Tax Liens Can Be Profitable, But You Need To Know This

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tax liens

Will someone with experience in tax liens (tax lien certificates) investing please
rate the risk, difficulty, and time involved in this endeavor?
— Mark

“I recommend investing in tax liens if you have at least $10K – $15K to get started.

You could start with less but I don’t think it would be worth the time or effort.

“Depending upon what state you are investing in, when you buy tax liens you are basically being
paid a premium interest rate to pay someone else’s delinquent property taxes.

“This is not a very difficult endeavor, but you need to know a little
bit about the procedures pertinent to the particular county that you are investing in.
Usually you can get that info easily enough by accessing the county treasurer’s

“Plan to devote about two days’ time for each tax liens auction you plan
to attend.

“The way to make money from tax liens are twofold, in a direct way.
(There are many other ways in secondary ways, e.g. selling services in this potentially
lucrative investment.)

“One is that you should be able to get a much higher interest rate return on
your investment if you did your due diligence on the property first before buying the tax lien on

“The other is that if they do not redeem by the end of the redemption period, typically you get to
own the house the lien is on. For example, I have bought houses worth $60,000 for about $2,000
in tax liens. I just listed a house for $40,000 in Savannah, Georgia that I paid $11,000 in a
tax sale there last June. That should easily give me a 200%+ profit for my investment. That is how
you can make good money if you do your homework.

“Indeed, it’s unlikely you will get a mansion or a house in a very nice
or posh neighborhood since most of those owners either can afford to pay taxes,
or know how to get out of situations like that long before it gets to that point, though it
does still happen. You just never know!

“As for Federal tax liens, they do NOT always negate your tax liens.
There are very interesting laws about that in different situations. I heard from one
real estate lawyer who specializes in tax sales that it has to do with the fact that when the
country was set up, the counties were the ones vested with the local properties, not the federal
government, or something to that degree, so the tax liens, which are on the property (land), are
superior to IRS liens, which are on the owners of the properties, and not the properties themselves.
However, they do have the right just like the owners, to redeem you by paying the penalties or
interest to cancel your lien. But then you would still earn the high interest rates or penalties in
the situations.

“Actually, that happened with one of my properties in Georgia, and the
IRS was asked if they wanted to redeem, or even collect the overbid, and the tax
collector said that after notification by them, the IRS has 120 days to do either, and that
typically they do not. And in fact, they did not in my case (the only time this had happened to me)
and I went on to own the property. The IRS liens went on with the original homeowners because, as
I understand, they are on the people and not on the property.”


Traits Of Successful Home Office Note Pros

Which ones do you need to work on?
Good planner
Strong communicator
Able to manage workload effectively
Aware of personal work style preferences
Able to work among family members
Not just looking for an escape from the office
Committed and responsible
Able to ask for feedback
A “doer” — not a procrastinator
Able to work independently without supervision
Comfortable eating lunch alone
Able to leave the work behind when it is time to end the day
Able to negotiate work time and prevent interruptions from family and friends
Realistic about what can and can't be done
Able to adapt readily to new situations
Able to manage time well
Proven producer of quality work
Able to focus on priorities and meet deadlines
Able to work without continual input and support from others.

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How Would You Broker This Note?

Someone owns a house free and clear — no mortgage.

They sell their house for $200,000, receive a $40,000 down payment from the buyer and take back the $160,000 balance as a note, an IOU, from the buyer, where he promises to pay the $160,000 plus interest in installments.

The note is secured by the house, so if the buyer defaults the seller can foreclose and get it back. In other words, the seller is the bank.

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Colorado Discourages Seller Financing

The Colorado Real Estate Commission says Dodd Frank is too complex and creates liability for both the Realtor and seller. They have basically told Realtors not to get involved in any seller financed transaction. They say refer buyers and sellers to a LO or a lawyer instead. You can’t find a LO who wants to get involved with a seller financed transaction. Not all buyers and sellers can afford a $250 an hour attorney. Now property owners and buyers who want to use an installment sale are being denied access to a Realtor”

“Real estate brokers are prohibited by Colorado law from taking a residential
mortgage loan application or offering or negotiating the terms of a residential
mortgage loan, including a seller-financed loan. A real estate broker should not
even assist a seller or buyer in any way with the application process or related
documentation or engage in any loan term discussions if the seller-financed loan
involves residential property. This caution would include not giving a seller advice,
including as to whether or not the seller might be “exempt.”

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