In today’s economy, many real estate investors have found that there is lucrative money to be made on government tax foreclosure properties.

Government tax foreclosure properties are essentially properties that have a tax lien against them. Tax liens, which take priority over any other types of liens, are usually a result of a homeowner not paying his or her property taxes. When this happens, a lien is levied by the county, and the tax foreclosure properties are sold in an effort to collect the taxes owed.

How Do Investors Make Money on Government Tax Foreclosures?

Frequently, the government will sell these government tax foreclosures to investors, who are essentially looking to buy the tax lien certificate from the county.

In other words, if you purchase liens on tax foreclosure properties, you are essentially paying for the lien and collecting the state-mandated interest rate on the amount for which you originally purchase the lien. Depending on the state, the state mandated tax can be anywhere from 8 to 50 percent on tax foreclosure properties! This means that you can get a tremendous bargain on a real estate property, or you enjoy collecting the taxes and interest rate on government tax foreclosures.

The Benefits of Purchasing Tax Lien Certificates for Tax Foreclosure Properties

The best part of this situation is that tax liens on government tax foreclosures are one of the safest investments because you either (a) collect the money for the lien, plus the state-mandated interest charges or (b) take the property. In other words, government tax foreclosures create a win-win situation. You either collect the money or sell the property – either way, you make out profitably on the deal.
Because counties rely on property taxes for the majority of their revenue, they are happy to sell the liens to investors and get out from underneath the properties, of which they have no interest, other than to collect the owed taxes.

Counties often sell the tax liens from tax foreclosure properties because it may take months for the property owner to finally pay on the lien – which often never happens. On the other hand, if an investor purchases the liens for their government tax foreclosures, then they essentially collect their taxes and pass the liens onto someone else.

The liens on government tax foreclosures give homeowners a predetermined amount of time to pay the taxes. During that time, interest accrues. If the taxes are not paid during the predetermined amount of time, then the homeowners lose their properties. The time during which the county has given the homeowners of the tax foreclosure properties to pay their taxes is the time that you, the investor, can make money from the accrued interest.

Because of the downturn in the economy, government tax foreclosures have made a resurgence, which therefore means that many investors can stand to make a great return.