subject: What To Expect From Purchasing Tax Liens [print this page] For new investors and for those who are just starting, purchasing tax liens is also one of the great options in real estate. You should know that other investors see this as an simple way to get a huge return from the fraction of the total price of the property. So if you are new at this, you may see this as a chance for you to start your own investment.
But what is a tax lien?
Every property owner has to pay the taxes and they fail to pay it on time, the government has the right to take control of your property. They will then have the option to sell the property, or they can put up an auction for tax lien certificates and whoever wins the bid will have to pay up the taxes owed to the government.
This means that you, the certificate holder are not the owner of the property yet. It is like you are just going to loan the homeowner until they can pay back at a certain time. This is how you will profit from purchasing tax liens. The owner will have to pay you the amount you paid for their taxes and the "interest" given to the owner as a penalty charge.
At the time of purchasing tax liens, the schedule and mode of payment will be be established. If the owner can pay within the allotted time, they can have their property back. This is where it might turn out to be frustrating for some people who are hoping to get the property.
If and only if the owners cannot pay back the loan, then ownership is given to the person who purchased the tax lien.
The apparent drawback when it comes to this type of investment is that if you want to target or own the property, you will have to wait for the right time like if the owner cannot pay you back. Therefore, that is the only time that you can own the property. If you prefer to get a property immediately in exchange for your investment, this is not a strategy for you. But if you do not mind the odds of the owner being able to pay off their loan, and you are satisfied with the interest, then you are on the right spot.
Assuming you get the property, the outright benefit is that you only paid a fraction of the actual price. Although, many owners will be able to pay their taxes, there are still some who cannot. So the evident profit if you invest in purchasing tax liens is gaining the property at a lower price.
The decision then is up to the investor, whether he is willing to take this kind of risk or not. No matter what the outcome is, the investor still wins in purchasing tax liens because he either gets interest by loaning his money, or he gets the property at a lower price.
