April 27, 2016

Investing In Tax Liens

Diana Hoff
4 min

With a self-directed IRA comes many allowable investments. One of these options is investing the IRA in a tax lien.

A popular allowable investment due to the lower purchase price when compared to other investments, investing in a tax lien can potentially quadruple the initial investment.


A tax lien is a taxing unit sold by a governmental agency when a property owner is delinquent on property taxes.

Tax liens are sold to investors when the governmental agency needs money immediately for the budget and to avoid foreclosure.

The investor then gets the right to collect interest, serve notice of foreclosure and obtain possession of the property when applicable.

Using an IRA for Investing

The investor will have to research whether the county they are looking at offers tax liens. Once they determine that it does the investor will need to research the properties offered. Most liens are sold at live auction, but sometimes they are offered online as well.

The governmental agency will generally expect the money immediately or within 48 hours after the sale. With a traditional self-directed IRA, the investment has to go through an approval process before the money can be accessed. For more information about this process when investing in a tax lien contact Mountain West IRA.

Holding the Tax Lien

Once the investor has the tax lien they just need to wait until the delinquent taxes are paid. If the taxes are not paid the investor will receive first right of refusal for the next year’s delinquent taxes.

Generally, the tax payer must suffer for three years before the investor has the right to foreclose. This means the lien holder has to pay three years of past-due taxes before they can see a return on the investment. If the tax payer defaults on their taxes for the three years, the investor can take possession of the property through foreclosure, which can be a huge return on that particular investment.

For more information or questions regarding investing in tax liens contact Mountain West IRA. Tax liens are just one of many allowable investments with a self-directed IRA from Mountain West IRA.

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