What Is a Tax Lien?

The simple answer to what tax liens are is:  it’s an obligation a delinquent tax payer has to the local government (typically a county or other local municipality) to pay past due taxes on property.  These tax liens are offered for sale to investors, typically at a government tax lien certificate auction, by law the local government must collect the money needed to provide local government services from each property owner.  For the investor this system provides a safe, secure and predictable investment in government issued tax lien certificates with maximum annual interest rates, set by the state government, which can be 18% or more annually.

When investing in tax lien certificates you are making an investment secured by the real estate on which the taxes are due.  If the delinquent taxes are not paid you can get possession of the property for only the past due taxes and fees… basically for pennies on the dollar!  That means that if you bought a tax lien certificate and the property taxes are not paid, you could end up owning the property for just the back taxes and fees owed the local government.

So, what is a tax lien?  It is considered by many as the safest investment you can make.  Here are some unique features about tax lien investing that benefit the investor in tax lien certificates:

1. Tax liens are sold in about half of all the states in the USA; the other half sell tax deeds.

2. The laws and regulations regarding the sale of tax lien certificates are defined by state law and the sales process is administered by local government.

3. State laws set the maximum interest rate a tax lien certificate may pay, which can be 18% annually or more, depending upon the state law.

4. There are no commissions payable to brokers when buying tax lien certificates or when they are paid off (redeemed) by the delinquent tax payer… no extra fees paid to a middleman, the investor gets back all the investment and all the interest.

5. About 95% of all tax lien certificates are paid off within three years of being issued.

6. Tax lien certificates are secured by real estate.  That means if that tax lien certificate is not paid off you can own the property for only the cost of the unpaid property taxes and fees after a foreclosure process.

When thinking about the question: “What is a tax lien?” investors in tax lien certificates take two approaches:

1. Obtain a high interest rate passive investment, where the tax lien investor gets all the original investment returned plus a high rate of interest when the tax lien is paid off, or

2. A strategy of investing in tax liens with a likelihood of not being paid off, resulting in the tax lien certificate buyer owning the property for pennies on the dollar value of the property.

Traditionally most tax lien certificates and tax deeds sales were held at a public auction.  Today many of these government auctions of tax lien certificates and tax deeds are done on-line.  Investors can buy tax lien certificates from almost anywhere in the world using the internet.

After over 20 years of instructing others on the secrets to successfully  investing in government auctioned tax lien certificates and tax deeds, Ted Thomas has presented at hundreds of wealth building seminars, held over a hundred workshops and amassed thousands of hours of recorded material that he has edited into a comprehensive learning system.  This system includes presentations from Ted Thomas and many other experts with first-hand personal experience investing in tax liens and tax deeds.  In this video Ted helps answer the question: “What is a tax lien?”

 

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