A couple of years ago I picked up a very interesting book from a garage sale called “Lies My Teacher Told Me”. I forget the name of the author, but he was a history teacher and in this book he exposed how history has been practically rewritten in textbooks to fit the government institution that teaches it. The book exposed some of the truths about history that are covered up because it doesn’t show our founding fathers in their best light. Because of all the misinformation going around about tax lien investing, that book inspired me to write this article, to lay out what you might have heard from your tax lien guru, that’s not exactly the truth. So let’s take a look at some of the myths out there about investing in tax bonds.

You can do this anywhere in the US.

In real estate and wealth building seminars around the world, foreigners are taught that they can earn double-digit returns on their money by investing in American tax liens, and are somehow led to believe that they can do so anywhere. part of the US country doing everything online. This is simply not true. The fact is that not all states sell tax liens, and less than half of the states that sell liens have online tax sales. Last time I checked, only 9 states had online tax sales. Among those 9 states, one has only one county with an online tax sale. That state and 2 others have bidding methods that are not favorable to investors (bid by percentage of ownership of the property). Judging by the tax sales results above, it is unlikely that in 2 of the 6 remaining states you will get a return of more than 5%. And in the other states you are lucky to get a 10% return.

It is “government guaranteed”

Some “experts” who invest in tax liens like to suggest that tax liens are “government guaranteed.” The problem with this is that people hear that term and think that they are guaranteed to get their tax lien paid. But that is not what is meant here. The term refers to the fact that the interest rate is set by state law, but it is incorrect to imply that this is guaranteed by the government, since these state statutes can be changed by state, not federal, mandates. And just because the interest rate is determined by state law doesn’t mean the investor is guaranteed to get paid. The only guarantee is ownership. Therefore, tax liens are secured real estate, not guaranteed by the government. That is why it is so important to do your due diligence on the property you are buying a lien on.

there is always plenty available

Another misconception about tax liens and tax deeds is that there are more tax liens and deeds available than competition. It is true that in some tax sales there are tens of thousands of links available. But consider that a percentage of those links are to worthless properties that nobody wants. Half of the good ones will be paid off and taken out of the tax sale. And competing for the other half of the good liens or deeds are not just investors, but also big banks and fund companies that are bidding for thousands of liens. Therefore, the supply of good bonds and stocks is not inexhaustible and there is stiff competition for the good stuff.

Leftover Deeds and Liens Are Good Deals

So what some tax lien investing “gurus” recommend is that you forgo the tax sale and instead buy the surplus (or over-the-counter) liens or deeds from the county. They say that tax sales are so competitive that you probably won’t get the best returns on the offer; instead, get the maximum interest rate by buying the leftover liens or deeds from the county.

There are 2 problems with this strategy. First, not all counties sell surplus bonds or deeds. Some counties will simply continue to offer them at tax auctions until the lien or deed is sold or until the redemption period ends, in which case the county will keep the property. The other problem is that if tax sales are so competitive, what makes you think there’s anything good left after tax sales? Keep in mind that in many online tax sales, there will be an initial tax sale and anything not sold in that sale will be offered in a second tax sale. Only if a property survives both sales is it sold “over the counter.”