by Jai Li

Created on: January 12, 2009   Last Updated: January 28, 2009

For the investor who desires to make some serious funds, tax lien can be a very honoring experience. Such things as the little known and misunderstood investment, known as the tax lien certificate, can bring in high returns, that are usually associated with riskier investments with security offered by low income instruments such as bonds.

Within the tax lien, a property owner is responsible for payment even if a prior owner has incurred the obligation owner. A notice is issued to the property owner and mortgage holder when a property tax is delinquent. Even if the owner is not deployed with an escrow account, the mortgage company may acquire the notice and still may pay the delinquent tax.

The mortgage company will then demand compensation from the householder and create an escrow account to recover the proceeds. The mortgage company might lose some of its mortgage lien value and this is why this method is done. Tax sales are offered up by the local government to the public in auctions.

In most states, property taxes are demanded many months at the end of the year with divided payments of up to two or three instalments, becoming due, different times of the year. In a tax lien auction, for several states, there is a bid up process based on the competition of the lien.

The price paid for the lien bid may be higher, but the interest rate is fixed and will not soar. Another kind of tax lien auction for investors is the interest bidding down. During such an event the interest rate is placed down and the winning investor is the one who bids and accepts the underlying interest rate payable on the lien.

Investors receive the government lien for property taxes or the first lien position to title, ahead of mortgages, deeds of trust, and judgements. They are only subject to the state tax liens. Investors can make money by buying a debt to be claimed on. They are not collecting the property but rather, they are paying the home owners debt and anticipate that they are paid back in interest.

The local government allows investors to pay off these taxes so that they can acquire money to aid to basic functions. Law enforcement security, public school funds and medical services, are just a few of these functions. As the investor, you must seek out these tax liens and be aware that different states have different procedures.

The tax lien certificate, also provides a general amount of percentage return to investors, which can range anywhere from 15 to 36 percent per year. In the investors

• 1
• 2
• 3
• Next Page >>