I just added audio to this article so now you can listen to it instead of reading it! Just click the yellow play button.

Unfortunately you cannot trust the media. Just when they say it’s time to get into an investment opportunity, that’s when it’s usually oversold and it’s time for the wise investors to get out. Regardless of what the media is saying about the real estate market, the market is down and we’ve not seen the bottom yet. There are so many people that are defaulting on their homes and because of the backlog that the banks have, we won’t see those homes on the market for another two years. So as bad as the market is today, two years from now it will probably be worse.

The stock market is also going through a natural correction, much like it did in 1939. It’s all very predictable and connected to cycles in the economy. If you really want to understand these cycles, read The Great Depression Ahead by Harry Dent. Mr. Dent is the renowned economic forecaster who accurately predicted the boom of the early 2000’s and the most recent stock market crash, which he claims is not done yet.  And to make things even worse the baby boomers are headed for retirement. This is the time when they want to cash in on their investments and take profits. Only problem is there might not be any profits for you if you are heavily invested in the stock market (especially in “safe” mutual funds).

However, if you had a large percentage of your investment portfolio in tax lien certificates you’d be sitting pretty right now. That’s because tax lien certificates – even though they are tied to real estate, are not affected by the markets. In order to understand this you need to know what a tax lien certificate is.

Municipalities and counties cannot provide the services that they do, such as building roads, schools, paying police officers, fireman, teachers, and elected officials, without collecting property taxes. If property owners do not pay their taxes they are given hefty penalties and charged high interest rates, but that does not guarantee the townships and counties their money. So some states will allow the local governments – sometimes it’s the county and sometimes it’s the municipality – to sell the taxes to investors. Investors bid for the right to pay the taxes and receive the interest rates that the county would charge – normally between 8% and 36% depending on the state and the amount of the lien.

A tax lien certificate is a great investment for today’s times for quite a few reasons, and I’ll outline a few of them for you here:

1. Where else can you get 8, 12, 18, 25, or 36% on your money without the risk of the stock market?
2. Your investment is secured by real estate, which has a value a few times that of your investment (if you did your research). So even if the real estate market takes a tumble, it’s still worth more than your investment.
3. Since you do not have to go through someone else to purchase a tax lien, there are no brokerage fees.
4. Unlike other real estate investments, you don’t need a lot of money to start. You can invest as little as $200, or even less in a tax lien.
5. You don’t need good credit, you don’t have to open a special account, and you don’t even need to be a U.S. citizen or live in the U.S.
6. You can invest using your computer from the comfort of your home.
7. You can invest with funds from your Self-directed IRA.
8. Because of the economy there are more tax liens available now than in the past couple of years.

 copyright 2010 Tax Lien Consulting LLC. All Rights Reserved. Any use of this article without the express permission of the author is a violation of copyright law.

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