Tax Lien Investing is not the secret of the wealthy anymore. Do
to late night infomercials and high priced investment seminars
that tout buying tax lien certificates as a high yielding
investment, more and more people are buying tax liens. As a
result of this recent exposure to the general market, tax lien
investing in some areas has become highly competitive. Is it
still a profitable investment?
It's true that it's getting tougher to buy profitable tax lien
certificates. This is largely due to supply and demand. There
are less tax liens available and more buyers in the market. At
some of the tax sales that I have attended in New Jersey there
are more bidders than there are liens for sale.
There are fewer liens available for two reasons. First, it is
very easy to get a low interest loan these days. Couple that
with the increase in the value of real estate in the last 5
years and that gives property owners the incentive and the means
to pay their taxes, even if they have to get a loan. With fewer
liens available and more investors in the market, tax lien
certificates are selling at lower interest rates and/or higher
premiums depending on the state. In most states either the
interest rate is bid down or the premium is bid up while the
interest rate remains constant. New Jersey is rare in that first
the interest rate is bid down and then the premium is bid up.
Hence in New Jersey tax lien investing is not the highly
profitable investment it once was.
Judging from the premiums that institutional and private
investors have been paying for tax lien certificates in the last
couple of years, I would venture to say that they are seeing an
actual return on their investment of 4% or less. This is not
very good considering you can probably find a bank right now
that will give you 4% on a one year CD. Perhaps as interest
rates go up over the next year or two, institutional buyers will
get smarter and less desperate for tax lien certificates and
stop paying too much for them. In the mean time the best way to
find out if tax lien investing is still highly profitable in
your state is to attend a couple of tax sales and take note of
who is buying and what interest rate liens are bid down to or
how much premium is being paid for them. Be sure that you do
this before you go out and buy somebody's high priced program on
how to make a lot of money with tax lien investing.
© 2005 Permission is granted to reprint this article in print or
on your web site so long as the paragraph above is included and
contact information is provided to the email provided.
About the author:
Joanne Musa works with investors who want to reap the rewards of
tax lien and tax deed investing. She is the author of the Tax
Lien Lady's E-books, Tax Lien Investing Secrets and Tax Lien
Lady's State Guide to Tax Lien and Tax Deed Investing. For more
information about Tax Lien Lady's E-books go to
http://www.taxlienconsulting.com/sales/sales.htm. For more about
tax lien investing e-mail MoreTips@taxlienconsulting.com.
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