Tax Lien Investing Another Great Niche

All we keep hearing about these days is gloom and doom due to the record number of foreclosures in this country. Ever wonder if anyone is making money during these trying times? The answer is a resounding YES! I know guys who predicted these days were coming and made hundreds of millions “shorting” the market with the hedge funds they run. If you know anything about the dice game called craps, then you are familiar with the “don’t pass” line on the table. It’s an unpopular bet at the gaming tables because you win when everyone else loses. You must be visibly pulling for the table’s good fortune while you are secretly dancing a jig when the shooter “craps out”. 

So, apply this to real estate investing. The trend now is foreclosures and depressed housing prices because of it and the banks closing their wallets on less than perfect borrowers. The table is now set for betting the “don’t pass line” in real estate. One way to do this is to invest in Tax Lien and Tax Deed sales. I don’t have enough time or space to give all the details in my allotted word-count here but want to give brief summary of how it works.  The rules can vary by state so as always; do your research so you understand the game.

In a nutshell, a tax lien sale is the sale, conducted by a government agency, of tax liens for delinquent taxes on real estate. A tax deed sale is the forced sale, conducted by a government agency, of real estate for nonpayment of taxes. Both types of sales are held as an auction and can be in person or increasingly, over the internet. The tax lien sale allows for the homeowner to stay in the home and you are earning interest during the time it takes he/she to pay off the lien. The lien sale typically has a minimum guaranty of return (usually 5%) and can be realized in some cases immediately if the lien gets paid off right away. The deed sale forces the homeowner to sell and you are paid off plus interest at the time of sale. Because a tax lien supersedes even a mortgage on title, it’s a pretty safe bet as well. It is a competitive game, but so is real estate in general. At least you are on the “don’t pass” line with an upward trend of chances to win.

It was not my intent to address all of the possible attributes of each, so I invite responses of readers who have participated in a tax lien or tax deed sale along with others who have comments to add.

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