The Complete Guide to Investing in Real Estate Tax Liens & Deeds: How to Earn High Rates of Return - Safely REVISED 2ND EDITION

By Alan Northcott

If you are searching for a new way to invest that can challenge your investing skills and potentially make you a bundle, look no further than investing in real estate tax liens and deeds. If you’ve considered this path before and found it too complicated, not to worry. The Complete Guide to Investing in Real Estate Tax Liens & Deeds REVISED 2ND EDITION is here to help. With all the information from the first edition, plus updated laws, websites, and a new chapter guiding you through the exact steps you’ll need to start your tax lien investment portfolio, this book will have you making money in no time.

Investing in tax liens and deeds can be very rewarding. Tax liens can be tax deferred or even tax-free. You can purchase them in your self-directed IRA. Interest rates vary but average between 4% and 18%. The interest rates are fixed by local governments, essentially a government-guaranteed loan. Additionally, the investment is secured by real property (real estate). This sounds great, but what is the catch? There really is none, except you must know what you are doing! You will learn what property tax liens and tax lien certificates are; how to invest in tax lien certificates; how to buy tax lien certificates; insider secrets to help you double or even triple your investment; how to start with under $1,000; the risks, traps, and pitfalls to avoid; and a detailed directory of states that sell tax lien certificates with contact information.

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• Language: English
• Publisher: Atlantic Publishing Group
• Release date: Jun 30, 2012
• ISBN: 9781601389343

Alan Northcott

Alan Northcott is a successful financial author and trading educator, having been writing in the sector for some years. He has ten conventionally published books which were completed with Atlantic Publishing, and more recently has self published four more. These are in the "Newbies' Guide to Finance" series, and they fill a perceived need for straightforward introductions to various aspects of finance. All books are available in print and Kindle editions. In addition to the books published under his name, Northcott has ghostwritten several other books and regularly contributes articles and other writing for a variety of print and online clients.

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The Complete Guide to Investing in Real Estate Tax Liens & Deeds

How to Earn High Rates of Return — Safely

REVISED 2ND EDITION

Alan Northcott

The Complete Guide to Investing in Real Estate Tax Liens & Deeds: How to Earn High Rates of Return - Safely REVISED 2ND EDITION

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Library of Congress Cataloging-in-Publication Data

Northcott, Alan

The Complete Guide to Investing in Real Estate Tax Liens & Deeds: How to Earn High Rates of Return - Safely REVISED 2ND EDITION / by Alan Northcott

p. cm.

Includes bibliographical references and index.

ISBN-13: 978-1-60138-899-5 (alk. paper)

ISBN-10:

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Table of Contents

Preface to Revised Second Edition

Chapter 1: What Is a Tax Lien Certificate?

Chapter 2: Delinquent Properties

Chapter 3: Income and Growth Potential

Chapter 4: The Annual Tax Sale

Chapter 5: Bidding on Tax Lien Certificates

Chapter 6: Investing in Tax Lien Certificates

Chapter 7: Obtaining Investment Dollars

Chapter 8: Return on Investment Dollars

Chapter 9: Steps To Purchasing Tax Lien Certificates

Chapter 10: Making Use of Tax Lien Certificates

Chapter 11: Foreclosing Unredeemed Properties

Chapter 12: What Next?

Conclusion

Appendix: State Laws

Bibliography

Author Biography

Preface to Revised Second Edition

My initial encounter with the tax lien process was from the other side. I had owned my first house in a small Arizona town for about ten years when I decided that I could pay off the mortgage. Up until that time, as is the practice with residential mortgages, the mortgage company had been taking care of taxes through the escrow account, and I had been duly noting the amount from the annual statements to claim on my tax returns.

We paid off the mortgage in, I think, August of one year, and when I came to prepare my tax returns for the following year, fortunately in February long before they were due, I noticed that I had no property taxes on the closing statement from the mortgage company to claim. I checked with the county taxation department, who informed me that my taxes were going to auction on the following week in the tax lien sale.

Needless to say, I was shocked, outraged, confused, and a host of other feelings, particularly as I do not make a practice of not paying my bills. I did not understand how they could be selling my debt so quickly and how I had had no idea that a payment was due. I also was concerned what this would do to the credit rating I had nurtured so carefully. I was working away from home at the time, so I had to pay additional costs for overnighting a cashier’s check to the collector to prevent the auction taking place.

A multitude of factors figured into causing this distressing situation. I had not realized, having not owned property before, that I should have been receiving a tax statement every year, even though I was not paying it directly. The address on file was incorrect in two respects — it was a physical street address, when our small town had no delivery and only post office boxes, and it even was addressed to the adjacent municipality, not my own. Presumably, each year the tax statement had been returned to the county as undeliverable, but as they firmly told me, there was no requirement for the county to do other than send the statement, not to track down the owner. The onus is on the owner to pay, whether or not a statement is received. I was in the telephone book and frequently in the local paper from my involvement in town government, but the county made no effort in this regard.

