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Earn passive income by investing in tax liens

In addition to investing in stocks, you need to invest in alternative investments like debt.

Do you know what the biggest financial hurdle is for many aspiring homeowners?

The typical mortgage payment is approximately $ 1,600 per month. However, many Americans pay much more for their mortgage.

But mortgage payments aren't always the biggest financial hurdle for Americans. Many Americans cannot pay their property taxes or cannot pay them on time.

The typical property tax rate is 1.1% or about $ 2,375. That may not sound like a lot of money.

However, when you're trying to pay a mortgage, utilities, and other living expenses, a property tax can be the straw that breaks the camel's back when you're on a steady income.

And you have to take into account that your property tax rate depends 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 New Jersey home, you could end up paying $ 8,100 in property taxes annually.

A recent study by the National Tax Lien Association shows homeowners are unable to pay over $ 14 billion in property taxes each year.

In November 2020, around every 14,000 house was sealed off.

These can be some morbid statistics to focus on, but it is also a reality. And there are many possibilities that are unfortunate.

If you are strategic and developing a diverse portfolio, you can invest in tax certificates. Investing in a few tax certificates can be a nice residual income.

Tax Certificates 101

If local or state authorities seize residential property due to unpaid property taxes, a tax lien is enforced on the property.

Essentially, this means that the homeowner cannot reclaim the property until the tax lien has been paid out and removed.

Remember, there are no property taxes paid over $ 14 billion annually. Therefore, many tax liens are issued every year.

One way local governments can mitigate their property tax losses is by auctioning off tax certificates through courthouses or online auctions.

Third party investors can purchase a tax certificate for as little as $ 100 with interest rates between 5% and 50%.

You are paid every time the original homeowner pays back their tax lien. In some states, the property tax interest penalty is applied after the purchase of a lien. So you can qualify for an interest repayment without the original homeowner paying anything back.

And instead of seeing such an investment as scary, it can help motivate the original homeowner to repay their tax lien and speed up the return on your investment.

Just make sure you buy a few tax certificates for a healthy return on investment. Since tax certificates are relatively affordable in relation to auction prices, this won't be difficult to do.

You can get stable passive income by investing in tax certificates. This is an inexpensive way to invest versus investing in the stock market.

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