Why buy tax liens on other peoples homes? How does this make you money?

Question

Step by step process? Or just a common explanation would help

Answer 1

This is being pitched as a get rich quick scheme around the country. It wont work as advertised The basic premise is you pay somebodys deliquient taxes and have a lein against the property at a specified interest rate. It might be a while before you get paid etc. Not worth the hassle...

Answer 2

I'll try to explain it easier:

1. Tax liens are placed on a property if the owner doesn't pay his taxes on time. They are charged an interest rate every month until it is paid off.

2. Property taxes pay for schools, roads, etc. The county needs to get the money somehow even though the owner is not paying.

3. Counties will hold an annual tax lien sale and offer investors not only the original money they invested but all of the interest and penalties that the delinquent taxpayer

accumulates. In Florida, the interest rate is 18% annually, in Arizona it is 16%, etc.

4. Because of the high rate of return, banks, companies, and individuals participate in these tax lien sales every year like clockwork.

5. You can contact your local county officials for tax lien sales. Some are even done online. You can find out more about tax lien schedules on

http://www.investingwithoutlosing.com -- which is where most people go to in order to get information on upcoming auctions.

6. There are numerous strategies you can apply in tax lien sales since there's a variety of ways different counties hold them. Some use a bid down method, sealed envelope, etc. It is best to buy a simple guide book from Amazon or Barnes&Noble on this. My favorite book on the subject is: Complete Guide to Real Estate Tax Liens and Foreclosure
Deeds: Learn in 7 Days [ISBN 0978834682] by Don Sausa

7. Sample problems if you don't have a guide book: (a) You could buy a tax lien on a ditch and your money is wasted. (b) You may have an owner that has bankruptcy or IRS liens and

your money is wasted.

Answer 3

I think the buyer would get a break on his own tax.
If the owner cant pay then when the house is sold the buyer pays the back taxes the lien holder get his money back with interest.
It is not a huge get rich quick scheme just another method of making money.

Answer 4

I have never heard of this, but that doesn't mean a lot. I don't believe that a tax lien can be removed except by the taxing body, so I don't see how you could even "buy" a tax lien.

Answer 5

Some are guaranteed double-digit rates. As long as the equity exists in the home, eventually you'll get paid, as they can't sell or refinance without paying you off.