How do you make safe investment income? You will know one great way after you read this article.
Any good source of investment income must have -
* Low risk to your capital.
* Large and predictable payments of earnings.
America's county and municipal governments are eager to offer you that - and I don't mean bonds.
* Return of your investment guaranteed by the government.
* Unusually high yields guaranteed by the government.
The investment is tax lien certificates.
Tax Lien Certificates - What They Are
County and municipal governments depend on property tax revenue. Property owners sometimes fail to pay their taxes. If they don't pay after many warnings, the government sells tax lien certificates -
* You pay the tax owed. The government gets its money right away.
* The property owner gets an extra 12-24 months to pay up.
* You get high yield investment income guaranteed by the government.
Tax Lien Certificates - How They Work
Each state sets its own interest rate and terms. 12% - 18% per year is common.
* Check the interest and terms for your area. Do a web search on "tax lien certificates [name of your county and state]."
* Certificates sell at auction. They go to whoever will take the lowest - still high - interest.
If the property owner pays early, you get a guaranteed minimum profit.
* 5% is common. Check your local rate.
* Your do better with early payment. 5% in a month beats 18% in a year.
* Property owners avoid penalties by paying early. They often do.
You get paid by the government. Not the property owner.
* No worries about collection.
If the property owner pays his tax in a year, you get your investment plus interest. If the property owner pays his tax in two years, you get your investment plus double interest.
* Simple interest with no compounding.
Owners that don't pay property tax often don't pay their mortgage either.
* Banks will foreclose on the mortgage and auction off the property.
* You get paid that juicy minimum interest - guaranteed by the government.
* You get paid before any other creditor.
* It works the same way if the property owner sells the property himself.
If the taxes go unpaid for the full 12-24 months, the county auctions off the property.
* Again, you get paid.
If no one buys the property at auction - rare - you become the owner.
* In this case, the property is your return. Not cash.
* Wait! You don't want the property. But you can avoid this by doing some homework. (Sorry - there is a bit of work involved.)
Keep risk low and investment income high.
Only buy tax liens on property you have seen.
* Make sure the property exists.
* Make sure you can get there by road - no land in forests or swamps.
* Make sure the property is worth much more than what you pay for the tax lien certificate.
* Property near water or developed land is good.
* Go with undeveloped property - land. Buildings can get tricky.
Go with property owned by individuals - not development companies, banks, or trusts.
* Corporations and trusts can make legal trouble.
You get paid when the property owner pays.
* You won't know when in advance.
* Worst case would be an auction after 12-24 months.
You can't sell tax lien certificates easily. In a few counties, if you're not paid in a year, you have to pay property tax for the second year. Check the rules for your county. To get started -
* Check your county's website or visit your county courthouse.
* Check your local paper. The county must advertise tax lien certificate sales in advance.
* Ads are in "Legal Notices."
* Visit the property. See that it's OK and worth good money.
* Attend the tax lien certificate sale.
* Don't get caught up in competitive bidding. Know what you'll take for interest before you arrive.
Tax lien certificates are true safe money. They're among the safest, highest paying sources of investment income today.