How To Profit from Buying Tax Lien Property

How To Profit from Buying Tax Lien Property

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If you are looking for a lucrative way of investing your money that doesn’t have to take a lot of effort, buying tax lien property could be perfect for you. It can give you a rate of return of around 18% and sometimes even higher. Because the investment is backed by property that you can have foreclosed, the amount of risk involved is relatively low.


What is Tax Lien Property?

Tax lien property helps municipality governments to collect property taxes, even when the property owner doesn’t pay them. They will write out a lien certificate that investors can buy, in a situation like this.

The highest bidder gets to purchase the lien certificate and has the right to collect the due property taxes plus interest. Every state has their own specific rules about lien sales. The amount of interest and duration of the lien depends on the area the property is located in.

If the property tax and interest are not paid within the duration of the lien, the property can be foreclosed on. This makes buying tax lien property a relatively low risk investment. It’s not completely without risk though, because some properties might generate insufficient money at a foreclosure sale to pay off the total tax and interest amount.

Buying Tax Lien Property

Photo by 401(K) 2012 / CC BY


What To Know Before Buying Tax Lien Property

You will have to make sure to collect the total remaining tax amount before the lien expires. In a situation when you failed to collect the money within time, you should always try to get the house foreclosed so you don’t end up empty handed. It’s very important to have a detailed knowledge of all the duration periods and your rights and obligations, because you have to take the appropriate steps yourself.

Having a large sum of money to invest before you start buying tax lien property, is very important. A lien has to be paid within 3 days of the purchase in most cases, so running out of cash can cause you to miss out on great deals.

If you have enough money saved up, you can grow a bigger tax lien portfolio and reduce your total risk. It can take up to 2 years before you collect the due taxes and interest rate, so it’s important that the invested money can be missed for a while.

You should always be careful not to buy a tax lien certificate on an unusable piece of land. This can be a piece of property completely surrounded by other land and without direct access to a road. It can also be a piece of swamp land where nothing can be built.

As a rule of thumb, you want the total amount of due tax to be lower than 60% of the property’s value.


Where to Buy Tax Lien Property

When you want to buy a tax lien property, it’s advisable to get a list of lien sales well ahead of time. This makes it possible for you to do research on the properties well ahead.

The county treasury is responsible for the sale of tax lien certificates. To get more information about auctions being held in your region, you can contact the county treasury in your area.

You can also find information about tax liens and upcoming sales online at


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