Basic Principles of Tax Deed Investments
There is a large contrast between tax lien certificates and tax deeds. If you are thinking of purchasing tax-defaulted land or homes, you must be aware of the distinction and how it affects your bidding.
About Tax Deeds
Let's begin with the basics. Every piece of real estate in the United States is actually owned by the government because the owner is compelled to remit taxes on it. You have the right to keep the real estate as long as you settle the tax debt.
This system has been in effect for centuries. The law of assessing taxes and taking those taxes at the county level of government was enacted by Congress back when America was still in its infancy. Property taxes get used for funding all manner of civil programs and services - everything from streets to schools to the police and fire departments.
Why Tax Deeds are Issued
If you don't settle your property taxes, your city and county are negatively affected. But the local government has a recourse to recoup their funds - they issue a tax deed and sell it at a public auction. Every single state in our country has the authority to hold auctions in order to get the revenue they need to run and manage local services.
While about half the counties in the U.S. offer tax lien certificates, the balance sell tax deeds at auction. In this scenario, the investor is actually bidding on the property itself. The minimum bid is ordinarily the sum of taxes in default, plus any penalties and interest that have accumulated. The bidding goes up from there. The winning bidder is required to pay the purchase amount of the tax deed right away.
Once you have purchased the deed, you can foreclose on the land or home and possess it with no outstanding liens.
Making a Profit with Tax Deed Purchases
There are several choices when you become the new owner of tax-defaulted land or housing. One is to keep the land or home and use it personally as a home or for a company (conditional on the zoning laws). Another possibility is to keep the land or home, but rent it out. This is often ideal if the former owner still resides on the property and wants to stay there but can't sustain the upkeep. A third opportunity is to sell the real estate and this is the alternative most investors make. Because you've acquired the parcel for pennies on the dollar, you can afford to carry the note and unload it cheaply which results in a fast turn.
As long as you've conscientiously done your homework, there is really no way you will waste cash by investing in tax deeds. Real estate is always worthsomething - even in a depressed real estate market. And if you can afford to hold onto it long enough (a real option because you acquired it so reasonably), you are sure to make a tidy profit. Tax deeds are a great investment!
About the Author
Ted Thomas is America's Tax Lien Certificate and Tax Deed Authority. He has helped thousands of students graduate from his investment courses and make amazing profits. Visit Ted's website and receive your FREE copy of the 57-page Start Up Guide now at http://www.tedthomas.com.