subject: Tax Lien Certificates: Safer Than Stocks or Real Estate [print this page] Tax Lien Certificates: Safer Than Stocks or Real Estate
There are so many great opportunities to invest and make money right now. When the economy is not so great and the markets are down, when everyone else is selling, that is usually when the smart investors are buying. But how do you know what to buy when? If you purchase stocks when the stock market is down, you don't know if the market will go lower before it turns around and you don't know for how long it will remain down before it goes back up. It's the same with real estate or any other market.
One of the nice things about investing in tax liens though, is that they are not tied to any market. The rate that you receive on your tax certificate is fixed, so even though the value of the real estate that secures your lien may fluctuate, the interest that you get when your lien redeems remains constant. The county or municipality that issues the lien, not by the price of the property that the lien is against, determines the interest rate.
There is one thing that I'd like to make clear though; no one guarantees that you will get paid on your tax certificate. I think it is a great misconception that tax lien certificates are "government guaranteed," - they are not! What guarantees that you will get paid on a lien is the underlying real estate. Tax liens are real estate guaranteed, not government guaranteed. No one guarantees that you will be paid on your lien, but if the lien is not redeemed within the period of time allowed by the county (the redemption period), then the lien holder can foreclose on the property in order to satisfy the lien.
A problem can arise if you think that a tax certificate is "guaranteed" and you purchase a tax certificate without doing any research on the property to make sure that the property is marketable. Just as when you purchase a stock, you want to make sure that the underlying company is a good company with solid financials, you need to do your due diligence on a tax sale property to be sure that it has value before you purchase a lien on it. Otherwise what good would it do to foreclose on a property that you couldn't do anything with and couldn't sell to someone else?
Tax certificates can be a very safe and rewarding investment. In my opinion safer than investing in the stock market or in real estate, but just like with any other investment you have to do your due diligence. Learn more about tax lien investing and about how you can get double-digit returns on your money without the risk of the stock market in the Members Area of TaxLienLady.com.
Joanne Musa works with investors who want to reap the rewards of
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