRS lien, or that was contaminated or whatever. So, caveat emptor: Buyer, beware.

Still, there is no doubt that many savvy real estate investors are making money with tax liens and will will make lots of money over the next few years through tax lien certificate investments. One of the biggest reasons is simply supply vs demand. There is a tremendous supply of tax liens on the market today and many more coming. So, it is easier today to find a tax lien bargain than it has been in the recent past.

Not to confuse the issue, but you should know that some states do not have government tax lien certificate sales. They sell tax deeds instead. The difference between tax deeds and liens is that when you purchase a deed you actually purchase the property itself. Naturally tax deeds are normally more expensive than liens and can be more risky if you purchase a property with some sort of problem (i.e. an environmental liability or something like that).

There are a number of good resources to use if you are interested in tax lien investments. The John Beck tax liens course is a good one. We also like the information you can get at Tax Sale Lists.

If you are interested in tax lien investments, let us know by using the form below. We are interested in forming a tax lien investment club of sorts – if the interest is there.

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