Ever looked for the most aggressive investment you can find and still keep your money safe? That's a tough challenge. This article is about one of the investment vehicles I've found that are better than you'll get at the bank. Usually.
Why CD’s Stink
Many Americans still consider a Certificate of Deposit (CD) to be a very safe and secure investment. In fact, I remember my High School Economics teacher, suggesting to our class in 2008 an idea that he was ecstatic about. His idea was to purchase one 6-month CD each month for 6 months so that every month of the year an individual would receive interest income and could eventually replace their job.
At the time, it was the most brilliant idea I had ever heard. Real residual income that wasn’t risky at all. So when I was in the military, I started looking at CDs. Then I realized that the interest rates on them ranged from a mere 0.61% to 1.05%. In case you didn’t know, that’s not even keeping up with inflation, which I hear is around 3 – 4% per year. Here’s how your investment would look after 20 years starting with $5000:
20 Year Monthly Projected Income using six separate 6-month CDs with starting balances of $5,000
Enter Tax Liens Certificates (TLCs)
A Tax Lien is a lien imposed by law to upon a property to secure the payment of taxes. They are normally imposed on delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes. The Internal Revenue Code section 6321 is the authority from which High Interest Tax Lien Certificates were created.
Sec. 6321. LIEN FOR TAXES.
The challenge for local governments is, when owners don’t pay their property taxes, this puts a large constraint on their budgets. Between $7 billion and $10 billion in property taxes go delinquent each year, according to Brad Westover, executive director for the National Tax Lien Association. This is money that could be used for paving roads, helping schools, and other government programs. So what does the government do when it needs money? Usually they print it. But in this case, they borrow it from the citizens. Lucky you!
Investor citizens can purchase a Tax Lien Certificate, a financial note from counties in various states across the U.S. which helps fund government programs in the mean time. Then, when the taxes are brought current, the investors get their money back, plus interest. In the event that they aren’t ever brought current, the investor can foreclose on the property, which becomes the investors if there is no mortgage. If there is a mortgage, the investor still often times has priority over the bank or mortgage company on taking the house, although most times the bank will pay off the investor to protect their interests in the property. Either way, you get paid!
4 Reasons to Invest in Tax Liens
20 Year Monthly Projected Income using six separate 6-month TLCs with starting balances of $5,000
Sheridan's interests are in technology, business, music, and adventures