The old addage "to make money you have to have money" and you're stuck in a catch-22! LOL

But if you do your research, there are taxes due that are under $100, versus having to pay thousands on say a waterfront property. People don't pay their taxes for a myriad of reasons, maybe there was a divorce and both spouses believed the other took care of the bill. Or if there's a death of the homeowner, and there are no heirs, or all family members live far away.

It's much like the person who hunts for a bargain every time they go shopping. They know they want an Ipod for example, but don't want to pay full price, so they start doing their research. They look on-line for used, in the paper, or even eBay--garage saling in your pj's!

It's the same with Tax Liens. You have to do your research, not just to make sure it's a valid, not government owned easement, but to match the budget you do have. I know tax bills in the Northwest Florida area for 1/4 lots with a double-wide mobile home on them where the annual tax bill is less than $100. It can be found--just not on the beachfront, or waterfront. As with any type of investment, you start small and gradually increase as your funds increase.

There is a lot of research involved, and only you can decide if starting with $100 for a 14% return is worth all that research, but if you put $100 in the bank, right now you're only guaranteed 1%, which doesn't even cover the cost of inflation. Some banks might give you as high as 4%...but you still can't fill your gas tank with that!

You do have to start somewhere, and while there is a lot of research involved, as with anything, as you learn, the research necessary doesn't seem so overwhelming, nor does it take as long. Meanwhile, you'll be building your portfolio. If you can make the commitment to yourself that whatever you do make on "today's" investment will be added to the amount you can put on "tomorrow's" investment, to continue to increase your portfolio, then you're building a good foundation and future for yourself.

 Keep in mind as well, that if the owner does not pay their taxes in the amount of time necessary, you can foreclose on that property and either keep it for yourself as your home or a rental, or sell it to someone else. If you sell it to someone else, then that could easily give you the $50,000 or more you need to continue to invest in tax deeds, or other investments.

Just like with any investment you make, you have to decide if the return you do or can get is worth the time and effort that you put in to it. And if it's not, then the question I would ask is what else would give you that kind of return?

BJ sent me an email asking a great question about tax deeds and I thought I would share his question and my answer here.

His question was "if you purchase a tax deed and there are no liens but there is a mortgage, do you owe on the mortgage?"

First, so that everyone understands, a mortgage is a lien on the property, as well as other liens possible. Tax liens take precendence over the mortgage lien, which means when the property is foreclosed on, the taxes get paid before the bank does. Other liens could be IRS liens, mechanics liens (where work was done on the property, but not paid, the contractor can put a mechanics lien on the house to ensure they are at least paid when the house does sell).

As for owing on the mortgage. If you have the tax deed, that's all that you are responsible for, is paying THAT tax deed--you are not obligated to even pay future unpaid tax bills. It is to your advantage to do so, because then you aren't competing with other tax deed holders. As for owing on the mortgage during the time you hold the tax deed--your name is not on the mortgage, nor the property. NOW, once you start foreclosure proceedings (requirements differ by state, so make sure you do your research--minimum requirements before you can foreclose are usually about 3 years), the best thing to do is to contact an attorney to help you through the process.

If you want to know what, if any, liens are on the property, you can check with your county clerks office. Mortgages are usually recorded and publicly available. This information only shows the original mortgage amount, and/or payoff statements. It doesn't necessarily show a current total balance owed. You would need to get with the bank to find this out, and likely wouldn't be able to do so until you start foreclosure proceedings.

You can also run a title search on the property. In Florida most closings are done through a title company, and it will cost around $100 to have a title search completed with a title company (prices vary according to company as well as scope). This will show any liens against the property.

Thanks BJ for an excellent question, and please share with us what you learn about tax deeds and tax liens in Utah!

Good Luck!