subject: How Buying A Tax Lien Works - And A Better Way To Cash In On Tax Foreclosures [print this page] So you're wondering how buying a tax lien works. You probably are hoping to find a safe way to make a really great interest rate on your money, without actually buying a property. Buying tax liens can be a great investment, as long as you're privy to the pitfalls and risks that come along with the investment. If what you really want is real estate size paychecks without owning property, then good news: you don't have to start buying tax liens to make money without property.
First, how buying a tax lien works. Depending on where you are, tax liens will be sold on a first-come, first-served basis; by round robin; or, in many places, to the highest bidder at auction. Once you've bought the tax lien, you will then wait out the redemption period, hoping the delinquent owner will pay you off, and then you'll make your interest. If they don't, you will then have to go through a legal process to become the deed owner. This part differs state-by-state, and can be pretty complicated.
Since you don't want to take that last risk, the best bet is to bid on very nice properties, whose owners will likely bail out of the tax problem. Unfortunately, everyone else wants those too. You may have to bid a lot of money to get that tax lien, and if the owner doesn't end up paying off, you just bought yourself an expensive property for retail price.
If what you really want is to make some big money from real estate without owning property, consider investigating the overages created from these same tax sales. When more is bid for a property than is owed in back taxes, the overage is usually held for the former owner to collect. But the owners are usually gone by the point that they are notified of the funds - so they never collect them.
These are huge amounts - $10,000, $20,000, even $50,000. Because they aren't subject to state money finder laws, you can legally collect 30-50% as a finder's fee for these funds, and owners are happy to pay. If no one connects them with their funds, they are usually lost permanently to the government shortly after they become available to collect.
This means, without owning property, you can build a five-figure per month business, helping owners reconnect with their lost money. The current economy assures you'll have no shortage of foreclosures to work for quire some time.
