Expert: Dr. Joseph de Beauchamp - 5/28/2006

Question

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Followup To

Question -
Hello,

I would like to know about the pros and cons about investing in tax lien certificates.  Thank you.


Answer -
Elise,

Usuallly on property that nobody desires. I have tracked this with a few friends that attempted this over the last 30 years. When they thought that they made money, the owners paid off the tax liens. They never made money in this method of investing. They had wished that they had put their efforts into a simple mutual fund over the years.

Dr. deBeauchamp

I thought that if the property owner paid off the lien that was a good thing, because with interest and penalties, the tax lien holder would obtain the interest based on the balance.

Answer
State gets all the interest and the penalties, not the lien holder. The person owning the certificate gets nothing for their investment. According to my friends, this always eventually happens. Furthermore, with laws of proper notice and all, several times they got sued in court and had to pay out hundreds of thousands of dollars to defend themselves. Property rights and ownership is still very protected in this country. I suggest a mutual fund by going to the county library and looking through Moringstar book to find one.

Dr. deBeauchamp