What is tax lien investing?

Question

*sheepish* I saw an infomercial on tax lien investing and they were claiming to get huge returns on the investments. Something like 50%

Is this true? And what exactly is tax lien investing?

Answer 1

It's a scam...

Answer 2

First off, if it sounds too good to be true, it probably is and that is especially the case with infomercials.

However, you CAN get decent returns on liens, but it is not all that easy.  The 50% is true, but only on second year liens in michigan (if I remember correctly).  So good luck on that.

Basically all these are are notes that government creates when someone doesn't pay their property tax.  you can buy that note and get a good return that is government backed.  10% is quite common.

Answer 3

My understanding is this,

"The general rule is that where two or more creditors have competing liens against the same property, the creditor whose lien was perfected at the earlier time takes priority over the creditor whose lien was perfected at a later time."

Thus a mortgage lender has priority liquidation (ownership) over the investor in the tax lean on the property. Very few properties in the USA are fully paid for, thus the lender has control over the property.

There are very few times one will find a fully paid property where the lender is out of the picture, and someone has no money to pay the property tax.

If someone has a fully paid home, they can just go out and get an equity line of credit to pay the property tax or sell the home, and cash out.

I would avoid investing in this real estate TV hype.