Solo 401k Tax Lien Investment Procedure

Tax Lien Defined

If the owner of real estate is delinquent in paying his property taxes, the county or other taxing units sells its right to foreclose. The sale of tax liens is done at a public auction. Because the county is hungry for tax revenue, the purchase price of these tax liens generally fall in the hundreds of dollars. As a result, solo 401k investors just starting out and with low account balances find tax lines to be an attractive investment. Also, returns can be as high as 12 to 16 percent a year.

Locating Tax Liens

You can contact the local tax authority, or do an internet search for tax liens followed by the name of the city. You will be provided with the date and time of the sale as well as a list of delinquent properties.

Purchasing Tax Liens

At auction, the county or state will require payment within 48 hours. As the trustee of the solo 401k, you go to the bank and have the banker issue a cashier’s check from the solo 401k bank account on the day of the auction.

Holding the Tax Liens

After the lien is obtained, if the property owner pays the delinquent taxes (redeems the line), the proceeds are deposited into the solo 401k bank account. On the other hand, if a three years of delinquencies pass, the solo 401k trust can foreclose on the property and title to the property is taken in the name of the solo 401k trust.

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