Tax Lien Investing

Creating Wealth Without Risk

This eBook guide will show you the main secret that Wall Street Banks have been using for over 200 years to assure that they stay healthy and wealthy. If anyone knows how to do good business, it's Wall Street. Even when the went bankrupt, they have risen again as powerful business forces, and this guide can teach you the same strategies that they use to stay wealthy year after year. If you buy tax lien certificates (which get a detailed explanation in the book!), you will be able to both help your community get out of debt AND make a fortune. You will be able to legally take a share for yourself of the government bailout money and build your own fortune, using strategies that have been perfected by Wall Street investment bankers and analysts. You will be able to make more money that you ever have thought possible, using the tips in this ebook! Read more...

Creating Wealth Without Risk Summary


4.7 stars out of 12 votes

Contents: Ebook
Author: Steven Waters
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My Creating Wealth Without Risk Review

Highly Recommended

The writer has done a thorough research even about the obscure and minor details related to the subject area. And also facts weren’t just dumped, but presented in an interesting manner.

As a whole, this book contains everything you need to know about this subject. I would recommend it as a guide for beginners as well as experts and everyone in between.

Tax Liens and Tax Deeds

When homeowners or real estate investors fail to pay their property taxes, local governments place a tax lien against the property. If the taxes remain unpaid, the government will eventually sell the property via a tax deed. The free and clear infomercials of Ed Beck promise to show investors how they can make money buying up these tax liens and tax deeds.

Tax Lien Certificate Sates

The county ultimately sells the property in a tax lien certificate sale auction to generate the funds necessary to satisfy the unpaid real estate property taxes, along with the accrued penalties and fees. But local municipalities don't want to foreclose or wait for payment because they need the funds today to pay the costs of government, so they auction off these tax lien certificates to investors. Tax lien certificates can be a good investment regardless of the economic cycle, because some property owners will always be unable to pay their property taxes. When you buy a real estate tax lien, you're simply providing the government entity with the funds for the delinquent taxes and buying the rights to collect those taxes from the property owner (plus penalties and a fixed rate of interest that can range from 12 to 24 percent per year). The property owner can't sell or pledge her real estate without paying the outstanding tax liens, so over 90 percent of the tax lien...

Tax Sales and IRS Liens

People buy at tax sales for two reasons (1) They hope to get the property for the amount of back taxes due. For example, if a 200,000 house has 8,000 of property taxes not paid and goes to a tax sale, investors want to buy it for 8,000, the amount of the back taxes. Of course, several investors bidding can actively raise the price, but you can still find good deals at tax sales. In this example, say your area's interest rate for tax liens is 20 percent and the homeowner pays you 8,000 plus 20 percent to get the house back. If the homeowner doesn't pay you off within one year, you get to keep the 200,000 home. However, you can't sell that house until the year is up. Alternatively, you could buy properties for the amount of the tax lien. You can also acquire them by bidding on them at a foreclosure sale auction. Sure, they may be difficult to talk with, but most often the things that are hardest to obtain are the sweetest. So work these foreclosures and preforeclosure tax sales.

Profiting from Property Tax Sales

When homeowners fail to pay property taxes, the taxing authority places a powerful lien against the property that almost always supersedes all other liens. While other liens can get wiped out by foreclosure, the property tax lien cannot. Unfortunately for you, as an investor, a tax lien may never end up on the auction block. Another lien holder is highly unlikely to see its position wiped out To profit from tax sales, research the property carefully prior to the auction, as discussed in Chapter 8. Then, do some additional homework, as explained in the following sections to track down tax sales, find out the way tax sales are handled in your state or county, and locate tax sale opportunities. jflNG. Although purchasing tax liens is a relatively low-risk approach to acquiring foreclosure properties and profiting from foreclosures in other ways, you can still get burned when purchasing tax liens, especially if you don't know the rules, regulations, and deadlines that apply to tax sales...

Tracking down property tax sales

Delinquent property taxes are almost always processed at the county level, so your county offices are the most logical places to find information about tax sales. If your county has a website, it should supply most of the information you need, so the clerks don't have to spend most of their days answering questions. i Where and when are the tax sales i Do you sell tax deeds or tax lien certificates (See the following section for more about the difference between tax deeds and certificates.) i Does the tax lien hold priority over all other liens If not, which liens can supersede it i If I buy a tax lien, do I need to do anything to protect my position on the title Do I have to record my interest Do I have to buy future tax lien certificates as they go to sale i How long is the redemption period on tax sales i What are the purchasing terms on tax liens at time of sale i Does the county offer financing to purchase tax liens Pick your real estate attorney's brain for additional...

