Countercyclical Investments: Profiting in Tax Liens and Deeds (Part 1)

Posted under Investing by Roman

In these troubled times picking the right type of investments can be a headache, if not more. Traditional investment options are either too risky (stocks) or the return is too low (bonds). In order to survive in such a volatile economy we should consider investment opportunities that are more secure and often times overlooked. Ever Friday, i will be a new article about different investment strategies. This week we will be investing in tax liens and deeds. In my opinion this is the most straightforward investment strategy while maintaining the least amount of risk exposure.

Tax liens and tax deeds are the same thing just in different stages of the game. A tax lien is a lien that is imposed on a property by the government for not paying taxes or other fees. (Mainly taxes as the name infers) A tax deed on the other hand is the sale of property due to the lack of payment of taxes by the owner. Now, if you’ve made it this far through my ramblings you’re definitely wondering how will I be able in invest in this and receive a GOOD return on my investment? This is simple, the county always needs funds to run its day to day operations. In order to get these funds in a timely manner they sell liens at auctions. The return comes in the form of interest and penalties that are charge to the owner of the property. This interest that ranges from 10-25% are collected owner of the lien. The best part is that if the owner of the property does not pay the lien of after a certain time (that’s set by the county) the property is foreclosed and the property now belongs to you as the owner of the lien. Pretty good so far, no?

A tax deed is the purchasing property that is already foreclosed by the county. This is a great way to buy property because odds are you will get it at below the market value. Although it is still an auction, the starting price for the property is the value of the tax lien on it. Hence the starting price is only a fraction of the market price. That is bid up until there is only one bidder left.

The key to this strategy is to research the properties to make sure they will be worth what you are paying. If you are buying a deed, see the property before you buy it because this is not a real estate firm that will tell you information about the property. The counties job is just to get the property sold.

A few good tips are to avoid any areas that will have bio-hazards attached to them (gas stations, commercial lots and so on) even if it was not your fault you will be paying for it. Always, as a rule of thumb, target homes because those usually get paid off with minimal fuss.

ALWAYS DO YOUR RESEARCH AND YOUR MATH. DON’T LOSE MONEY BECAUSE YOU WERE SLOPPY AND DIDN’T DO YOU HOMEWORK.

Good luck and have fun house hunting. If you would like to know more information on this topic ask someone at the county clerk’s office or just leave a comment.