The World of Property Tax

Do not get upset with all those taxes you pay. True enough; taxes can sometimes be a big deduction from your money and savings. However, there is a good reason why we pay taxes, particularly property tax. Here is something for you to understand the world of property tax.

Property tax, or it may also be called as realty tax or ad valorem tax, is an annual tax on real estate. It is collected by the government so that there will be enough funding on government structures and groups as schools, libraries, police and fire departments. Citizens pay their tax based on their property or property value.

Determining the amount of tax to be collected is based on the re-evaluation of the property’s value. Most of the times, the value of tax collected from a specific property is not increased even though the value of a property increases from time. The value of the property when it was purchased is the determining factor on the amount of the tax to be collected on it. However, in some cases, reassessment is considered. This happens when, for example, a house is built on a piece of vacant land or constructing an extension to an already existing home. If this is so, the amount of tax to be charged will definitely increase.

Funds collected from the taxes are used as a source of local revenues. Property tax is the main source of revenue for the government aside from income tax and sales tax. Being the primary source of the tax has an important role in delegation and self-sufficiency of local government. This delegation or decentralization of government integrates the power to increase revenue in independence and the power to use the funds from property tax accordingly.

Buying Real Estate Taxes – How Can I Make Money Investing in Tax Property?

If you’ve heard the term “buying real estate taxes,” it’s generally referring to buying tax liens or tax deeds. Tax property is a big money-maker in the current economy, but you don’t have be buying real estate taxes in the form of liens or deeds to make a lot of money. There are two especially easy ways to make money with tax property, and one doesn’t even involve property ownership.

1. Invest in tax property outside the auction. Buying real estate taxes is done by bidding on the taxes. The highest bidder wins. This is a sub-par way to get this property. Bidding creates a lot of competition and inflates the price of the property associated with the taxes. You can’t inspect the property you’re buying real estate taxes from, and you have to come up with your entire bid in cash, right then and there.

A much better time to get tax property is after the property has already been sold at tax sale. The owner can still legally sell it during the redemption period, and your competition has moved on to the next tax sale. By waiting until close to the end of the redemption period and contacting the owners directly, you’ll be buying at the most desperate time for the sellers and you can often get deeds for under $1000 at this point.

2. Go after the tax sale overage. When those bidders bid on the real estate taxes, they often bid much more than what was owed. The owners are usually due the excess money, but often move on, not realizing they can collect the difference. Then the money sits, and eventually is seized by the government.

By locating these owners, you can act as a middleman for the claim and charge up to 50% of the amount owed as your “fee”. By working on contingency, like a lawyer, you don’t charge an up front fee, but charge more in the end. Unlike a lawsuit, however, the work required to release the funds doesn’t cost much, if anything.

With the huge number of foreclosures creating millions in overage funds, this is a great way to make a lot of money from tax property without ever having to own one.

Practice either of the above alternatives to buying real estate taxes, and you’ll have your business going in no time. If you work hard, your first year could be a six-figure year!