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tax certificates?
Old 03-16-2006, 07:16 PM   #1
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tax certificates?

I'm new here - and found out about this site from members of the CandlePowerForums site.

I've read in Rich Dad / Poor Dad about tax certificates that yield 15%+ interest. The author recommends these over the traditional CD's and other standard banking products. Can someone point me in the right direction to get some more information on this?

Also, has anyone bought these? What are the risks / things to watch?

Thanks!
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Re: tax certificates?
Old 03-16-2006, 07:30 PM   #2
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Re: tax certificates?

hq, welcome aboard. The following statements are not a reflection on you, I'm sure you are a nice guy :

Kiyosaki is SATAN! He is what is most evil in the financial world! He sells books with tantalizing statements about high yeild "tax certificates" and real estate gains that aren't taxed etc., but offers no specifics. This is so you will blow 5 grand on a seminar, where his minions will bust out flashy presentations, thumping music, shark suits and hand free microphones left over from the Tony Robbins seminar and tell you all about - nothing!

Yet people keep going to these seminars, spewing gobledygook to their friends like, "He changed the way you think about money!" "He teaches you to have the mind set of a winner!" "Savers are losers!" "Get to the 4th square!"

If there were tax certificates that yeilded 15%, why would anyone invest in the stock market? If it's too good to be true, it is.

There is web sites out there detailing how he is a fraud, he doesn't own a bunch of real estate, his personal wealth only came after he started doing his own seminars, how he started as a flunky/lacky for another seminar pusher, his "rich dad" is completely fictional, I could go on, but you get the picture.

He has done an excellent job worming his way into the mainstream media, getting on as a contributer to yahoo finance etc. That's what really gets me riled up. Now he has the endorsement of the mainstream financial community (which isn't that clean to begin with, but still) so now he'll suck in even more victims. Scumbag...
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Re: tax certificates?
Old 03-16-2006, 09:56 PM   #3
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Re: tax certificates?

Kinda reminds one of Charles Givens :-)
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Re: tax certificates?
Old 03-16-2006, 10:46 PM   #4
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Re: tax certificates?

In the real world, tax certificates do not as a rule yield much more than your best 5 year CD rate, with an awful lot of work to boot. In Arizona, as an example the rate last year was around 7 % Each state has a MAXIMUM interest rate. The bidding starts at this rate, and it is bid DOWN. The person willing to take the lowest interest amount, buys the Tax Certificate. However, you must check out each property you are going to bid on and do a title search.

The only big gains come if you happen to be one of the lucky ones, that gets the property if the property owner does not pay. This rarely happens, but it does occationally. There are sydications at these sales that buy large amounts of Certificates and bring the bid down quite low.
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Re: tax certificates?
Old 03-16-2006, 10:48 PM   #5
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Re: tax certificates?

I'd prefer to keep this thread focused on the topic at hand - tax certificates.

A short google brought up the following site:

http://www.brevardtaxcollector.com/taxcol2.htm

which is run by a Florida Tax Collectors Office. They mention tax certificates and that the maximum interest rate allowable by law is 18%. So, apparently, it does exist - and it is legal.

If someone has experience in this - I am very interested.

Thank you.

Edit: Modhatter - thank you for your insight.
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Re: tax certificates?
Old 03-17-2006, 12:26 AM   #6
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Re: tax certificates?

Good luck with that. Just like those car auctions that start at $50, the free market has a way of making things reach an equilibrium.
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Old 03-17-2006, 02:08 AM   #7
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Re: tax certificates?

I have never bid on a tax lien certificate but did look into this some time back.* I first heard about them from a book I bought in the 90s called "The 16% Solution" (Joel Moskowitz, 1994).* Moskowitz advocates the idea of investing in TLCs without engaging in a lot of hype or manipulating readers into a seminar or boot camp.* In the end, though, I was not persuaded to do the TLC thing.* The time and effort to do the research and travel out-of-state (CA does not have TLCs) didn't seem worth it.* I preferred, and still do, to buy property directly.* *

Recently it seems a lot of crafty seminar performers have jumped on the TLC bandwagon.* Yes, you can go to FL and start bidding at 18% but the rate will get beaten down at auction.* If you're not in FL would it be worth the time and expense of a trip to go to one of these auctions?* Even Moskowitz acknowledges that getting a free and clear property from a TLC is relatively rare.*

My advice, for what it's worth, would be to research it online and at the library.* Maybe buy a used book on the subject. Moskowitz may have an updated "16% Solution" edition.* I would run away from seminars and infomercial products, John Beck's for example.* If you live in a TLC state perhaps it's an option for high yield investment.* I remain a skeptic.
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Old 03-17-2006, 06:55 AM   #8
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Re: tax certificates?

