Many investors have seen infomercials telling them that they can make a ton of money buying tax liens and tax deeds, but is that really true? The truth, as with most infomercials, is that the presenters leave out a big chunk of information--namely all the cons to the investment.
First off, investing in tax liens and tax deeds can get complicated. Each state is different, so before you even think about investing, make sure you understand how the process in your state works.
Secondly, tax liens and tax deeds can often require you to wait a long time before paying out. This investment is cash intensive up front, requiring you to purchase with all cash, but it can sometimes be years before you see any money.
Thirdly, these auctions can be competitive; thus, getting incredible deals like the ones they talk about on TV is far from the norm.
As with most investments, though, there is money to be made if you know what you are doing and are willing to put time into due diligence and research. By no stretch, though, is investing in tax liens and tax deeds as easy as some promoters make it seem. For more information on investing in tax liens and tax deeds, read through some of our relevant articles:
Investing in Tax Liens and Deeds
The Benefits of Tax Deeds in Texas
How Texas Tax Sales Work
Georgia Tax Deeds
Investing in tax deeds can be dangerous without proper research and due diligence. I highly suggest a person read up a few books on it before actually trying to invest or go through a real estate forum online. Don't go to expensive seminars those are a waste. The best book I have seen on the topic is Complete Guide to Real Estate Tax Liens and Foreclosure Deeds: Learn in 7 Days by Don Sausa [isbn 0978834682].
Yes, it can be both dangerous and lucerative. Ending up with a property for a few hundred bucks isn't the most realistic goal though... Deeds are issued Less than 3% of the time, however you can plan on 10- 24% returns in various states.... not to shabby!!! Due diligence is a MUST. Researching the properties, attending the auctions and accounting for the flows, applying for deeds, etc takes a lot of time to do ..so depending on the amount you plan to invest it might be less expensive to invest in a fund or investment club that purchases them. I know of a few. Feel free to email me for info on them. Good luck email@example.com
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