Tax Deeds: 3 Benefits of This Investment Type

One of the little-known ways to get invest in real estate is through the purchase of tax deeds. This process involves buying a deed from a local municipality after a homeowner has become delinquent paying their real estate taxes.

Once you buy the deed, you must hold the deed for a specified amount of time, allowing the homeowner to pay it off plus interest. This is known as the redemption period, which varies by state. If the homeowner pays up and reclaims their property, you collect the back taxes, all fees & a specified (by law) amount of interest. In this scenario, you earn more money than you bought it for. If they homeowner does not reclaim their property during the redemption period, the home will be foreclosed on, and you will legally own the property having paid only the back taxes and any municipal fees. This means that either way, you stand to make some money out of the deal. Consider some of the main benefits of using tax deeds as an investment.

This is considered a low maintenance type of investment. You really do not have to do anything after buying the deed. You don't even have to go after the homeowner to pay. The county tends to do this, as it contacts the property owner constantly in an attempt to collect. Dependent on the state, the deed holder or the county eventually provides the owner with notice of an upcoming foreclosure, which may prompt him or her to finally pay you the cost of what they owe for taxes, plus the interest. This means you make back what you paid, and then some. If he or she ignores the notice, the foreclosure occurs, and you end up with a property for the price of the overdue taxes plus any municipal fees. Clearly, this is considered a good investment.

Another benefit of tax deeds is that few people have heard of this option, and even fewer understand it enough to try it out. This means that as long as you know where to look, you will not have a lot of competition, at least not compared to the typical foreclosure auction. Of course, there are some people who make a living purchasing tax deeds, which means competing with experts to find some of the best ones. However, this is still a rather unique way to either make some cash or end up with a foreclosed home that you own.

One nice thing about tax deeds is that liens that are created due to unpaid taxes usually take precedence over other debts, which means they get paid first, before other liens. This is why you are likely to make at least the amount of the unpaid taxes, plus the interest. In fact, in the majority of cases, the bill is paid long before the home forecloses, which is why you are much more likely to end up with money than property. As long as you are prepared for either result, you will likely be happy.

While every investment has a few risks, investing in tax deed sales is considered pretty safe. But in some states, you must be prepared to sit on the deeds for several years if necessary. Just educate yourself on the matter and consider consulting a professional to get some advice first, and then get started looking for this type of deed sale or auction available near you.