Tax Liens - An Investment Alternative

You could be forgiven for thinking that the once, safe, secure and sensible investment options provided by your local bank, have lost their security and their value in recent times. While the banking sector has never provided strong returns on capital investments, the 'play it safe' investors always preferred the good, old-fashioned saving account and avoided anything that was more risky or more complicated than a deposit slip!

The economic crisis and the huge role the banking institutions have played in creating it have led to a number of previously 'safe' investors seeking out the alternatives. After all, with banks all over the globe on the brink of collapse, and billions of our tax dollars propping them up, can we really trust the banking institutions with our hard earned money? The simple answer is no.

One alternative investment that is growing in popularity amongst savers is tax liens. Previously the realm of the rich and knowledgeable, these little known investment opportunities have been offering investors solid returns for years. In light of a loss of faith in the banks and heavy losses in stocks and shares, more and more people are actively seeking out other ways to invest. Many of these investors are turning to tax lien certificates as a relatively safe investment with a solid return.

So, what are tax liens?

In short, a tax lien is a vehicle used by the Government to recover delinquent property taxes. When a homeowner fails to meet their property tax obligations, the Government file a tax lien against their property. This lien is then sold to an investor. Essentially, the investor is buying the debt. However, the debt they are purchasing comes with the security of knowing that if the lien and the agreed interest (typically around 16%) are not paid off within the specified period, the lien holder can foreclose on the property and take ownership of the same.

How do you buy tax liens?

Tax liens are purchased at Government tax auctions. The bidding process for tax liens varies from state-to-state, with some processes being quite simplistic and straightforward and others being a little more complex. You do not have to purchase tax liens within your state, however, for new tax lien investors, it is probably advisable to stick to your home state until you are more confident and knowledgeable about tax liens.

This all sounds too good to be true...

Tax lien investment is not without risk, but much of the risk can be avoided with knowledge. There are stumbling blocks, there are pitfalls, and maximizing your return will largely depend on your willingness to learn and the time and effort you are willing to invest.

The Essentials of Investments is an informative website dedicated to shedding light on little known investment opportunities that can benefit the Average Joe. Unlike many other investment websites, Essentials of Investments does not promote 'flash in the pan' get-rich-quick schemes. People have been investing in Tax Lien certificates for many years, the question is are you ready to join this growing group of successful investors?

Jay_Neaves

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