Trying to find a secure type of real estate investment? Many investors start out constructing their portfolios by buying tax liens.
How It Works
Every single property owner is assessed a particular amount of their property to pay inside the type of property taxes. The county in which the property is located utilizes the dollars earned from such taxes to pay for municipal services such as roads and schools. If the property owner is unable to pay their taxes in time the county will produce a lien against the property. Since this lien does not result in immediate payment to the county, the county will often sell this lien to a third party as a way to get the money in requirements now. Third party buyers of tax liens are normally investors. This is simply because the tax lien might be paid back to the investor either by the property owner or the county, with additional interest and fees. This makes tax lien investing a potentially intelligent investment method.
Potential Pitfalls
You will discover some possible pitfalls of investing in tax liens. 1 of these potential troubles often results from the property owner filing for bankruptcy. Based on a Minneapolis bankruptcy lawyer, if a property owner files for bankruptcy it could hurt the investment outcome of the property?s tax lien holder. This is since the Minnesota Chapter 7 bankruptcy court could lower the tax lien?s interest rate or discharge the property owner from the lien. If this was to happen it would remove most of or all the lien holder?s possible gains. So as to prevent this a potential investor will need to take the time to effectively analysis all properties prior to deciding to acquire any liens on them. This indicates checking whether or not or not the property is in danger of foreclosure. An investor who?s worried about a possible property going into bankruptcy must consult a bankruptcy lawyer by calling: 952-294-0144 or by visiting the offices located at: 6465 Wayzata Blvd., Suite 780, Minneapolis, MN 55426.
Source: http://finance.therefinedgeek.com.au/index.php/2011/10/prospective-problems-in-tax-lien-investments/
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