Nov 18

A Basic Introduction to Tax Liens Investing

When it comes to the real estate investing, the power of success lies in being informed and suave in cutting deals. In fact, most successful investors are not after property per se but a deal that will be executed swiftly giving them enormous returns on investment. If you have tried your hand in real estate, you will agree that sometimes, this market looks like an esoteric club where accessing information is very difficult. One of the most hidden secrets of real estate market is tax liens which most moguls have exploited since the property bust in the mid 2000s.
The National Tax Lien Association (NTLA) reckons that sales of delinquent properties have shot by 200% over the last 5 years making this an investment choice worth checking out. A taxi lien sale is conducted by the government or one of its agencies for delinquent taxes in the market. It is a unique way the government has been using to collect delayed taxes in order to run operations smoothly.

With so many counties already in the red due to aftershocks of the recession, this is one way of getting your hands on cheap property and later offloading it using one of the many available exit strategies. Tax liens give you amazing leverage as an investor. If you are looking at this investment option, you can consider common liens such as mortgage, IRS tax liens, and code violation fees.

Tax Liens Sale Procedure

Once a date is issued after which tax is indicated as late, a taxpayer is notified through a letter and if they still do not pay, a sale notice is advertised. Different state statutes give the public various bidding options and the winner gets a certificate or a deed. If a taxpayer does not redeem the lien, most states have a redemption period say 6 months or 1 year but you can elect to start a legal suit to have the courts deed the property to you. On winning this case, you own the property and you can elect one of the following exit strategies;

  • Rehabbing; you can spruce up the property and then place it in the market immediately to recoup your investment. You will have all the leeway to state a market price irrespective of how cheaply you bought the property.
  • Wholesaling; most sophisticated investors opt to sell the property immediately in a discounted resale as they seek for other tax liens sales.
  • Buy and hold; if the property is appealing, you can include it in your portfolio. This will definitely have a high return on investment (ROI) over time.


With this basic insight on this unique investment option, you might be wondering what benefits you can accrue from tax liens sales.  For a start, interest rates are very high to penalize the defaulting tax payer while encouraging investors. Additionally, as priority lien, this option is even higher up there than mortgages and trust deeds and this makes it an ideal addition to an investment portfolio. One more advantage is the fact that you get a chance to invest in unique places and even other states where such property lies without any restrictions.



Like most real estate experts argue, this is one of the most creative options for making it big in this market without burning your fingers. It is an investment which is ideal for investors starting in the industry and even those who are established.

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