← Optimal Finance Daily - Financial Independence and Money Advice
Optimal Finance Daily - Financial Independence and Money Advice
3305: Tax Lien Investing: Can You Make Good Money? by Vicki Cook and Amy Blacklock of Women Who Money
00:10:56
Tax lien investing offers the promise of diversification, steady returns, and even the chance to acquire property at a fraction of its value
Loading summary
Transcript16 lines
- [00:00]
A
Introducing the new Dell PC powered by the Intel Core Ultra processor. It's not just an AI computer, it's a computer built for AI.
- [00:10]
B
That means it's built to help do.
- [00:12]
A
Your busy work for you so you can fast forward through editing images, designing presentations, generating code, debugging code, running lots of apps without lag, creating live translations and captions, summarizing meeting notes, extending battery life, enhancing security, finding that file you were looking for, managing your schedule, meeting your deadlines, responding to Jim's long emails.
- [00:40]
B
Leaving all the time in the world.
- [00:42]
A
For more you time and for the things you actually want to do. No offense Jim. Get a new Dell PC@dell.com AI PC how those ahead stay ahead.
- [00:59]
C
Time it's always vanishing. The commute, the errands, the work functions, the meetings Selling your car Unless you sell your car with Carvana, get a real offer in minutes. Get it picked up from your door. Get paid on the spot so fast you'll wonder what the catch is. There isn't one. We just respect you and your time. Oh, you're still here. Move along now. Enjoy your day. Sell your car today. Pickup fees may apply.
- [01:29]
B
This is optimal Finance Daily Tax lien Investing can you make good money? By Vicky Cook and Amy Blacklock of WomenWhoMoney.com youm want to diversify by adding some alternative investments to your portfolio. As you research options to help you build wealth, your interest in real estate investing grows. You have many opportunities to consider. Does buying a single family rental make sense? Should commercial real estate be on your radar? Is joining a real estate investment club a good idea? Passive investing in real estate investment trusts or REITs might be better than buying physical property. But hearing about tax lien investing has you wondering if it's a good way to make money. What is a property tax lien? When you purchase a home or vacant lot, you'll be required to pay property taxes. Property taxes fund a municipality's public safety and services schools, roads, parks, libraries and more. If a property owner fails to pay taxes, the city or town government can make a legal claim or lien against the property for the amount owed for the municipality to recover the money the property owner hasn't paid. They sell tax lien certificates to investors. The delinquent home or landowners then have a period of time, usually six months to three years, to pay the investor the tax penalties and interest owed. If they fail to pay off the delinquent amount, the investor can foreclose on the lien. The property owner cannot sell or refinance their home or land without paying the tax lien off. How Buying a Tax Lien Certificate works the National Tax Lien association, or ntla, is a non profit professional trade organization for the tax lien industry. Yahoo Reports Market research done by the ntla showed over $14 billion in unpaid property taxes in the United States. Around 30% of that debt is sold to investors. Property tax liens are not for sale in every state. However, you can find out the tax lien states using a resource from the ntla. People bid on tax liens at public or online auctions, which are usually held annually by a municipality. If you have an interest in investing in a specific location, check with the city or county treasurer to find out when they hold tax lien auctions. Depending on the auction, the investors bid down to the interest rate or bid up the cash they'll pay for liens. State regulations may limit the interest rate investors can earn. Because the process differs around the country, it's important to understand how to bid on tax liens. You may need to register well in advance of the auction and pay a registration fee. Also be aware tax lien auctions are highly competitive in many areas of the country. Bidding wars drive down the rate of return for investors. Benefits of investing in tax liens. You don't need to be a real estate agent or have a business to invest in tax liens. Anyone with the money to pay the minimum amount established by the city or county can bid. The important thing is to have a thorough understanding of tax liens and the risks involved before you consider this type of investment. Here are Some other possible 1. Diversification. Investing in tax liens can diversify your portfolio while offering an average of 3 to 7% interest rates. Finding liens with above market interest rates is definitely possible, but lots of competition or additional risk needs to be taken into account. Number two. Payoff. In most cases, you'll get your money back. To avoid foreclosure, most property owners pay off tax lien certificates. When the property owner pays, you get paid. CNBC reported NTLA figures of around 6% of tax liens ending up in a foreclosure situation, and only 0.5% of those are not redeemed before the foreclosure is complete. And number three potential if you do end up successfully foreclosing on your tax lien, you may have bought a property for a fraction of its worth. Drawbacks to tax lien investments Keep in mind that just because you have the money, it doesn't mean tax liens are the right alternative investment for you. Many People are attracted to tax liens because they see the potential for high rates of return. Others think tax liens are passive real estate investments. Some believe these properties are usually foreclosed on, resulting in them ending up with the property. There are plenty of reasons to take your time before you jump into tax lien investing. Here are more drawbacks to consider. 