In our previous article, we had discussed about the scrapping of tax liens in our personal credit reports.
This new policy is a big boost to millions of Americans, especially small business owners who need stronger credit to apply for a business loan. After just two weeks of implementation, Terra International Realty learned that the three major credit bureaus were able to delete the last remaining remnants of tax lien data on consumer reports at 5.5 million records.
Sometimes it’s so excruciating to learn that your loan application was disapproved because of a negative credit rating which had been settled several years ago. Ironically, paid-off negative items stay in your credit file and is allowed by law even after you’ve paid them.
Each one of us has an idea about property taxes. Whether you’re a homeowner or an investor, we know for sure that the government collects taxes from property owners to fund the needs and services for the common good of the greater number of people. This is in addition to income and sales tax.
We have written a number of articles on tax lien investing in the past. TAX LIEN SEMINARS’ utmost concern is the concern of its huge clientele with their investment money. For that reason, since no business is without risks, we would like to give some potential investors some of the major danger or risks associated with tax lien investing:
Before we discuss about investing in Tax Liens with a self-directed IRA, it is important that we first have a good understanding of what does Self-Directive IRA mean, and how would it benefit the owner or holder of an IRA or an “Individual Retirement Account?”
Both Tax Liens and Tax Deeds are basically unpaid taxes of delinquent properties resulting in public auctions. That could be the main reason why buyers or first time investors find too confusing. To be more specific, both the tax lien and the tax deed sales are initiated once a homeowner neglects or fails to pay the taxes imposed on the property. The local government authority, either the municipality or the county will then decide whether to pursue a tax lien or a tax deed. If it chooses the tax lien route, the resulting lien is auctioned off to an eventual buyer who in turn is entitled to collect the back taxes from the owner plus interest and penalty. On the other hand, Tax deeds are auctioned once a homeowner appears incapable of paying the back taxes on his property. Here the buyer or investor has direct claim to the property. To give more clarity these are the glaring differences:
Investing in tax lien is quite complicated and also expensive sometimes, especially for first time investors. Complicated because you may be investing on some useless tax lien certificates or worthless tax deeds. And, could also be expensive if you have been enticed to enroll in some special seminar or course on tax lien investing charging exorbitant fees.
More people today find it easy to invest on tax lien certificates than tax deeds. Especially for small and new investors who don’t have to spend thousands of dollars to start. Unlike investing in tax deeds where you need a bigger capital since you are practically buying the property. With tax lien certificates you only bid for the delinquent tax and subsequently purchased the delinquent or unpaid tax on the lien property. Tax lien certificates are sold during tax sales conducted by a county or municipality. Sales are usually held at least once a year. Counties with very large population hold tax sales quarterly or even monthly to collect enough money for their expenditures.
Most people don’t realize that you can even use your retirement account to purchase these tax lien certificates where you can grow your retirement with profit rates of 8% to 36% mandated by United States law.
Unsold tax lien certificates are transferred back to the government and available on a first come first serve basis (no auction).
In many states, you can buy these government-owned tax lien certificates year round through the mail or the Internet. You can even walk into the government offices and purchase them over-the-counter.
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