Frequently I?m asked the question what is more profitable, investing in tax lien certificates or tax deeds. Whether tax lien investing or tax deed investing is better for you depends on the state that you live in and your what your goals are. If you are looking to pick up property under market value than you are better of with tax deeds than with tax liens. If you do your homework and purchase tax liens on good properties, the chances of foreclosure are slim. And in some states, even if the lien is not redeemed, you may not be able to get the property.
In the State of Florida for example, if your lien does not redeem during the redemption period, the property goes into a tax deed sale in order to satisfy your lien. If you did your due diligence and purchased a lien on a decent property, in order to get the property, you will have to bid against other investors at the deed sale. So if you want to invest in Florida, and you are interested in obtaining property, then deed investing is the way to go, not lien investing. If, however, you are not interested in owning property, but just want to get a higher return on your money than you could in the bank, then tax liens are the way to go. In Florida, as long as you do your due diligence, you won?t have to worry about the possibility of owning the property.
If you live on the west cost, you might want to consider investing in tax deeds instead of tax liens. That?s because most of the states on the west cost are deed states and not lien states. Yes, you could travel to the closest lien state, but that would eat into your profits. And yes, you could invest online but then you have to deal with increased competition and higher costs. Also, would you purchase a property that you did not physically look at first? Even though with tax lien investing, you are not purchasing the property, you?re only buying a lien on the property; your lien is only as good as the property that guarantees it.
If you are interested in either owning the property or getting a very good return on your investment and you live in or near a redeemable deed state, than you should consider investing in redeemable deeds. Redeemable deeds are kind of in-between tax liens and tax deeds. You purchase the tax deed at the sale, but there is a redemption period in which the previous owner can come back and redeem the deed from you. They have to pay a pretty hefty penalty in most redeemable deed states in order to do so, and the penalty is on the total amount that you bid at the sale. In Texas the penalty is 25% and in Georgia it?s 20%. Not a bad rate of return! Another great thing about redeemable deeds is that the larger counties with bigger cities can have a tax sale a few times a year or even every month. That?s better than waiting for a tax sale only once a year sale as in most states that sell regular tax deeds or tax liens.
If you live in a state that sells tax liens, and you are not interested in purchasing property, but are interested in investing your money safely at a high rate of return, than tax lien investing is the best choice for you.
?2008 Tax Lien Consulting LLC. All Rights Reserved. Any use of this article without the express permission of the author is a violation of copyright law.
By jmusa May 2, 2010 - 9:53 pm
Hi Carl,
You are right about needing to do your due diligence before you purchase a tax lien. And most good liens will redeem. I always tell people that if obtaining the property is their goal they are better of with tax deeds, or redeemable tax deeds.
That is why there are only 2 tax lien agents that I recommend. I have met and spoken with both of these agents and I know that they do their due diligence on properties. One company purchases redeemable tax deeds as well as tax liens and they have averaged at least a 30% return for their investors over the past few years.
For the web sites of the agents I recommend go to my Tax Lien Lady Recommends blog at http://www.TaxLienLadyRecommends.com.
Joanne
By Carl May 1, 2010 - 9:21 pm
This information is not entirely accurate. If you invest in a tax lien and the lien is not redeemed at the foreclosure date, it’s likely you have a dud. Most people will not let valuable property be foreclosed for a few thousand dollars in taxes. The only way to get paid with a lien is 1) the owner redeems 2) the owner sells and you’re paid at closing 3) the lender pays the taxes to avoid you foreclosing OR 4) you foreclose and gain the property (pretty unlikely – see 1 -3). You have to know what you’re doing, what you’re investing in, just as much as if you are buying the property. You just may own it if no one else does! Even if you use an “agent” you have to know that they know what they’re doing, since you may not know you’ve purchased worthless property for several years unless you do your own due diligence and inspection.
By Nebraska Counties Tax Lien Sales April 20, 2010 - 5:58 am
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