Tax Liens & Deeds

Investing in Tax Liens & Deeds

Investing in tax liens and deeds with self-directed IRAs are attractive investment strategies because they are somewhat easy and inexpensive to acquire and manage. And, they have the potential to earn a desirable return on the initial investment.

When you use retirement funds to invest, the liens and/or deeds are purchased by the self-directed IRA and are owned by the IRA. All income and expenses attached to the asset flow directly into and out of that account and provide critical tax-sheltered income for your retirement.

Advanta IRA oversees many investments in tax liens and deeds in self-directed IRAs. While these investments have the potential to offer solid returns, as with any investment, due diligence is key, and seeking the appropriate advice from professionals is advised.

Tax Lien Investments

Tax liens are attached to property when owners fail to pay annual property tax. Once a lien is in place, the owner is unable to sell the property or refinance a mortgage until the lien is paid in full. Governing agencies sell these liens at live or online auctions. Investors who win the bid pay the taxes due. The investor assigns and collects a set interest rate and fees from the property owner. The property owner has a set timeframe pay the investor to get the lien released from the property.

Investing in tax liens can offer steady returns until the lien is paid in full. In case of default, the investor can take ownership of the property and can sell it outright—another way to earn income.

beige ranch style home with large front yard

Judge wrapping a gavel during an auction for Tax Liens and Deeds

Tax Deed Investments

Tax deeds work much like tax liens when property taxes are in arrears—with one critical exception: the government or municipality takes immediate ownership of property. Tax deeds are then sold at auction, and the investor with the highest bid wins ownership of that property. The investor can rehab and flip the property, rent it, or sell it for a quick return.

Tax deeds have the potential to garner quick and desirable returns in the right circumstances.

Free eBook

Invest for Success: Real Estate in Your IRA