The latest real estate investment craze in the US is tax-lien auction due to unpaid property taxes. All the bidding process happens online, a guide is available at bidmaricopa.com. The process involves bidding on property-tax liens (which consists of delinquent taxes, accrued interest, and costs associated with the auction/sale) where investment returns can be as high as 16 percent annually.
In 2009, the average winning bid was 8.7%, which is better return than most investments in the stock market.
Lien investors pay off other property owners' past-due taxes, receive a decent rate of return for a few years, then hope to make the money back when the property is sold or the taxpayer ultimately pays it off with interest and penalties.
In 2009, an average lien was $1,784 - when the lien is paid off.
To read more about what is a tax-lien auction and sale, click here.
This year in Phoenix Metro, property-tax-lien auction is geared up to be the largest ever in volume and value.
Rampant home foreclosure, plummeting property values, and inactive commercial buildings caused a dramatic spike in unpaid property taxes during the 2008 tax year. In fact, it was recorded as one of the largest sale of property-tax liens on record, an estimated $70 million worth of unpaid taxes on about 42,000 homes and other properties.
The amount of unpaid taxes involved constitutes as 1.6% of the county's total 2008 property-tax levy.
In 2009, Maricopa County (Phoenix Metro) involved the sale of 33,500 available parcels valued at $47.5 million.
On Feb. 8, those unpaid taxes will be sold to investors hoping to earn interest on them until the property owners pay up.
And if the home owner does not pay the overdue tax within 3 years, the investor has the right to collect the property and transfer the title into his/her name.
But as with any investments, there are risks.
If a property doesn't sell for enough money to pay off all county tax liens, which can exist for multiple years and be held by multiple investors.
Investors who don't do their research could find themselves holding a lien on property that has been deemed an environmental hazard, and the investor could be liable for financing the cleanup.
To get the latest info on tax-lien auctions, read the advice of Mark Manoil, a Phoenix lawyer who specializes in property-tax issues and tax-lien investing.
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