Who invest in Tax Liens?

VI. Who invest in Tax Liens?

1. Investing in tax lien certificates is an alternate way to include real estate in your portfolio without having to take on the risks and responsibility of a landlord. Tax lien certificate investing can be more complicated than owning mutual funds or stocks, however, and it may be better suited to some investors than others. Tax lien certificates provide a predictable and consistent rate of return. As opposed to stocks and mutual funds, an investor’s returns are not subject to fluctuations in the market.
2. In exchange for putting up the money, the county will give you the interest rate and late fees they charge the owner when the taxes are finally paid. If the property owner does not pay the taxes, you can foreclose and take the title on the property for the total of the back taxes, penalties and fees owed the county.
   • In other words, there are two investment outcomes from tax lien investing:
   • The tax lien certificate is redeemed and you earn a secured high-interest rate.
   • The tax lien certificate is not redeemed and you can acquire the property through foreclosure, sometimes for pennies on the dollar.
   • If you’re looking for an investment with a very strong return (far higher than anything you’d ever get from a conventional investment), tax liens are a great way to do it. For example, New Jersey offers a maximum rate of 18%, Arizona offers a maximum rate of 16% and Iowa offers a guaranteed 2% per month (i.e. – 24% return annually).
   • If you want to eliminate any ambiguity about whether or not you’re going to own a property (i.e. – if you actually want to own the property and/or flip it for a profit), tax deeds can be a great way to do this.
   • Benefits of investment in tax lien/ deeds