Real Estate Notes | Tax Lien Certificate Investing – 16 percent return on your money or more

Anyone who owns real estate has to pay taxes to the government on their property. The taxes collected from property are used to fund county services such as law enforcement, public schools, parks, road construction and hospital funding. The government is unable to support county infrastructure without real estate taxes. To help with making money for local governments, the government sells tax lien on property to real estate investors.

Most people are looking for a get rich quick scheme. This is not the case with a tax lien. You will need to do your research before making any decisions. There are a variety of sites that offer information and courses on the subject. Also, some people don’t realize the difference between tax deeds and liens. Every state doesn’t provide liens to investors. Potential investors will have to check and see if the investments are available in their state.

One of the ways of getting started with investing in tax lien is by visiting your local government office.  Local offices are willing to provide information about them. Another option is using online lien listings which will give access to listings for a variety of states. Some government agencies usually have auctions certain times of the year. The auctions are open to the public. During the tax sales, you will not purchase the land but instead purchase the debt.

The process involves paying the homeowner’s debt and with the possibility of getting the money back with interest. Potential investors are lending money for homeowners to pay their taxes. Investors will receive a government lien for the property tax. If the homeowner defaults on the debt, then the property is given to the investor.  The main goal is to collect the interest on the property instead of gaining control of the property.

Tax sales are profitable but will take time and research. If you are planning to pursue this type of investment, then you need to learn everything about the subject. There are a variety of resources like books, ebooks and online courses. Investing in a tax lien is another way to secure your future.

Investors can’t even keep up with inflation if they put their money into savings accounts, CDs and other such stable financial products. The stock market has been in such a state of flux for the past two years that many investors are reluctant to return to it. How can investors make money in this economy? One way investors can still make good returns on their money by purchasing a tax lien.

There are several different ways investors can purchase tax liens. In some areas of the country where the economy has been extremely bad and the housing market has tanked, investors can attend tax lien auctions. At most of these auctions the liens are sold to the bidder willing to accept the lowest interest rate in return for purchasing the lien at face value. The lower the interest rate the investor is willing to accept, the less he will make in return on the lien. Even liens purchased by “bidding down” on the interest typically yield higher rates of return than most of the stable financial products out there that are currently offering interest rates as low as 1% in some cases. Investors may also be able to purchase liens and tax deeds for the amount owed in taxes if there are any left unsold after the end of the auction. Investors should check with the County to determine what their rules are for purchasing an unsold tax lien or deed.

Unlike investments in the stock market, investments in tax lien certificates are a sure thing. The taxes owed do not decrease over time. The interest continues to accrue until the balance on the bill is paid. And unlike other types of debt, the property owner cannot just skip town without paying the bill. In a worst case scenario the sale of the property to another owner simply transfers the tax bill and interest to the new property owner. The new property owner must be informed of the taxes due on the property at the time of purchase. In some places, the property actually cannot be sold or transferred to a new owner until the tax bill is paid. It is basically a guaranteed investment. The only unknown is when the lien holder will get his money back and how much he will earn from interest.

Real estate is a hard business. Long delays, waiting, patience of the gods, huge capital requirements (ie. money down and upfront), and severe maintanence upkeep make managing and thriving in real estate one of the most challenging businesses to succeed in. It’s a miracle anyone makes income from it and doesn’t go insane. One way to get around the above problems is to deal in paper real estate, which includes tax liens, real estate notes, or any similiar mortgage instrument. You own a certificate not unlike a stock certificate or CD from a bank except that you are paid a lot more money and are secured by actual real estate property (homes, malls, shopping centers, land, etc.). If this is much easier and cheaper to do, why don’t more do it? Simple, because there is one problem with it, and that is it takes time to do (patience). Real estate naturally has a long turnover rate, even for foreclosures or delinquencies. The easiest of the bunch, and hence the fastest, is still real estate paper. There are many guides, free and paid, out there that teach you the process but most leave you gaps to fill out for yourself (bad) and yet others tell you this can be done online (true) but don’t tell you what websites do the listing and buying/selling for you (the real secret).

Now Melford’s advice isn’t for everyone. But if you’re able to follow what he and his wife have to offer on the subject of tax liens, you will be able to profit enormously.

Melford’s help is not for everyone but if you follow his advice on his website (see below), he will tell  you to do the following:

1. Filter out which “deals” to go for. Believe it or not, there are still some homes or properties you should absolutely avoid. Doing so will allow you to profit either 16% return or a house for pennies on the dollar.

2. Use his tax property database system to browse the entire United States’s delinquent tax list. This cuts down the searching to a minimum of a few hours.

3. Buy tax liens or real estate notes that go for only $100-$3000 each. The government is so desperate for money that they are willing to take almost anything as long as they get their back taxes.

4. Follow the instructions exactly so you realize success and profit in about 30 days.

5. Receive tax benefits and good will from the IRS.

6. Buy tax lien deeds from all over the country every month to have a stable source of income.

Since Melford’s advice isn’t for everyone, he does have some flaws. They include…

1. This information should be priced at like $1,000. I don’t want this kind of information leaking out to everyone. I like keeping secrets that everyone else can’t have. Don’t you?

2. Helping the IRS make money. The US government will love you because you’re helping them get badly needed cash dollars to run services like the post office, roads, or courts. Also you will be helping to provide affordable housing to people (which is the U.S. government’s primary motivation besides taxes) by getting these unused homes into use as fast as possible.

3. Too much money to be made. With more money comes more taxes. Even though there are many legal tax loopholes, credits, and deferrals, paying taxes is always a pain.

4. I hate waiting. Often, you will be dealing with the government, and the government is SLOW. It can take a while before deeds or property are transferred to you. You can get around this by doing assignments (and thus “sell” the liens to a bank, letting them take title to the lien).

5. Many homeowners pay back the taxes with interest. Instead of taking over the homes for cheap, the homeowners pay their back taxes with 16-50% interest. So many times you will get your money back plus 16%-50% interest (return) on investment. Not too bad but I still rather have the big house.

6. Could fix some of the spelling typos here and there, which is a common problem amongst successful real estate investors. I bet Donald Trump & Robert Kiyosaki has a team of proofreaders to fix all their little grammar and spelling mistakes.

The Overall Verdict…

Melford’s tips will make you great money in real estate paper and tax liens. 2 million homes are in foreclosure at any given time, and a good portion of those are behind in tax payments as well. By giving the government badly needed funds, you will help lower taxes in the region in question since the government can perform it’s vital everyday functions.

If you’re not sure if this will work for you, see what these people had to say about Melford’s tips:

So if you’re ready to dive into the lucrative world of real estate and tax liens, then check out Melford’s website here. Remember, I do not know if he can help you with your particular needs or goals but his experience is gauranteed to make you richer if you listen to him.