tax lein certificates

[Troy Whiten]

What are the investment risk

[Jerry K.]

@Troy Whiten You have good comments from @Wayne Brooks and @Ned Carey. You need to know the statutes of the state.

The investment risk? You can lose you're entire investment. (Not what the infomercials tell you, is it?)

How can you lose it all? You buy the lien and the owner never pays and you never foreclose. The only way you get your money back is if the owner pays the taxes (or the property is sold and the county pays you the back taxes that either the owner or buyer paid at the closing). Other than that, you have to foreclose and there are usually time constraints. In Arizona you have to foreclose within 10 years of the date the tax lien was first sold. If you don't, the lien is expired and worthless.

Another way is you buy the lien and the property is worth less than the amount of the lien. The owner won't pay and even if you take the property, it's worth less than what you paid for the lien and costs.

Still another scenario, the property has EPA issues and you have to pay to clean it up which could wipe out your investment if the property is worth less than the cost of the lien and the clean up.

A rare case is the owner files bankruptcy and the judge decides you only get your principal back with no interest.

There are other investment risks, but those are just a few of which to be aware.