Can Buying Tax Lien Certificates Really Be Profitable

Buying tax lien certificates can be a very profitable way to invest in real estate and with the right knowledge can provide very healthy returns on your money. But it's not to be treated as a "get-rich-quick" scheme, as the in-experienced can find it soon becomes a "lose-your-shirt-quick" investment model. By way of a brief introduction, a tax lien is basically a means that guarantees that a business or individual that lends money or provides a service will be repaid for that investment, by securing a lien on the property of the person receiving the money or services.

A tax lien certificate is issued and is secured against the personal property of the person receiving the loan. Of all the different types of liens, the most popular or common is the mortgage lien. Every different type of lien is subject to its own set of rules and regulations.

Here we are talking about property tax liens specifically, of which there are two main types; the particular lien and the general lien. A particular lien allows the investor (the person lending the money or providing the services to the owner) to claim access to the property (or the equity held within it). Liens are either legal (or federal) in nature - which means they are enforceable in a court of law - or equity liens which are bound by equity courts.

When you buy a tax liened property you need to be aware that you are not actually buying the property itself. What you are doing in effect is lending the property owner the money they need to pay back their tax arrears. The property owner is also agreeing to repay that loan, with an agreed amount of interest, within the already determined repayment period that was established when the tax lien certificate was sold.

So here's how we make our profits. If the property owner is able to repay the value of the tax lien certificate back to you within the allotted schedule, including all interest owed to you, he retains ownership of the property, and his credit rating remains intact.

In the event where the property owner is not able to repay the tax lien back to you, in full, ownership of the property is transferred to you as the purchaser of the tax lien certificate. The property is now yours for you to do with as you wish.

So as a quick recap, s an owner of a tax lien certificate, you will either make a profit by way of the interest repaid on your loan to the property owner, or of the owner is unable to make the repayment, you take ownership of the property and make your profit from how you then manage that property.

There is a lot more information you need to be aware of, and a lot more knowledge required before you go off a buy your first property tax lien certificate, but in simple terms, it is a very realistic model to make money and invest in real estate.

Article Source: http://www.myaddirectory.com

Real estate investor Mike Fairweather explains how to invest in real estate without losing your shirt. Tax lien certificates can be a very profitable road to building a real estate portfolio. Buying Tax Liens

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