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Tax lien investing can be a lucrative and relatively secure and easy way to make money. In fact, estimates are that 95 percent of people receive what is often a double-digit (at least 10 percent) return on their investment. If this sounds like the definition of "easy money" it's certainly being presented that way by many resources. What's true is that local governments provide investors with excellent opportunities to make good returns on their investment and you can take advantage of this. For this type of investment you will be required to do a large amount of research to be successful. Nonetheless, there's money to be made by the majority of investors who proceed carefully, so here's how the tax lien works. When a real estate owner is delinquent on paying property taxes, most counties have a method in which they try to recover or mitigate their losses. One way is to issue liens against the taxes owed. The tax lien is then auctioned off to the lowest bidder (although each state has different bidding procedures). To encourage investors to buy tax liens, counties give tax liens priority over all other liens. Many counties offer investors the opportunity to bid a lucrative interest rate on the delinquent taxes and if the owner does not bring the taxes current in the period of time dictated by state law, the investor can initiate foreclosure proceedings. This is different than those states that are tax "deed" states, which award the actual property deed to the investor. Each state varies, so it is important to know your state's laws. Tax lien investing can be a very profitable endeavor, but do make sure you always do your due diligence.
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