Are tax lien certificates a good investment?

The economy is doing terribly right now, so it’s a normal question to ask, “Are tax lien certificates a good investment?” Let’s look at why I think they are the best investment of the year.

First, let’s look at the economy which is doing worse than at any time since the Great Depression. So of course, it’s a fair question to ask, “Are tax liens a good investment right now?” What we are about to see is that they are one of, if not the most amazing investments available in 2021.

If you are interested in getting in on what is making investors double-digit returns, while many other investments may be losing money, keep reading.

Tax-defaulted Investing vs. Stock Market Investing

2020 really was one of the worst years economically in modern history with the stock market not doing very well overall, interest rates at historical lows, and other investment vehicles, like bonds and CDs, not even keeping up with inflation. Because of all this gloom, doom, and volatility, tax-lien certificates are looking more and more like one of the top two investments this year.

I’ve been doing a lot of studying lately about how to financially survive, and possibly even thrive in today’s challenging economic conditions. Between the C-19 virus, high levels of unemployment, and political turmoil, the stock market has been a roller coaster that has most investors disgusted.

Returns on investment in many stocks and even mutual funds have left investors looking to put their money elsewhere. Before I go on, a bit of background on me.

I would never claim to be an investment genius. If you would have asked me, “Are tax lien certificates a good investment?” A few years ago, I would either have asked you what they were or said that I have no idea.

I’m just a normal person, trying to survive financially, and eventually get out of the rat race. I spent years working my way through university, but I’ve always had to work for a living.

I’m just a normal, everyday man who would really like to get out from underneath my load of bills and start enjoying my life. My goal is a simple one, stop worrying about bills and see the world, maybe with someone special.

Maybe you want to go fishing instead of going to the factory. Maybe you want to see more museums instead of being chained to your desk. How about getting out of the office more often, and playing a little more golf, or tennis, or just about anything? 

Well, keep reading. What I’m about to share with you will make you stop asking, “Are tax lien certificates a good investment?” and convince you that tax-lien certificates are a valuable tool for making those goals a reality.

If you’d like to get started today, you can begin now at no cost by taking advantage of Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax delinquent real estate investment.

Why I Started Investing In Tax Lien Certificates

Up until recently, in all my work and study, I didn’t learn or know anything that was different from what almost everyone else knew about financial security. Sure, we all were taught to try to buy a house, start planning for retirement as soon as possible, and all that common wisdom.

What I couldn’t do was stop working, or to be honest, see anywhere off in the horizon where I would be able to. It definitely was a case of no matter what my job was, it was always just a different treadmill or hamster wheel. 

I couldn’t anticipate the real-estate and financial crash of 2008, or predict the C-19 pandemic and how it devastated the world economy. So my 401K, Roth IRA, and savings took a beating.

When we ask the question, “Are tax lien certificates a good investment?” we definitely need to compare them with these other investments and how they would have compared then. 

For the last few years, I have been studying investing, the markets, and how to adapt financially regardless of the financial climate. All the experts I read repeated how a diverse portfolio was essential.

It was basically the old adage, don’t keep all your eggs in one basket. So I examined my situation. It was not looking good. At the end of my self-assessment, I knew I had to look outside of the normal mix of stocks and bonds.

I also was not willing or able to stop working and go back to school or leave my future up to another expert. So I asked my best friend, the smartest guy I know, if he could suggest anything that would get me closer to my goal of financial freedom.  He actually gave me something, or rather someone, that would change my life.  That, someone, was Ted Thomas.

Who Is Ted Thomas?

Ted Thomas is an educator, publisher, and author who specializes in an area of real estate that I had no idea existed. I had been looking into real estate. But I quickly ruled out just getting another mortgage on a house, because I had been down that road, and it got me no closer to financial freedom.

Then something I had never heard of came up: tax liens. Of course, first I had to figure out what they were. So he told me to go to Tedthomas.com. That was where my education began.

