Posted by Carlos Samaniego EA

Four Tips on Buying Tax Liens

Four Tips on Buying Tax Liens

In real estate today, investing on Tax Liens is a very popular activity because investors can receive an annual return of up to 8% to 25% on what they paid for the Tax Lien. Another reason is investors have the opportunity, through foreclosure, to become the actual undisputed owner of the property free and clear. For those new to Tax Liens, these are the government’s way of forcing individuals or organizations that do not regularly pay property taxes to actually pay their taxes on time. By putting a limitation on their business or personal property, this restrains property owners from reassigning its title or employing it as collateral to earn additional financing. In most cases, properties are placed on public auction where winning bidders receive Tax Lien certificates as proof of purchase. If you are looking to make a substantial profit on real estate by investing on Tax Liens, you may need to consider seeking the services of a good tax preparer that specializes on Tax Liens. You may also need to consider following these 4 tips when investing.

Tip 1 – Establish Your Goals

When buying Tax Liens, it is very important to establish your goals before investing. It is essential that you are realistic with how much money you are planning to spend and how much time you are willing to invest. It is also wise to have different resources available at your disposal as it can be very expensive to invest on Tax Liens.

Tip 2 – Devise a Good Investment Plan

When creating a good strategy, here are two questions that you may want to consider asking yourself. First, is your end goal to receive yearly rates of return? Second, is your mission to be the undisputed property owner free and clear? Once you have determined this, you may now devise a good investment plan and here are some factors to consider:

  • Choosing the state. Choosing the right state that aligns with your investment plan may be difficult as each and every state has its own annualized rate of return. These rates vary from 8%, 25%, and even more for some states. For this, you really need to find a tax preparer who will recommend the best states to invest in. 

  • Finding the right county. The next factor that you may want to consider is finding the right county within the state. There are various counties that offer more Tax Lien certificates than others. Choosing a county that offers a high volume of certificates increases your chances of winning a property bid. 

Tip 3 – Secure a Tax Sale List

Many people find securing a tax sale list is to be a tad bit difficult because there are many ways available. First, you can seek the services of an accountant who lives in your desired county who will point you in the right direction of the county treasurer who is in charge of book-keeping the county’s current Tax Lien listings. Secondly, you can search for online newspapers that offer their county’s listings. Finally, you could contact brokers in the county to give you information such as owner listings, parcel numbers, and legal descriptions among others. 

Tip 4 – Study the Auctions Carefully

Once you have found the ideal county that offers multiple auctions, it is time to do your due diligence as an investor by carefully studying your current Tax Lien landscape. When doing your due diligence, there are many things you will need to consider such as zoning, property value, how many people are bidding, and so on. You will also need to study the Assessed Dwelling value of a property, which should be at least 70% or less of the gross assessed value. Bottom line is you will need to make sure that the property has value. You will also need to take the time to physically visit the property and inspect every square inch if you have to. Cover all your bases. 

Once you have followed these 4 tips carefully, you will be well on your way to become a property owner free and clear to earn annual rates of return or to sell the property as you see fit. As you can see, this is why investing on Tax Liens is a very popular activity in the real estate business.

Carlos Samaniego EA
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