Income Tax Rates

The tax portion of the term actually regards to property taxes that were not paid. According to the dictionary, lien is:

"The legal claim of one person upon the property of another person to secure the payment of a debt or the satisfaction of an obligation."

Tax lien is like a form of security wherein the individual's property is used as collateral to make sure that tax-related debt to another person is settled. Initially, the person with the property owes a debt to the government who imposed the taxes. However, after a certain period of time, the government agency will then take the property into auction to be able to compensate their expenses and open a new opportunity for savvy investors.

Tax liens are a result of the federal government and are not only 100% statutory, yet the concerns of the investors are protected by each state that they buy it from. To their benefit, State governments will then be the one responsible for the entire tax lien process.

Also, buying tax lien certificates is completely safe and open because the investors are actually true to their words and do pay the required taxes imposed. These certificates can be bought at tax sales where a county or municipal official is conducting it.

If everything else has been settled, the lien will then be handed to the investor from the government. If this is already complete, the investor will now have the right to collect all of the stated interest that has been made by the government. The usual interest stated in the lien is between 8% and 25% per year.

The owner of the property will be given a certain period of time to be able to pay the new total amount (taxes, interest, and other fees related). However, once the owner of the property cannot pay within the given schedule, the investor will now have the right to foreclose on the property due to the lien.

Tax lien investing is a high yielding investment. Tax lien certificates are an attractive investment because you don't need thousands of dollars to start and you don't have to pay any brokerage fees.

This is an investment that you have to be able to devote some time to. If you research the properties attached to the tax liens and make good purchases, then you should be overjoyed to gain the property through foreclosure. The list of properties that you get before the sale from the tax office, in most cases, does not tell you anything about the property. Frequently this list will only consist of the tax ID, owner of record, and amount owed.

In addition to this, when making your first investment, it is highly advisable that you have a copy of the assessment information first and then locate the property. If you already have the address, it does not hurt if you pay a visit to the property and see for yourself if the assessment is updated. Also, through visiting, you will have an idea whether the property costs more that what is owed for back taxes. Always bear in mind that there is a possibility, if it does not redeem, that you will have to pay the taxes of this property throughout the period of redemption before you can actually foreclose on it and apply for a deed.

Foreclosing on tax lien properties guarantees you a profit that is several times your initial investment.