So I asked my friend, “Are tax lien certificates a good investment even with the economy failing and real estate going down?”

Why Tax Lien Investing Is Profitable in a Down Economy

First of all, tax liens have been around for almost two hundred years, so they are nothing new. They have seen many ups and downs during that time.

Second of all, they might not be as well known as stocks and bonds, but a quick search will show they are known by many authorities as good investments. 

Obviously, with any good opportunity, you need to know as much as you can. At the very least here are nine things you should know. I believe these will get you to come to the same positive outlook when asking, “Are tax lien certificates a good investment?”

When I went through the first part of Ted Thomas’ program, I began to get excited. I mean, of course I was excited, because of this, I began sharing what I learned with family and friends. The same questions kept popping up. What everyone wanted to know was…

Are tax lien certificates a good investment in troubled economic times like what we are going through now? The question pushed me to study more before I was able to answer confidently.

My answer went from a simple, “I think so…” to a resounding, “it may be the best time ever to get involved in tax liens.” The worse the economy is doing, the more tax liens become available.

To begin with, the upheaval going on now is a perfect example of something that causes people to fail to pay their back taxes. As a result, counties all over the country issue tax-lien certificates, often called ‘tax liens.’

Why Investing In Tax Liens is Socially Responsible

You see, when property owners can’t pay their back taxes, local governments can’t properly function. That’s because they depend on those tax dollars to pay for schools, police, fire departments, and a host of other services needed to keep neighborhoods running safely.

Are tax lien certificates a good investment if they contribute to the local government’s ability to provide essential services?

By my definition they are. That’s not something that can be said for many other investments. More and more people want to earn a healthy return on their investment while doing something good at the same time.

This is often referred to as socially-responsible investing. In my opinion, even though they are not often thought of in that context, I would argue that tax liens qualify for that title. 

So while some mutual funds are making money by speculating and actually betting against the success of some companies, when you invest in tax-lien certificates, you are helping fund essential services for counties.

If you’d like to get started today, you can begin now at no cost by taking advantage of Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax delinquent real estate investment.

Are Tax Liens A Safe Investment?

When some of my friends and family ask me “Are tax lien certificates a good investment?” What they are really asking is, “Are tax liens a safe investment?”

To this question, my answer is yes, tax liens are generally a lot safer than most stocks and mutual funds. My reasoning is that tax lien certificates are guaranteed by counties to return the percentage of return that they are purchased at.

So while that percentage may vary, it is locked in at a specific percentage once bought.

Any investment professional will explain a general rule of investing. With risk comes reward. No risk, no reward. While that may be true with tax liens, at least it’s mostly you who controls the risk.

By this I mean that buying a tax-lien certificate, on a dilapidated property, in a terrible neighborhood, would likely be a poor choice…but you can look at any properties that you want to buy tax-lien certificates on.

This greatly reduces your risk. This is something almost impossible to do with stocks and especially mutual funds.

More importantly, approximately 90-95% of the time, the property owner pays the back taxes owed. This is referred to as redeeming the certificate. In this case, the lien holder gets paid the full percentage the lien is guaranteed for.

If that doesn’t happen, then another process begins. Let’s save that for a future blog because here we want to concentrate on what happens most of the time. Again, over 90% of tax liens get redeemed, which means it is paid off by the people who owe the back taxes.

Ask many investment professionals, “Are tax lien certificates a good investment?” And be surprised.

If we were to ask an investment professional which stocks or even mutual funds guaranteed a healthy rate of return 90-95% of the time, they would have to say none. Actually, with stocks and mutual funds, there is never a guaranteed return. That is because of the very nature of stocks.

With a stock, you are purchasing fractional ownership in a company. Mutual funds are simply groups of stocks, or a combination of stocks, bonds, commodities, real estate, etc…in which the mutual fund and you are the owner of a percentage in the fund. 

