The reason I am writing this Tax Lien blog is that I lost lots of my 401k, ESPP in company stock, and my individual stock investment in brokerage firm during year 2008. So this is my endeavor to find out very secure, but provide high yield return outside traditional stock, or bond markets. The million dollar question that I had this severe down turn was: is there any type of investment instrument that can offer good returns, like high flying stocks (>12%), but as secure as FDIC backed saving account?The answer is "yes".
I found out that tax lien investment is the ultimate mixture of good returns and security. Like a saving account, this tax lien is secured by real estate.
To invest tax lien, I have to explain what tax lien is and how it works and procedure of obtaining tax line (see right side cartoon).
First of all, Tax lien is statutory lien placed against a property. A tax lien is usually filed because property owner did not pay property taxes whatever reason. As we all know, property taxes are main revenue for local government, city and county. Without assessing these taxes, there would be no schools, police, road improvements, fire department, etc.
By filing a tax lien and selling the lien to investor, the local government is able to recoup its property tax loss. The investor in return will be paid interest and penalties if the property owner pays for the lien. What if property owner is not paying taxes, then lien holder (or investor) can recoup his investment by owning the property outright, and by state statue, tax lien supersede any liens like mortgage lien. How much interest invest can get? For Arizona, investor can earn up to16% and 18% for Florida. That's why it is secure and high yield investment.
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