One of the many types of investments self-directed investors often consider is property tax liens. Knowledgeable investors can find value in this type of investment, but are aware it comes with its own risks and pitfalls.
Using property tax liens to buy properties is one possible use for tax liens, but most lien investors are after the interest rate and penalties owed on the tax amount. Although it can vary by state, conservative estimates put only about two to five percent of liens going unpaid and ending up with the tax lien holder going through the foreclosure process. Educational resources on tax lien investing suggest doing thorough research on the properties associated with the tax lien prior to the auction, just in case you end up with a property instead of repayment of the lien.
Equity Trust’s Client Services team is happy to walk you through the process of what your IRA needs to do if you find yourself in the position of looking to foreclose on a property tax lien. As with any IRA investment, you need to make sure the investment stays titled to the IRA and not to you personally.
It’s also important to remember you will need to complete the appropriate ‘buy’ and ‘sell’ Equity Trust paperwork
. In this case the terms ‘buy’ and ‘sell’ are in name only to facilitate a replacement. This paperwork is to maintain a paper trail of the asset changing from a tax lien to a property, as well as granting Equity Trust permission to sign any necessary third party paperwork. Feel free to familiarize yourself with the paperwork prior to calling your Client Services Team or review it while they guide you through the process.
Considering an investment in tax liens is one way to utilize the diversity found in alternative investments. Equity Trust also offers additional education resources
as you explore the various strategies for your wealth-building goals.