For any property that is owned in the United States, there are certain local taxes that need to be paid every year. In the event of non-payment of these taxes for a substantial amount of time, a county government or municipality has the right to seize the property from the owner. To give an opportunity to the owner to pay his tax dues, a county may sell tax lien certificates for the property. It is a provision for the owner to secure a loan to pay his taxes.
The person who buys a tax lien certificate is providing a loan to the real estate owner. This provides the owner with some time to repay the tax debt. A holder of any tax lien certificate must be returned the principal amount, along with a fixed interest, within a fixed period of time. Failure to repay the loan provides the tax lien certificate owner with a right to acquire the property outright in some states. It is a tax debt relief instrument.
It all depends on whether the real estate owner is able to pay back. In any case, you will certainly make a profit, based on the interest rate paid back to you. Many people looking for a real estate investment go for tax lien certificates, as they provide them with an opportunity to acquire properties at a fraction of market prices in some states.
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