Intro

Tax Sales Investing

Making Profits and Growing Wealth

to Create Financial Independence

People invest in real estate because it represents one of the best vehicles available for making an excellent income while building long-term wealth. We congratulate you for making the decision to create lasting, permanent changes in your own life, and for using real estate investing as the vehicle to get you there. You are reading this because you recognized the great opportunity to change and invested in it.

However, we will not tell you it is easy to make money in real estate. If it were easy then everyone would be doing it, and there would be no real money in it, to say nothing of wealth. Easy jobs pay minimum wage; we are certain that if minimum wage were enough for you, you would not be involved in this program.

On the other hand, success in real estate investing is very simple. Certain basic steps and fundamental principles make it possible, so long as you follow them. As you might imagine, the purpose of this planned system course is to help you learn and then follow these steps and abide by these principles.

Good Intentions

It has been said that all worthwhile people have good thoughts, good ideas and good intentions; but precious few of them ever translate those into action. This being true, in order for you to derive any tangible benefit from this set of materials, you must apply them. The materials you have now will teach you much about what you need to know.

However, success comes when you engage in the practical activity of doing your business.

This should not be just an interesting read: turn this into an apprenticeship where you learn by doing. Take the theory from these materials and apply it to the pragmatics of doing. You need theory, because you find it works best if you know what you are doing, but it is vitally important that you do what you know if you want good things to happen.

Working this way will ensure that by the time you finish this course, we could call you a journeyman rather than an apprentice. This is not to say you will know everything about real estate investing, but you will know how to take care yourself, how to do the business, and you will know where to go for what you need.

Tax Sales as a Simple Entity

When you engage in tax sales investing, you choose between two very attractive methods of working: tax lien certificates or property acquisition.

The certificates serve as privately held notes secured by a common tax lien on real property. This kind of investment provide excellent security along with very competitive rates of return. The security is the property to which the lien is affixed, and rates of return are general double digit. You most often get your principal investment amount back with high interest within a set time period; occasionally the property owner defaults and you get the property. This is much like providing the owner a loan and extra time to save the property.

As an alternative, you acquire properties by purchasing tax deeds from the local government or by buying the property from the owner before the property is confiscated: now that the property is yours, you pay the taxes to forestall foreclosure and it belongs to you free-and-clear.

As you research states, you will learn which sell certificates, which sell deeds, and which do both. You can view a state-by-state outline along with a color-coded map of how this works on a separate page of this site.

The Government Needs Its Revenue

A typical county government obtains at least half its annual revenues for everyday operating expenses from property taxes. These taxes help fund school, hospitals, law enforcement, fire protection, road construction and maintenance, social services, parks and recreation programs, to say nothing of county administration. They support public libraries and mosquito abatement programs. Some of this money goes to the local justice system and to public transportation. The county depends on these revenues. When taxes are not paid, the county cannot function as it should.

When the county is not collecting the revenues due it, it does what other creditors have done for as long as creditors have existed. It sends it out for collection. And this is where savvy investors can make high return on secured investments.

In this case, the collecting entity is the fellow citizens of the delinquent taxpayer. It works well for both parties. The county gets the budgeted revenues from property taxes, and the fellow citizen has a nice investment with high returns, secured by real property, or just takes possession of the property outright. In any case, the purpose of selling the property tax lien is to allow an investor, in place of the property owner, to pay the delinquent property taxes due. The county receives immediate revenue and the investor benefits with a low risk - high yield investment.

How Does It Work?

When a property owner is late on paying real property taxes, the taxing entity (county or municipality, in Louisiana, the parish, in Alaska, the borough) issues a tax lien on that property, while assessing an interest accrual penalty. The government could wait for the lien to be paid by the property owner, but in order to meet budget needs, would rather get the money now. A tax lien becomes a first priority lien on the property; in certain states a certificate representing this can be sold at auction. Investors can then buy the lien (cash only) and receive the following in order:

Guaranteed yield from the lien, which the delinquent property owner must pay in order the release the lien

Title to the property after a redemption period, the length of which is set by the local jurisdiction, if the property owner fails to pay.

In other states, the taxing entity sells a deed at public auction. The deed buyer now owns the property outright and is entitled to collect rents on it or sell it for a profit.

One state, Texas, sells a deed that allows a redemption period, in which time the previous owner can pay the taxes plus a large penalty (25%) to the investor in order to get the property back. The redemption period is six months on most properties, two years on homesteaded or agricultural use properties.

Georgia, Tennessee, Rhode Island, Connecticut and Hawaii observe a one-year redemption period, as well. Although some sources list them as a redeemable deed states, in reality the document that you buy in these states does not give you ownership of the property until after a year. If it quacks like a duck and waddles like a duck, it must be a tax lien certificate. The difference between these and other tax lien certificates is that the return is usually in the form of a fixed-rate penalty, rather than by interest accrual over time.

Tax Lien Certificates

Tax lien certificates are a very attractive growth investment for people who know how to find them and how to buy them right. They offer guaranteed income mandated by a government agency, and may lead to the title to real property at a substantial discount. You get rates of return on your investment like 12%, 16%, 18% or even 24%. The risk is that you buy a lien and it gets redeemed within a month. For example, if you purchased a $1,000 lien at 18% interest, and the owner redeems the lien 30 days later, your total income would be $15.00. You may have spent more than that in gasoline to travel to the auction.

Therefore, the best way to buy liens is in bulk: if you buy 20 at a time, the law of averages holds that some will be redeemed quickly, others in a few months, and another group of owners will wait until the last minute to redeem. In fact, out of twenty there is a chance that one of the properties will not be redeemed and you can take possession of it.

In a later article you will read about circulating money for growth and how compounding interest causes money to increase at an accelerated rate over time. The power of tax lien certificates is that a consistent management of your fund leads to financial independence over time. When you become financially independent, your residual income supports your life style and you no longer have to work for money.

Tax Deeds

With tax deeds, you acquire great properties for pennies on the dollar. Put tenants in that property that you now own free and clear, and your passive residual income continues for as long as you want it. Just remember to pay the property taxes, of course. Or, if you wish, you can just sell the property for a handsome profit.

Quick Profits

If you have a lump sum of investment capital right now, buying liens gives you a great return on investment for wealth accumulation over time. Passive investing means you put your money aside to let it grow over time, and it is the foundation of wealth accumulation.

If quick profits are more important right now than passive growth of capital over time, you will want to acquire properties through tax deed sales. The resulting profits can accumulate to the point where you now have the capital to invest for long-term growth.

The good news is that there are multiple ways of acquiring properties in this market:

Buy at auction

Buy directly from the property owner prior to the date on which that owner loses possession of the property

Buy from the county on an over-the-counter basis - these are properties that the county has in inventory and wants to sell immediately.

All three methods of acquiring property work very well. The obvious advantage is that if you happen to live in an area where only tax lien certificates are available, you can still purchase properties by using the two non-auction methods of purchase in addition to participating in a number of deed auctions conducted online. Not only is that possible in all parts of the country, but you can easily do it without having to be there: if there is no requirement that you attend the auction in person, you don't need to travel. The Internet, postal system and the telephone system will allow you to make money at home.

We hope you will take advantage of this wonderful opportunity to take control of your financial life and move toward financial independence. The basic theory and knowledge you need to succeed in this business appear on the pages of this site. It will be up to you to apply the theory. Any good and successful endeavor requires both theory and practice.

Therefore, be sure to not only read these materials, but put them to practice. Nothing happens until you take action, but the little actions over time create a solid foundation of success.