Tax Certificate Purchases For Investors

Many real estate investors are looking into tax certificate purchases as a way to build wealth. In today's troubled real estate market, there are so many homeowners that have upside-down mortgages and properties that are in various stages of distress. Homeowners may be behind in their payments to the mortgage company, banks, credit cards and the county tax assessor. When these delinquencies get to a certain point, the mortgages may go into foreclosure, the home may be put on the auction block for back taxes and tax certificate liens may arise. Investors can make money, municipalities can gain much needed operating revenue and homeowners can be released from tax obligations they cannot fulfill.

The Homeowner

Homeowners who end up losing their homes due to being in over their heads financially may actually wind up as renters and in a preferable position. Over the last decade, mortgage companies offered a slew of questionable loans to borrowers who couldn't really afford the properties. There were balloon payments, interest only loans, no down payments and a variety of hybrids. Individuals were encouraged to take out home equity loans via enticing advertisements to further burden their debt loads. While this may have seemed like a good idea at the time, many individuals got in too deep but couldn't figure out how to escape their debt. When foreclosures or tax auctions occur, many homeowners are relieved to be rid of that deep pool of red ink.

The Investor

Individuals who purchase these certificates are actually purchasing liens against a troubled townhouse, house or condominium's delinquent property taxes. If the owner of the property doesn't pay off the lien, an investor can eventually foreclose after a specific length of time and make a profit which includes interest on the lien and sale of the house. Because title insurance on distressed properties is difficult to obtain, services through an expert who specializes in tax certificates may offer assistance.

The County

It's the county's job to collect property taxes from citizens. When a homeowner is unable to pay monies owed, the county treasurer will take action such as putting the property up for auction, posting notices for investors, allowing liens. By collecting and distributing funds from this pool local government pay for essential services and amenities such as public schools, parks, streets, fire and police protection and more.

Although having one's house foreclosed upon, or put on the auction block to pay delinquent taxes, fines and fees and having liens placed may be a challenging process to go through, it can actually be a win-win proposition. Homeowners can be released from a troubled situation so that they can start again; investors can make a profit from their investments; county treasurers can collect fees so that they can distribute them within the community so that other citizens in the town, city or county can have a better place to live. Without property taxation, citizens would be without protection from law enforcement officers; fires would become a danger in the region due to lack of firefighters; libraries would losing funding; public schools would be unable to properly educate children; and parks and streets would be ill maintained and unsightly. If investors choose to put their investment dollars in these certificates, everyone wins in the end.

By: aabbey

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A tax certificate purchase can be a great investment with the right strategy. To get help with your planning, go to taxtitleservices.com.