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The Secret 24% “CD”

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 The Secret 24% “CD”
Dr. David Eifrig Jr., MD, MBA

Almost every courthouse in the U.S. employs a little old lady to stand guard over the real-estate
property records… the way a junkyard dog guards the auto yard.

Buried in their file cabinets – in rooms with names like “County Tax Collector’s Office,” “Office
of Finance,” or “Treasurer Tax Collector’s Office” – are lists of properties held by owners who haven’t
paid their property taxes.

For investors patient enough to do some homework, finding those lists could lead to double-
digit returns on your money… in some cases within months.

And since most short-term CDs and money-market accounts aren’t paying more than 1% to 2%
interest, these investments I’ll describe in this report offer a great opportunity to increase the income
in your portfolio.

The investment has nothing to do with stocks, bonds, or any other risky investment. It’s not an
actual CD either. (So the FDIC does not guarantee it.) But because the investments are backed by
real estate, they can be in some cases even safer than a bank account.

Quite simply, this investment – what we call a “Tax CD” – is created and administered by state
and local governments all across the country. Essentially, it’s a way for your local government to raise
money.

Like all great opportunities, it will take some work. (But don’t worry, you’ll have time to do the
research because, in many states, you can only take advantage of it once or twice a year.)

I’m talking about buying tax liens on your county courthouse steps. And right now, it’s one of the
best alternatives to leaving money lying around earning next to nothing.

An Investment That Wins 95% of the Time

The basic idea of tax lien certificates is simple...

Every year, the local municipalities require property owners to pay taxes on their real estate – the
taxes cover sewer, trash, and police. But every year for many reasons, people don’t pay those taxes.
It’s up to the county to chase down those delinquent payers.

But since the city needs that money, it allows other individuals (us the investors) to pay the back
taxes in exchange for a lien on the property. The government regularly auctions these “tax liens” on
the courthouse steps (at least once a year and as often as monthly).

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 Once the person pays the taxes, the lienholder get his
Here’s just a small sampling of
money plus interest. The investment is incredibly secure
the interest rates per state:
because it is collateralized by the value of the real estate. If
the property owner never pays the taxes, the government Alabama 12%
will eventually seize the land and force the sale. Arizona 16%
Connecticut 18%
In most cases, people want the tax collector off their
Colorado 15%
backs as soon as possible and pay what they owe – this
District of Columbia 18%
means a quick return on your money. Even in the worst
Florida 5%-18%
case… when the government forces a sale… the holder of
Hawaii 12%
the tax lien is first in line to get paid in foreclosure.
Iowa 24%
There are more details to consider, of course. Every Kentucky 12%
state is different, with different interest rates, penalties, fees Louisiana 12%
and time periods to pay back taxes. So you do have to roll Maryland 6%-24%
up your sleeves here and do a good deal of homework. But Massachusetts 16%
that’s also part of the beauty of it... You have literally thou- Mississippi 18%
sands of these tax lien certificates available, and not many Missouri 10%
people willing to figure them out. It’s a perfect way for a Re- Montana 10%
tirement Millionaire reader to make safe income and even Nebraska 14%
capital gains. New Jersey 18%
North Dakota 12%
Ohio 18%
Risks of Investing in Tax Liens Oklahoma 8%
Pennsylvania 10%
The beauty of this opportunity is the tax collector
South Carolina 8%-12%
charges steep penalties and fees for late payments. For ex-
South Dakota 12%
ample, Texas sticks it to delinquent property owners for
Tennessee 10%
25%… Georgia 20%… Illinois 18%… and Florida 18%.
Vermont 12%
Those percentages represent your gains. When the property
West Virginia 12%
owner pays his taxes and fees, you get your original money
Wyoming 15%
back, plus the fees.

The best part is, property owners pay off 95% of these
liens within a couple of years (sometimes within months). Thus, you can easily and safely earn 16%-
24% a year on your money by investing in these liens.

Worst case is the taxes and penalties aren’t paid, and the property has to go to auction. Once it’s
sold, you get your money back. Because taxes are usually only 1%-2% of the value of the property, it’s
almost impossible to get back less than your initial investment from the proceeds of a foreclosure
sale.

In some states, you can actually get the property for just the cost of the taxes and penalties
you’ve already paid (but this is rare).

The bankruptcy can represent a big question mark… and risk. Before you bid for a tax lien, you
have to make sure the lot exists, is accessible, and is worth significantly more than the back taxes to
ensure you’ll get your money back with full interest.

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 As long as you’re certain of these things… then bankruptcy mostly represents a delay in when
you receive your payback. The laws surrounding foreclosure vary among states… and can at times be
Byzantine. For example, in Florida, the foreclosure process can start only after two years of delin-
quent property taxes. Even then, it takes time and you can’t be sure when you’ll get paid.

Still, the rewards here usually outweigh your risks. This is a lot more secure and a lot less risky
than the stock market... Again, 95% percent are paid with a couple years (usually sooner). That kind
of certainty is hard to beat, especially when it comes with a built-in 16%-24% gain.

Six Steps to Collecting Amazing Income Checks

The clerk of court in your county sells tax liens at auctions.