1. Homework to make a smart tax lien investment, the due diligence takes time. You need to review the properties on the list, determine if other liens exist against the property to avoid title issues and foreclosure. Price sales for similar properties and decide what interest rate you're willing to bid down to or what price you're willing to pay at the tax lien auction. This may take a lot more work than you realize, especially as a new tax lien investor. Tax liens are active investing 2. Details Winning bidders need to understand the details of the tax lien certificate, including repayment schedules and expiration dates, to avoid others having a claim on the property. You may end up having to pay property taxes in future years, too. Costs Successful foreclosures on a property may require you to spend a significant amount of money. If the property owners weren't paying their taxes, they probably weren't maintaining the property well either. It may cost tens of thousands of dollars to make repairs so that you can rent or sell the property. Substantial legal fees for the foreclosure and eviction of anyone living at the property should be considered as well. Are Tax Liens a Good Way to Make Money? If investing in tax lien certificates wasn't a good way to make money, there wouldn't be much competition for them. But based on all the drawbacks explained today, you can see why they aren't a good alternative investment for people without some real estate experience. New investors see long lists of properties having delinquent taxes and get excited about the investment potential. Later, they realize that list narrows considerably because property owners pay taxes, interest, and penalties they owe before the auction date and after researching the properties left on the list, some people give up thinking tax lien investing is a good idea. If you're interested in investing in tax liens but aren't interested in doing all the work involved, using a tax lien fund investing manager is also an option. But for inexperienced investors, this can still be a very risky move. Take the time to learn about tax liens in your state before including them in your portfolio. Otherwise, research different alternative investments that fit your risk tolerance better. You just listened to the post titled Tax Lien. Can youn Make Good Money by Vicki Cook and Amy Blacklock of WomenWhoMoney.com Imagine.
- [09:12]
A
You'Re a business owner who has to rely on a dozen different software programs to run your company, none of which are connected, and each one is more expensive and more complicated than the last. It can be pretty stressful. Now imagine Odoo.
- [09:26]
B
Odoo has all the programs you'll ever.
- [09:28]
A
Need and they're all connected on one simple, easy to use platform, giving you peace of mind that your business is always being taken care of from every angle. Odoo has user friendly open source applications for everything. We're talking CRM, accounting, inventory, manufacturing, marketing, HR and everything in between. Basically, if your business needs it, Odoo's got it. Odoo sounds pretty amazing, right? So stop wasting your time and money on those expensive disconnected platforms and let Odoo harmonize your business with simple, efficient software that can handle everything for a.
- [10:05]
B
Fraction of the price.
- [10:07]
A
It doesn't get much better than that. So what are you waiting for?
- [10:10]
B
Discover how Odoo can take your business.
- [10:12]
A
To the next level by visiting odoo.com that's o d o o.com odoo modern management made simple.
- [10:24]
D
The holidays have arrived at the Home Depot and we're here to help bring the excitement with decor for every part of your home. Check out our wide assortment of easy to assemble pre lit trees so you can spend less time setting up and more time celebrating. And bring your holiday spirit outdoors with unique decor or like one of our Santa inflatables. Whatever your style, find the right pieces at the right prices this holiday season at the Home Depot.
- [10:55]
B
After reading this article, I asked a few of my friends who invest in real estate if they also invest in tax liens as it seems really interesting. One friend has, but he told me that it was a big hassle and due to his inexperience at the auctions, he ended up losing money. He said this was due to the property being misvalued and he didn't realize it. I'm assuming that's why this article cautioned that tax lien investing is better suited for experienced real estate investors. Typically, the tax bill should be less than 3% of a property's value, although it can be more for undeveloped land. The lower this percent, the more secure your investment, so knowing a property's market value is key before you bid. It's also more advantageous to be local so you can make sure there's a house on the property and that it's still there when you bid, the house could burn down or be damaged by something like a flood. If you paid $5,000 and the land is worth only 2,000, after the home burns down, you'll lose money. But that brings us to the end for today. Thanks so much for listening all the way through, and I'll catch you tomorrow on our next episode, where your optimal life awaits.