Recent messages have extolled the virtues of tax liens, but this intelligent way to create wealth has created a lot of misunderstanding. See what I mean below.
I have written several messages about the advantages of investing in tax liens. These investments make special sense in these days of shaking equity markets, rising inflation and low interest rates and bond yields. Yet many investors have expressed concerns, that this investment preys upon the poor.
For example a reader named Connie sent me this terse note.
"I am sorry but you have never been in danger of you and your children being homeless. You don't have a clue. Connie"
Another reader Gene, was a bit more sympathetic but still did not like the idea when he wrote:
"In reading your letter from a 'wise' reader, regarding the moral outrage concerning the tax liens, you indicate a possible solution: that any buyer of tax liens could call the delinquent party first, to find the cause of the lien and whether it is conscionable to benefit from another's hardship."The problem is that few people will ever give you the real reason for their tax dilemma. If they are willing to talk to you at all. Most of them will give a song and dance about the government and personal hardships that either don't exist or are far from the root cause. Like irresponsible spending and massive credit card debts. That is the way society works....victims tend to blame it on others, rarely on themselves."And who is going to confide to a total stranger on such a personal issue....? Your noble approach, unfortunately, doesn't hold water."Tax liens are a profit-making venture. Pure and simple. You'll win some and you might lose some. No one wants to profit on other people's misery. But to try to discern the real issues behind someone's tax repayment dilemma is a very difficult task to add to the mix. And doesn't hold up in the moral assessment of things. I enjoy your newsletter. Gene"
I hope this reply cleared up some misconceptions, though these notes really miss an important point (which I will get to in a moment).
Sorry, Connie, I have more clues than I care to think about having been below broke, in debt, unable to pay my rent and without a job (the company I worked for in Hong Kong went broke and stranded me there) while living in Hong Kong 10,000 miles from home. I had no college degree, no job possibility, no folks or friends with money to help and I actually could not find 3 cents to ride into town to have an interview. Instead I walked (in a dark suit) in tropical heat for miles. I had no money to buy food for my three kids.
This is why Merri and I have donated more than all the profits we have made over the past few years to help poor people who have no homes, water, electricity etc. This is why we have encouraged our daughter to work for a human rights NGO rather that work for just money and this is why I offer this website free.
People get into these situations for a reason. There are ways to get out. It is not the situations that count but what we do with them. People in this situation need help, some will take it and solve their problems. Others won't. We have learned the hard way that if you give many homeless people financial help they will just spend it (often on the worst stuff such as tobacco, drink and drugs) and end up homeless again.
Gene, This is why I suggest that people who are concerned about taking care of their own while also helping those who may lose their homes can create a credit counseling business that runs hand in hand with their tax lien business. Some people will accept help when they are in such a desperate situation. This gives a way to help those who really want to do something about their plight. This can be a system to find these people who need help. Otherwise people will lose their homes to other investors who don't care. I think this is a positive and realistic approach that uses the work and the system as it is. If you have other ideas, I am always open and would be happy to hear your positive suggestions on a better way to help these people.
Now here are really important points. First tax liens are not foreclosures. The fact that investors will pay delinquent taxes (so the county can pay its bills and provide services to the public) in fact often stops the necessity of such a sale. Tax liens are not foreclosures. They are certificates showing that you have paid someone's delinquent tax.
But here is the key! Most tax liens are not created by people who are about to lose their homes. Many businesses and wealthy people delay paying tax simply because they can put the money to better use. I have a friend who buys properties on the court house every week and he tells me that many of the foreclosures are created by estates and very often when drug dealers are put in jail, etc. In my friend's case, he looks at every deal before making an offer and simply will not buy a property where a family lives. Thus he avoids the problem and still makes nice profits from this unique business.
Another reader summed up my thinking nicely when she wrote;
"Dear Gary; Just briefly read your article re Tax Liens and the reply one of your readers made. I worked in the foreclosure field some years ago, not the usual way of making money off the misfortunes of others, but with the attitude of "How can I help this person" AND make money. The foreclosure field where I live was tough at that time and it didn't pan out for me, but I know from that experience that if you are coming from a loving heart, you can help those who are in unfortunate circumstances as well as make money, and WHO BETTER TO DO THAT THAN SOMEONE WHO HAS INTEGRITY and is not totally self absorbed and self serving? The challenge is to find a way to assist others, PERHAPS BY SHOWING THEM HOW TO CREATE A BETTER REALITY FOR THEMSELVES. None of us gets into financial straits because of anyone else, but because we have unconsciously, unintentionally created that experience for ourselves. As long as we blame someone outside of ourselves including 'the government,' we put ourselves into the victim position which is a powerless position because then 'the government' has to change before we can. THAT IS SLAVERY! Kathy"
How can I add to such a loving comment made by a person who is experienced in the field?
Tax liens are an excellent alternative investment in these difficult days and can be a socially responsible way to help those in need. I suggest that every investor who has the time to research them consider these investments now.
Until next message I wish you good investing that also does some good!