In many states you can profit from the purchase of a tax lien certificate – up to 36% ROI annually! That number should make you sit up and take notice. But what exactly is a tax lien certificate? Let’s say a property owner didn’t pay his property taxes. County bureaucrats tend to notice things like that so they slap a tax lien on the property. That means the owner cannot benefit from the sale of the property until his tax bill gets paid with interest. Remember that phrase – with interest. The holder of the tax lien certificate is the one who will be receiving the interest as ROI on his investment when the property owner decides to pay his tax bill.
Even though holders of tax liens are in line to be paid even ahead of the mortgage lender, it is a good idea to thoroughly research the property before buying a tax lien certificate. Make sure it’s a worthy piece of land that the owner would actually hate to lose and also insure there is a good record of tax payment. If they have paid regularly for years, there’s a good chance they’ll pay this time too and you will be the happy recipient of a nice investment decision.
Tax liens are sold at auction to the bidder willing to take the lowest percentage return on the money he invests. It’s basically a fund raiser for the county. They get operating income in lieu of the delinquent taxes. When the taxes are paid, they get the actual money and you, the investor, get a nice little return on your principal.
If you’ve never heard of it before, tax lien investing might be worth your time to research. There are investors making money doing this every day.