Hi Awesomely friend!
Jay Drexel here, wanting you to know how excited I am to have put together some awesome training, with the fine folks here at Awesomely, to help people learn how to land guaranteed double-digit returns investing in tax yields. It’s an asymmetric opportunity in the real estate arena that I have gotten very good at tapping into.
I go into detail and demonstrate step by step exactly how we’re doing it 100% passively from anywhere in the world with only a laptop and the internet… scoring sweet deals for just the cost of back taxes owed.
It’s pretty great. You should def check out Tax Yields!
Anywho…
About those 4 levels in the world of tax yield investing… well, I want to give you a high-level overview in this blog post. Perhaps it’ll peak your interest. And of course, for a deeper dive, look into my Tax Yields Training Program.
Let’s get to it…
State laws determine how property taxes are issued and enforced. These are the 4 categories, or levels, of tax yield investing:
- Tax Lien Certificates
- Tax Deeds
- Hybrid States (Liens & Deeds)
- Redeemable Tax Deed
Alright, lemme summarize a quick snapshot of each of those 4…
1. Tax Liens
When the property owner doesn’t pay their property taxes, the county issues a lien against that property, which is an encumbrance.
That means the owner has to pay it if they ever want to sell their property.
So, as the investor, you’d purchase that lien at a specific interest rate and you’re given a redemption period: a preset time that the property owner has to pay you back by.
If they don’t pay you back by the end of the redemption period, you’re given the right to foreclose on that property, and you can buy that property for only the back taxes and fees that go along with the foreclosure.
So, in tax lien states, if the owner doesn’t redeem the property, the tax lien certificate owner initiates the foreclosure — not the county, not any other municipality.
That’s how you can earn double-digit returns guaranteed by the government from those investments. And, that’s how you can get properties for pennies on the dollar, if/when you should choose to foreclose after the redemption period.
2. Tax Deeds
The same process happens: The county issues a lien against the property. But! They’re going to hold onto it, and the county accrues the interest.
Now, at the end of that period, the county will foreclose on the property. Then, they’re going to sell it to the highest bidder.
So, the county initiates the foreclosure. On average, those properties sell for about 65¢ to 70¢ on the dollar.
The difference in the first 2 levels…
In tax lien States, the county sells the tax lien certificate at an interest rate. But in tax deed states, the county sells a deed to an already foreclosed property.
3. Hybrid States (Liens & Deeds)
A hybrid state is essentially both of what I just shared: It’s a tax lien state AND a tax deed state.
It just depends on where you’re investing or the method you prefer — if both are offered, you can choose the one you like.
In hybrid states, each local area determines what they offer. Some local areas offer both liens and deeds, and some specific areas offer just liens or just deeds. It’s all determined by that local government.
4. Redemption Deed States
These are very interesting — a hybrid of tax liens and tax deeds put together.
So, just like the deed states, you’re actually buying the deed to the property. But unlike the deed states, you don’t get immediate ownership of the property… you have to wait until the redemption period is over.
Once that redemption period is up, then you have the ability to take ownership of that property.
What’s cool about redemption deed states, is that they generally pay a higher rate of return than in tax lien states. It usually starts off around 18% to 25%… sometimes even 36% to 50%.
And, they tend to have redemption periods of 6–12 months.
What’s great is that you get a twofer: a high yield and an awesome opportunity to acquire a property.
So, again, it’s a tax deed that acts like a tax lien. But, those higher interest rates are actually not assessed like a tax lien interest rate — though there is a penalty that’s issued on day one. So even when you purchase one, you can take immediate possession of the property, but you’re not officially on the title until that redemption period is up.
Those states are giving that extra amount of time for the previous property owner to have one more chance to protect their property, before it goes to an investor.
So, you’re not taking full title to the property, but you do have immediate possessory rights in a lot of cases — you’re actually buying a property, not a tax lien in a redemption deed state. It’s kinda odd… like a hybrid of a hybrid.
There you have it…
A high-level snapshot of the 4 levels of tax yield investing.
Maybe you’ll consider a new strategy for your real estate investing endeavors.