The number one concern I hear from potential real estate investors is “What if the tenant destroys my property?” It is a very real concern albeit overblown in my opinion. A lower risk option I suggest is tax lien investing. Rules and regulations vary by county. Our real estate investments are in Polk County in Central Florida. A tax lien is simply a claim that Polk County puts against a property when the owner hasn’t paid taxes. This lien prevents the owner from selling or re-financing the property until the taxes are paid with interest and penalties. Since the county needs the money to pay for public services, they sell the tax lien certificate to investors. The county gets the tax money and the investors will pocket the interest and penalties. The homeowner has two years to pay the back taxes and penalties in Polk County or the investor can request that the county puts up the property for auction. Once the property is sold, the investor recoups their interest and penalties.
Unfortunately, there are some downsides to this type of investing. The number one risk with tax lien investing is purchasing a certificate on a property where the taxes owed are more than the property value. At auction, the property will not be sold and the investor will never recoup the money paid for taxes two years earlier. However, more than 90% of tax lien certificates are redeemed by the homeowner before the auction so this risk is not overly concerning. Since this type of investing is such low risk, the interest rate is typically low. In addition, the redemption period is so long that the annualized return is low. I know an investor who likened tax lien investing to a supercharged savings account. The tax certificate website provides more information on the bidding process and the important dates. Overall, I think this method is a safe way to generate modest and reliable income.
Yorumlar