Categories
Uncategorized

Should You Invest in Tax Liens?

There are many ways to make money in real estate. You can own properties outright and sell them at a profit. You can purchase them and earn rental income. You can buy shares of real estate stocks or funds.

It’s also possible to make money when property owners fail to pay their taxes. If a municipality places a tax lien on a property, an individual can buy that tax lien and then collect the taxes and interest from the owner.

This type of investing can be lucrative, but it’s also complex and potentially risky. If you are considering delving into tax lien investing, here are some key things you should know before taking the plunge.

How Tax Lien Investing Works

It all starts when someone fails to pay the necessary taxes on property they own. Once this happens, a municipality will place a lien on that property. This means the property can’t be sold until the taxes are paid and the lien is removed.

Currently, 29 states and the District of Columbia allow tax lien certificates to investors through an auction process. Roughly 2,500 cities, townships, and counties sell public tax debt, according to the National Tax Lien Association.

Municipalities do this because they will receive cash immediately for delinquent taxes. The sale of tax lien certificates also helps homeowners, because it provides them a time during which they can pay the owed taxes.

During the auction process, investors will compete to see who will accept the lowest interest rate or bid the highest premium for the tax lien. The goal of the investor is to collect the taxes plus associated interest on the lien, and hope it results in more money than what they paid.

Potential Benefits

Tax lien investors make money from the interest on the liens, and this can prove to be quite lucrative because rates are often high. Rates can be bid down auction, but (to offer a few examples­) they could be as high as 18% annually in Florida, 12% in Alabama, and as high as 36% in Illinois.

The property owner has a redemption period to pay the required taxed plus interest. This typically ranges from 1-3 years depending on the state. But sometimes, the property owner does not ultimately pay the tax lien. When this happens, the owner of the tax lien has the right to foreclose on the property and can become the owner. Thus, tax lien investing can be one way to acquire properties for less than they would normally be worth on the open market. (Though most investors don’t enter a tax lien auction with this as their chief objective, as the NTLA reports that most property owners eventually pay the required taxes.)

The Responsibilities

Tax lien investing isn’t as simple as buying the certificate and sitting back and collecting money. As the owner of the tax lien certificate, you have certain obligations that vary depending on where you are.

It’s also vital to remember that tax liens expire. The expiration date varies depending on the municipality and the type of lien.

So if you think that you can just hold onto a lien for a long time and eventually foreclose if you don’t get your money, you may be in for a rude awakening. When the lien expires, all of your rights to collect also expire.

Depending on the location, there may be a host of rules governing communication with the property owner. They must usually notify the property owner that they have purchased the tax lien certificate. They are then also required to notify the owner that a redemption period is coming to an end.

The Risks

Tax lien investing isn’t easy. For one thing, auctions can be quite competitive, and it’s easy to find yourself buying a lien at unfavorable terms. Sometimes, interest rates get bid down so low that buying a tax lien is no more profitable than putting money in the bank. In fact, tax liens can sometimes be larger than the value of the property itself.

It’s also crucial to have a good understanding of the physical condition of the property you are buying. Is the property located in an area where foreclosures are high? Is there hazardous material or environmental problems on the property?

This type of information matters, because if you do end up owning the property due to foreclosure, you may be responsible for costly maintenance and cleanup.

You must always be aware that you may never end up collecting a dime in taxes or interest. Many property owners simply don’t pay. Others will declare bankruptcy. If this happens, you should be open to the idea of foreclosing on the property. If you are not prepared to take over the expense and work of property ownership, tax lien investing may not be for you.

Tax Lien Fund

One potential way to invest in tax lien certificates with less risk and effort is through special investment funds.

Some investment companies have set up private placement funds that invest in tax lien certificates. In this case, you may be pooling your money with other investors, and an investment company or fund manager is making the decisions on what tax liens to purchase.


Kite Tax Lien Capital is one company that has been investing in tax liens through a fund since 2009. Its first fund closed in 2011 and provided investors with a 14.1% annual return, according to the company. Its current active fund, opened in 2012, is projected to have a 14% average annual return by the end of 2019.

