Wednesday, April 24, 2024
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Paying Your Neighbor’s Taxes?

Paying Your Neighbor’s Taxes Can Net You Your Biggest Return.

Death and Taxes…the only two things guaranteed in life. So you can be sure if you don’t pay your taxes Uncle Sam will come after you.

Unfortunately, some homeowners have found this out the hard way. Medicare and social security taxes are taken out of most people’s checks from their employer automatically, so people never even see that money. The employer sends that money to Uncle Sam before you have a chance to spend it. It’s the same with sales and excise tax, companies tack that tax on when you make a purchase and you pay those taxes right away.  So a lot of times you don’t even notice those charges.

Taxes on real estate though are different. Homeowners can choose to pay their property taxes in two ways. Property owners can choose to pay their taxes monthly where they are rolled into their monthly mortgage payment or as a balloon payment each year.

And regardless of choice if those taxes aren’t paid you can make yourself a low risk 12-18% on your money.

Let me explain…

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When people don’t pay their property taxes the government issues a tax lien against their property. A tax lien is a legal claim or hold against an individual or business who owes money or services to another. The lien becomes a legally guaranteed way to ensure a debt will be paid by placing a restriction on the debtor’s property, which limits them from transferring its title (selling the property) or using it as collateral to obtain further financing.

You can imagine in this recession there are a whole lot of people not paying their mortgage or property taxes, which provides investors like you and me with a whole lot more opportunity to realize hefty gains.

Why do cities and states need these back taxes?

Local governments need the money collected from property taxes.  It has to pay for the daily services of policemen, the fire department, ambulances, city services and teachers. Can you imagine if these services were no longer provided? If the money isn’t collected the local government will be forced to raise taxes on everyone who does pay their taxes. This is why local governments offer great interest rates for you to pay these taxes.

How to make money with tax lien certificates?

When I first heard about this opportunity I didn’t see the advantages. Footing the bill for someone else’s taxes doesn’t sound like a smart way to get rich to me. But I was wrong. This investment opportunity is NEARLY risk free. You can win regardless of whether the property owner pays or not.

A tax lien certificate sale is a public sale, usually at auction, of the right to collect on a delinquent taxpayer’s debt. What is purchased by the winning bidder is not the deed to a property. The investor’s money pays the delinquent taxes to the local government on behalf of the delinquent property owner.

So here’s how it works.  Let’s say Peter owes $3,000 in back property taxes.  You pay the government the $3,000 in back taxes and collect your initial payment and interest when the tax is paid off.  And there is heavy incentive for Peter to pay this off.  If Peter doesn’t pay it off he’ll lose his property

There are only two outcomes to a tax sale certificate, both of which you can profit from. One, the lien gets paid and the government guarantees you a fixed rate return on your money. Just how much depends on where you live but generally you can expect to earn 12-18%. Are you making those kinds of returns with your current investments? I bet not!

The delinquent property owner must repay the loan with interest to you in a specific amount of time, typically 12-24 months. If the property owner does not pay you back with interest in the specified amount of time then you could get the title to the property if it is not auctioned off.  But in the event it is the lien holder is the first to be paid.

If you do acquire the property you now have the options of selling, renting or living in the property. Now this may not seem like a winning situation, but it is! Just imagine an investment of only a couple of grand in a tax lien certificate could net you a $100,000 property. Even if you sell the property for half of what it’s worth, $50,000, you’re looking at a great return on your investment.

The best part of all is this is done through the government. They are the middleman. You never have to work with or meet the delinquent property owner. Or hassle the property owner for payment.  The government cuts you your check, not the property owner.

But Nancy, if this opportunity is so good why haven’t I heard of it before?

Your financial adviser or stockbroker will never recommend this type of investment to you because they can’t make any commission off of it. In fact they’re prohibited from making commission off of these types of investments.

For years this is how the super wealthy made low risk, conservative investments. Banks and other financial institutions have been investing in these certificates for decades. It’s only now the rest of America is finding out about these opportunities.

Buying tax lien certificates are a win for nearly everyone involved. The government gets their unpaid taxes and continues to fund necessary services to its residents. Property owners get on average a year or two to recover from their financial hardships and repay the loans to you. And you get to generate better than market average returns.  With the possibility of it being a home run.

If you would like to invest in tax lien certificates contact your local county government for specific information. The tax collectors office is generally a good place to start. Rules and regulations can vary wildly from county to county so make sure to get all the facts about the county you’re buying in before you make any purchase.

Until Next Time…

Keeping Money In Your Pocket,

Nancy Patterson


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