Tax Lien Investing In Tax Liens & Tax Deeds

Tax Lien Certificates

To the non-US reader this will be completely unknown information. Tax Lien Certificates are advertised by many gurus as a safe, secured, guaranteed investing strategy that allows the investor to achieve returns of anything from 8% to 50%. Are they telling you the truth, and what really is a Tax Lien?.

What’s a Tax Lien Certificate you ask?

In the UK, like it or not, we have to pay council tax. This is a local authority tax placed on property to allow the county to supply community services eg police, ambulance, fire, schools etc. Now the equivalent of council tax in the US is Property Tax.

In the UK, if we fail to pay our council tax then the local authority starts legal proceedings to get the money from you. They will place a CCJ (County Court Judgement) against you, thus blackening your credit rating; they will take you to court and either the court will issue a warrant for a bailiff to go in, and seize property to the value of the judgement and legal costs, to allow the local authority to recover their money; or the judge may even send you to prison if they believe you do not have goods to cover the judgement. All of this is very time consuming and costly for the local authorities and they still may not recover their monies. It is for this reason why our council taxes keep going up – those of us that do pay our council taxes are in effect subsidising those that do not. Are you happy about this?
The US has, in my opinion, a far more sensible way of obtaining money for their property taxes. When a homeowner in the US fails to pay their property tax, the local authority (aka County) places a legal charge against the property called a TAX LIEN. This prevents the homeowner from selling the property and/or refinancing the property until the taxes are paid. Great, the local authority has secured the debt, but they still do not have their money to keep community services going. Now this is the clever bit, they sell these TAX LIEN CERTIFICATES to investors.

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