In Chapter 8 of my book “Tax Lien Investing Secrets: How You Can Get 8-36% Return on Your Money Without the Typical Risk of Real Estate Investing or the Uncertainty of the Stock Market” I talk about how to maximize your tax lien profits. This chapter is all about what to do after you purchase a tax lien or tax deed to protect your investment and maximize your return.
One of the sections in this chapter is titled “Take the Sub Way to Profit.” In this section I describe how you can pay subsequent taxes on your lien to maximize your return.
When you purchase a tax lien in most states you are paying the back taxes from the previous year or years. There is likely to be current taxes due at the time that you purchase the lien. And more tax bills will come due before the redemption is over.
Some states will allow the tax lien holder to pay the current and/or subsequent taxes on a property if the owner doesn’t pay them. This is a way that you can add to your lien (and in some states get the maximum statutory interest) without having to bid at the tax sale.
In the book I gave an example of a small utility lien that I had purchased and held for a few years in New Jersey. New Jersey tax liens have quite a long expiration, you can hold a lien for 20 years before it expires. I held this lien for 10 years and made $3200 on an investment of just a little over $4000.
Here’s how I did it…
I bought a small utility lien for only $420. Then I kept adding a little to my lien each year by paying the subsequent utility payments. I did this for the next 7 years. Then I did nothing for another 3 years. Finally, I decided that I wanted to get paid (10 years after purchasing the lien), so I started the foreclosure process.
All I did was have my attorney send out what’s called a “dunning letter.” It’s a pre-foreclosure letter that basically says if the owner doesn’t redeem the lien I’m going to foreclose. This letter is sent to any owners and lien holders of the property.
Then the lien redeemed, and I nearly doubled the money that I had invested over 7 years’ time. I could have started foreclosure sooner, and forced redemption sooner. But the longer I held the lien, the more interest I accumulated, so I let it ride.
It Doesn’t Work This Way Everywhere
Keep in mind that you wouldn’t be able to do the same thing in other states. This wouldn’t work in states that have shorter expiration periods, or in states that don’t pay the statutory rate on subsequent tax payments. Every state treats subsequent tax payments differently, so you really need to know the rules and procedures in the state that you’re investing in!
If you would like a better understanding of how you can maximize your tax lien profits, you can get my book from Amazon. Find out more about the book and how you can get over $100 worth of free bonuses at TaxLienInvestingSecrets.com.
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