 |
|
Tax Lien Certificates:
Best keep investment secrets of all
times
Across the nation there’s a lot of
new talk about an old form of investment; the purchase
of tax lien certificates. Although they’ve been around
for over 150 years, it’s only been recently that they’ve
become a popular investment. In fact, it’s been one of
the best keep investment secrets of all times. Now the
secret is out and thousands from Florida to Arizona are
reaping the benefits of a virtually untapped investment
market.
Tax certificates are offering
indisputable higher yields at 100% security. According
to Don Burnham, President of the Discount Buyer’s
Association of America, "People are out there
making a lot of money with tax certificates."
Here's how the tax certificate system works: When a
property owner does not pay one or all of the
installments on an annual property tax bill, the
property becomes tax default. Because the government is
dependent on tax revenue to pay its bills, it must have
a way to collect those defaulted taxes, or face the risk
or running out of money. The best way to do this, and
most states practice this method, is to sell tax
certificates at a public auction for the amount due in
back taxes. The amount of back taxes may also include
interest, fees, and other administrative costs
associated with the delinquent tax, such as the cost of
conducting the sale.
Investors agree to pay off the delinquent tax in a
lump sum in exchange for a certificate, or more
accurately a tax lien, that entitles them to redeem
their investment, plus substantial interest after a
certain amount of time. You can think of a tax
certificate as a kind of a promissory note or evidence
of indebtedness. It would be similar to taking out a
loan. For example, when you go into a bank to borrow
money, you sign a promissory note or deed of trust
certifying that you agree to pay the money back with
interest.
Currently, approximately 47 states sell tax
certificates or similar type tax liens. The process of
selling them actually dates back to 1816. Until
recently, there really weren’t many tax certificates
available and those that were for sale were usually
bought by attorneys, mortgage lenders, and other real
estate insiders.
Today, the cat’s out of the bag and the prospect of
making money with tax certificates is incredible. In
fact, many states report that over 100 million dollars
or more in tax certificates or unpaid taxes. In reality,
as long as people continue to default on property taxes,
there will be a steady stream of tax certificates for
sale. Even investment experts like Barron and Mark
Skousen are recommending tax certificates as an
investment, and for good reason.
Tax lien certificates offer 15, 20, even 25% return
on an investment. In some cases, your interest yield can
be as high as 60 or 70% because penalties and compounded
interest, under certain circumstances, are awarded to
the purchaser. It's really quite profitable. But, even
better, it's very secure. Each tax certificate is
secured by the real property itself. If the tax lien is
not paid off by the property owner, the certificate
holder can force foreclosure on the property to redeem
their investment. This is also a strategy used by
investors to purchase properties for literally pennies
on the dollar.
Imagine finding a way to not only get a high yield on
an investment, but a safe return as well. Most
investments don't work this way. Traditionally, high
yields and successful returns meant high risk as well.
There aren't too many investments in today's market that
offer the exciting yield and security that tax
certificates do.
Compare tax lien certificates to a more traditional
investment... the Certificate of Deposit, or CD. While
it’s true that CD’s are safe and you’ll always get
a guaranteed return, they only offer approximately 4 %.
But why would you do that when, in the same amount of
time and for the same amount of money, you could earn 20
% from the purchase of a tax certificate. This is a
substantially more profitable investment than a CD or a
government bond for that matter. You can put $1000
dollars into a CD annually for 20 years and still not
achieve the return you would by investing the same
amount, for the same length of time, in tax
certificates. Getting high returns with CDs is virtually
unheard of.
In theory, if you put $1000 a year into an IRA that
pays 4 percent interest, compounded annually, in 20
years you'll earn less than 50,000 dollars. On the other
hand, if you put the same amount into tax certificates
at 18 %, compounded annually, for at the same amount of
time, you'll could earn around $500,000.
Stocks offer high returns. You've heard of people
getting rich in the stock market, sometimes overnight,
or earning hundreds of thousands even millions in a
matter of weeks. But it takes a lot of capital and even
worse, it can be very unsafe. There are no sure bets in
the stock market or even futures or commodities. It's
basically a gamble. Whenever you invest in something
with the speculation that its value will increase, you’re
not always happily rewarded. Just as there have been
people who became rich overnight, so have there been
those who have lost it all in a blink of an eye.
Comparatively speaking, it’s not hard to understand
what all the buzz is about. Fortunately, entering the
tax certificate market requires very little money.
You'll never have to go to a lending institution to beg
for capital. With only a little cash and some
intelligent money handling techniques, you'll be able to
get started immediately. And compared to other
investment opportunities, they’re a steal.
So whether it’s high yields or security, tax lien
certificates have proven to be a smart investment for
over 150 years. It simply goes to show you that an oldie
can still be a goody.
United Financial Resources does
not offer tax lien investments. This article is for
general information only
|
|
|
