Zero Risk Real Estate: Creating Wealth Through Tax Liens and Tax Deeds

The Risks of Illiquidity

Tax liens are not a liquid investment! Plan on your money being tied up for the entire term, plus six months if necessary for foreclosure.

As I stated in the beginning of this book, tax lien investing is a get-rich-slow plan. For this reason, you should be wary of investing critical funds that you may need for other purposes. Tax lien investing is certainly not something you should be engaging in with emergency resources. Instead, consider stocking a percentage of your income away, or using a qualified retirement plan with the goal of investing the saved money in tax sale ventures (see Chapter 8). Remember that, in addition to the money required to actually purchase the lien or property at sale (including back taxes and associated costs), you may be required to continue paying all subsequent taxes on the property. If you don’t pay, the property will once again be listed in the next tax sale. But you are still in a secure position. To avoid losing your possible foreclosure profit on the investment, you should be sure you have the funds available for the interim costs until the owner redeems or you sell or assign.

You should also keep in mind that, if you foreclose on the property and attempt to resell, it’s possible your money may be tied up if you’re unable to sell for some time. Plan on six months, although this is dependent on market conditions ...