So every now and then I go on TikTok to see what’s new and what people are talking about. And apparently theirs this new side hustle, and it’s called tax leans.

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1. Let’s Explain the process first
Facts:
County tax leans
Pay tax leans and then if they don’t pay you, you keep the house.
Delinquent tax county taxes ( preview houses ) – tax lean delinquency website ( keep a list of the properties ( preview items for sales ) – tax certificate

– According to a 10 seconds tik tok
– You buy tax liens and get a tax certificate
– If they don’t pay, you foreclose on the house and get a nice house for hundreds of dollars ( and even they do pay you, make some money around 10-18% on your money )

However, here is the truth:
– 98% of all tax liens are redeemed before foreclosures, meaning the chances of you actually getting a house is very low
– The average investors only make between 2-5% on their money, because big institutions are also bidding driving up prices
– And Tax liens are expire

So in real life, it would go like this
– You have to find a state that does tax liens sales and auctions, not every state does it ( so just do a quick google search on that )
– For me, that’s new jersey tax liens auctions
– You signed up for the auctions and that’s about it
– However, if you have more than one bidder your interest rate can go from 18% to 0% because you pay extra money on it

2. Let’s Explain all the Pros in a perfect world
– Of course, you have people that make money doing this
– But it’s not TikTok east
– This takes work, knowledge, and experience

Here is a really good example of someone in new jersey that did ( I read in an article by the Fool.com )
– Buying a tax lien on a single-family home for $2200 at the tax lien auction ( senior lien, not a junior one, because they are also different ones by way )
– Spending 5k in legal fees (6 months ) and another 105k in renovations for the property which he borrowed
– After 5 months of renovations, he sold the property for 250k and net $112k

Tip: again that right there is a great good example, but the odds are only 2% that that’s going to happen to you. But the odds are 0% if you don’t get involved.

3. Let’s explain all the risk in the real world
– Competitions: from institutions and also individuals and around 80% of the liens are bought by institutions because they have a lot more money. So usually when the sale starts it starts at 18% return, but as people bid more and more ( it can go all the way down to 0%) – and you cross your fingers and hope they don’t pay you back

– Expiring: tax liens expires if you don’t enforce them. So if that person doesn’t pay, and you get the chance to foreclose but you don’t have all the legal fee money, then your lien could expire, and then you would be left with nothing.

– Opportunity cost: some states give people 3 or more years to pay back the money, and some states are 6 months. But the point is that’s money than if you paid too much won’t make you anything and if you get the average will only make you 2-5%. And if you get lucky could get you a house. ( but then that’s not all )

– Not getting paid: If there are other liens against the property good luck trying to collect. The point it’s not as simple as it seems.

– Terrible property: imagine buying a lien on a house that looks pretty good. But then 3 years later after being occupied, now it looks trash. That’s all renovation money that you will have to get from somewhere

– Evictions: don’t forget about the ugly side either, you will have to evict people from homes. Which will be expensive and also hard to do for some of you.

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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I’m an Accountant but I’m not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

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