Your Questions About Investing

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John asks…

How does investing our way out of debt compare to a business doing the same?

Investing your way to growth in business means taking market share or automating to reduce your employee count.

Government already has 100% market share. They cant create jobs that do not increase our debt and they have no market share to chase except exports that will change GDP. Higher taxes just means less for consumers to spend. In other words they are indirectly forcing us to spend our own money.

financi4 answers:

Your name is fitting.

Too bad there is not more of it in the media or Washington.

James asks…

How safe is investing in Treasury bills & it will return good money in future guaranteed?

How safe is investing in Treasury bills & it will return good money in future guaranteed?How much highest interest rate we can get?

financi4 answers:

The biggest risk to bonds right now is inflation risk.

The longer the term of the bond the greater the inflation risk.

Some believe that a strong dose of inflation will hit us at some point in the next couple of years. If they are right then, though you principal is safe, the market price of you bond and its eventual purchasing power will go down.

George asks…

What are the steps to investing in tax liens and deeds?

My kids and I would like to start investing in tax liens and deeds and want to know how to do it. And what are the tax consequences for doing it? I’d like to buy 2-3 homes per year to sell for profit and also to be able to make money on the side by investing in tax liens. Eventually, I’d like to do this for a living, to the point of quitting my day job. Has anyone done this and how successful are you? How long have you been doing it and do you have any tips for us before we begin?

financi4 answers:

Investing in tax certificates has received a lot of attention lately by investors and the general public. One observation I’ve made is that this investment is not for everyone. There’s a lot of hype and marketing out there that makes tax lien investing seem to be a low risk, high return investment that just about anyone can do. But, actually, tax lien investments are highly illiquid, time intensive and the high returns are sometimes associated with higher risk properties. On top of that they are very labor intensive in researching and analyzing the properties and attending auctions.

So, whom is tax lien investing NOT for?

1. You want to spend all of your investment dollars in buying tax certificates or tax deeds.
2. You do not have much time to see the properties yourself and do due diligence.
3. You’ve never invested in real estate let alone tax certificates before.
4. You may need the cash within a couple years.
5. You think it’s a great way to buy real estate.
6. You want to buy a lien on your neighbor’s house because they parked an RV in their driveway.
7. You bought a “make me rich” course from a TV ad or online pop-up.

If you don’t fall into one of the above categories, you’re well diversified with your other investments and you have the time and some basic knowledge of real estate, then this investment might just be right for you.

If done right, investing in tax certificates can be a safe investment that produces a return well-above what you can get in a money market account and without the volatility of the stock market. Most liens have a short life-span of a few months, so you can keep reinvesting your investment in other auctions and really ramp up your annual return. For example, if you’re in the Midwest, you can buy Indiana tax certificates in a March auction, earn a good return and reinvest those liens that redeem in the Illinois tax auction (or in another Indiana county tax sale). This is where you could make returns of 20, 30 or 40% annualized.

You can also buy these liens in a retirement account saving yourself from paying taxes on the interest you earn. It’s a great way to diversify away from your stocks, bonds and other investments that are very correlated with the overall economy.

Finally, tax liens investments are great for private equity or family funds. A portfolio of diversified tax liens can provide good returns that can be leveraged or securitized.

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