Tax Lien Investing As an Alternative to Investing in the Stock Market
The stock market recently took another tumble, but it doesn't concern me at all.
I have very little invested in the market.
Most of my investments are in tax lien certificates and the interest I make on my liens does not fluctuate with the market.
In fact it's guaranteed by the county or municipal government that issues the lien.
A Better Investment For Today There is a better way to invest your money - you can get double digit returns without putting your money at the risk of the market.
Tax investing is a great alternative to investing in stocks and now is a great time to invest in liens.
But let's start out with some basic information about tax investing.
What is a lien anyway? What is a Tax Lien? Municipalities and counties need money in order to pay city and county workers - school teachers, policemen, firemen, and public officials.
They also need money to fix the roads and maintain public properties.
That money comes largely from property owners who pay property taxes.
Local governments need to collect property taxes in order to meet their budget.
When property taxes go unpaid some states will allow the unpaid tax bills to be sold to investors.
Investors bid for the right to pay the delinquent taxes and get the interest on their money that the county or municipality would normally charge the delinquent tax payer (anywhere from 8 - 36% per year depending on the state).
Why Would You Want To Invest In Tax Lien Certificates? Investors buy tax certificates because of the interest they receive on their investment.
Where else can you get 8, 12, 18, 25 or even 36% on your money without a high degree of risk? And if the delinquent tax payer does not pay off the lien within the required amount of time, the lien-holder can foreclose on the property.
So the tax lien is secured by the property or the real estate that it's held against.
In most states a tax lien takes priority over other types of liens, like a mortgage for instance, so the tax lien investor gets paid first before a mortgage holder or other lien-holders.
Anyone with a tax ID number can purchase a lien, so you don't have to pay money to a broker to invest in tax liens.
And unlike other high earning investments, you can start with very little money.
More Reasons Why Now Is A Good Time To Buy Tax Liens You don't need good credit to buy a lien.
You don't even need to be a U.
S.
citizen or live in the U.
S.
to purchase U.
S.
tax liens.
Some states allow investors to purchase liens online from their computer, so you don't even have to leave home.
You can also purchase liens with money from your retirement account if you have a self-directed IRA or 401(k).
And because of the week economy throughout the country right now and the in-ability to get financing there are more liens available now then there have been in recent years.
Things To Watch Out For Beware though of people that make it sound too easy, after all if it were that easy everyone would already be doing it.
Tax lien investing is a great way to grow your wealth, but it's not a way to get rich quick.
Beware of gurus that tell you that you can make a lot of money by only investing a couple of hundred dollars in liens.
Even if you make 36% on your money, unless you have a considerable amount to invest you're just not going to make an income on the returns.
Also, investing in lien certificates is not a way to get the property, most liens redeem, and very, very seldom will you get the chance to foreclose on a property.
Plus even if you did get to foreclose on a property, you would have to pay the taxes on the property while you waited out the redemption period, which is as long as 3 years in some states.
Other Things To Consider Although some tax lien investing "gurus" make it sound like your guaranteed to get paid on a tax lien, this is simply not true.
The only thing guaranteeing that you'll get paid on your lien is the property.
So you do have to do your due diligence before buying a lien.
You also have to make sure that you understand the terms and conditions of the tax sale and the bidding procedures.
Each state handles these tax sales differently and you have to make sure that you know the rules of the game before you play! How To Have A Profitable Tax Lien Portfolio Buying profitable liens is really quite simple.
You only really need to do 2 things.
The first is to buy liens on good properties and the second is to be able to get the money out of your lien.
There are 3 ways that you can cash out of your lien.
Either the lien will be redeemed by the property owner, or if the lien does not redeem you can foreclose on the property.
Or if you don't want to wait for redemption or for the opportunity to foreclose, you can sell your lien to another investor.
I have very little invested in the market.
Most of my investments are in tax lien certificates and the interest I make on my liens does not fluctuate with the market.
In fact it's guaranteed by the county or municipal government that issues the lien.
A Better Investment For Today There is a better way to invest your money - you can get double digit returns without putting your money at the risk of the market.
Tax investing is a great alternative to investing in stocks and now is a great time to invest in liens.
But let's start out with some basic information about tax investing.
What is a lien anyway? What is a Tax Lien? Municipalities and counties need money in order to pay city and county workers - school teachers, policemen, firemen, and public officials.
They also need money to fix the roads and maintain public properties.
That money comes largely from property owners who pay property taxes.
Local governments need to collect property taxes in order to meet their budget.
When property taxes go unpaid some states will allow the unpaid tax bills to be sold to investors.
Investors bid for the right to pay the delinquent taxes and get the interest on their money that the county or municipality would normally charge the delinquent tax payer (anywhere from 8 - 36% per year depending on the state).
Why Would You Want To Invest In Tax Lien Certificates? Investors buy tax certificates because of the interest they receive on their investment.
Where else can you get 8, 12, 18, 25 or even 36% on your money without a high degree of risk? And if the delinquent tax payer does not pay off the lien within the required amount of time, the lien-holder can foreclose on the property.
So the tax lien is secured by the property or the real estate that it's held against.
In most states a tax lien takes priority over other types of liens, like a mortgage for instance, so the tax lien investor gets paid first before a mortgage holder or other lien-holders.
Anyone with a tax ID number can purchase a lien, so you don't have to pay money to a broker to invest in tax liens.
And unlike other high earning investments, you can start with very little money.
More Reasons Why Now Is A Good Time To Buy Tax Liens You don't need good credit to buy a lien.
You don't even need to be a U.
S.
citizen or live in the U.
S.
to purchase U.
S.
tax liens.
Some states allow investors to purchase liens online from their computer, so you don't even have to leave home.
You can also purchase liens with money from your retirement account if you have a self-directed IRA or 401(k).
And because of the week economy throughout the country right now and the in-ability to get financing there are more liens available now then there have been in recent years.
Things To Watch Out For Beware though of people that make it sound too easy, after all if it were that easy everyone would already be doing it.
Tax lien investing is a great way to grow your wealth, but it's not a way to get rich quick.
Beware of gurus that tell you that you can make a lot of money by only investing a couple of hundred dollars in liens.
Even if you make 36% on your money, unless you have a considerable amount to invest you're just not going to make an income on the returns.
Also, investing in lien certificates is not a way to get the property, most liens redeem, and very, very seldom will you get the chance to foreclose on a property.
Plus even if you did get to foreclose on a property, you would have to pay the taxes on the property while you waited out the redemption period, which is as long as 3 years in some states.
Other Things To Consider Although some tax lien investing "gurus" make it sound like your guaranteed to get paid on a tax lien, this is simply not true.
The only thing guaranteeing that you'll get paid on your lien is the property.
So you do have to do your due diligence before buying a lien.
You also have to make sure that you understand the terms and conditions of the tax sale and the bidding procedures.
Each state handles these tax sales differently and you have to make sure that you know the rules of the game before you play! How To Have A Profitable Tax Lien Portfolio Buying profitable liens is really quite simple.
You only really need to do 2 things.
The first is to buy liens on good properties and the second is to be able to get the money out of your lien.
There are 3 ways that you can cash out of your lien.
Either the lien will be redeemed by the property owner, or if the lien does not redeem you can foreclose on the property.
Or if you don't want to wait for redemption or for the opportunity to foreclose, you can sell your lien to another investor.
