Essentials of Tax Deed Investing

Article Written By: tedthomas

There is a great distinction between tax lien certificates and tax deeds. If you are contemplating investing in tax-defaulted real estate, you must be apprised of the difference and how it affects your bidding.

Let's get going with the essentials. Every piece of property in the U.S. is essentially owned by the government because the landowner is required to pay taxes on it. You have the privilege to keep the property as long as you satisfy the debt. This policy has been in effect for quite some time. The law of assessing taxes and bringing in those at the county level of government was established by Congress back when the U.S. was founded.

They are used to fund all manner of civil programs and services - everything from highways to parks to the police and fire departments. If you don't pay your real estate taxes, your town and county are adversely affected. But the local government has a remedy to make up for their revenue - they issue a tax deed and offer it at auction. Every single state in America has the power to convene auctions in order to get the money they need to run and manage municipal services.

While about half the counties in our country offer tax lien certificates, the other half sell tax deeds at auction. In this case, the buyer is actually bidding on the plat itself. The minimum bid is usually the amount past due, plus any penalties and interest that have been assessed. The bidding rises from there. The winning bidder must remit the purchase amount immediately.

Once you have acquired the deed, you can foreclose on the property and own it entirely. There are several options when you become the new owner of tax-defaulted real estate.

One is to keep the property and use it for yourself as a residence or for a business (contingent on the zoning laws). Another option is to keep the property, but lease it out. This is often optimal if the former homeowner still lives at the house and wants to stay there but can't pay for the bills. A third possibility is to sell the property and this is the choice most investors make. Because you've bought the real estate for pennies on the dollar, you can afford to carry the loan and sell it cheaply which results in a quick turn.

As long as you've thoroughly done your investigating, there is really no way you will squander money by investing in tax deeds. Land or housing is always worthsomething - even in a depreciated real estate market. And if you are able to keep it long enough (a real likelihood because you bought it so inexpensively), you are sure to make a nice profit. Tax deeds are a perfect investment!

About the Author

Ted Thomas has helped thousands of students graduate from his investment courses and make amazing profits. Visit Ted's website and receive your FREE copy of the 57-page Start Up Guide now at www.tedthomas.com.

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