Tax Liens and Distress Sales - Opportunities for Real Estate Investing

With the current real estate hiccup going on the U.S., more and more people are losing their homes

because they failed to pay their home mortgages. But what happens to the homes is something few

people think about. This can be a very good canyon lake real estate for sale opportunity for the

shrewd, and one can quickly earn profits in a very short amount of time.

How To Earn Through Tax Liens

If a homeowner has defaulted on his

payment, then the mortgaging bank

will start the pre-foreclosure process.

A tax lien will then be issued for the

property, so that the right to retain

the property can be gained. You can

do real estate investing in tax liens

for a certain property that has been

issued a lien and put out for an

auction sale. The way you can earn

profit from this is that the state will

pay fixed interest on a tax lien and

there are others that will start the

bidding price at auctions in the

amount of the lien.

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If the tax lien is unpaid during the duration of the redemption period, then all other mortgages and

liabilities on the house are extinguished, and the title to the property will be cleared. The investor

will now own his or her new property with a clean title. If the owner can pay the liability on his

property however, the investor can still earn through interest earned on the lien. Real estate investing

in this manner can lead to profits both ways.

Real Estate Investing Through Auctions

Sales of properties by tax-distressed owners can be quite a steal. However, you'll need to find out if

your real estate investing opportunity is going to be worth it. Check the property location

beforehand, because you might be buying something worthless, like purchasing a piece of land that

is routinely flooded. If you are able to acquire and own a piece of land legally, you can participate in

property auctions as well. But, you'll have to have ready cash on hand or in easy access, because

auction sites will typically require that those who win the bidding on their chosen properties to pay a

down payment or the full amount in a short span of time, if not cash up front. This is one of those

investments not for those without capital.

Starting Up Your Own Real Estate Investing Business

You can always start up your own business in the real estate investing industry. Given that you have

enough capital, and you have enough knowledge on the state rules on tax liens in your area, you can

start investing in property tax liens immediately. One of the most important things to do when doing

business in this nature is to check the property liens that you'll be buying. Physical inspection is

needed, but since it can be so time consuming, limit your searches to somewhere you can drive to. A

real estate investing business will also require that you have adequate knowledge of the legal

processes involved, since tax-distressed sales by homeowners will involve banks and other

institutions, most notably the government. You can earn high profits with just homes for rent with a

few pieces of properties sold, but you can also spread the profit out and sell properties for a smaller

markup, provided that the turnover for those profits will be faster so you can move on to other

properties for sale.

A distress sale is a great opportunity for investment, but one should always be careful since at

auctions you won't know if the property you're buying is a good buy, and not a lemon. You should

also check if the owner of the property is not on the verge of bankruptcy, because the IRS can

override your lien and take first priority as well as your real estate investing opportunity away from

you.