Tax liens are an incredible source of high interest rate, passive investments. Interest rates on these financial instruments go up to 36% and returns can be even higher when penalties are calculated in. In one state the penalties for not paying the tax lien are 50% per year!
Tax liens are secured against real estate. A tax lien is sold by a taxing authority and places the investor in the shoes of the taxing authority. Meaning that the investor has to be paid or can ultimately foreclose on the property or will simply be given the property in the event the property owner does not pay the tax lien off within a specific deadline. And in most situations the investor would take the property free and clear of any mortgages.
Tax liens do not have to cost a lot of money. You can invest as little as a few hundred dollars or as much as millions depending upon how much you have to invest. The investment is passive and since you don’t actually own the real estate you never worry about maintenance, repairs, mortgage payments etc. Yet the investment is backed by the real estate.
You can use strategies to buy liens that are more likely to redeem (meaning you get the interest and penalties) or less likely to redeem (meaning you get the property) depending upon your investment strategy which can be to get the real estate or to get the interest and penalties.
You can even put tax liens into a self directed ROTH IRA, which will cause the profits to be totally tax free.
All fifty states hold sales of either tax liens or tax deeds where you get the property right up front. Sales are held in every county at least once per year and sometimes more frequently than that. Check out your local tax sales and learn about this very lucrative area of investing.