Making Money Off Government Tax Liens

Rick Goldfelder
June 16, 2009 — 1,776 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

There isn't anybody with a mind functioning properly that doesn't like the sound of the word "taxes". Hearing somebody mention it only stirs up negative and sometimes blasphemous conversations, knowing that the government takes a part of every single income that flows into our pockets. In some areas, income taxes are so high that it almost feels like the government acts like a tyrant, pillaging us citizens. But there are some that actually love taxes, why? Because these individuals have found the brighter side to taxes, and use the problem in such a way, that it benefits them by making money.

The money making opportunity is made possible through government tax liens. Now you're probably wondering how government tax liens work, taken that you have no idea as to what they are, maybe. If so, listen to the following explanation: we all know that everybody owning property has to pay property taxes, also known as real estate taxes, to the governing authority. The amounts in which they pay are dependent on the assessed value, which does go up as that value increases. For some, the amounts due here are beyond what they can afford, therefore slowly rendering them incapable of making any payments that are needed to be complied with.

When that happens, they become delinquent, and then the process of establishing its delinquency kicks in. After that process has been verified, the collection of these delinquent taxes must be done be the governing authority in charge of such. They will then be left with no choice but to implement the collection through a tax sales. Under this, we have basically two kinds, the first being tax lien certificates. What happens here is these certificates are auctioned off to buyers. Just like other auctions where you buy antique junk or furry animals, the auction starts off with a minimum bid.

And just how much is the minimum bid, you ask? The answer to that would be the total amount of taxes owed, plus the administrative charges on such, plus the interest on what's owed. From there, everybody starts bidding. The certificate will of course be given to the highest bidder - so just how is the winner going to make any cash anyway? Simple: the delinquent payer would be required to buy the certificate back from the person owning it, plus at interest charge of around 17%. If in any case he fails to do so within the set payback period (as set by the governing body), the deed to the property will go to the owner of the certificate.

That's bad news for the delinquent chump, but definitely good news for the investor/buyer. The 2nd variation of tax sales is none other than tax deed sales. In general, they're pretty much similar to tax lien certificate, where the minimum bid starts at the total amount of taxes owed, plus the administrative charges and interest. The only difference is that you bid for the deed straight on, meaning the deed goes to the highest bidder, not giving the delinquent tax payer a chance to buy it back. Take note that the restrictions on the possession of the deed does vary from state to state, as well as the time duration set before you're given the deed.

Having said that, it's best that you familiarize yourself with the rules of each state, so you won't run into any surprises when you get down to auctioning for government tax liens.

About the Author

The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available at

Rick Goldfelder