Investing in real estate can be a great way to earn passive income, and how quickly you want to grow your real estate holdings depends on the strategy you take.  If you just want to add a little money to your retirement savings each month, you can accomplish that by renting out your old house, where the mortgage is paid off, after you move into your new house.  At the other end of the real estate investing spectrum is buying multiple multi-unit residential buildings or even building them from the ground, but that requires huge amounts of capital.  Flipping houses, in which you buy uninhabitable properties, invest the money to make them move-in ready, and then sell them, is a popular form of real estate investment.  Most investors buy a “fixer upper” house by buying a tax deed, but if they don’t have enough capital for that, investing in tax liens is a popular alternative.  To find out more about the legal details of tax lien and tax deed investment, contact an Alabama real estate lawyer.

Tax Liens: The Poor Man’s Real Estate Investment Strategy

You have probably heard that the buying and selling of debt is a booming business, but you don’t have to be a big corporation to buy a debt.  A tax lien is the money that a home owner who has fallen behind on their property taxes must pay to the county before they can sell or refinance the house; the local government effectively blocks their ownership of the title to the house.  The county government sometimes auctions off tax liens, so if you buy one, the homeowner has to pay you before they can get their title back and sell or refinance their house.  Since you can often buy tax liens at lower than their face value (taxes owed plus a fee to reinstate the owner’s title), you can make money by buying them.  You don’t buy the property, just a debt related to it.

Tax Deed Investing Requires an Investment of Time or Money

With tax deed investing, you buy the property itself.  If you can afford it, you can simply buy a tax deed; a tax deed is where the property owner has fallen so far behind on their property taxes that the local government auctions off the deed to the property.  Many investors who flip houses do so by buying tax deeds.  If you buy a tax lien and the property owner does not pay it off within three years, you can have it converted to a tax deed; in other words, it doesn’t require a lot of money, just a lot of patience.  When you obtain a tax deed, you must file a quiet title action in order to be able to resell the property.

Let Us Help You Today

A real estate attorney can help you if you are trying to get a tax deed or file a quiet title action.  Contact the Alabama real estate attorneys at Cloud Willis & Ellis for a consultation.