The Safest High Yield Investment in America

Imagine an investment that can produce rates of return exceeding 25%. Imagine an investment that has never been affected by the global economy, jobless rate or inflation. Imagine an investment that is guaranteed by state law and has existed for over two hundred years. Such investments have existed since before we became a nation. The investment, although used extensively by investors, is not well known by the general public because large investment brokerages and banks can’t market the product. The investment could enable you to become the owner of a house or real property for a little more than the taxes owed on that property.

In order for governments to operate, they must collect revenues from various sources. Real estate taxes provide the largest source of income for county governments across the United States. If property owners do not pay their real estate taxes, counties need to find another means of obtaining that money so that they can continue to operate. When taxes become delinquent, properties go into tax foreclosure. Counties will then allow any willing person to pay the delinquent property taxes for the property owner. This is done through instruments known as tax liens or a tax deeds.

Tax lien and tax deed purchases are the safest investment opportunities because they are GUARANTEED BY EACH STATE and allow you the opportunity to earn up to 50% on an investment. Texas charges 25% interest on late tax payments. Purchasing a tax lien in Texas enables the tax lien purchaser to earn 25% beginning the day the tax lien becomes one day late. The penalty is 25% every six months which equates to 50% annually. Florida’s penalty is 18% calculated on an annual basis. Should the property owner pay their taxes 30 days late, you would receive 1 ½% interest for your Florida purchase. Familiarization with each state’s rules and procedures is extremely important. In Kentucky, you can never own the property so it is best to avoid Kentucky. In Georgia, bidding must be done in person but potential returns are outstanding.

Property owner’s redemption rights vary from 6 months to 3 years. A redemption period is the amount of time a property owner has to reclaim the property before the tax lien or tax deed buyer can foreclose. Indiana has a special program with a redemption period of less than six months on certain properties. To maximize returns, the redemption period should be used in any investor’s calculation. The only negative to buying tax instruments is that you never know when you will receive your money. If you purchase a tax instrument in a state with a 3 year redemption period, you could end up waiting three years to receive your money. The good thing is that your investment is accruing interest for the entire period. The redemption period becomes an issue unless you do not mind investing your money for the long term. If a property owner doesn’t pay their taxes, you can foreclose on the property and could end up owning a $200,000.00 home for $3,000.00.

Florida is a tax lien state. The interest rate is 18%. However, Florida is a state in which buyers bid on property. Tax liens can be bid as low as ½%. A small return does not represent a good investment for a normal investor. The recommendation is to wait for the initial surge to stop and buy tax liens on which the full 18% can be earned. Florida counties have long lists of tax liens available for sale online. County tax auctions follow the redemption periods at the request of a lien holder. This author purchased a tax lien on 2 acres of Florida swamp land for $560.00 via the internet. The property had great potential and there was reason to believe the owner was not going to redeem the piece of land valued at $20,000.00. The owner did pay the back taxes 18 months later and the author was sent a check by the county for $711.00. The author earned 26.9% (18% annualized) on the investment.

In 2007, four investors paid $47,510.00 to purchase a tax lien on a piece of property worth over $1,000,000.00. The property had been in the name of billionaire Wayne Huizenga, owner of Blockbuster and the Florida Marlins. The county had sent the tax notifications to Huizenga’s agent but he never received them because he had moved. Because the taxes had not been paid to the county, the county sold the property and four tax deed investors earned an exceptional return. Huizenga had his attorneys argue vehemently trying to get the property back. The county stated that when taxes are not paid property gets sold.

Texas and Georgia are tax deed states and use tax sales to obtain their delinquent tax funds. Tax deeds are sold at auction, generally on the county courthouse steps. In 2010, a $350,000.00 rental home in San Antonio was sold for $192,000.00 to satisfy a $32,000.00 tax bill. Since it was a rental property, the owner only had 6 months to pay the 192 thousand plus $48,000 representing the 25% interest that Texas allows. The 25% is added whether the property owner pays the day after the tax sale or six months later. After 6 months, another 25% penalty is added; a great way to purchase a property or earn 50% on your investment. These purchases are not unusual in Texas and Georgia. Excellent investments such as these abound for the investor who has done his research.

Sales of tax liens, tax deeds, and similar instruments exist in every state and provide a very safe high yield investment opportunity. An investor can get into tax sale products with a small amount of money but to maximize growth, due diligence is essential.