Step One to Building Your Profitable Tax Lien Portfolio
By: Tax Lien Lady | Posted: 23rd May 2007
The first step to building a profitable portfolio of tax liens or tax deeds is to decide on the purpose of your tax lien or tax deed investment portfolio. Why do you want to invest in tax liens or tax deeds in the first place? Your reason for investing will determine what type of investment will be best for you; tax lien certificates, tax deeds, or redeemable tax deeds. It will also be the determining factor in deciding where you will invest and in forming your bidding strategy and how you will profit from your investment later on. Basically everything that you do to develop a profitable portfolio of tax liens or tax deeds will be based on this decision.
Do you want to invest for your retirement? If so, you may want to invest with before tax money in a self-directed IRA. If current income is your goal for your investment portfolio than you will want to use after tax money to invest and you may want to invest through a corporation or LLC so that you can pay any expenses related to your investing out of that income before you’re taxed on it.
Keep in mind that income from tax liens and tax deeds may be treated differently. Interest income from tax lien certificates is reported as interest income on a 1099 form. Income that you receive from the sale of tax deed properties would be treated as capital gains if you hold the property for at least a year before you sell it.
Are you building a tax lien portfolio because you want to obtain properties for back taxes? If so, you are better of with tax deeds or redeemable tax deeds. The chances of actually foreclosing on a tax lien property and getting the property are pretty slim. In some states if your tax lien does not get redeemed within the redemption period, the property will have to go to a deed sale and the property will go to the highest bidder. Then you will be paid on your lien along with any interest and penalties. This is the second article in an 8 part series. If you missed the first article in this series, “7 Steps to Building Your Profitable Tax Lien Portfolio,” you can view it here. In subsequent articles I will take each one of these steps and go over them in depth to give you an idea of what each step involves. For more information about how you can build your own profitable tax lien or tax deed portfolio, I invite you to sign up for the free preview teleseminar to my new 8 week coaching course, "Build Your Profitable Tax Lien Portfolio." To register, go to http://tinyurl.com/f2hy4.
About the Author
Occupation: Tax Lien Investing Consultant
Joanne M. Musa is the creator of Tax Lien Investing Secrets II and author of Tax Lien Lady’s e-books, Tax Lien Investing Secrets: How You Can Buy Tax Lien Certificates in New Jersey and Other States and Tax Lien Lady’s State Guide to Tax Lien and Tax Deed Investing.
Her easy to follow step-by-step guides to investing in tax lien certificates and tax deeds have earned her the reputation of The Tax Lien Lady. Through her web site http://www.taxlienlady.com, she has helped hundreds of investors, answering their questions about investing in tax lien certificates and tax deeds.
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Tags: highest bidder, retirement, self directed ira, redemption period, capital gains, investment portfolio, interest income, tax liens, tax money, back taxes, tax deeds, tax deed, tax lien certificates