Cash on a tree with title "5 simple reasons for investing in tax liens in 2023"

Are you looking for a low-risk way to earn higher returns than what your bank has to offer? Tax liens can be a profitable investment to grow your cash with low risks.  You’ll be able to make money while you sleep… it’s like having a money tree.  Here’s how it works.  If a property owner does not pay their property taxes, the government will put a lien on the property. They then sell that lien to investors. The county government gets the tax money they need and the investors get a very high interest rate with the chance to possibly own the property.

These are 5 reasons why you should put your cash into real estate tax liens:


1. High potential returns

Depending on which state you choose to buy this government-backed investment… Tax lien investors can earn between 5% and 36% interest. Tax lien investors in Florida and New Jersey make up to 18% interest per year. The sunshine makes it lucrative for investor by paying a minimum interest rate of 5% even if the investor bought a lower earning certificate. Texas pays a whopping 25% interest on tax liens.


2. Very low risk government-backed investment

It’s hard to go wrong when tax lien investing are backed by the county governments. In most states if the property owner doesn’t pay their tax liens the county will auction off the property making it pretty much a low-risk investment for investors like you.

The lien represents the back taxes, interest and fees. The county sells the tax liens to investors in exchange for interest on their investment. Florida is one of the states where if the property owner doesn’t pay the tax lien within a certain amount of time, the owner risks losing the property at a tax deed auction. This time period is known as a redemption period. The county sets the opening bid at an amount equal to the back taxes, the interest required to pay off the tax certificate investor and administrative fees. Investors should do their research on state laws and county rules governing delinquent taxes. Each state’s laws are different. Tax liens are a government backed investment which makes them very low risk.


3. Make money in a declining economy

Tax lien investors can make money when the market is down due to the fact that there will be more people who don’t pay their property taxes during the redemption period. When times get tough homeowners have less money to pay off their expenses. If these homeowners property taxes become delinquent it creates an opportunity for investors to earn interest by buying the tax liens. The liens are very attractive due to the fact that they are secured by real estate and backed by the government. So you see tax liens can be a profitable niche when the market declines and all other investments are losing money, tax lien investors are making more money.


4. Low cost investment

Tax liens can be sold for less than it costs to fill your car with gas or less. The tax lien costs is often based on the assessed value of the house. The lower the assessed value the lower the tax lien costs. The only hurdle is getting a good interest rate on the tax certificate. Most states sell their tax certificates at a competitive auction where investors bid against each other. This process can reduce the interest rate if there are a lot of bidders. Tax liens can be good opportunity for those with less money to spend on investments due to the low costs of entry. Tax lien investors can earn between 5% and 36% interest in some states.


5. Potential to get a house for just the back taxes

This may be one of the biggest attractions to tax liens. Many states allow the tax lien investors to become the owner of the property if the property owners fails to pay the taxes in a certain amount of time. In Florida for example after 2 years the government will auction off the property if the owner doesn’t pay the taxes. That auction is called a tax deed sale. If no one buys the property at the auction, the tax lien certificate investor gets to keep the property!


As you can see the high returns, low costs and opportunity to get a home for just the back taxes makes tax liens very lucrative. An investor’s capital is practically guaranteed due to the security of these government backed investments provide. However not all tax liens are good tax liens. It’s up to each investor to do their due diligence to make sure they are buying a good investment. Depending on each state’s laws… most tax liens wipe out all other liens and mortgages. Some properties have liens that will not get wiped out. Investors that do their research will find the most success in tax liens, obtain portfolio diversification and watch their capital grow like a money tree.


About the author:  Sandra Edmond, the Queen of Tax Deeds®,  has been buying at the Tax Deed & Lien auctions since 2004.  Her first Florida Tax Deed cost $12,000. Sandra sold it for $49,000 a couple of months later.  Sandra is a full time Real Estate Investor.  Her experience in the area of tax delinquent properties landed her on a front page article in the Orlando Business Journal and Seminole Woman Magazine.  She has made guest appearances on live radio shows, podcasts, and keynote addresses before a live audience on the topic.  Sandra is the Past President of the Central Florida Realty Investors Association in 2013 & 2014, one of the largest real estate investor associations in the country.  Prior to real estate investing, Sandra was a television news reporter and fill-in Anchor in Ft. Myers, Tallahassee and West Palm Beach.
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What Are The Top 5 Simple Reasons For Tax Lien Investing In 2023?


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