A Tax Lien is a lien placed on real property by county governments when a taxpayer becomes delinquent on property taxes owed. The investor purchases the Tax Lien from the county and receives a certificate, which certifies the investor’s right to receive the tax and interest owed or to foreclose at the end of the redemption period.
Tax Lien Certificates are a unique asset because of the very low Lien-to-Value on the real property. Property taxes are typically 1% to 5% of a properties assessed value. Tax Lien Certificates are an excellent way to invest in real property in this uncertain real estate market. Tax Lien Certificates are usually the senior lien on the property and receive interest rates between 8% and 18% (depending on the state and county).
Tax Lien Certificates are also beneficial to the community, since they allow county governments to fund their operations without having to issue municipal debt.
A Life Settlement is the sale of an existing life insurance policy to a third party investor in exchange for an immediate cash settlement. The investor, who becomes the policy’s new owner and beneficiary, receives the full benefit at maturity.
Life Settlements are a unique asset because of the low correlation to the broader market. Life events occur regardless of “up” markets or “down” markets, and irrespective of recession or expansion. Once a policy has been bought the benefit is known and the only variable is time. Generally, investment returns are not determined by the market, but rather by the time to maturity.