There is a more recent book out by Larry Loftis , a lawyer who did a pretty good job of explaining how things work. I would suggest you buy it and read it if you are interested in this stuff.

I looked into tax liens last year and I am interested, since in my state each municipality (hundreds!) holds it own tax sale. From what I gather, you are not likely to get crazy high yields in this market, but you might get a couple of points over CD yields, which is better than a sharp stick in the eye. I was hoping to go to my town's tax sale, but I couldn't get that day off. If I manage to get the day off this year, I will attend and try bidding on a few liens. I will have the advantage of being local and being able to check out (or know) each property of interest.

Tax liens are likely a reasonable place for some conservative money, not a bonanza.
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Old 03-17-2006, 07:22 AM   #9
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Re: tax certificates?

My bil bought a tax certificate for a property in the UP of Michigan. He lives a few hours away and did look at the property first. He was the succesful bidder. I don't recall what the rate was at the time, but this was maybe 6 years ago.

The owner of the property, a cabin by a ski hill, never redeemed. There was no mortgage so no mortgage holder to redeem either. Very unusual. My bil ended up owning the property. Once you own the property you have to go through a fair amount of rigamarole to be able to pass clear title as "tax title" in most states, if not all, is somewhat problematic. Because of the tax title issues, he decided to wait a few years to sell it. Currently he uses it as a cabin for snowmobiling and skiing in the winter and rents it out in the summer. He had to do a lot of repairs to the property: new well, sewer, and roof.

It sounds like a great investment but I think it turned out to be more of a pain in the ass then anticipated.
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Old 03-18-2006, 04:45 AM   #10
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Re: tax certificates?

here in new york city you cant even buy tax liensthey are bundled in packages that cost millions and auctioned off to certain companies....my step-sons wifes dad buys leans..they do pay well..the problem becomes when you actually get one of these properties to default..the homes are usually very run down and require alot of money,,,,the problem is you may get the house but evicting the tenants here in new york requires a lawyer and more money...figure 6 months of time too..all the while paying new yorks hefty real estate taxes....no thank you, ill take my stocks and bonds
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Re: tax certificates?
Old 03-18-2006, 08:31 AM   #11
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Re: tax certificates?

Quote:
Originally Posted by hq
I've read in Rich Dad / Poor Dad about tax certificates that yield 15%+ interest. The author recommends these over the traditional CD's and other standard banking products. Can someone point me in the right direction to get some more information on this?
HQ,

First, welcome to the forums. I too read that book, and it is ultimately what got me started working on my finances. I also read The 16% Solution, which is the book mentioned by Kiyosaki about tax liens. The crux of the issue is that yes, those returns Are possible, but as others have stated, very unlikely. Companies show up at those auctions and bid everything down so far that it's incredibly hard to obtain liens higher than a CD rate. However, it could happen if you are close to a county that does auctions somewhere remote.

I'd encourage you to do some searching on the web or call around your county government to see if the opportunity exists for you locally. You may be able to succeed with this. If so, please come back and share your success with the rest of us.

However, if this doens't work, as an alternative, you could look into municipal bonds. While the rates aren't terribly high, they are exempt from certain taxes, which can make them more attractive than a CD or a money market account.

NP.
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Old 03-20-2006, 12:28 PM   #12
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Re: tax certificates?

Quote:
Originally Posted by Laurence

Kiyosaki is SATAN! He is what is most evil in the financial world! He sells books with tantalizing statements about high yeild "tax certificates" and real estate gains that aren't taxed etc., but offers no specifics.
Laurence, I totally agree with you. I wasted money on his book because it was given a FIVE STAR rating on the retireearlyhomepage. I felt it was worse than useless, and will not be relying on that particular site for accurate information about books ever again.

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Old 03-20-2006, 12:36 PM   #13
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Re: tax certificates?

As I've opined in the past, the part of RDPD that's worth considering is "own assets, not liabilities"...

Otherwise, crap, tripe, pondscum...
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