You don’t only have to invest in stocks – you can invest in alternative investments like debt.
Do you know what the biggest financial hurdle is for many aspiring homeowners?
The typical mortgage payment is about $1,600 per month. However, many Americans pay a lot more than that for their mortgage.
But mortgage payments are not always the greatest financial hurdle facing Americans. Many Americans can’t handle paying their property taxes at all or on time.
The typical property tax rate is 1.1%, or about $2,375. Now that may not sound like a lot of money.
But if you are trying to pay a mortgage, utilities, and other costs of living bills, then a property tax may be the straw that breaks the camel’s back if you live on a fixed income.
And you must consider that your property tax rate is determined based on where you live. Believe it or not, New Jersey technically has the highest property tax rate in the country at 2.47%.
So, if you own a luxury home in New Jersey, you could end up paying $8,100 in property taxes annually.
A recent study by the National Tax Lien Association reveals that homeowners are unable to pay over $14 billion in property taxes every year.
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In November 2020, about one in every 14,000 homes was foreclosed on.
These may be some morbid statistics to focus on, but it is also reality. And there is a lot of opportunities that can be found in misfortune.
If you are strategic and develop a diverse portfolio, you can invest in tax lien certificates. If you invest in a couple of tax lien certificates, you could generate a nice passive income.
Tax Lien Certificates 101
When local or federal government authorities seize residential property due to unpaid property taxes, then a tax lien is invoked on the property.
This basically means that the homeowner cannot reclaim the property until the tax lien is paid off and removed.
Remember, over $14 billion dollars in property taxes are never paid annually, so a lot of tax liens get issued every year.
One way that local governments mitigate their property tax losses is to auction tax lien certificates through courthouse or online auctions.
Third-party investors can buy a tax lien certificate for as little as $100 with interest rates ranging between 5% and 50%.
You get paid every time the original homeowner pays back on their tax lien. In some states, the property tax interest penalty is applied after a lien is purchased. So, you could qualify for an interest payment return without the original homeowner paying back anything.
And instead of viewing such an investment as ghoulish, it can help motivate the original homeowner to pay back their tax lien and expedite a return on your investment.
Just make sure that you buy a couple of tax lien certificates to ensure a healthy return on investment. Since tax lien certificates are relatively affordable, relative to auction prices, this won’t be hard to do.
You can earn a steady passive income by investing in tax lien certificates. This is an affordable way to begin investing relative to investing in the stock market as well.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.
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