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2024/09/04

Leaning on Liens

Wealth Daily

Leaning on Liens

Dear Reader,

Over the past few weeks, I’ve personally received countless advertisements for “courses” on something called “tax yield investing.” Some of them have come direct from marketing companies. Some have been forwarded by friends and clients wondering if this tax yield investing is the real deal. All of them make it sound like an incredibly easy way to set up a MASSIVE income stream from the comfort of your own home. And all without really working too hard at all. So I wanted to delve into the topic of tax yield investing. And together, we’ll see if it’s really as great an option as the people selling the courses make it out to be…

tax yield investing

What Is Tax Yield Investing?

Now before we get into whether it’s as great as the salesmen make it sound, we’ve got to answer the question of what it is. And what’s being described as tax yield investing is actually something called tax lien investing. It’s a real thing and you can use it to establish relatively lucrative income streams. But that doesn’t tell you much, does it? So let’s take a few minutes to look at tax lien (or tax yield) investing to see what it’s all about, and then we’ll cover everything else you need to know before you get started with tax yield investing...

  • What is a tax lien?
  • What is a tax lien certificate?
  • What is tax lien (or tax yield) investing?
  • How profitable is tax lien (or tax yield) investing?
  • How easy is tax lien (or tax yield) investing?
  • What’s better than tax lien (or tax yield) investing?

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And that all starts with understanding what a tax lien is. But that’s pretty simple… A tax lien is a legal claim that a government (local or municipal) has in place on an individual’s property. They get put in place when the owner fails to pay property taxes and incurs a debt. It’s the step before a tax levy, where the government can actually seize the property to recover the debt.

Tax liens come with tax lien certificates. These certificates show the taxes that are owed by the property owner. And they also include any interest and penalties, or fees, that go along with paying off the debt. And these certificates are often auctioned off to investors looking for a profit.

How Does Tax Yield Investing Work?

You see, the government isn’t in the business of collecting debts. It doesn’t have the time, resources, or patience to do all of that. So it would rather get as much of the money it’s owed as quickly as possible. And that’s where tax yield investing and the tax lien auctions come into play.

When you fail to pay your taxes on time, you face a penalty on top of those taxes you already owed. And when it’s going to take you some time to pay back what you owe, there’s usually interest involved. So people who are interested in tax lien (or tax yield) investing can pay off the debt, sometimes for a fraction of the actual amount. And then they can collect the debtor’s payments, which will include the original debt, plus fees and interest.

The interest charged on these tax liens differs from state to state. So do the fees. So does the way they process and assign tax debts…

tax yield investing states

But the interest alone can get up as high as 25% in some instances. And the liens are typically paid off on short-term schedules lasting only a few years at most. So, through a small initial outlay, tax yield investing can set you up with a profitable, relatively steady income stream.

And so far, everything the salespeople are saying about tax yield investing seems to be right on point. But here’s where reality diverges from marketing…

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How Easy Is Tax Yield Investing?

That’s the ease with which these folks say they’ve set up their income streams. If you believe the marketing, these folks just sit around in their fancy houses polishing their fancy cars. Can tax yield investing really be both that profitable AND that easy? Well, yes and no.

You see, it really can be a profitable business. But tax yield investing is just like any other business. It requires work. If you want to get into tax yield investing, you have to seek out tax lien certificates that are going up for auction. You have to bid on those certificates, too. But before you do that, you need to investigate the properties securing the liens…

tax yield investing foreclosure

That’s because, when you’re tax yield investing, if the debtor doesn’t pay the debt, you’ve got two choices: Write off the loss, or foreclose on the property and sell it. So you need to know if the property could sell for what you’re investing to buy the lien. And if you do have to foreclose, you need to know how to flip houses (or businesses).

But let’s say you get the perfect tax yield investing situation: a debtor who makes regular and timely payments until the lien is satisfied. Even those tax yield investing scenarios require effort… The state got its money. It’s out of the game now. So it’s up to you to notify the debtor of the transfer of the debt. And it’s up to you to set up a payment schedule. It’s also up to you to follow up on those payments and make sure they come in on time.

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But you’re still not done working yet. You see, when you’re tax yield investing, you’re making short-term investments. Tax liens usually get paid back within a few years at most. So that means at least every three years, you’re going to have to go back on the hunt for more tax liens to bid on and then service. It could be more frequent. And every time you invest in one of those liens, there’s a chance you might own that property later on down the road.

The Bottom Line on Tax Yield Investing

So yes. You can make a very good living through tax lien (or tax yield) investing. But it’s not quite as easy as the people selling the courses want you to think it is. It requires research. It requires legwork. It requires steady communication. And it includes the risk of owning a property that needs major work before it can be sold.

Personally, I don’t have the extra time all that would take. So I enlist a more passive strategy to collect yields from real estate other people own. It’s been incredibly successful for me and the members of my investment community, The Wealth Advisory, where we’ve used it to beat the markets for years. And all the while, we’ve been generating steady, growing, truly passive income streams.

Our strategy allows us to invest in some of the most profitable and highly sought-after real estate in the world. This includes industrial buildings like warehouses, specialized manufacturing facilities, and even government buildings. And through these investments, we collect steady income as the owners are obliged, by law, to share the vast majority of profits with investors.

You can learn more about this impressive passive real estate investment that beats tax yield investing every time here on our website. And if you’re interested in joining my community and getting access to a portfolio of specially curated income-generating opportunities like them, I and the rest of the TWA family would love to welcome you as our newest member.

To your wealth,

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Jason Williams

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After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter; the founder of Future Giants, a nano cap investing service; and authors The Wealth Advisory income stock newsletter. He is also the managing editor of Wealth Daily. To learn more about Jason, click here.

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