Buying tax deeds or certificates

One of the most important differences in how tax sales are handled from state to state is whether the state sells tax deeds or tax certificates 1 A tax deed is a document conveying ownership of the property to the high bidder. Prior to the tax deed sale, the county informs the homeowners and all lien holders that the property is going to be sold if nobody pays the past taxes. In most cases, a lien holder who has a large claim on the property pays the back taxes. If nobody pony's up the money to pay the taxes, the county auctions off the tax deed. 1 A tax certificate or tax lien is simply a document giving the purchaser the right to collect the unpaid taxes. When you buy a tax certificate, you're essentially paying the taxing authority to take over its interest in the property. This gives you first lien position on the title. You can then foreclose on the property or place yourself in a better position with the homeowner and other interested parties to acquire the property.

Tax Sales

If people do not pay their property taxes, the government taxing entity will demand payment and force a tax foreclosure. You can buy the property at a tax sale, or, in certain states, you can buy a tax certificate for the amount of the back taxes. By using a certificate, you get interest on your money or on the property. Some tax certificates pay anywhere from 10 to 30 percent interest. People buy at tax sales for two reasons 1. They hope to get the property for the price of back taxes. For example, if a 200,000 property has 8,000 of property taxes not paid and goes to a tax sale, they want to buy it for 8,000, the amount of the back taxes. Of course, others may bid against you and raise the price. Still, you can find good deals at tax sales. to pay back all of the taxes and interest due and redeem the property. For example, if your area's interest rate for tax liens is 20 percent, then the homeowner pays you 8,000 plus 20 percent to get the house back. If the homeowner does not pay...

Buying Tax Liens

Another investment possibility is buying tax liens. Government agencies (generally the country or municipality where a property is located) can put liens against properties on which taxes are owed. Given the current state of the economy, more and more tax delinquencies are occurring. Typically, a county sells tax liens at auction to individual investors. The government agency sells the liens because it needs money to pay for the fire department, the police department, and other services that it provides to its residents. For example, Philadelphia was recently in the news because it had so many delinquent taxes that it had almost no revenue, so its mayor asked the federal government for a buyout. Buying tax liens is also another way to acquire property because if the taxes are never reclaimed, fixed, or redeemed to pay off the investor, the investor is then able to buy that property at a discount. Each state and municipality has its own way of handling tax liens. Some are bid based on...

Buying Tax Deeds

Another type of alternative investment is to buy the deed and own the real estate. The process for buying a tax deed is different from buying a tax lien in that when you buy a tax deed, you get the actual deed. A government agency sells a tax deed when it forces the sale of a property for nonpayment of taxes. It is one of two methods government agencies use to collect delinquent taxes owned on real estate (the other is a tax lien sale). County, municipal, and state governments differ on how they handle properties on which taxes are owed. For example, Florida sells tax liens on such properties, whereas Texas sells tax deeds. Generally, the redemption period for a tax deed is shorter than for a tax lien. For instance, in Texas, a property owner has six months to pay back the delinquent taxes. If the property owner hasn't paid the taxes within that time, the investor who bought the tax deed can sue to acquire the property. To get information on tax deed sales in your area, contact your...

Taking the Passive Approach

Researching real estate investment trusts (REITs) Considering tenants in common realty investments Exploring triple net properties Understanding tax lien certificate sales Looking at limited partnerships any investors want the diversification and solid returns offered by real estate but aren't qualified for or interested in actively managing their real estate holdings. These real estate investors often look for investment opportunities that require no management or even minimal interaction with a property manager. Real estate investment trusts (REITs) are probably the easiest to understand and access, but other avenues allow you to passively invest in real estate, including tenants in common, triple net properties, notes and trust deeds, tax lien certificate sales, and limited partnerships.

