Is Buying Tax Lien Certificates Still Highly Profitable?

Is Buying Tax Lien Certificates Still Highly Profitable?: "Is Buying Tax Lien Certificates Still Highly Profitable?

By Joanne Musa, the Tax Lien Lady
I get many e-mails from subscribers to my e-course and newsletter about tax lien investing. What most people want to know is; “Is tax lien investing still profitable, is it something that I can do,” and “how do I get started.” In this article I’d like to address the first question, “Is tax lien investing still profitable?”

It’s true that it’s getting tougher to buy profitable tax lien certificates. Tax lien investing is not the secret of the wealthy any more. This is largely due to supply and demand. There are less tax liens available and more buyers in the market. At some of the tax sales that I have attended in New Jersey there are more bidders than there are liens for sale.

There are fewer liens available for two reasons. First, it is very easy to get a low interest loan these days. Couple that with the increase in the value of real estate in the last 5 years and that gives property owners the incentive and the means to pay their taxes, even if they have to get a loan. With fewer liens available and more investors in the market, tax lien certificates are selling at lower interest rates and/or higher premiums depending on the state. In most states either the interest rate is bid down or the premium is bid up while the interest rate remains constant. New Jersey is rare in that first the interest rate is bid down and then the premium is bid up. Hence in New Jersey tax lien investing is not the highly profitable investment it once was.

Judging from the premiums that institutional and private investors have been paying for tax lien certificates in the last couple of years, I would venture to say that they are seeing an actual return on their investment of 4% or less. This is not very good considering you can probably find a bank right now that will give you 4% on a one year CD. Perhaps as interest rates go up over the next year or two, institutional buyers will get smarter and less desperate for tax lien certificates and stop paying too much for them. In the mean time the best way to find out if tax lien investing is still highly profitable in your state is to attend a couple of tax sales and take note of who is buying and what interest rate liens are bid down to or how much premium is being paid for them. Be sure that you do this before you go out and buy somebody’s high priced program on how to make a lot of money with tax lien investing.

Joanne Musa works with investors who want to reap the rewards of tax lien and tax deed investing. She is the author of the Tax Lien Lady’s E-books, Tax Lien Investing Secrets and Tax Lien Lady’s State Guide to Tax Lien and Tax Deed Investing. For more about tax lien investing e-mail MoreTips@taxlienconsulting.com.