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Tax Lien Certs is a form of investment, most of the time it refers to a property or real estate.
Tax liens arise when property taxes are not paid.
the government can record the tax obligation and wait to get paid. While they wait they charge a modest 8% to 50% interest. If those taxes are not paid within the allotted time, the owner loses the property.
Most municipalities would be happy to wait and collect the large interest. (property taxes are owed to the municipality govt, but the law governs them are by the state govt)
If, the city govt's finanical situation is not ideal, which is the case for most of the Canadian municipalities. That is where tax lien certificates come into action. If the local goverment wants the taxes quickly, they may issue a tax lien certificate. You as the investor buy the tax lien certificate for the back taxes plus any interest accrued. You then have the same right to collect interest as the goverment, and the same rights to the property as the goverment would have had.
Tax Lien certs are superior because it's tax, not even bankrupcy can get rip of this obligation.
So what does this mean? It means that when you buy the tax lien one of two things will happen. First, and most likely, the tax lien will be paid off. This will happen when either
a) the property owner pays the taxes directly to clear up his account, and you earn about 24% on the cert on avg or
b) Lienee sells the house and taxes get paid out of closing costs to assure clear title to the new owners, in other words you still get paid
c) by the bank when they foreclose on the property (if he isn't paying his taxes he probably isn't paying his mortgage either). That means you HIT THE ULTIMATE JACKPOT, You will receive your original investment plus the stated interest (8% to 50%).
But what if the tax lien is never paid?
That's even better
Different state has different laws on the timing and execution on the matter should a lienee choose/forced to default on the lien, but essentially, you get the property.
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