Buying Tax Liens: The Facts

Friday, October 16th, 2009 at 17:04

Thanks for coming back to visit.

Recently someone asked me some questions that I think are on the mind of everyone who is thinking about buying tax liens. People want to know how much money they need to get started in tax lien investing and if this is something that they can use as their main source of income. In this article I will give my experience of what it takes to get started as opposed to how much money you need to invest in order to turn buying tax liens into your main income source.

First let me make it clear that tax lien investing is only one of my income sources. I use it as a way to invest for the future and not for current income. All of the investors that I know personally who buy tax liens do not make a living at tax lien investing. I do know individuals who are independently wealthy and all of their income comes from passive sources – part of that is from tax lien investing. Most of these individuals made a lot of money in other businesses or in real estate and invested their profits in tax liens where it could grow faster.

But you don”t need to be wealthy to get started. You can get started with only a few hundred dollars; however you are not going to get rich that way. In order to be able to quit your 9-5 JOB you would have to have hundreds of thousands of dollars invested. Think about it, even if you are averaging 18% on your investment – how much would you need to have invested each year to make enough to live on?

Assuming that one third of your tax lien portfolio will redeem each year, and you had $250,000 invested, you would receive $88,500 the first year. But in order to keep making that money, you would have to reinvest $75,000 and your actual profit would be only $13,500 per year. If you actually wanted to live off your profits from buying tax liens you would have to have $900,000 invested to make only $48,600 per year and reinvest the $270,000 in principal that gets redeemed each year. In order to keep that much invested, tax lien investing would have to be your full time job.

Tax lien investing is big business and you can see why millionaires, bank, and fund companies get involved, but what about the average person? I have a small portfolio of about $50,000 and it took a few years to build up to that. About 30% of that gets redeemed each year, and that’s $16,000 and I make about 18% on that or $2700 a year. I need to re-invest the $16,000 principal each year, which I can do by going to a handful of tax sales. I’m not making a killing, but where else can I put my money away safely and make that much? If I continue to re-invest my profits as well, I can grow my investment so that by the time I’m ready to retire I will have at least $250,000 invested and will be able to take out $13,500 in profit each year. It’s not enough to live on, but I’ll take an extra $13,500 each year along with the other streams of income I’m working on! Of course I’ll still have to be actively involved in tax lien investing if I want that money to keep coming.

So here’s my suggestion to those of you who are looking to have tax lien investing replace your job. Keep your job especially if you have benefits and a 401(k). Contribute all you can to your 401(k), especially if you have a company match to a portion of it. Start building your tax lien portfolio now, while your working at your job so that you can retire early take all of the money in your 401k and roll it over into a self-directed IRA where you can use it for investing in real estate and tax liens. That’s my plan.

Joanne Musa is known online as the Tax Lien Lady. Her web site is, http://www.TaxLienLady.com. You can get her free tax lien investing kit at www/taxLienInvestingKit.com.

Author’s Email Address: joannemusa@verizon.net
Article Source: http://www.articlemarketer.com

Why A Self Directed IRA May Be Good For You (slideshare.net)

P.S. Here is the Best Course for Investing In Tax Lien Certificates And Tax Deeds. Audios, Manual, and Resources. Click Here!

Tags: Buy Tax Liens, Tax Lien, tax lien certificates, Tax Lien Investing, Tax Lien Lady

Beware Tax Liens For Sale on Ebay

Friday, October 16th, 2009 at 17:02

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Not too long ago I received a question from one of the subscribers to my Tax Lien Tips newsletter. He was confused because he saw a tax lien for sale on e-bay that sold for over $4,000. The face value of the lien was only 228.28 with 5% interest on the lien amount. This was a Florida tax lien, so instead of having the opportunity to foreclose on the property, you would apply for the tax lien to go to a deed sale if the lien was not redeemed during the 2 year redemption period.

The e-bay listing said “Residential Home Near Ocean, Tax Lien Certificate.” It included one aerial photo of the property and a few pictures of the Fort Lauderdale, Florida beaches. The item specifics said “Residential Real Estate,” and made it look as though it was the real estate that was for sale by owner, until you read the description. The description clearly said this is a tax lien certificate. It had even stated that the seller of said certificate had never even looked at the property and recommends that you look at the property before bidding on the certificate.

I don’t think that the bidders clearly understood what it is they were bidding on. Perhaps, even though the listing said otherwise, and so did the description, they thought they were actually bidding on the property. Or perhaps they thought they would have the opportunity to foreclose on the property if they owned the certificate.

They may have misread the description of the item for sale where it said “The Winner may have the opportunity to move for a tax deed sale on said property, in less than two years, by contacting the county office and following all procedures.” I’ve highlighted those little words that the bidders apparently missed when they read the description of this item.

