The stock market is still trying to decide if it is going to recover or head back into a bear market. The value of real estate is trying to recover but where is going to recover first and what is the best place to purchase now? Unemployment is hovering around 10% in many areas of the country and foreclosures are still running wild.
You may think the best option that you have is sticking your money in a savings account or in a CD just so that you do not lose any more. Let me suggest another option – tax liens. What are tax liens?
Everyone who owns land with or without a building on it is paying property taxes. When times turn bad, when people are having financial trouble or in some cases just because people have forgotten, those taxes do not get paid. Meanwhile towns, villages, cities, counties and other municipalities still need those funds to be able to operate. So – those municipalities create tax liens on those properties.
Owners of properties are notified that they must pay their overdue taxes within a period of time. If those taxes are not paid, the municipalities will hold auctions and anyone can purchase the tax lien to that property. By purchasing the tax lien, you pay the property taxes and the municipality now has the funds it needs to operate.
The municipality allows the property owner to come in at any time and pay the overdue taxes, plus penalties and/or interest. If the property owner comes in and pays what he owes, you as the tax lien holder will be reimbursed for the taxes you paid plus receive the penalties and/or interest.
If the property owner does not pay the taxes after a period of time you actually get ownership to the property. A key factor here – you get the property unencumbered by any mortgages or other liens against it, with the exception of IRS or state income tax liens. It is possible for you to pay out $3000 to $10000 in property taxes and end up with a property worth $100,000 or $200,000 or more.
Do you always end up with the property? No – more often than not, you do not end up with the property. What you need to realize though is that in some states the penalties and interest rates can be as high as 24%, 30% or in the case of Illinois 36% per year. So even if you do not get the property you can be earning a significant rate of return on your invested dollars.
Investing in tax liens is not the easiest investment – it is not like buying a mutual fund and checking its value occasionally. Each municipality has different rules and regulations regarding when auctions are held, what interest rates are being charged and the criteria under which property ownership changes hand.
If tax liens sound intriguing to you, you need to do your homework. There are companies out there for a fee who will do the all the work for you, take a cut and send you the rest. There are books, seminars, tapes and programs out there that will teach you how to do tax lien investing. I only present this as an option. You need to decide if it is something that is appropriate for you.
The stock market is still trying to decide if it is going to recover or head back into a bear market. The value of real estate is trying to recover but where is going to recover first and what is the best place to purchase now? Unemployment is hovering around 10% in many areas of the country and foreclosures are still running wild.
You may think the best option that you have is sticking your money in a savings account or in a CD just so that you do not lose any more. Let me suggest another option – tax liens.
What are tax liens?
Everyone who owns land with or without a building on it is paying property taxes. When times turn bad, when people are having financial trouble or in some cases just because people have forgotten, those taxes do not get paid. Meanwhile towns, villages, cities, counties and other municipalities still need those funds to be able to operate. So – those municipalities create tax liens on those properties.
Owners of properties are notified that they must pay their overdue taxes within a period of time. If those taxes are not paid, the municipalities will hold auctions and anyone can purchase the tax lien to that property. By purchasing the tax lien, you pay the property taxes and the municipality now has the funds it needs to operate.
The municipality allows the property owner to come in at any time and pay the overdue taxes, plus penalties and/or interest. If the property owner comes in and pays what he owes, you as the tax lien holder will be reimbursed for the taxes you paid plus receive the penalties and/or interest.
If the property owner does not pay the taxes after a period of time you actually get ownership to the property. A key factor here – you get the property unencumbered by any mortgages or other liens against it, with the exception of IRS or state income tax liens. It is possible for you to pay out $3000 to $10000 in property taxes and end up with a property worth $100,000 or $200,000 or more.
Do you always end up with the property? No – more often than not, you do not end up with the property. What you need to realize though is that in some states the penalties and interest rates can be as high as 24%, 30% or in the case of Illinois 36% per year. So even if you do not get the property you can be earning a significant rate of return on your invested dollars.
Investing in tax liens is not the easiest investment – it is not like buying a mutual fund and checking its value occasionally. Each municipality has different rules and regulations regarding when auctions are held, what interest rates are being charged and the criteria under which property ownership changes hand.
If tax liens sound intriguing to you, you need to do your homework. There are companies out there for a fee who will do the all the work for you, take a cut and send you the rest. There are books, seminars, tapes and programs out there that will teach you how to do tax lien investing. I only present this as an option. You need to decide if it is something that is appropriate for you.