How to Work Foreclosures

Here's how it works If a house is worth 500,000, with a tax lien of 7,000 and you buy it at a tax sale, you can get the house for 7,000. Many people have bought properties at tax sales and learned afterwards that they can never get clear title. If they buy a property, they do own it, they can rent it and live in it, but they can never refinance it or get a mortgage on it because they can't get title insurance.That means they can never sell it because the new buyer can't get a mortgage. That's the way some tax foreclosures laws have been written. In major cities, tax sales have become highly competitive. A lot of investors bid on these properties. My strategy is this Go to small towns, out in the middle of nowhere. There are real opportunities in small towns, away from the competition.

Safer than Buying at the Foreclosure Sale

Several exceptions might include (1) states where the foreclosed owners may have a right of redemption (2) if the foreclosed owners still retain some legal right to challenge the validity of the foreclosure sale or (3) if a bankruptcy trustee or the Internal Revenue Service (tax lien) is entitled to bring the property within their powers. Rarely would any of these potential claims be worth losing sleep over. But prior to closing an REO purchase, you might want to run these issues by legal counsel.

Check the Public Records to Verify That All Recorded Liens Are Uncovered

County recorder or prothonotary's office Check the grantor and grantee or mortgagor and mortgagee indexes, federal tax lien index, public assistance liens, conditional sales contracts such as contracts for deed, agreements for deed and land sales contracts, notices of lis pendens index, writs of attachment, judgment liens such as mechanic's and materialmen's liens, and property tax liens. 2. Clerk of the county and circuit court Check the defendant's judgment index, state income tax liens, state inheritance tax liens, state franchise tax liens, judgment liens, homeowners' association liens, suits to quiet title, suits for specific performance, estates of deceased persons, guardianships of minors and incompetents, termination of life estates, termination of joint tenancies, and condemnation of lands. 3. United States Court Check for federal judgments such as federal tax liens and judgment liens resulting from defaults on government-guaranteed FHA, Department of Veterans Affairs (DVA),...

Sixteen Liens to Check for When Researching Titles to Real Property

Real property tax lien Real property tax liens are placed against properties by local taxing authorities city and county tax collectors when property owners fail to pay their property taxes. 2. Federal tax lien Federal tax liens are statutory liens that the IRS places against the titles of real property belonging to taxpayers who fail to pay their federal income tax. 7. State inheritance tax lien Most states have an inheritance tax, which is levied against the estates of deceased persons. The amount of inheritance tax owed becomes a lien against the estate. 8. Corporate franchise tax lien States having a corporate franchise tax will tax corporations for the right to do business within the state. When corporations fail to pay their franchise tax, the state files a lien against any real property within the state belonging to the corporation.

Best to Hire an Experienced Title Abstractor to Perform Your Title Searches

Verified by an experienced title researcher or abstractor. You must understand that an uncovered, but recorded, mechanic's lien, federal tax lien, or third mortgage or deed of trust loan can come back to haunt you at a later date, usually when you are in the process of trying to sell the option on the property. Researching property title information can sometimes be very tricky, even if you know what you are doing. And this is why I highly recommend that you hire an experienced title abstractor to do a title search on a property before you buy an option. To find an experienced title abstractor in your county, log on to the following web site Abstracters Online

Negotiating with the lien holders

When you know where all the lien holders stand, you can begin calling them and negotiating your short sales. You can't negotiate the property tax lien, but you can negotiate short sales on the other liens. The following sections provide some guidance on how to proceed, but every situation is different, so use your noodle and plan the strategy that you think is likely to be most effective. If the property has a property tax lien against it, use that to your negotiating advantage. Tell the lenders that if they don't work with you, they can expect to incur another 5,000 expense (or however much the tax lien is). This lets the lender know that it can automatically offer you a 5,000 discount without losing anything. To make it worth your while, request a discount in excess of what's owed in property taxes. If the lender discounts from 25,000 down to 20,000, and you have to pay 5,000 in taxes, you're not really getting anything. If it discounts down to 17,000 or 18,000, you immediately...

Finding golden tax sale opportunities

Perhaps the owner died and the family is unaware that taxes are due, or the homeowners live out of state. In these situations, the tax lien may be the only lien on the property. As an investor, this can be a perfect opportunity for acquiring the tax lien and buying a property for much less than market value. Pay particular attention to tax liens on properties that have no other liens against them, abandoned properties, properties with out-of-state owners, and properties that the owners use as their vacation home. In the case of a property used as a vacation home, the homeowners facing foreclosure may be using all of their resources to save their primary residence, so they drop the ball on the vacation home.