So the actual value of the stock or stocks is determined by many factors. Some of these factors are supply and demand of the stock, state of the economy, investor confidence, and company performance.

With all those factors and more affecting the cost of stocks, their value can swing widely and quickly. Even a mere rumor can set it off.

Individual stocks or specific mutual funds may occasionally earn well. But they also carry the risk for large losses. Tax liens don’t have those risks. If you don’t like the percentage of interest offered by the tax lien, you don’t bid or buy it.

If you do, and you buy it, then your rate of return is guaranteed. I don’t know about you, but I like knowing what I’m getting a lot better than rolling the dice with my financial future. 

When you learn from a pro like Ted Thomas, he is going to start with the basics, like how to get and study a tax lien properties list, and many other tools to make sure you can minimize risk and maximize profit, like a pro.

 

You may be surprised to know that as you start attending and participating in tax lien sales, you will likely be competing against institutional buyers representing large investment firms, that have been enticed by the high rates of return. 

The good news about this is that this shows that the yields are enticing enough to attract the big boys. The bad news is that it increases competition, and makes it vital that you be well educated and prepared in order to compete and succeed. These guys have been studying tax lien investing strategies, and you had better do the same.

More good news, though, is that there are millions of tax-lien certificates to choose from, and even after the big boys make a showing, there’s still a more than an ample amount of great deals left on the table if you know what to look for.

It doesn’t matter if you buy tax-lien certificates online, or in person, there is real money to be made, but make sure you know everything you can before going into the fray.

Is Buying Tax Liens Profitable?

What some of my friends were asking when they asked the question, “Are tax lien certificates a good investment?” was really “Is buying tax liens profitable?” What I found out was that there was no one answer to that question.

The answer depends on each buyer and each lien. That’s because the rate of return varies from county to county, and state to state, and even from lien to lien at each auction. “How is that possible?” you may be asking right now. 

Well, it works like this:

Let’s use Florida as an example. Florida works on an auction principle called reverse bidding. What that means is in Florida the rate of return offered on a tax-lien certificate starts at 18%, and with each round of bidding, the rate goes down.

Obviously these variables make it extra important that buyers are armed with all the knowledge possible. 

That’s why I strongly suggest Tedthomas.com as a source of information for anyone who wants to make sure their investment will indeed be profitable.

There are plenty of examples of Ted Thomas investors earning over 10% or even 20% interest, which by my standards is a spectacular return, especially when lots of stocks have been losing value lately. At this point, I’ll ask you, “Are tax lien certificates a good investment?” Am I starting to make my point yet?

Even excluding the disastrous year, 2020, the stock market has seen an average rate of return of between 8 and 12% over the last two decades. The actual number many experts are using is often 7%.

Average Stock Market Return: Where Does 7% Come From?

That means that if you compare the Standard and Poor’s 500 biggest corporations in America, to tax-lien certificates, you could easily come to the conclusion that tax-lien certificates earned a higher rate of return in many cases.

Are Tax Lien Certificates A Good Investment: Conclusion

In conclusion, if your criterion for deciding, “Are tax lien certificates a good investment?” is based on socially-conscious reasons, then I would have to say absolutely. I cannot think of many things I would rather know my investment was doing than providing for schools, fire departments, police, and keeping neighborhoods running safely.

If when you ask, “Are tax lien certificates a good investment?” you are asking, “Are they safe?” Again my answer is yes. If you mean can you earn a healthy return on your investment, my answer is still yes.

So all I can suggest at this point is to take a look at tax liens. Learn it from someone like Ted Thomas, who has literally spent decades going to every state, hundreds of counties nationwide, to uncover the best way to invest in tax liens.

Ted not only has a tax-lien certificate investing course, but unbelievable resources to help you, and coaches who have been buying tax-lien certificates for years. 

If you’d like to get started today, you can begin now at no cost by taking advantage of Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax delinquent real estate investment.

Recommended Posts