Investing in property tax lien certificates is one way to earn money that you may be considering. However, before you do so, you need to understand what you are investing in.
Tax lien certificates can allow investors to enter the real estate market without investing a lot of cash up front. Instead, investors purchase property tax lien certificates from the owner for a fraction of its market value.
Experts recommend starting your investing journey with a tax lien certificate investing course to understand more about this investment’s opportunities and risks.
Evaluating risks in tax lien certificates is not something you will learn overnight, so do thorough research to decide if this type of investment is right for you. Here’s what you’ll need to know to get started.
Expect to Put Your Money in Secured Loans
One of the main things you need to know about property tax lien certificates is that they can be considered a type of secured loans, meaning that you have a personal claim on a piece of property in case the owner does not pay their taxes.
In short, you will put your money into a tax lien certificate that is collateralized by the property. If either party fails to fulfill their end of the deal, you could take title to the property. Though this situation is not the typical outcome, it is still possible.
If the property owner does not pay, you will have access to any residual income from selling the home. You can either reinvest this money into more property tax lien certificates to make even more profits.
Expect to Be Responsible for Paying Property Taxes
It is important to remember that when you buy a property tax lien certificate, you are investing in a potentially income-generating vehicle. While you can get your money back with interest and possibly make money off the deal, you will also be paying the property taxes when you invest in the lien certificate. You may also end up responsible for other costs associated with the property if you take title to the property.
Expect to Get Tax Lien Certificates From the County Treasurer
Investors buy tax lien certificates from the county in the states that sell tax lien certificates. The exception to this is New Jersey, where the certificates will in some cases be sold by townships, and Louisiana, where they may be sold by parishes. Another exception is Maryland, where you will buy from the county in most cases but from the city if you’re buying tax lien certificates in Baltimore.
Are you wondering where to begin your search for tax lien certificates? The best place to start is at your county treasurer’s office. But remember, finding opportunities is only the first step in your research. You will also want to learn other pertinent information from the treasurer’s office before you invest, such as sales dates and the terms of the sale.
The Bottom Line
When considering any tax lien certificate investment, it is important to choose wisely and carefully. While property tax lien certificates can be a smart financial choice for those who understand what makes a good investment, they should be used cautiously because they are secured loans.
You should consider consulting an attorney and other more experienced tax lien certificate investors before you invest your hard-earned money. And don’t forget, taking a course that is taught by seasoned professional tax lien certificate investors is always the best place to start.
