A lot of people have started investing on tax liens as a way to get additional income. If you invested on a great deal, you can end up getting more than what you expect. However, making money with tax liens is a tricky business and you have to know much about it before you start investing in it. If you want to know how to make money with tax liens, here are the things you need to do.
- Know the difference between tax liens and tax deeds. Identify if you want the extra income tax liens can give you or you just want to get additional property that you can sell in the future. With tax liens, you agree to pay the property tax that the owner owes the government. The owner pays back the amount that you paid with a huge interest. If the owner defaults and the property is seized and afterwards sold, the new owner pays for the tax liens on the property so you still get your interest. Since the tax lien amount is related to the value of the property at the time, you can get a huge interest on your money as its real estate value goes upwards.
If, however, you plan to generate a list of available real estate properties for yourself that you can sell or auction off, you may want to invest in tax deeds instead.
- Research on the properties. When you get the list of tax liens for auction, you can end up with hundreds and thousands of properties. Don’t be discouraged when looking at unknown terms and descriptions. Use the Internet to find out what these terms mean and which of them offer the most amount in interest. You normally get the property’s ID, description, the address of the property and the owner’s name, size of the property and if there are additional structures on it, and the value of the land after assessment.
Pinpoint the properties you can buy based on your needs and your budget. Scratch off properties that you can’t afford for now. However, if you have money to spare, you can either buy an expensive tax lien or divide your investment money on a number of smaller, less expensive properties.