It’s no secret that the market has been in the tank for a few years, and people are around trying to find the best place for their money. Of course, now that I paid off my credit cards, have a much more manageable debt load, I’m also looking to invest some of my money while still paying off debt. Like everyone else, I’ve got a whole slew of things to balance when I invest – risk, time frame, security, return and more. All of this is because my financial situation is different from your financial situation. In an effort to get a bit higher returns, I’ve been exploring some investments that are new to me recently, starting with lending club. Today, I’m going to check out tax liens.
I had never heard of these until 2 years ago, when my future father in law started to tell me about them. For those of you that have never heard of them, the process (at least in wyoming) works like this:
- Some landowner does not pay the county taxes for the most recent tax year (In this case, 2011)
- The county puts a tax lien on the property
- You pay the taxes for the property (whatever they may be) and now you own the lien. In wyoming, the person who owns the land now owes you the property tax, plus 15% interest.
- If the person does not pay you at all, they will be delinquent the next year (2012) as well. You then have the option to pay the taxes on it or not. If you choose to pay the taxes on it, the same situation applies
- After 4 years, you can start proceedings to become the full owner of the property.
At first, I thought (like lots of others, right beating broke?) “what’s the catch?” Well, there really doesnt seem like there is one. For one, the county wants they money – they dont care where it comes from. They need that money to operate for the year, plow roads, pay salaries, collect garbage, etc. They are anticipating a certain amount of revenue, and if they cant get it, there will be problems.
Since they are a government agency, they can essentially make people pay whatever they want in terms of interest on late debt, which is were the nice 15% comes in. Better than anything that I’ve seen, and the property owner has to pay it to remove the lien! Sounds like a good deal to me. The only crappy part about this is that you cant choose the parcel that you purchase the lien for – you have to put your number into a lottery and they will draw you and assign you 5 properties. If you want them all, you can take them all, and if you want none, you pass on all of them. Once everyone has made the decisions, it starts again. This doesnt work like this everywhere, but where I’m going, this is how it works.
I havent gone yet (it’s in july) but I’m looking forward to it – I havent decided how much I’ll invest (if anything at all) but I think it could be a good way to get a high return. Even if they never pay me, i’ll get something that i’ve wanted for a while as well – a plot of land!
Readers: have you ever bought tax liens? If so, what do you think about it? If not, would you consider it? Have you ever even heard of something like this?
Whoa, interesting! Seems like you can’t lose (unless of course you don’t want that property) in this situation.
even then if you dont want it, you’re only out the time it takes to head over to the courthouse, not any real money! the sale is actually tomorrow, so I’ll make sure to whip up a post on how it went.
Sounds very interesting! And like a good deal.
Too bad it didn’t work out, but this is an awesome way to invest. Pay less than something is worth and you win every time.
Cool, no I had never heard of this before… sounds interesting though. If the person doesn’t pay, I wonder what’s involved in becoming owner of the property or if there is any way to recoup those taxes owed if the property is sold at auction, are you then a creditor paid after the mortgages are satisfied? Stuff I need to look into!