Saturday, October 13, 2012

Getting Your Questions Answered

It's one thing to hear that delinquent tax sales represent an excellent opportunity for the burgeoning investor, but it's quite another to actually take the leap of faith it requires to believe it. Sure, you can read up on the subject, but how do you know if you're reading something true or propaganda from someone who is trying to sell you a strategy? You can confer with seasoned investors, but do you really know anyone like that? In order to consider this sort of investment for yourself, you're going to need some questions answered. Here are some of the most frequently asked.
How do you make money at delinquent tax sales?
The primary avenue for investors to make money at these auctions is through interest. When you purchase a lien, the property owner is then responsible to pay his back taxes to you, rather than the government. The amount of interest you can attach to those back payments are set by the state, but it can sometimes add up to a substantial amount. In bid-down states, the actual bidding on the lien or deed up for sale will be on the lowest amount of interest the bidder is willing to accept. This favors the investor working on a volume basis, but that doesn't mean first time investors are left out. Even five to ten percent interest is a positive ROI and can help fund your next purchase.
Are these investments safe?
It's only natural to wonder if you stand to lose your shirt on any investment. The good thing about delinquent tax sales is that they represent one of the safest investments you can put your money in. There are a few reasons for that. One, you have a fixed interest rate, which means you don't have to guess at how much the homeowner owes you. Two, the investment is actually secured by the property itself. If the owner fails to pay, you could become the owner of the home. This may not be exactly what you wanted, but it represents more collateral then you'll get on the stock market, certainly.
Can I buy more than one lien?
Most delinquent tax sales are run by governments that want to get these properties off the books as soon as possible. If one guy wants to come in and buy them all, the officials aren't going to care. Bidders are allowed to get as many as they want as long as they have the money to pay for them. Of course, if you make a bid in bad faith and win (i.e., you don't have the funds to cover your purchase), you won't be allowed back.

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