5 Reasons Why Tax Lien Investing is a Smart Financial Move

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If you’re thinking about investing in tax liens, there are a few things to consider before you dive in head first. However, there are many benefits to buying tax liens that will make your investment profitable in the long run and secure your financial future now. If you’re thinking about investing in tax liens but aren’t sure whether it’s the right decision, keep reading to find out why it may be smarter than you think to invest in tax liens.

1) Most people don’t know how to invest their money


Most people don’t really know how to invest their money. When given a few thousand dollars in cash, they often put it in savings or, at best, in some high-yield interest account with no plan for growth or future use.

This doesn’t make sense because your investments should help you achieve specific goals: paying off your mortgage faster, earning college tuition for your kids, buying that vacation home by next summer—whatever. You should be investing with intention.

2) Tax liens are backed by real assets


While tax liens may sound risky, there are safeguards in place to ensure that you’ll get your money back when you win your lien auction. Most states have a redemption period during which you can recoup your losses—and it usually takes up to six months after an auction for all legal proceedings to settle.

3) Legal and professional protections for investors


With today’s volatile real estate market, tax lien investing provides investors with both legal and professional protections. Because tax liens are considered secured debts in most states, there are substantial protections for investors involved in these types of deals.

4) You can grow your portfolio without having to take on more risk


While stocks and bonds tend to fluctuate in value, tax liens are fairly stable. There’s no guarantee that their values will grow year over year, but it’s not uncommon for them to increase 10 percent or more over five years.

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That may not seem like much, but it can make all of the difference when your goal is long-term growth rather than short-term gains. All you need to invest in tax liens are money and patience—both of which you probably have right now!

5) Easy access with as little as $100


If you’re investing small amounts, you may be reluctant to put much money into any one deal. When buying tax liens, though, your investment amount doesn’t matter as much because there are no upfront costs or fees involved. You can buy as little as $100 in liens, which means that even if you only have a few hundred dollars to invest, you can still access some great deals.