Is it possible to rake in 18% returns year after year? Too good to be true? I thought so too.
But after some due diligence, I found out that this is totally possible and well within reach of the common man. This is not some pie in the sky, nor is it reserved for the bourgeois. The investment du jour I'm talking about is tax liens. What exactly is this and how can you get a piece of the action?
Let me explain. If you are a property owner, be it a residential home or commercial building, you are required to pay property taxes. Such is the reach of the municipality in which you reside. Most cases you pay a quarterly tax. What happens when you stop paying your tax? The municipality is in deep doo doo if it doesn't have enough cash flow coming in to pay for the $1000 toilet seats, nor enough to pay for services such as policemen, librarians, etc. How does it raise this cash if it can't collect the money from you, the home owner? It sells a lien on your property to the highest bidder. What this means is that if/when you can cough up the cash to pay your delinquent tax (plus interest/penalties of course), you are paying the person that owns your lien. The investor is basically giving the municipality the taxes owed by you upfront in return for future payment of the taxes owed plus interest/penalties.
As a purchaser of a tax lien, you are entitled to receive the amount of taxes that are delinquent plus interest. How much is the interest? Well it depends on the state where you are purchasing a tax lien from. What generally happens is that the state will have an auction at least once a year where they will try to sell tax lien which have been delinquent for 2-3 years (again this depends on the state). You can 'bid' on any particular property's lien that is being offered at the time. The bidding process varies from state to state. In Florida, for example, bidding starts at 18% and is bid down. This means you can receive as much as 18% interest on the delinquent tax amount. Bidding down the interest means investors of these tax liens are willing to accept less than 18%. The more bidders there are for any given tax lien, the smaller the return. If you happen to win the bid, you are required to pay the delinquent tax to the municipality in as little as one business day. When the municipality is paid the delinquent tax by the homeowner, they will forward the cash to you.
Now, what happens when the homeowner never pays the taxes? This is the great thing. Their property is collateral. Again depending on the state, you can force the property to be liquidated within a certain number of years and you will receive your money back plus interest assuming the property is worth more than your investment. In some states like TX, you actually receive the deed to the property. It is yours for keeps - you get the house that was attached to the lien. WOW, that would be an incredible return... But alas, this seldom happens as the majority of the time the lien is paid in full before this ever happens.
I have really just touched upon the basics of the entire process. You should do your own due diligence and see how viable this strategy is for you. There are obviously some risks involved, but if you do your homework, those risks are mitigated. Each state has their own rules regarding purchases. Hopefully, this has sparked some interest in you for you to start your own tax lien purchases.
Here is a link to wikipedia about tax liens.
http://en.wikipedia.org/wiki/Tax_lien
Thursday, September 10, 2009
Wednesday, September 9, 2009
The Great Equalizer
Since this is my first posting, I shall share with you my favorite investment vehicle for the moment. Unlike yesterday's bell bottoms, this is not a one minute fad. I've tracked this vehicle and followed it's movements for several years now. I believe it will be 'The Great Equalizer' as it can be the so called ten bagger that everyone dreams about catching. It can make Princes out of Paupers. In the vernacular of big game hunting, this will be the elephant or maybe the lion of the Serengeti that is the prize - take your pick. The investment returns might be so big that people will name their kids after it.
Okay, enough of the buildup... drum roll.....
The winner of this year's 2009 Miss Universe pageant is.... Ms. AU. On the periodic table AU is better known as SILVER! Yes, silver. The stuff that forks and knives are made of (well for the rich folks at least). The trinkets that Tiffany charges an arm and leg for.
Why silver? The most compelling reason is that this will be the first element on the periodic table that will be totally consumed according to the US Geological Survey (ETA ~2020?). Wow, if that doesn't perk up your ears, I don't know what will. Just imagine for a minute. No more silver to be mined on Earth. Technically, there probably will be silver left on Earth, but not enough to satisfy both growing industrial and investment demand. Silver does not just serve as a store of wealth, but is actually consumed in electronic goods and other applications that make the modern world tick - ipods, laptops, etc. At some point, there will be so little left for consumption that prices will HAVE to move higher - it's simple supply and demand. And since silver is used in such small amounts per industrial application, it is not economically feasible for recycling (at least not until silver price rises significantly higher). So when we say it is consumed, it is gone... kaput... no mas.
So this brings me to my point. Current silver price is at an attractive level for a great potential investment - one in which the price can rise perhaps one to two significant orders from the current price. What do I base this on? One can compare the price of silver to say another source of wealth like gold and say it is relatively cheap. But that is another topic for a future blog.
What I would like to leave you with today is the following thought. If I told you that there was only a basket of oranges left on the face of the entire Earth. Or in the vernacular of Joe Six Pack, only one 12 pack of beer [insert your favorite beer] was left on this world. How much would you be willing to pay for that beer? To what dollar amount would you value that beer at? Hmmm.... In the case of silver we're not talking about a want but a necessity (some would argue that beer is a necessity, and I wouldn't argue that). Silver is a necessity in modern day society where cellphones and laptops are all around us. How much do you think people will value something that is slowly disappearing from the surface of the earth?
Just really think about it for a moment and perhaps you will see that my estimate of silver increasing one to two significant orders is too low of an estimate... Beer anyone?
Cheers.
Okay, enough of the buildup... drum roll.....
The winner of this year's 2009 Miss Universe pageant is.... Ms. AU. On the periodic table AU is better known as SILVER! Yes, silver. The stuff that forks and knives are made of (well for the rich folks at least). The trinkets that Tiffany charges an arm and leg for.
Why silver? The most compelling reason is that this will be the first element on the periodic table that will be totally consumed according to the US Geological Survey (ETA ~2020?). Wow, if that doesn't perk up your ears, I don't know what will. Just imagine for a minute. No more silver to be mined on Earth. Technically, there probably will be silver left on Earth, but not enough to satisfy both growing industrial and investment demand. Silver does not just serve as a store of wealth, but is actually consumed in electronic goods and other applications that make the modern world tick - ipods, laptops, etc. At some point, there will be so little left for consumption that prices will HAVE to move higher - it's simple supply and demand. And since silver is used in such small amounts per industrial application, it is not economically feasible for recycling (at least not until silver price rises significantly higher). So when we say it is consumed, it is gone... kaput... no mas.
So this brings me to my point. Current silver price is at an attractive level for a great potential investment - one in which the price can rise perhaps one to two significant orders from the current price. What do I base this on? One can compare the price of silver to say another source of wealth like gold and say it is relatively cheap. But that is another topic for a future blog.
What I would like to leave you with today is the following thought. If I told you that there was only a basket of oranges left on the face of the entire Earth. Or in the vernacular of Joe Six Pack, only one 12 pack of beer [insert your favorite beer] was left on this world. How much would you be willing to pay for that beer? To what dollar amount would you value that beer at? Hmmm.... In the case of silver we're not talking about a want but a necessity (some would argue that beer is a necessity, and I wouldn't argue that). Silver is a necessity in modern day society where cellphones and laptops are all around us. How much do you think people will value something that is slowly disappearing from the surface of the earth?
Just really think about it for a moment and perhaps you will see that my estimate of silver increasing one to two significant orders is too low of an estimate... Beer anyone?
Cheers.
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