Residual Income Through Real Estate

Content
Part 1, 2	Disclaimer, Introduction
Part3	Getting Rid Of Expenses And Debt
Part 4	Buying Discounted Mortgages
Part 5	Buying Foreclosures
Part 6	System for Picking Foreclosures
Part 7	What You Can Expect on Your Investment
Part 8	Tax Liens
Part 9	Rental Income
Part 10	Tax Implications
Part 11	Online Real-Estate
Part 12	Selling Your Home
Part 13	Start Your Own Online Real Estate Company

Part 8

Tax Liens

A tax lien happens when you have not paid your taxes to the local municipality. They will issue a lien against your property that says the property can’t be sold or change ownership until the lien has been satisfied. A tax sale differs from a foreclosure in that when the public authority offers the property for sale to satisfy a tax lien, the successful bidder buys the right to own the property if the property owner does not repay him.

There are three types of liens:

1. Judgments or judicial liens, which result from a lawsuit by a creditor. In New Jersey, once these judgments are docketed in the Superior Court, they become liens on real estate.
   
   
2. Statutory liens, the most common example of which are IRS or county/state tax liens, and property tax liens.
   
   
3. Consensual liens, such as mortgages.

You don’t have to be an attorney to understand liens any more than you have to be a mechanic to drive a car. But be forewarned! I suggest you ALWAYS consult with an attorney to dot the i’s and cross the t’s. You must decide, based on your research, whether to do the deal.

#1: You don’t pay your local taxes.

#2: The local government puts a lien on the property for the unpaid taxes that prohibits sale or transfer without payment.

#3: Government auctions tax lien certificates to compensate for the unpaid taxes. You bid. (NOTE: Always physically check out the property and do lien, judgment and title searches before you buy.)

#4: Lowest interest bid, or fixed interest to the highest bidder.

#5: What if the property owner doesn’t satisfy the lien? In some states, the tax lien certificate owner just applies for and gets the deed. In other states, the property is auctioned. Need 10% cash, with the remainder in 30 days. You bid the unpaid taxes plus interest due you.

This is a true scenario. A tax purchaser purchased a lien on a piece of commercial property for $12,000. The property was owned by unknown owners, which all the proper notices were sent out and there was no redemption. He acquired the property, which was valued to be over $350,000.00. His return was over 29 times his investment.

Arizona pays certificate holders 16% interest. At the end of 20 years, a $2,000 would have grown to more than $30,000 with tax-deferred earnings.

Bibliography:

See websites: www.inft.net, containing databases or tax liens.

www.ustle.com

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Bush, Fredy. Your Fortune In Foreclosures: Today's Best, Low-Risk, High-Profit Real Estate Investment. (Tucson, AZ: Knight-Ridder Press, 1987)

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Coslick, Merlin B. How to Buy New Jersey Tax Liens That Earn 18 Percent. (Wachtung, NJ: Key West Associates, 1994)

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Wiedemer, James I. The Smart Money Guide to Bargain Homes: How to Find and Buy Foreclosures. (Chicago, IL: Dearborn Financial Pub., 1994)