Often, the court “advertises” the auction in the local newspaper. They’re hidden away in the
legal-notices section of the classified ads. The notices don’t give the property address. They just give
the legal description of the property, which sounds like a bunch of mumbo jumbo. Here’s a sample...

...said certificate embraces the following described property in the County of St. Johns,
State of Florida, to-wit: PARCEL NUMBER 050602-1030 SEC 09 TWP 10 RGE 28 PART
OF SE 1/4 & PART SEC 16 330 X 404.8 FT (EX S 70 & E 30 FT) OR TRACTS 1030 &
1031 UNIT 2 FLAGLER ESTATES UNRECORDED PLAT OR696/1613 & 2729/1739(D/C)

The assessment of the said property under the said certificate issued was in the name of
[name withheld]. Unless said certificate shall be redeemed according to law, the property
described therein will be sold to the highest bidder at the front door of the RICHARD O.
WATSON Judicial Center, 4010 Lewis Speedway, St. Augustine, Florida, 32084, on SEP-
TEMBER 30, 2009 at 12:00 o’clock noon.

It’s almost impenetrable. But you can take the parcel number and enter it into the local property
appraiser’s website. That should identify the property and all the info, aerial views, and so on. (If you
care to, you can also get this info by braving the elderly ladies guarding the property-records office.)

Taking the time to do a little homework could be worth as much as 24% in annual income
checks.

I’d be willing to bet that you can get great buys just about anywhere... Local governments don’t
care what the properties sell for or how many people show up to the auction. They just want their
taxes. So they do a terrible job of promoting them, and usually there are just a few bidders.

How can you earn 16%-24%? First, find out if your state is a tax-lien state or a tax-deed state.
(Don’t worry about the distinctions. We’re only interested in tax-lien states.) Not every state handles
back taxes through lien auctions. Here’s a list of tax-lien states: AL, AZ, CO, FL, IL, IN, IA, KY, MD,
MI, MO, MT, NE, NJ, ND, SC, SD, VT, WV, and WY.

State law determines the interest, penalties, and fees the owner has to pay to redeem the lien
from you the investor. In some states the owner pays a minimum penalty (5% in Florida) no matter
when the lien is redeemed – even if it’s two days later.

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 If you live in or want to invest in one of the tax-
In addition to following the six steps I
lien states, call the courthouse and find out what
outline at the end of this report, I encourage
time of year and what type of auction it holds. In
you to buy a few books on tax liens a couple
some states, the auction bidding is for interest rates
months before the auction so you know ex-
the investor will receive. For example, in Florida
actly what to expect.
bidding starts at 18% and goes down to 0.25%. In
other states, potential buyers bid on the nominal Here are several books I recommend…
amount of taxes owed and go up, but with an inter- (They’re easy to find on Amazon.)
est rate attached to the final balance. In some states
it’s a mix of the two. These are local details the The Complete Guide to Investing in Real
court employees can explain. Estate Tax Liens & Deeds: How to Earn High
Rates of Return – Safely by Jamaine Burrell
That’s why I love to visit the courthouse and
talk with the people in the property departments. Profit by Investing in Real Estate Tax
They have books and records easily available, al- Liens: Earn Safe, Secured, and Fixed Returns
though not always understandable. And by hanging Every Time by Larry Loftis
out in person in the offices, your questions are
quickly answered. A few counties now have online Real Estate Tax Deed Investing: How We
records you can peruse from home. Made Over One Million Dollars in Two Years
by Matt Merdian and Laurence Samuels
Once you’ve picked out the properties, at least a
week or two before the auction, visit all the proper- Complete Guide to Real Estate Tax Liens
ties you’re interested in bidding on. Be sure and set and Foreclosure Deeds: Learn in 7 Days by
the limit you’re willing to accept. Once the auction Don Sausa
happens you’ll easily lock up returns of 12% on
your money and in amounts as little as $500-$1,000 – amounts that anyone can invest.

So here’s what you need to do:

1) Go to your local county clerk of court website and search for “tax lien sales,” “tax deed auc-
tions,” or something along those lines. You can also call the clerk of court’s office and ask where the
information is published and when the next auctions are.

2) Check out the properties up for auction. First, look them up on Google Earth (or Google
Maps) to find out exactly where they are. Then, drive by them and make sure they have rights-of-
way and such.

3) Figure out what you’d be willing to pay for them. A starting figure for this “trick” is to take
the property appraiser’s number and cut it in half. That’s for a great property. If it’s something that’s
not particularly impressive, try to buy it for 25 cents on the dollar. (Yes, I’m serious.)

4) Before you show up at the auction, pick up a couple of five-star-rated books on tax lien invest-
ing from Amazon and know them backward and forward... particularly the rules of your state.

5) Visit the courthouse and thumb through the big file for the property. Ask questions about the
property... you’d be surprised at what you can learn.

6) When you go to the auction, stick to your prices. Don’t get caught up in the bidding.

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 Researching and buying tax lien certificates takes a little bit of time and dedication. But this is
the safest high-income opportunity I know of right now... make sure you take advantage of it.

It’s rare to find an investment that 95% successful and offers built-in returns of 16%-25%. In-
come investors will have a hard time finding a better, safer alternative in the market today.

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Retirement Millionaire
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