The description says that the winner may have the opportunity to move for a tax deed sale, not the tax deed. But I believe that whoever won this tax lien certificate, to the tune of $4,625.00 plus a 195.00 transfer fee, thought that they could move for a tax deed, which is not the way it works in Florida. But even if they could, the chances of this tax lien certificate not getting redeemed during the redemption period are quite slim. All the property owner would need to do in order to redeem this lien would be to pay the face amount plus the 5% interest and any outstanding taxes, which the seller lists as being only $203.27.

The seller of the certificate understood that this lien could be redeemed at any time and made provision for that in his terms of sale. The seller states “If the Tax Certificate is redeemed by the delinquent property owner prior to transfer to Winning bidder, then seller will substitute a Tax Certificate of equal or greater value to Winner. Otherwise, we will refund all fees including your final bid amount.” So, even if you knew what you were bidding on, and you did your due diligence on the property, you could be substituted with a lien on a different property and there is nothing that you would be able to do about it. My advice is don’t buy tax lien certificates on E-bay unless you really know what you’re doing!

You can find out more about buying tax liens online in my Guide to Buying Tax Liens Online. It’s a free bonus for you when you try the members area of TaxLienLady. To find out more go to http://www.TaxLienLady.com/Membership.htm.

Author’s Email Address: joannemusa@verizon.net
Article Source: http://www.articlemarketer.com

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P.S. Here is the Best Course for Investing In Tax Lien Certificates And Tax Deeds. Audios, Manual, and Resources. Click Here!

Tags: tax deed sales, Tax Lien Investing, tax lien investing expert, tax sales

Tax Lien Lady’s Due Diligence Checklist for Tax Deeds

Friday, October 16th, 2009 at 16:58

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Purchasing tax deeds calls for some extra due diligence since you actually purchasing the property and not just paying the taxes and putting a lien on the property as you are when you invest in a tax lien. Here is a checklist that you can follow when you are getting ready to purchase tax deeds. Please be advised that this is for educational purposes only and should not take the place of any legal advice.

You will probably want to start your due diligence for tax deed properties at least 2 weeks before the tax sale. For online tax sales that require you to have money deposited a few days ahead of time, you may want to even start working on these items sooner.

1. Investigate the state statutes of the county/state that you are planning to invest in to see exactly what liens or encumbrances will survive the tax sale and what the procedures are for participating in the tax sale.

2. Get the list of properties that are in the sale. You will also want to get updates of the properties that are paid and no longer in the sale every 2 or 3 days leading up to the tax sale. Properties will come off the list daily and you do not want to do due diligence on properties that are no longer in the sale. You’ll want this list in Excel format if possible.

3. See if the state has an environmental web site where known sites with environmental problems are listed and make sure that none of the properties that you plan to bid on are on this list. If they are eliminate them from your bid list.

4. Find out from the county if you are still responsible for any other charges when you purchase a property at tax sale. For instance, what about current taxes or other taxing districts (municipalities, etc.) that might have a lien on the property. If there are other municipal charges that you may be responsible for, call the taxing authorities for each of the properties that you plan to bid on and find out what is owed. You will have to pay this after you purchase the property at the tax sale.

5. Do your own title search by searching on the name or names of the owner(s) of the property. Stay away from any properties that have owners that have filed for bankruptcy or that have IRS liens.

6. Check the tax assessment data, and get the address of the property

7. Look at the property, or get a picture of it if you can. At the very least look at the tax map (plat map) and look at an aerial photo from Google Maps or Zillow or a similar service.

8. Determine the ARV (after repaired value) value of the property. The best way to do this is if you have access to the MLS or know a realtor that does and can get the comps for you. If you can’t do that you can use Zillow or Domania, but that is not 100% accurate. Zillow, Domania and other services like them will lag behind the market. So if your market is going up those numbers will be low and if your market is going down, or is stale they will be too high.

9. Based on the assessment value and market value of the properties in the tax sale, choose the properties that you are going to bid on and determine just how high you are willing to go for each property. Indicate that on list of properties that you will take with you to the sale (or have with you at your computer if you are bidding online).

10. Don’t forget to subtract the extra costs of the tax sale from what you are planning to bid. There are extra costs such as an auctioneer’s fee, recording fees, and realty transfer fees. Make sure that you ad those in to what you expect to pay.

11. If you’re bidding online be sure to have the required funds transferred into your tax sale account in order to be able to bid. If you’re going to a physical sale make sure that you have the funds that you need in the required form of payment. Most county tax collectors/treasurers will not accept cash, personal checks, or credit.

Now you’re ready to bid!

You can find out more about buying tax liens online in my Guide to Buying Tax Liens Online. It’s a free bonus for you when you try the members area of TaxLienLady.com. To find out more go to http://www.TaxLienLady.com/Membership.htm.

Author’s Email Address: joannemusa@verizon.net
Article Source: http://www.articlemarketer.com