Which is better between tax liens or tax deeds? That is a common question when people learn about tax sales. They are the two different types of sales.
Tax liens are created when property owners fail to pay their property taxes. The county wants to get their money and sending notices to the owner isn’t working. They turn to investors for help. They will place a tax lien on the property if the investor is willing to pay off the taxes owed. The county even offers interest to be more appealing to investors.
The interest rate on tax liens can vary from 5% up to 36% annually which spikes investors interest. Many of the counties offer the interest as a flat rate regardless if the owner pays off the lien the next day or in 12 months.
Tax liens, if researched properly, can be virtually risk free investments because your investment is secured with real estate and takes precedence over voluntary liens such as a mortgage. Because of this, if you find a property with a mortgage and the home owner does not pay off your lien within the redemption period, you can foreclose on the property and the bank most likely will pay off your lien.
Many investors favor tax liens because of the security and guaranteed returns.
Tax deeds on the other hand are also popular. A tax deed is like a tax lien in the sense that the county wants their money, but they want to get it every year and not have to go through the process year in and year out. Because of this, the county will give you a deed to the property if you pay the taxes and fees for the property.
Investors like the tax deed auction because they get ownership of the property unlike the tax lien. It is a great way to build a real estate portfolio at deeply discounted prices.
In order to find out which one is best for you, you will need to decide what you want out of the auction. If you want a return on your money, both provide a way to do that. If you don’t want to deal with cleaning, fixing, or selling properties then tax liens would be an excellent choice. If you want to buy and hold property, then tax deeds would be your best choice.
There are many steps that will help you understand tax delinquent auctions better. We recommend http://BankREOTraining.com for tax sale education.
