Finding new possibilities to gain from your investment in a weak economy? Purchasing a tax lien in a tax lien sale might be something you should contemplate. Uncertain of what precisely that is? Find out whether this is a suitable investment strategy in your specific financial condition with the clarification that follows.
Local municipalities enforce tax liens versus property owners who become delinquent on their property taxes in any given year. Because a lot of people who neglect to shell out for their property taxes are also in default on their property debts, property tax liens and foreclosures are frequently intrinsically related. What this means for the quick investor is there subsists an opportunity to benefit from tax lien sales in order to earn profit every year on the tax lien that has been purchased. Properties that have gone through foreclosure might be taken ownership of by a financier.
The method is different from state to state, so potential investors should research the relevant statutory law in their respective jurisdictions. Investors in most states can be assured a profit on their investment and the interest gained on their bought lien, if the homeowner manages to get caught up on mortgage and property tax payments, thus redeeming the property in question. Just like the time given to a homeowner to release the property in question, however, the profit percentage you can earn varies from state to state.
In the event that a homeowner is unable or unwilling to release the property, a practical financier may stand to earn even more. By filing a lawsuit, a financier may seek title to the property in question. This method can frequently be lengthy, difficult and expensive, but if concluded properly, the investor can take official ownership.
There are risks that come with purchasing a tax lien, though.
In addition, an investor needs to make sure the municipality where the tax lien was purchased followed correct statutory steps when it originally imposed the tax and lien on the property. Additionally, if the state in which the tax lien was purchased has a redemption time that is more than a year, an investor should continue to shell out for the requisite taxes each year in order to obtain another lien.
The purchase of tax liens via a tax lien sale therefore has the probability to be a wise investment prospect, if an investor takes steps to understand both the dangers and the overall tax lien sale procedure. In the end, the key to reaping the investment benefits offered by a tax lien is patience.
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