There is not a lot of information out there about how to make money with tax foreclosures, tax deed sales and tax lien certificates for good reason. Those who do make good money in this field would rather not share their secrets with the rest of us. Instead we have to study, research and search until we can find the tax foreclosure investment methods on our own. But buying foreclosures is not a simple thing to do. You need to be able to take risks to be an investor and entrepreneur. Not everybody is capable to that. You also need a little bit of money to invest in tax foreclosure properties or tax certificates. But a lot of people that are looking to make money in real estate miss this concept and fail miserably. For those that have the entrepreneurial spirit and money to invest buying tax foreclosure properties is a decision that will change their financial career forever.

There are many ways to skin a cat as they say. So too are there many ways to gain wealth through tax foreclosures. There are always tax lien certificates that are a safer investment. But those who are looking to make the most on foreclosures do so either for themselves or to flip the properties at a much higher return than you can get with tax lien certificates.

At tax deed sales, properties can be bought for as little as pennies on the dollar and real estate investor than flip these homes for their values and can make up to 300% Return on investment.

Want to make money on tax foreclosure properties?

Buyer Beware!

As with purchasing any real estate property or investment it is always best to research the tax foreclosure properties that want to buy. Many times the property is just land for sale and doesn’t have a property even on it. That doesn’t mean that you cant make money on land. It only means that not everything that glitters is gold so you must do your research first. Also properties that are under foreclosure usually run the risk of not being up kept. Their can be serious mainetnace issues with the properties, so even if you buy them for pennies on the dollar in  many cases you will have to invest money to bring the property up to code or livable conditions. There are still many deals out there on tax foreclosure properties that can be bought at tax deed auctions where you don’t have to put any money into them, but in order to be sure about what you are getting involved in you must research the property first. Sometimes their will be an inspection period either before or during the tax deed sale. This is a great time to either have someone who knows about property  maintenance and construction come with you to the inspection or if you know these thing yourself than this is the best time to see what is involved with the property that your are interested in buying.

Another way that people invest in tax foreclosure properties  is through tax lien certificates. A tax lien sale is a sold by the taxing agency to the highest bidder similar to a tax deed. The major difference is instead of buying rights to the deed and property, you are buying the debt from the tax authority. This is usually a less risky investment but is a little bit more complicate in nature. If you buy the tax lien certificate than the property owner who is delinquent in taxes now owes you the tax money plus interest. Therefore tax lien investing can be profitable even without owning the property since the back taxes get paid with interest usually between 12-25% depending on which state. So if the tax that is owed is $1000, and you buy the tax lien certificate than you can make $250 in profit, as an example. The security behind these investments are if the delinquent tax payer does not pay you the back taxes, than you can move to foreclose on the property and keep it for yourself or sell it to the highest bidder at tax deed sale or auction.

Tax foreclosures are foreclosures on a property where the property owner has failed to pay local, state or federal taxes for personal property such as real estate taxes or federal income tax. Tax foreclosure proceeding vary from state to state and county to county but are similar to bank foreclosures in many ways.  Federal Government tax foreclosures are tax foreclosure properties where the property owner failed to pay income tax on the property and the federal government imposed a tax lien against the property. Real Estate owners are required to pay property taxes to their local taxing authority. In the event that the property owner fails to pay their property taxes than the local authority can move to redeem the delinquent taxes; by way of a tax foreclosure sale is one of those ways.

Tax foreclosures are in general a more strict foreclosing mechanism than bank foreclosures.  Each state varies on their tax foreclosure law so it is best to consult with an experiences tax foreclosure professional in the specific geographical area that you may be interested in pursuing tax foreclosures.  Tax liens are superior to mortgage liens and the mortgage holders value in the property could be lost if the property is foreclosed on due to back taxes. This is an advantage that tax foreclosures have over bank foreclosures. Where in bank foreclosures if you inherit the property at a foreclosure sale than you will likely inherit the back taxes as well, whatever they may be. On the other hand those that inherit a tax foreclosure property will generally be free and clear of any mortgage liens or debts since the tax lien supersedes them.

Difference Between Tax Liens and Tax Deeds

Each state has different laws regarding tax lien sales, tax deed sales and tax foreclosure laws. In general tax liens are liens that are put on a property by the local taxing authority. The property owner than pays their property tax, usually either monthly or quarterly to the taxing agency or to their mortgage company (with their mortgage) who than pays the tax authority. In the event that property owner fails to pay their property taxes than a notice is sent to both the mortgage lender and to the mortgage borrower. The mortgage company will usually pay the back taxes since they do not want to lose their interest in the property and than demand the money back from the property owner. In the event that these taxes are not paid, and the taxing authority has made repeated attempts in order to recoup the back taxes, than one of two methods usually occur:  The property end up foreclosed on and sold which is called a tax deed sale, or the governing tax agency that is owed the back taxes to sells the tax lien in what is called a tax lien certificate.