Investing in tax certificates: a fantastic income stream or something else – you decide

Tax lien certificates are issued by counties for nonpayment of property taxes each year. These Fiscal Certificates are sold as an investment once or twice a year to anyone interested in owning them. A large number of these Tax Certificates are on properties of very little value (empty lot, underwater, landlocked, non-building, other government liens, etc.). In many states, a prerequisite for holding tax lien certificates is that the prospective investor must have a social security number, tax identification number, or employer identification number. Counties are regulated by the state in which they are located.

For years, people have talked about this little-known investment, but most people do nothing to invest in them. Fiscal Certificates pay an annual percentage yield of up to 18% and much more. This type of investment has some features similar to a money market account. But there are many things that make it a very different type of investment. One key difference is that they are fully backed by the real estate associated with each individual tax lien; while a certificate of deposit is usually insured by the FDIC.

Tax lien certificates (or tax liens) are excellent investments for the investor who fully understands the risks and benefits of owning a tax certificate. Tax liens consistently pay an interest rate of 18% per year and occasionally reward the investor with real estate for “pennies on the dollar” in the form of a tax deed. The key to this type of investment is the research required to understand tax lien certificates as a whole and to understand as much as possible about each property you are going to invest your money in when purchasing a tax lien.

The novice should either hire someone to do their research or do the research themselves. Self-help books, instructional CDs, and instructional DVDs are good for general knowledge information, but can be quite expensive and leave a lot to be desired when it comes to hands-on experience. Public libraries and online searches are less expensive and do a much better job of teaching newbies about Tax Certificates. Another good type of teaching is learning from a mentor who invests in Tax Certificates in the particular area in which he plans to invest.

Everyone started out as a newbie at one point or another, but if you follow these steps you will succeed beyond your wildest dreams. Do not invest in anything blindly: knowledge is power. It is more important to receive a return on your money than to receive a good return on your money.

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