How Do Tax Liens Work in Real Estate in Texas?

How Do Tax Liens Work in Real Estate in Texas?

Tax liens are financial holds that the government places on property holders due to their non-payment of taxes. It puts certain restrictions on their ability to buy or sell the property or to make a profit on the real estate in question.

This protects the banks who have an investment in the property as well as any other stockholders of the real estate property until such time that the person pays their taxes or their property is foreclosed.

In the case of foreclosures or default, this is where you can cash in on the investment opportunities in Texas. Even if you have never worked in the real estate industry, there are ways that you can take advantage of the opportunities that tax liens provide.

How Do Tax Liens Work in Real Estate in Houston?

First, Know the Tax Lien Laws

Before you can cash in on the opportunities of tax liens in a real estate investment, you have to know what the applicable laws are in Texas and Houston or surrounding areas. You need to study the laws of your state of residence or the state in which you plan to purchase the property before completing the transaction. They are all different and each as its own quarks and pitfalls.

A poor understanding of tax liens and how they work in Texas can lead to lost profits and even stiff fines. Remember, you want to keep your bank account in the positive side at all times and avoid any legal troubles.

In addition to the state laws, there may also be city or county ordinances that dictate what you can do regarding tax liens. Some cities, for example, require that you have a real estate license in order to get involved in the transaction while others do not encourage private lending or private money transactions. In Texas you don’t need a license or any qualifications but the highest bid to get the tax lean. This could be bad and good.

Know Your Limits

Another important thing to know is how much you can afford to invest if you want to cash in on a real estate transaction that involves a tax lien. Remember, if you do start transacting real estate business involving tax liens, you are profiting from the interest on the tax lien that is placed on the property on an annual basis. In Houston on a home stead house you get 25% return on your money the first year and 50% the 2nd year. After which you own the property. IE if you paid $20,000 for a take lien. To get the house back they would have to pay you $25,000 the 1st and $30,000 the 2nd. The right of redemption is 2 years on a home stead and 1 year on a non except property. You must report this amount on your personal income tax and there may also be fees associated with doing this sort of transaction.

Know how much credit you can extend to private investors and try to keep things as simple as possible when it comes to dealing with tax liens. If the person whom the lien is held against does not pay their amount due, the property may revert to you. So make sure you are investing in a good property with resale value. In Texas the property is help by you until the debtor pays you back. It is sold at a tax auction and the highest bidder gets the tax deed.

When to Ask for Help

If you need help, you can locate a real estate investment expert or tax lien specialist and ask them how tax liens work in Texas. That way, you cover both city and state ordinances and figure out what you have to do to be in compliance with state and city laws. The last thing you want to do is to find yourself in a precarious legal situation or one that requires you to pay large fees for your lack of knowledge.

Investing in properties with tax liens can be risky.  It’s no shame to ask for help when you need it to avoid a costly error down the road!

Learn More About Tax Liens in Texas

If you need to know more about how to profit from tax liens in Texas or 77055, let us know. Give us a call at 832-210-3088 or fill out the form to learn more and we’ll get in touch with you immediately.

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