Categories
Uncategorized

MicroVentures

The MicroVentures platform allows for early-stage and late-stage startup investing for as little as $100.11

The company has dozens of companies to invest in, ranging from a maker of live-action mobile sports games, a digital marketing and tradeshow company, and a manufacturer of high-end tequila.

MicroVentures was founded in 2009 for accredited investors and was an early funder of many top companies, including Twitter.12 13 It remains quite selective about the number of companies approved for investment.

Like other platforms, MicroVentures offers information on each investment including the company’s fundraising goal, and the number of days left in the investment round. In most cases, a startup will offer details on how it intends to spend the money it raises. Many companies will also offer perks to investors, such as free products or invitations to exclusive events.

Categories
Uncategorized

Republic

Republic is another online platform that allows individual investors to purchase a stake in early-stage startups. It allows you to get started for as little as $10.

The company was founded by alumni of AngelList, the popular investment platform for accredited startup investors.9

Republic says it selects the companies you can invest in through a four-step screening process that analyzes a firm’s founders, product, mission, and proof of growth. It then performs lengthy due diligence before putting a company up for investment.10

In addition to offering investments, the Republic platform hosts six different investment groups and allows for discussion, ideas, and advice between investors. Group members are also encouraged to invest together.

Categories
Uncategorized

Wefunder

Wefunder has a stated goal of funding more than 20,000 startups by the year 2029.7 It hopes to do this by accepting investments of as little as $100 at a time.

Through Wefunder, an average investor can inject capital into a wide range of companies. At last glance, it was accepting investments into dozens of companies including a fan-owned entertainment company, a vegan marketplace, a dog cancer cure, and a brewing company.

The platform allows an investor to purchase stock (with dividends or no dividends), convertible notes, or debt. Wefunder has accepted $110 million in investments since 2012, supporting over 300 companies.8

When you invest, money is placed in an escrow account. If the company succeeds in raising enough funds, your investment goes to the startup. Otherwise, you can get your money back.

Categories
Uncategorized

SeedInvest

Seedinvest is a crowdfunding platform that allows individuals to invest in early-stage companies that have been pre-screened for potential viability. According to SeedInvest, less than 1% of companies that seek funding through the platform are accepted.

The company claims it has more than 250,000 investors, with more than 150 companies successfully funded.4

When you sign up for an account on SeedInvest, you are presented with a list of companies seeking money. Many companies are open to receiving investments from anyone, but some require large investments and are open only to accredited investors who had an income exceeding $200,000 in each of the past two years.5

You are provided with a “pre-money valuation” as well as the total value of funds being sought and the amount already raised. Each company has its own minimum investment requirement and a time by which the money needs to be raised.

For example, an ice cream company in New York City can have a pre-money valuation of $9 million and have raised $71,250 out of a goal of $2 million, with 29 days remaining.

If you aren’t interested in investing in just one startup, you can build a portfolio of investments through the company’s auto-invest feature. With auto-invest, there is a minimum investment of $200 and there is a 2% processing fee for each investment.6

SeedInvest touts the importance of diversification, recommending that you invest not in a single startup, but a portfolio of up to 25 companies.

Categories
Uncategorized

Basics of Investing in Startups

Before you get started investing in early-stage companies, it’s important to understand that many startups fail and leave investors with nothing. It is a high-risk, high-reward kind of endeavor.

Sometimes, startups allow you to get your money back if a company is not successful in raising sufficient funds, and if they guaranteed the return of your money.

It’s worth noting that startup investments are generally not tradeable like stocks. You should expect to hold onto your investment until the company goes public or is acquired.

While relaxed regulations have allowed for more individual investors to get a financial share of startups, there are some rules to follow. Due to the risks involved, the Securities and Exchange Commission (SEC) limits how much you can invest in any 12-month period. This limit could be as low as $2,200 or as high as $107,000 depending on your income and net worth.3

The platforms listed below offer a sampling of the avenues available to anyone who wants to invest in a startup with limited funds. While it’s unlikely that you’ll become the next Silicon Valley billionaire, these platforms can help diversify your broader investment portfolio and give you the satisfaction of supporting a young company you believe in.

Categories
Uncategorized

Hello world!

Welcome to WordPress. This is your first post. Edit or delete it, then start writing!