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Tax Lein certificates

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  • Tax Lein certificates

    Read this particular topic in a book and it seems our county has an online auction at the end of the month. Sounds legitimate... Property taxes that are not paid are auctioned out as a tax lien to the lowest interest rate bidder. The county gets their money sooner and transfers the risk to an investor. Interest rates can be as high as 18%? And I've read that most property owners eventually pay that tax back plus the interest and penalty fee?

    I haven't seen a WCI blog on this before? Anyone know the advantages and disadvantages? How do you best investigate which property to bid on? Is it possible to foreclose on if nonpayment? If you win the bid.. Do we send the notice to the property owner regarding the back taxes owed? Just curious in other folks experience with this investment product or should I avoid all together?

  • #2
    One of our clients has made money by foreclosing on property, rehabbing, and turning into rental property, but he decided it's too much time and trouble to continue and has sold the properties. I had the experience of having a lien on a piece of rental property a few years back when we moved and the new owner (who is a client!) didn't forward mail to me. We have several properties and I just lost track - it was a very expensive mistake. By the time the lien holder caught up with me, I had to pay almost double the original tax bill. It was obvious that the attorney fees of 25% were from a lawyer who specialized in this area as did the lien-holder. I sure learned a lesson from that, especially since I came close to losing a valuable (to me) piece of property.

    Tax liens can pay off if you do everything right, but it's also possible to spend time and money pursuing this strategy and waste it all because a piece of property becomes worthless or you didn't send proper notice to the owner. Unless you want to specialize in this area and/or have a lot of experience with real estate (beyond simply owning a few rental properties), I recommend you invest elsewhere. This is a good article.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087