My other question was why a tax lien should be sold so quickly following nonpayment. There is a lesson here in devious interpretation of the rules. The county assured me that I was recorded as delinquent for two years, even though it had only been one annual payment missed for just five months. Under their rules, the taxes that should have been paid in September were those charged for the previous year. That meant that I was recorded as not paying for the previous year, and when January came I also owed for the year just gone, despite the fact that in normal circumstances that would not be due for payment for another six months.

But this experience turned into a positive one. Through it, I became aware of the profit from tax liens industry. I made some initial attempts to become involved in the business but moved on to other things when I had little success. The fact is that it takes some effort and perhaps many attempts in order to invest successfully in tax liens or tax deeds, and the popular Internet course I purchased glossed over many of the details. Unfortunately, at that time, I had not discovered the book you now hold in your hands, which at a far lower cost goes into considerably more detail. And the other positive outcome was that my positive credit rating remained intact, as Maricopa County in Arizona had a policy of not reporting delinquency to the credit rating agencies. You should note that I am not sure if this applies to any other jurisdiction or if it still applies in Maricopa County.

The first edition of the book was already a thorough reference work, but there were little niggles that needed addressing, as evidenced by the odd criticism given by reviewers on Amazon. Although the reviews were mainly favorable, I have, in updating this volume, taken on board any negative comments. One major revision was to include, where available, the website addresses for all the county treasury departments that handle tax lien and tax deed sales. This information has been added to the tables at the back of the book. Inevitably, some of it might be out of date by the time you read it; in fact, the references I found, even on government websites, were sometimes out of date and led to generic advertising websites, presumably where the county had abandoned maintenance of the site and let it go back to the domain registrar. However, the majority of references should be usable, and I chose those that seemed to provide the most direct path to the relevant information, whether the tax sales are held online or in person.

Sometimes, for example in Louisiana, the sheriff’s department may be responsible for the sales, and I have attempted to list the most useful sites, although you might need to click through or call to get the information you seek. Even so, it is my hope that the details given will be of value. I have personally viewed each of the sites listed for current relevance. And yes, there are 3,143 counties or equivalents (such as Louisiana’s parishes) in the United States. The most common county name is Washington, which is in more than 30 of the states.

In addition, the final chapter, which runs through the basic process of taking part in tax lien and tax deed auctions, has been added in response to readers’ comments that the book lacked a step-by-step action plan. Although every municipality has its own process, a general framework is given that can be followed easily and adapted to local regulations. This outline details the necessary dealings that make up this method of investment.

Alan Northcott

Table of Contents

Chapter 1: What Is a Tax Lien Certificate?

In general, when property owners fail to pay the required property tax assessed on real property, the property may be auctioned and sold at a real property tax sale, though real property is not always sold at tax sales. Some states engage in the sale of deeds to real property to recoup losses from delinquent property taxes. Other states engage in the sale of liens against real property to recoup the losses. A lien is simply a security interest in real property. That means the debt is secured by the property, which may, as the ultimate recourse, be seized in payment of that debt.

The purchase of a tax deed is significantly different from the purchase of a tax lien. States that engage in the sale of tax deeds are considered tax deed states. The bidder bids for immediate possession of deed and title to a property. A tax deed is issued or assigned in return for the payment of unpaid real property taxes as well as associated penalties, interest, and costs of the tax sale. States that engage in the sale of tax liens are considered tax lien states. The tax sale initiates a process or system by which an investor pays the delinquent tax on behalf of the property owner. The property owner is then given an opportunity to repay the investor or be forced to relinquish title and deed to the property in the future. A certificate that indicates payment of the tax lien is issued or assigned in return for the payment of unpaid real property taxes as well as associated penalties, interest, and costs of the tax sale.

Tax Deed States

In tax deed states, the winning bidder at a tax sale purchases ownership to a property, as specified by a tax deed. The bidder becomes the property owner upon payment of the delinquent tax amount and any other costs and fees assessed against the property. In some tax deed states, the sale is not immediately final, as the previous property owner is given an opportunity to redeem the property from the newly established owner. The redemption period varies among the states, but generally ranges from six months to two years. These states are considered hybrid tax deed states. Hybrid tax deed states include ten states and the territory of Guam, as follows:

• Connecticut

• Delaware

• Georgia

• Guam

• Hawaii

• Louisiana

• Massachusetts

• Pennsylvania*

• Rhode Island

• Tennessee

• Texas

*Pennsylvania engages in a hybrid tax sale system for improved properties that are legally occupied at least 90 days before the tax sale. Otherwise, Pennsylvania does not provide an opportunity for the previous property owner to redeem the property from the new owner. In hybrid tax deed states, even though the sale of a tax deed transfers ownership to the tax deed purchaser, the purchaser has no right of possession to the property. Hybrid tax deed states allow property owners to retain all rights of possession.

Other tax deed states do