From house flipping to being a landlord, real estate investing has several profitable strategies you can utilize to make profit!
But …
They come with risk.
Let’s be honest …
Low risk real estate investment opportunities are difficult to find!
Did you know there is one strategy that is low risk, has a high potential upside, and even has a super low competition?
It’s true.
Welcome to the world of government backed tax yields!
In this article, we’ll break down the advantages and disadvantages of government backed tax yields so that you can decide if they are right for you.
What is a Government-Backed Tax Yield?
Government-backed tax yields are legal certificates issued by state and local governments when a property owner does not pay their property taxes.
They are also known as tax liens.
These certificates act as a claim to the amount of tax owed — for example, property taxes.
Tax yields are auctioned off to investors with interest. This is a way for the government to recoup the property taxes owed to them within a short period of time, rather than waiting for property owners to pay their taxes.
The other half of the municipal governments auction off the properties themselves, rather than a certificate.
How Does a Government-Backed Tax Yield Work?
Know that we know what tax yield is …
How does investing in one work?
The tax lien process starts when a property owner fails to pay their property taxes for an extended period of time.
The government will create a tax lien certificate, which specifies the amount of taxes owed, an interest rate, and a redemption period.
The redemption period is the amount of time the homeowner has to pay their taxes before the foreclosure process begins.
This tax lien is then put up for auction.
Interested investors — like you— have the opportunity to bid on the certificates!
In some cases, investors will bid on the upfront payment amount, while in others cases, they will bid on the interest rate.
The winning investor will then obtain the certificate and immediately pay the government the amount of back taxes owed.
Then, the homeowner has until the end of the redemption period to pay their taxes with interest to the investor.
If the homeowner does not make the payment by the end of the redemption period, the investor has the right to initiate the foreclosure process.
After the foreclosure process, the investor becomes the owner of the property.
Make sense?
Next, we’ll take a look at some of the advantages and disadvantages of investing in government backed tax yields.
Advantages of a Government-Backed Tax Yield
Government-backed tax yields offer a variety of benefits for investors.
- High interest rates: These tax liens offer relatively high interest rates when compared to other passive investment vehicles. Minimum interest rates are usually anywhere from 12 to 36%, depending on your state!
- Government-backed: Since these tax liens are government-backed, they provide an additional level of security when compared to other real estate investing strategies.
- Less complex than purchasing property: Investing in government-backed tax yields is a way to break into the real estate investing market, without having to buy a property outright!
Disadvantages of a Government-Backed Tax Yield
Government-backed tax yields also come with some disadvantages.
- Research required: Before purchasing a government-backed tax yield, it’s important to research the property you’re interested in and understand its value. If you don’t conduct this due diligence, as with any real estate investment, you could end up having to foreclose on a neglected property.
- Competition: There’s no guarantee that you’ll get the tax yield for the property you’re interested in. You’ll need to outbid competitors at auction.
- Expiration: Tax liens expire at the end of the redemption period. Investors will need to be proactive to ensure that they redeem the certificate before the expiration date.
Tax Lien Investing vs. Tax Deed Investing: What’s the Difference?
You may have heard of tax deed investing.
How does it differ from tax lien investing?
A tax lien is a claim to the amount of taxes owed on a property.
On the other hand, a tax deed is a claim to the property itself.
Keep in mind that both are auctioned off by state or local governments to recoup property taxes owed.
With tax lien investing, you’re making a claim to the amount of taxes owed, plus interest. You don’t claim ownership of the property unless the original owner fails to pay by the redemption period and you initiate foreclosure.
With tax deed investing, you’ll own the property outright once you win the auction.
For those looking for a passive form of real estate investing with minimal risk, tax lien investing achieves this compared to tax deed investing.
Got it?
Where to Buy a Government-Backed Tax Yield
So …
Where can you buy a government-backed tax yield?
Government-backed tax yields are auctioned off at annual tax sales.
These auctions are scheduled by your local tax revenue office.
If you’re looking for one today, keep in mind these offices will typically make online announcements specifying where and when these sales will happen.
Prior to the auction, investors should get in touch with the tax revenue office to learn more about specific investor requirements.
You’ll also need to conduct research to determine which properties have the most potential and conduct your due diligence.
How Much Money Can You Make From Government-Backed Tax Yields?
Profit yields for government-backed tax yields can vary, but tend to be substantial!
Let’s say you invest in a $5,000 tax lien with a 12% statutory interest rate and a two-year redemption period.
If the original homeowner pays at the end of the redemption period, you’d receive $6,200 — a nice payday for such a small amount of work!
How The Investor Can Receive a Return on the Investment
There are two ways for investors to make a profit from government-backed tax yields, both of which we will explore next.
Although homeowners will pay their property taxes in most cases, investors should still be prepared for both scenarios.
When The Owner Pays
In most scenarios, the original homeowner will pay the property taxes they owe before the redemption period ends.
When this happens, the investor will receive the original value of the tax yield …
Plus interest!
Since interest rates for government-backed tax yields are so high, this can result in significant returns.
When The Owner Doesn’t Pay
In the rare cases where the original owner does not pay their taxes before the end of the redemption period, the investor can still profit.
After completing the foreclosure process, the investor will own the property.
They can then improve and sell the property to profit.
How Do I Learn About Tax Lien Investing?
Although tax lien investing can be low risk with high potential upside, it still requires education to ensure that you make the right investment decision.
If you’re looking to learn about tax lien investing, we have the best tax lien investing course for you: Government Tax Yields!
In the course, you’ll learn how to flood your bank account with monthly tax yield payouts of $885.56… $1,248.33… $2,061.21 or much more!
You’ll discover step by step:
- How to tap into the asymmetric opportunity of tax liens and deeds.
- How you can invest 100% passively for assured double-digit returns by getting tax-delinquent properties for just the cost of back taxes owed — from anywhere remotely, with any amount of money.
- First-class tools, resources, amplifier training videos, demos and best practices for your own real estate investing endeavors to help you in the process.
The tax lien investing course is taught by Jay Drexel, who, before discovering tax liens, was completely broke.
With less than $100 bucks, Jay did his first deal and continued slowly with small deals to build up from there.
Fast forward to today, and Jay owns 500+ Tax Yield investments!
It’s true!
Jay and his co-teacher, Phil Kessler, have a passion for helping others interested in tax liens, but unsure how to start.
Best of all, the Tax Yields training course is divided up into a series of jam-packed video modules, plus tools, resources, bonus “amplifier training” sessions and even more, guaranteed to not only educate you, but keep you entertained along the way!
The Bottom Line: Government-Backed Tax Yields
Government-backed tax yields are a unique real estate investment vehicle with the potential for high returns!
To experience this profit, you have to understand how they work.
That’s crucial.
Watch Government Tax Yields today so that you can get started investing in tax liens today!
