Posted on 12/04/2006 6:28:55 AM PST by rudy45
If I understand correctly, a third party can find properties for which taxes are owed, and on which liens have been placed by e.g. school district, city or county.
Do I understand that if that third party pays the taxes, it's possible that the third party can gain title? Has anyone had experience with this kind of investing? I understand the possibility of other liens that take precedence, e.g. IRS tax liens. How does one address this issue, and what other pitfalls are there?
How different is this from buying a foreclosure?
Thanks.
for later
You may be able to get 10-16% interest. The lien is usually in first position because liens from property tax have seniority.
You can buy around the country. Each county has their own procedure. Check the county web sites.
If you're interested in a property, maybe a local realtor will snap some pictures and send them to you for a commitment to list with them if you sell.
Most liens do not result in you owning the property. But you will get your interest from paying off the property tax. On some occasions you will get the deed.
I think the key is volume buying. There are websites and seminars for how to do this. I suggest you attend one of them.
Best wishes.
I know that you can pay the taxes on delinquent properties, But as long as the taxes are kept up then there is no reason for the taxer to foreclose. If the owner decides to sell, he can't transfer title without paying you. I don't know if I would want to be in that position.
To gain title to a delinquent property by paying the back taxes is do-able. But IMO you're better off waiting and buying the foreclosed property at auction.
FYI
I'm unclear about the interest. How do I earn interest by paying off the tax?
The lien on the house assures that when the owners or the next buyers pay the tax bill, the county will give you the money. The county interest is to get the tax money. When you bought the lien, they got their money. When the owners pay off the lien and the interest, the county gives you the money.
It's my understanding that most of these result in the interest being paid by the owner, rather than the lien holder getting the property.
When you don't pay your property tax there is interest charged. Sometimes for up to five years before the county auctions the property or awards it to the lien holder.
The county settles for the tax debt and gives you the interest. However, you may have to pay more than 1 year's tax bill to maintain your position to receive the property at the end of the process.
Remember some counties auction the property and don't award it to the lien holder, just their money.
Best wishes!
I'm sorry, I guess I'm still confused.
Say a property has a $1000 tax bill, and the owner doesn't pay, and the municipality puts a lien on the property.
If I understand correctly, I can buy the lien. Is that the same as paying off the back taxes? Are the amounts the same? Or is my price for the lien only a percentage of the tax bill?
Have to go!
The problem is one you own the lien, you then call it in then sell the property to have the buyer pay off the lien, then you have to get the people in the house, out of the house and since it is generally someone in financial trouble it is not easy and they generally destroy the place when you finally do get them out.
Also, if you are out of state and dealing with another place this increases your costs.
I have been to a couple of these seminars over the years. There are easier - less frustrating ways to make money.
Law concerning this varies greatly from state to state. If you know what you are doing, can make some money at it. If you don't you can get screwed over big time.
He didn't go into much detail but he told one of the callers at one point that it was very risky and that she shouldn't invest any money in it that she wouldn't be willing to take to Las Vegas with her.
Given that this guy practices law in Massachusetts it seems possible that his advice only applies under Massachusetts law.I suppose that it's possible for this to be a bad idea in Mass but,possibly,a good idea in other states....depending on *their* laws.
I did it here in Utah about 11 years ago just to see if it really worked. At the time, the auction was run on "feet off the X side of the property", where X was N, S, E or W, and you had to pay the entire amount owing, then you got title to the piece of the property that was left over after the bidding.
I ended up paying $150 for a tiny quarter-acre strip on the back side of some farmer's field. I tried to sell it to the old guy for what I paid for it, but he thought it was humorous and said no thanks. I abandoned the idea, and never paid the taxes, and it was sold again in 2001 without my knowledge. I found out about it when my name popped up on the list of unclaimed money that the state publishes every year - turns out some moron had paid $1000 or so for it, leaving me $450 in cash for my trouble after the back taxes were paid :)
The answers to your questions regarding the process, as well as whether you can get the property deeded to you free and clear, depend on the state. Essentially there are two types of property tax regimes, tax lien states and tax deed states. The laws regulating the returns, bidding, and lien redemption process differ from state to state.
In tax deed states it is indeed possible (though very rare) to pick up a property by paying back taxes, waiting for the claim period to pass, and having legal counsel go through the legal motions necessary to get the deed and clear the title. But this is a very rare event. Typically by just buying the lien and having the property owner redeem the lien, you can expect an 8-25% return on your investment depending on the state tax laws.
The risk inherent in tax lien investing, like any other investing, is in not doing sufficient research. You should never buy tax liens on property that is unmarketable or which no one wants. Examples of this include brownfield property, or unusable property (such as a median strip or ditch that a municipality may own - they would love for you to get the deed to the unusable property and squeeze you for the taxes indefinitely).
Let me recommend a good book that helped me get started:
http://www.amazon.com/Profit-Investing-Real-Estate-Liens/dp/0793195179/sr=8-1/qid=1165248035/ref=pd_bbs_sr_1/002-3810643-7809660?ie=UTF8&s=books
No BS, and much cheaper than a seminar - and Loftis' advice is better/safer than what most seminars advise.
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