As far as possible largely unknown, Tax Liens are lucrative investment opportunities for private and institutional investors in the USA. “Despite the immense market, Tax Liens is as well known as programming a blockchain program in Romansh,” explains book author and financial expert Árpád von Tóth. Tax Liens are tax liabilities taken by property owners who cannot pay their debtors. As a result, investors can buy up the debt and achieve an attractive return by repaying the borrowers.
This form of investment is lucrative because, on the one hand, there is no intermediary between bank and broker. This has the advantage that fees are eliminated and the investor enjoys a high level of comfort. On the other hand, the investors are legally protected by the respective US states, since the authorities have a strong interest in promptly collecting the tax.
High return, los risk
Investors act actively, but are almost unemployed due to the intervention of the tax office. Yields vary by state, but are guaranteed by the government nationwide. The special thing about Tax Liens: the risk that is normally associated with high returns is low. “Tax liens are interesting because they are hedged down. The probability of default is relatively low with a comparatively high return” xplained Prof. Dr. Beck, honorary professor of business administration at the Dortmund University of Applied Sciences, recently in a panel of experts. “Some believe that as the chances increase, the risk automatically increases. But that’s not true.”
Since this is a government interest replacement product, the investor is also entitled to a security in the form of the property that the debtor pays. This means that even if the loan is canceled, the investor does not receive a return, but instead receives a property. While insurance companies, foundations and family offices in the USA are actively involved in these investments and are also among the “big players”, German investors have not yet discovered this market for themselves.
TaxsLiens as an interest rate strategy
Árpád von Tóth has come to the conclusion that Tax Liens “is really only known to a small, elite group.” He therefore appeals to everyone’s responsibility to take life into their own hands. “The worst thing that can happen is if the debtor pays earlier than planned,” says von Tóth. “If we expect a return of 18 percent, but the debtor pays off the loan beforehand, this could cause our return to shrink to 9 percent because the interest is paid pro rata temporis. But that’s still attractive. ”Nevertheless, he notes, there are counties that only pay 6 percent.
The investment finances schools and education, as well as the fire service, police and infrastructure. Von Tóth also believes that attractive returns are guaranteed, while operating entirely on the part of the state and legal foundations. It also helps to preserve people’s property.
Liens in Germany
Since the form of investment is only practiced in the USA, but has been for over 300 years, there is hardly any information on this topic in the German-speaking countries. Workshops and seminars of well-known investment sizes occasionally touch on the topic. That is why Árpád von Tóth is holding a 2.5-day seminar again this year, as private, qualified investors in particular have expressed great interest.
von Tóth previously contributed to the topic in the form of his book “America’s Strangest Secret”, for which Prof. Dr. Beck wrote the foreword. With the issuance of a TaxLiens certificate according to EU law, von Tóth, in cooperation with the university professor, has also proven that tax liens work here, but are still a niche market.
Born 1981 in Strasbourg, is a freelance journalist for various online media throughout Europe, focusing on finance, real estate and politics. He gathered his professional expertise as a consultant for global players and medium-sized companies. Fournier studied economics and german in Paris and Dresden. He currently lives in Saarland and has been a member of the Euro Leaders team since the beginning of 2019.