Investment World Today

Investing in property tax liens can be very profitable, but if you’re new to the tax lien arena, some background information is the best place to start. In its simplest form, a tax lien is a mechanism that guarantees that a lender will be paid for a debt by allotting a tax commitment on the debtors’ property. This then effectively prevents the property owner from raising further capital or financing secured against that property.

The most common type of tax lien is a mortgage lien - this is where the lien is secured against the property on which the debtor holds a mortgage. If the debtor - in this case the property owner - is unable to repay the taxes owed against his property he risks losing his property.

Of the property liens we are considering here, there are two types - namely the general lien and the particular lien. The particular lien comes into play when an investor claims the right of access to a property in return for services or money which they invested in the particular property. Most liens can also be divided into two main groups - namely legal and federal liens (which can be enforced in a court of law) and equity liens which are valid only in courts dealing with equity.

When you buy a tax liened property you need to be aware that you are not actually buying the property itself. What you are doing in effect is lending the property owner the money they need to pay back their tax arrears. The property owner is also agreeing to repay that loan, with an agreed amount of interest, within the already determined repayment period that was established when the tax lien certificate was sold.

So here’s how we make our profits. If the property owner is able to repay the value of the tax lien certificate back to you within the allotted schedule, including all interest owed to you, he retains ownership of the property, and his credit rating remains intact.

If the property owner fails to repay the lien in time, ownership of the property is transferred to the holder of the tax lien certificate - in this case you, as the recent purchaser of the lien - and you are free to manage that property as you see fit as the new legal owner.

So as a quick recap, s an owner of a tax lien certificate, you will either make a profit by way of the interest repaid on your loan to the property owner, or of the owner is unable to make the repayment, you take ownership of the property and make your profit from how you then manage that property.

There is a lot more information you need to be aware of, and a lot more knowledge required before you go off a buy your first property tax lien certificate, but in simple terms, it is a very realistic model to make money and invest in real estate.

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