Simple novice question: can you lose money after buying a lien?
Simple Answer: Yes! Books have been written on the right and wrong ways to by liens the number of ways to lose money are too numerous to list here. If you have a specific deal you are looking at give us some details.
@Bob E. is right - there are many ways to lose money in real estate tax liens after you buy. A couple off the top of my head:
- Property is worth less than the amount of the lien.
- Property is worth less than the amount of the each lien you have to buy before you can foreclose. (In some states you can't foreclose for a set number of years and you need to pay the taxes for each year or you lose the lien position)
- You don't foreclose before the lien expires. Some state statutes have a set amount of years before the lien expires worthless if the owner doesn't redeem or the lienholder doesn't foreclose.
- Property is worth less than all the liens and foreclosure costs you incur.
- Property has EPA issues that need to be cleaned up if you end up owning the property after foreclosure. (Example - lien on an old gas station with leaky underground tanks)
- Lien on an improved property is destroyed before foreclosure.
There are many other ways. State laws all vary.
I have not. I Mostly buy 1st position mortgage liens.
@Adam Griffis I invest in tax liens through online auctions in Arizona and Florida. You really need to know the aeas you are investing in, so I travel to those areas about every 18 months or so.
You really cannot buy a tax lien or deed without a prior and thorough due diligence which takes up your time and some resources. Once you understand it's an essential upfront cost, it's a good business.
Good luck with it!
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