Getting redeemed out of your position

When you buy a tax deed or lien, you may begin to feel as though you won the lottery. You now control the property and can cut all junior lien holders out of the deal. You're on easy street, right Not quite. In a large percentage of cases, the homeowners redeem the tax deed. This isn't all that bad. Worst case scenario, you get your money back. In some areas, the homeowners may also have to pay penalties and interest, some of which you may be entitled to. In other words, you stand to profit even if you lose your interest in the property. To encourage investors to purchase them, tax liens typically carry a very high interest rate or are auctioned off for only a fraction of what's owed in back taxes, so investors can earn a worthwhile profit. If the homeowners or other lien holders don't redeem the tax lien, it may convert to a tax deed, allowing the holder to take action to gain possession of the property. Tax deeds may have no redemption period or a period that's shorter than that of...

Step Three Check the Title

Cause this is where you'll find out about things like the IRS tax lien or the judgement from a lawsuit, etc. We don't always buy title insurance ourselves. If we are getting the property for nothing down, then we'll do a title search but usually not buy title insurance. We figure if the seller lied to us about the liens on the property and our title search missed it, if worse comes to worse, we'll walk away from the deal. On deals where the seller carries back a mortgage for part or all of the money we owe them, we also are more frugal with when we decide to buy or not buy title insurance. In every promissory note we use with a seller who is carrying back financing, we always use the Undisclosed Lien Clause discussed in Chapter 2 of this book. If we have to put any serious money in the deal and the owner is not carrying back a large note, then we always buy title insurance. Again, we want to reiterate that if you are not an experienced investor who understands the risks involved, we...

Knowing What Youre Bidding On

1 Junior liens (second mortgages or other claims against the property) i Tax liens (for unpaid property taxes) Prior to an auction, carefully research the title, so you're aware of all lenders and other parties that have a claim against the property. That way, you know whether the lien being auctioned is a senior, junior, or tax lien, and you can bid accordingly. When you're first starting out, bid only on senior liens or tax liens.

Knowing the lien holder pecking order

1 Ace The property tax collector generally holds the Ace, because foreclosure can wipe out all other liens except the property tax lien. If you can purchase the tax lien, you almost always hold controlling interest in the property. The tax lien holder, however, must adhere to some strict regulations regarding the notification of other lien holders. The lien hierarchy is determined primarily by the dates on which loans are recorded against a property. The property tax lien is the strongest position, typically followed by a first mortgage, because that's the loan the homeowners took out to buy the property, and then followed by other loans in order of the date on which loan was recorded. In other words, if the homeowners took out a first mortgage to buy the house, then financed new windows, and then took out a second mortgage, you would probably be looking at the following hierarchy (listed from strongest to weakest) i Property tax lien (strongest). i First mortgage. The lien holder...

The Nine Essential Contract Clauses of Any Owner Carry Financing Deal You Do

We use a clause in our loan agreement with the seller who is carrying back financing that says that the seller has told us about each and every lien against the property (e.g., tax lien, mechanic's lien, etc.). And if the seller was not accurate in his disclosure and a lien surfaces that clouds your claim to the title of the property, then you have the right to pay off the lien directly to the lien holder and for every one dollar you spend on these undisclosed liens you get


A foreclosure occurs when someone lends another person money to buy property and the money is not paid back. Because the property provides the guarantee for the loan, the lender has the right to take it back, usually through a first, second, or third mortgage or tax lien.

The Basics

After Rich Dad Poor Dad was published, many people asked, Is he saying that a person should not buy a house The answer to that question is No, he was not saying do not buy a house. Rich dad was only emphasizing the importance of being financially literate. He was saying, Don't call a liability an asset, even though it is your house. The next most asked question was, If I pay off the mortgage on my house, will that make it an asset Again, the answer in most cases is No, just because you have no debt on your home, it does not necessarily make it an asset. The reason for that answer is again found in the term cash flow. For most personal residences, even if you have no debt, there still are expenses and property taxes. In fact, you never truly own your real estate. Real estate will always belong to the government. That is why the word is real (meaning royal in Spanish), not physical or tangible. Property has always belonged to the royals. Today it belongs to the government. If you doubt...

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Creating Residual Income Opportunities in Real Estate

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