Retired couple seeks details on investing in tax-lien certificates
Now in their 70s, they have cash available after bond investments came due or were called.
D
EAR HARRY:
My wife and I are retired and in our 70s. We have a lot of cash because most of our bond investments came due or were called. We just heard about tax-lien certificates, and we have a number of questions. Exactly what are they? Are they safe for old codgers like us? Where can we buy them?
WHAT HARRY SAYS: There are many situations in which homeowners fail to pay taxes to local authorities. Frequently, liens are placed on the property to make sure that the taxes are paid before other debts. If the liens don't produce payment quickly enough, they may be sold at public auction. Brokers buy them and resell them to investors. If the property gets sold, the investor gets the amount of the lien plus interest. Ordinarily, the liens can be purchased at auction for less than their original value, so the investor gets a profit when they are paid.
Many stockbrokers will sell you liens. Make sure that your lien is on a property that has enough equity to cover your lien, because that's where an investor can get hurt. If you want to take a stab at this market, don't go in with both feet. And never let the total go over 10 percent of your total investments. As a matter of full disclosure, I do not own any tax-lien certificates.