Do Your Due Diligence When Investing in Tax Deeds and Tax Liens

If these uncertain economic times have you wondering about safe, alternative investment options, then you should consider tax lien and tax deed investments. With the right tools and a little research, you can achieve returns as high as 16% to 36%.How does it work?
Local tax authorities collect property taxes in order to fund their municipal infrastructure such as their school system. A property’s tax rate is a percentage of the property’s assessed value. When a property owner is unable or unwilling to pay the taxes, the taxing authority has a couple of options for recourse. One option is to place a tax lien on the property and sell it at auction, but only after a statutory waiting period of 2-5 years. Or they can sell the property tax lien to investors who will eventually be able to foreclose on the lien.When considering this type of investment option, it is important to understand some potential pitfalls. In many cases, these are easily remedied, but only if you know what to do.
First, examine the usability of the property. The best thing is to go out and take a look at the property you wish to purchase or bid on. Although there may not be anything wrong with the property itself, you may find that it is not useful for building. Things like measuring mistakes, zoning issues, and a poor or inaccessible location can ruin the value of a property and make resale a nightmare.You can easily avoid these situations by following a few simple steps for every property that you are considering.
o Get the plat map. This is simply the record of the property’s survey and can be obtained from the county.
o Visit the property. If it is difficult to get to, then chances are it is not a property you want to invest in.
o Find out if the property is in a flood zone.A second problem you may run into is that a property’s value is less than the amount of taxes owed. You typically see this in properties that have low value from the start or when it takes too long for the property to be offered at a tax lien or deed sale. Additionally, the county adds penalties every year to property with delinquent taxes. The back taxes itself, the year over year penalties, and the accrued interest can all add up and remove any potential for a good resale price. A property with an annual tax bill of only $200 can have thousands of dollars worth of unpaid taxes, penalties, and fees. Getting a good estimate of the property’s value is the best way to avoid getting into an unprofitable situation.A third problem to watch out for is environmental issues. This is a problem many investors fear the most especially when buying vacant land. Follow these simple steps to minimize the risk:
o Obtain a list of condemned properties from the county
o Visit the property and take a look around. If the property is occupied, you may not be able to do this.
o Contact the state’s office for environmental issues (for example, the “Arizona Department of Environmental Quality”). They will be able to let you know if the property in question has any known issues.
o Look at the property records to see if any environmental concerns have been recorded.Learn more about tax lien and tax deed investing at ,and check out my course entitled the Land Profit Generator. Also, you will have the opportunity to sign up for our free list that brings real estate investing tips and discounts right to your inbox. No spam, just content!