How Tax Liens Work

I have found government Tax Lien Certificates to be a safe alternative to investing in the stock market. In case you are not familiar with tax lien certificates. Here’s how they work: Local governments (counties and municipalities) need property tax money in order to meet their budget. When property taxes go unpaid they need a way to collect this money. So they sell the delinquent taxes to investors. When you purchase a tax lien, you are not purchasing the property but paying the back taxes on a property in order to get the interest rate that the county would normally charge the tax payer. These rates could be anywhere from 8% to 36% depending on the state. The lien must be paid within a specified period of time or the Investor can foreclose on the property.  That is the incentive for the property owner to pay off the lien. Continue reading →