- The Washington Times - Thursday, March 31, 2005

You’ve been reading about it, seeing it on late-night TV shows and hearing about your friends jumping headlong into it: real estate investing. Yet you just can’t bring yourself to take the plunge into owning property, collecting rent, taking repair calls and possibly having a renter who won’t pay the rent or take care of your property.

Never fear; tax liens are here.

Those who want a more conservative, methodical approach to real estate investing may want to consider one of the least risky ways to invest. The internet has plenty of sites that deal with the practice and process of investing in tax liens.

Taxliens.com, one such site, reports on New Jersey: “$7.6 billion … in delinquent property taxes are created each year with total size of the market at any given time being in the $20 billion … range. There are 566 municipalities that sell municipal liens in New Jersey alone.”

About 30 states issue tax liens, and the industry is growing at a rate of 8 percent to 12 percent per year, according to the Florida-based Web site.

If you decide to pursue this investment option, be sure to conduct due diligence in your research.

I appreciate the Taxliens.com approach. It does not promise extraordinary returns — 100 percent or 500 percent or 1,000 percent on investor money. It simply points out the necessary research and investigation to make the desired returns.

“Tax lien investing should be looked at as a modest return, lower risk investment. Goals should be set between 10 percent and 15 percent as a net return each year,” according to the site, which provides those who are skittish about the traditional method of real estate investing to take on a partner, the local government, to create higher-than-average gains on their money. Tax liens can be purchased for as little as a few hundred dollars up to tens of thousands of dollars. A simple explanation would be that you’re paying someone else’s taxes today while the issuing municipality or county pursues payment from the landowner. Once the government gets its tax dollars, the investor is repaid with interest.

Keep in mind that about 98 percent of tax liens will indeed be redeemed by the property owners. That means that most tax-lien investors are going for the 10 percent to 15 percent net return on their money rather than the hope of foreclosing on the property. That happens not as often as you would think.

Your first move would be to go to a Web site that lists the states that issue tax liens, then drill down from there.

You’re seeking the local contacts you’ll need to pursue the tax-lien purchases (which generally are sold at a live auction), says Brian Lee, creator and Web master of Taxliens.com.

His company, Iron Clad Realty Services, is a professional services firm that has purchased more than $23 million in tax liens in six states for its institutional investors. The company has completed more than $6 million in acquisitions in the secondary market for clients.

“Your best contact to pursue tax liens is the local tax collector’s office,” he says, adding that the search for liens is only the first step in acquiring this type of investment.

Once an investor acquires a tax lien, there is a redemption period during which the jurisdiction allows property owners to pay their back taxes. That redemption period can run up to two years in some states.

If the property owner doesn’t redeem the lien, the process moves into the tax-deed-sale stage. Reminder: The majority of tax liens get paid.

It is at this time that the foreclosure proceedings can begin and the tax-lien holder can take possession of the property.

Every state has different rules and regulations. Research is key.

Other Web sites for research include:

• Tax Sale List (www.taxsalelist.com). This site publishes more than 5,000 tax sale lists, including deed sales and lien sales.

• Tax Title Services Inc. (www.taxtitleservices.com). This site helps tax-deed purchases get clear title and insurance for properties acquired through tax-deed sales.

M. Anthony Carr has written about real estate since 1989. He is the author of “Real Estate Investing Made Simple.” Post questions at his Web log (http://commonsenserealestate.blogspot.com).

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