5 Common Arguments when Investing in Tax Liens

Today, tax liens are among the best investment options any American can take. News articles and

websites both praise and criticize this type of investment.

For you to be ahead of the pack, here are some of the advantages and disadvantages commonly

associated in tax lien investing.

Argument No. 1

Pros – It offers a high rate of return of 18 to 24 percent return per year, depending on the state. Other

states can offer as high as 36 percent.

Cons – Don’t forget your homework. If you purchased a lien on an area with noisy neighbors or frequent

environmental problems, you may not benefit from your investments at all.

Argument No. 2

Pros - If the previous taxpayer – the one who owned the house – fails to reclaim his house after two

years, the local government can now award the house to the tax lien investor, plus his investment and

the rate of return. Although most redemption periods last for two years, it varies from county to county.

Cons – Assuming the taxpayer reclaim the house, the lien on the home will be lifted. Though you can

recover your investment, you cannot own the house anymore. Also, if you own the house after the

taxpayer defaulted, the risk of regarding home and lot titles can even get you into trouble.

Argument No. 3

Pros - Similar to U.S. Treasury Bonds/Bills, tax liens are guaranteed by the government. Investments like

stocks are not guaranteed though in case the company defaults. Options, futures and foreign exchange

have the highest risk where you can lose money in a blink of an eye.

Cons – Be sure to invest only in prime and well-researched tax lien homes that you know. Otherwise,

earnings could turn into losses.

Argument No. 4

Pros - Tired of monitoring your investment on the tickers of Dow Jones, S&P 500 or at NASDAQ? Stock

market investors almost lose their mind during the crash of 2008, and many others went bankrupt in an

instant.

Investing in tax liens is a different story. There is nothing to worry about the daily, monthly or annual

performance. No need to tune in to the business channel and watch the reds on the ticker.

Cons – Be adept in state and local laws regarding tax lien home sales. If misunderstood, the written

print can be a complicated paperwork in the future.

Argument No. 5

Pros - According to Forbes Magazine, approximately $426 billion in state and local tax on real estate is

owed in the United States each year. These opportunities in investing in tax liens could be

overwhelmingly huge.

Cons – States like New York only sell tax liens and tax deed sale to large, corporate investors. This

excludes individual investors out of the game. Look for a state that gives equal investing opportunities.

Even better, there are several websites teaching prospective investors on how to buy tax liens online.

Now, you can deal with the world of investing. Don’t forget to enjoy the adventure, as well as the

earnings you will make during the process.