By popular demand, Carl Fischer teaches on investing in tax liens using a self-directed IRA. He will be covering a list of topics including:
• Comparing Tax Lien Vs Certificate and Tax Deed
• Discussing the process of purchasing tax liens
• Identify entities for purchase of tax deeds and tax liens/certificates
• Evaluate pros and cons of using different entities
• Examine a step by step approach to utilize your IRA/401k
• Review custodian fees

Carl Fischer is a Cornell University graduate and third generation real estate developer. Carl began his investing career in the 1970’s when he was employed as a rocket scientist at Kennedy Space Center in Cape Canaveral, Florida. He is presently one of the founders and principals of CamaPlan self-directed IRA….(read more)

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Investing in Tax Liens with a Self Directed IRA

Investing in tax liens can be a smart and profitable strategy for individuals looking to diversify their investment portfolio and potentially earn a high rate of return. The added benefit of using a Self Directed Individual retirement account (IRA) for this type of investment further enhances the potential gains, while also offering tax advantages.

What are tax liens?
Tax liens are imposed by local government authorities on properties owned by individuals or businesses who have not paid their property taxes. These liens act as a legal claim against the property, ensuring that the unpaid taxes will eventually be collected.

How does investing in tax liens work?
When homeowners or businesses fail to pay their property taxes, the government can sell the tax lien to investors through an auction. Investors who purchase these liens effectively step into the shoes of the government and become the new lienholders. The government receives the overdue taxes, and investors are entitled to earn interest on their investment until the property owner repays the outstanding balance.

Why use a Self Directed IRA for tax lien investing?
A Self Directed IRA allows individuals to have control over their retirement investments. Unlike traditional IRAs, which limit investments to stocks, bonds, and mutual funds, a Self Directed IRA expands the options to include alternative investments such as tax liens.

Using a Self Directed IRA for tax lien investing has several benefits:

1. Tax advantages: Income generated from investments within a Self Directed IRA, including tax lien investments, is tax-deferred or tax-free, depending on the type of IRA. This means that potential gains from tax lien investing can grow faster without being reduced by annual taxes.

2. Diversification: Including tax liens in your investment portfolio through a Self Directed IRA provides diversification. This strategy helps spread risk across different asset classes and can minimize the impact of any individual investment’s poor performance.

3. Control and flexibility: With a Self Directed IRA, investors have the freedom to choose their own investments, including tax liens. This allows investors to take advantage of their knowledge and expertise in real estate or tax lien investing.

4. Potential for high returns: Tax lien investments often offer high-interest rates which can greatly exceed traditional forms of investment. This can result in substantial returns, especially when reinvested within a tax-advantaged account like a Self Directed IRA.

How to invest in tax liens with a Self Directed IRA?
Investing in tax liens with a Self Directed IRA involves several steps:

1. Open and fund a Self Directed IRA: Establish a Self Directed IRA with a qualified custodian who supports alternative investments.

2. Do thorough research: Identify areas or jurisdictions where tax lien auctions are held, and study the local laws and regulations regarding tax liens.

3. Attend tax lien auctions: Search for auctions that fit your investment criteria, such as a specific location or minimum interest rate. Attend auctions in person or participate online.

4. Conduct due diligence: Before bidding on a tax lien, thoroughly research the property and assess its potential value. Evaluate the current market conditions and determine if the investment aligns with your financial goals.

5. Bid on tax liens: Once you identify a tax lien that meets your investment criteria, place a bid for the lien. The successful bidder becomes the new lienholder and begins earning interest on the investment.

6. Manage the investment: Monitor your tax lien investments and collect the interest payments from the property owner. If the owner fails to pay the owed taxes within a specified redemption period, you may have the opportunity to foreclose on the property.

Investing in tax liens with a Self Directed IRA can be an exciting and profitable venture. However, it is important to understand the risks involved and conduct thorough research before making any investment decisions. Working with a knowledgeable custodian or financial professional can provide guidance and ensure compliance with IRS regulations.

Remember to consult with a tax advisor or financial planner to assess your unique situation and confirm if tax lien investing with a Self Directed IRA is appropriate for your retirement goals.