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Tax Lien Certificate Investing: The 16% Solution by Joel S. Moskowitz Explained

The 16 Percent Solution By Joel Moskowitz Pdf 26

If you are looking for a way to get high interest rates in a low interest world with minimal risk, you might want to consider investing in tax lien certificates. In this article, we will review a book that explains everything you need to know about this lucrative investment strategy: The 16% Solution by Joel S. Moskowitz.

The 16 Percent Solution By Joel Moskowitz Pdf 26

The 16% Solution is a book that was first published in 1994 by Joel S. Moskowitz, a lawyer and real estate investor who discovered the power of tax lien certificates while researching alternative investments. The book has been updated several times since then to reflect the changes in laws and markets.

The book reveals how you can earn up to 16% or more interest per year by buying tax lien certificates issued by local governments on properties that have delinquent taxes. The book also shows you how to avoid the common pitfalls and challenges of this investment, and how to find the best opportunities in your area.

In this article, we will summarize the main points of the book and give you some practical tips on how to start investing in tax lien certificates today. Let's get started!

What are tax lien certificates and how do they work?

Tax lien certificates are legal documents that represent a claim on a property for unpaid taxes. When a property owner fails to pay their property taxes, the local government has the right to place a lien on the property and sell the lien to investors at an auction or sale. The investor who buys the lien becomes the lien holder and has the right to collect the delinquent taxes plus interest from the property owner.

The interest rate on tax lien certificates varies by state and county, but it can range from 8% to 36% per year. The interest rate is usually determined by a bidding process, where the lowest bidder wins the lien. The bidding can be based on the interest rate itself, or on a premium or discount on the face value of the lien.

The property owner has a certain period of time to redeem the lien by paying the delinquent taxes plus interest and penalties to the lien holder. This period is called the redemption period, and it can range from 6 months to 3 years or more, depending on the state and county. If the property owner redeems the lien, the lien holder gets their money back plus interest and penalties. If the property owner does not redeem the lien within the redemption period, the lien holder can foreclose on the property and take ownership of it.

What are the benefits of investing in tax lien certificates?

Investing in tax lien certificates has many advantages over other types of investments, such as stocks, bonds, or real estate. Here are some of them:

  • Low risk: Tax lien certificates are secured by real estate, which means that you have a claim on a tangible asset that is worth more than your investment. Even if the property owner does not pay their taxes, you can still recover your money by foreclosing on the property. In addition, tax liens have priority over most other liens, such as mortgages or judgments, which means that you are first in line to get paid.

  • High return: Tax lien certificates offer high interest rates that are fixed by law and guaranteed by the government. You can earn up to 16% or more per year on your investment, depending on the state and county where you buy the liens. This is much higher than most other investments that offer low or variable returns in today's market.

  • Secured by real estate: Tax lien certificates give you an opportunity to own real estate at a fraction of its market value. If you foreclose on a property that has a tax lien certificate, you can either sell it for a profit or keep it as a rental income property. You can also use tax lien certificates as a way to find undervalued properties that you can buy directly from the owners before they go to auction.

  • Tax advantages: Tax lien certificates offer some tax benefits that can lower your taxable income and increase your net return. For example, you can deduct the interest you pay on money you borrow to buy tax lien certificates as an investment expense. You can also defer taxes on your interest income by reinvesting it in more tax lien certificates. You can also avoid capital gains taxes by holding your tax lien certificates for more than a year before selling them.

What are the challenges and risks of investing in tax lien certificates?

Investing in tax lien certificates is not without its challenges and risks. Here are some of them:

  • Competition: Tax lien certificate investing has become more popular and competitive in recent years, as more investors have discovered its potential. This means that you may face more competition from other bidders at auctions or sales, which can drive up the prices and lower the returns of tax lien certificates. You may also have to deal with professional investors who have more experience and resources than you.

Due diligence: Tax lien certificate investing requires a lot of research and due diligence before you buy any liens. You have to verify the information about the properties, such as their location, condition, value, title status, occupancy status, zoning status, environmental status, and other liens or encumbrances. You also have to check the laws and regulations of each state and county where you buy liens, as they may vary widely in terms of interest rates, redemption periods, foreclosure procedures, bidding methods, and fees. 71b2f0854b

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