Today, the Real Estate is one of the fastest-growing and profitable industries. Hundreds of investors are quickly tapping into it through investing in their shares, stocks, and funds. Others are landlords earning rental income from the properties.
But as a real estate investor, are you familiar with property taxes?
More often than not, property owners are required to pay taxes as well as income and sales tax. The taxes are used to pay for services such as public libraries, police protection, and recreation centers. Nonetheless, it is still possible to make money even when property owners do not submit their taxes, thanks to tax aliens.
A tax lien is a type of investment placed on a property by the city or county to claim unpaid and owed taxes. It is possible to buy this tax, and the owner is coerced to give surrender the taxes to the buyer. However, the complete selling of such a property will only happen when all the taxes are cleared.
The business of tax aliens is a complex and risky affair. No wonder the amount of unpaid taxes have been rising every year. According to the National Tax Lien Association (NTLA), they were at $14 billion in 2017. Nonetheless, in some states like Florida, they have dropped from the accrued amount of $1.2 billion to $740 million.
Do tax aliens have benefits?
Yes, they do, from the interests they accrue. In states like Florida, the rates can rise to 18% and 36% in Illinois. Investing in tax lien is possibly one of the easiest ways to acquire properties with less hustle and cheaply. Failure to honor the payment of tax lien is not very common among property owners, but if it happens, the result is usually a foreclosure of the property.
Decide on the type of property before purchasing a tax lien
There are many types of property to choose from before you can decide on buying a tax lien. Commercial, residential, and undeveloped land. Additionally, it is important to carry out due diligence on any property, find out if the property has other lien numbers assigned to it before making any commitment.