Real Estate Tax Lien Investing

Have you ever been asked: “What does your dream house look like?”

You see this question very frequently at seminars and workshops. The keynote speaker will stand on stage, tell the audience to close their eyes and imagine what their future house will look like.

Each person will have a different image in mind – from having a pool in their backyard to a marble white mansion that towers over the city.

But the biggest difference I’ve noticed when people are asked this question is how their response varies depending on their age.

For example, if you ask a 7-year-old boy what his dream house will look like, he might give you details on how many windows it has, how big the house is, and how many luxury cars are parked in his underground garage.

This young boy will then think of all the ways he can make it come true. He’ll imagine himself living in that house, driving that Bentley, and shout his affirmations to the world that one day, his dream will become a reality.

However, if you ask someone who is much older – around 30, their response would sound something like this:

“My dream house? Psshtt, I can’t afford it.”

The Biggest Limitations People Have Is In Their Minds

As people age, their perspective on the world shrinks.

We encounter experiences that shape how we perceive the world. If we’ve been ripped off or scammed by a con artist, we become more skeptical and less likely to believe others. But when this skepticism is taken too far, it can limit our potential growth and ability to see opportunities.

In the example above, a 30-year-old adult has a very narrow perspective.

They have a concrete perspective of how the world works, and what doesn’t. When you ask them about their dream house, their response is based on their reality and their current situation.

Instead of focusing on what they can do, they focus on what they can’t. As a result, they see their current situation as an obstacle.

They don’t have enough money and allow this fact to control their actions. Instead of thinking about how they can get their dream house, they simply give up and say “I can’t afford it”.

Why Your Child Has A Better Chance To Grow Up To Be Super Successful

Children, however, do not have that perception. Ask them how they’ll achieve their dreams, and they’ll use their creativity to come up with many answers. 

“I’m going to become rich!”

“I’ll build the house myself!”

“I’ll invest in tax lien certificates and acquire ownership of the property!”

Children do not allow their reality or current situation to impact their future. Their minds are not yet solidified with skepticism, doubts and the reality of their life. If they want something, they will find a way to get it. 

Rich people understand this. They know that to make their dream lifestyle come true, they need to tap into that creativity, that allows them to see opportunities where others do not. This is one of the reasons why rich people get richer, while poor people stay poor.

Buying Your Dream House Begins With Your Mindset

Suppose your dream house is being sold right now, at a price you cannot afford. Can you think of any solutions to acquire your dream house, even though you don’t have enough money?

An adult would think in the realm of reality. “I could work more jobs, earn more money and eventually be able to take a loan from the bank.” They wouldn’t be able to come up with any other alternatives, because they haven’t practiced using their creative mind.

Your mind is like a muscle. The more you use it, the better it becomes. And this applies to everything in life – your relationships, skills, business and health.

If you neglect it and don’t spend time nurturing it, it will not grow. And when you have a financial mind that isn’t fully grown, you will miss out on opportunities that are right in front of you.

If You Want To Get Rich, Stop Saying These Four Words

Saying “I can’t afford it” is one of the worst things that are holding you back from becoming rich. Instead, I want you to ask yourself “How can I afford it?”

“I can’t afford it” shuts down your brain and stops you from using your creative mind.

Asking yourself the question “How can I afford it” forces you to think of alternative ways to get what you want. This is why successful people stay successful, and poor people stay poor. What separates them isn’t their wealth – it’s their mindset.

By educating yourself with financial knowledge, you can train your mind to think of creative solutions to financial obstacles. Instead of stressing about the fact that you don’t have enough money, financial knowledge shows you all the possible ways you can acquire that money.

Having financial knowledge equips you with the mindset to see many possibilities, and allows you to achieve things that would normally seem impossible. One of these ways is through real estate tax lien investing.

Tax Lien Investing Can Help You Acquire Your Dream Home

Real estate tax lien investing involves something called tax lien certificates. These certificates allow the holder to collect interest rates, similar to how the government collects taxes.

In certain situations, these tax lien certificates can be used to acquire ownership of a house at a very low price.

You can think of tax lien certificates like your credit card. When you don’t make your credit card payments on time, the credit companies hit you with high-interest rates.

The government does something similar with tax liens – if you don’t pay your property tax on time, they will charge you penalties and absurdly high-interest rates to make sure you pay up.

This is because, throughout the United States, the government has millions of dollars outstanding in overdue property taxes from property owners who will not or cannot pay their property taxes. And to fund the daily services of police, fire, hospitals, schools, roads, the government needs this money to continue operating.

In order for them to acquire the money immediately needed to continue operations, they sell the right to collect your taxes – called a ‘tax lien’, to investors. People who hold tax lien certificates have the power to collect interest rates from homeowners who don’t pay their property tax.

You Don’t Pay For Your Dream Home – Your Dream Home Pays You

Imagine this scenario: The owner of your dream home didn’t pay their property tax. So you go to the government and invest your money into a tax lien certificate for that house.

Now, you are able to collect interest rates from the homeowner. Tax lien certificates allow you to charge you absurdly high-interest rates to homeowners, which you can collect on. The longer they take to pay their taxes, the higher your ROI.

Now your dream house is providing you with extra income every month, even though you don’t officially own it yet. One of the reasons why investors love tax lien investing is because there is little to no work required. Once you own the tax lien certificate, all you have to do is sit back and let the money flow in.

But suppose you don’t want to use your dream home as an investment asset. You want to live in it and be the official owner of that house. However, the price is still far too high for you to buy. This is where tax lien investing provides you with one of the greatest opportunities possible.

If You Can’t Buy Your Dream Home – Foreclose It

If the homeowner refuses to pay his outstanding property taxes within a certain time frame, the holder of the tax lien certificate has a right to foreclose the lien – meaning you get the property.

In situations where your tax lien certificate is associated with your dream home, that means the dream you’ve been picturing in your head all these years, has just become a reality.

There may be a few transactions and fees you have to deal with, but once that’s all cleared, the end result is that you now own your dream home at a fraction of the price you would’ve had to pay.

Does Tax Lien Investing Carry Risks?

You may be wondering, “Dan, what are the risks behind tax lien certificates?”

Tax lien certificates are government-backed investments with minimal risk. If you fail to do your research, you may end up with a property you don’t want.

The worst-case scenario is that the homeowner quickly pays off his taxes and you collect a lesser interest rate. Other than that, there is very little risk with tax lien certificates.

The Monopoly Strategy To Acquiring Your Dream Home

Another method of using tax lien investing to acquire your dream home is through something I call “The Monopoly Strategy”.

If you’ve ever played the game of Monopoly, you’ll know there are many squares with property names on them. The goal of the game is to buy as many of these squares as you can, which represents real estate.

As you acquire more money by playing the game, you can use that money to build small green houses, and eventually turn 4 small green houses into one big red hotel.

You earn money by collecting rent from players that land on your square. The more that happens, the wealthier you become.

Once you have enough money, you can choose to build a small green house on the real estate square that you own.

The next time a player lands on your square again, they will pay you higher rent – with this amount going up the more houses you have. Eventually, you can build a red hotel, and charge players absurdly high rent if they land on your square.

To do this, you need a lot of cash on hand. This means that players who have a poor mindset will take longer to achieve that red hotel, whereas players with a wealthy mindset will find alternative ways to make it happen.

Just like in real life, opportunities are always present to people who have financial knowledge. The ones who struggle, are most often the ones who do not know the rules of the game.

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