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Tax Lien Certificates

What are Tax Lien Certificates?

Tax Liens are created by the local taxing government placing a lien on a property for unpaid property taxes. At some time during the year the local government sells these liens to investors and upon sale a Tax Lien Certificate is issued.  The local government holds tax lien sales to sell these liens to tax lien investors.

Here is how it works: A property owner fails to pay the local government the property taxes due on their parcel of land. The local government begins to establish penalties for not paying on time. However, local governments need cash to fund their operations and IOUs don’t pay their bills. So what is a government to do? They hold a tax lien sale to sell the lien to an investor for cash and the new owner now gets the principal, interest and penalties when collected. When the property owner finally pays, the investor makes good on their tax lien investment.

A property tax lien certificate is different from a federal tax lien, state tax lien, or IRS tax lien.
 

 

What Makes Tax Lien Certificate Investing a good idea?

Tax Lien Certificates are attractive investments because of their outstanding benefits:

    High Yield – Florida tax liens are 18%, Iowa tax liens are 24% and Michigan tax liens can reach 50%

    Safety – Secured by real property that has been valued by a government agency for more than the lien. Generally, 10-50 times more than the lien.

    Low minimums – They come in all sizes from a few dollars to several thousand dollars.

    Own Real Property – If the owner doesn’t pay with a period of time you can foreclose on the tax lien property and become its new owner. This means you could buy the property for pennies on the dollar.

 

How TLCs Fit Into Your Overall Investment Strategy?

Your overall investment strategy likely consists of multiple types of investments (CDs, Stocks, Bonds, Gold, etc.) with a variety of returns and associated risks. TLCs can play an important part of that strategy by returning High Yield returns with lower risk. Tax Lien Certificates enable you to make tax lien investing part of your investment plans.

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