|Why the Stock Market Is Not Necessarily the Answer:
The Answer Is...
Like millions of others you are probably wondering where you can attain the greatest and
safest return on your money in the shortest period of time. Finding the right investment vehicle can
be very difficult to say the least. The stock market can give you stable long term appreciation
potential if you diversity and hold for a number years. Sadly, however one downturn in the market
and years of gains can be wiped out overnight. Unfortunately, most Americans will stop looking
for other ways to higher yields. They will leave their money in stock market and must continually
hope that when they are able to retire the market will stay strong and not suffer a downturn. In
addition, when they are enjoying their retirement many will have the added burden of having to
constantly watch the market to make sure their nest egg stays intact.
In my work as a financial consultant and in my study of Finance I formed the opinion that
the greatest obstacle to attaining wealth through the stock market is the efficient market
hypothesis (EMH). This controversial theory is usually only discussed in academic circles but it
affects each of us everyday. EMH states that it is impossible to beat the market because prices
already incorporate and reflect all relevant information. Proponents of this theory state that it
is pointless to search for undervalued stocks or try to predict trends in the market because the
market (i.e., buyers) already take into account risk and growth factors, economic trends, and future
income when stocks are traded. While I don't completely agree with the theory it does present one
of the unseen hurdles, when trying increase the value of a stock portfolio.
The end result is that we have millions and millions of investors with the incorrect notion
that they can beat the market and find a way to financial freedom. This is a very difficult task
especially in the short term. What if there was a way to earn a guaranteed 10% to 50% per year on
your investment? What if there was a way to purchase a high yield investment instrument which
helped the community and put your dollars to good use? What if the investment vehicle was created
and backed by state law and designed to protect the investor? What if the investment vehicle
allowed you sleep easy at night because at worst you would get clear title to valuable real estate
acting as the security of your investment?
There Is Another Way: Tax Lien Certificates
There is a way to earn a guaranteed return on your investment which if consistently repeated
over time would greatly improve your wealth position. The answer is investing in tax lien
certificates. Tax lien certificates are a way for local government to collect the unpaid revenue
from back taxes. The rates of return from tax lien certificates can range from 8% to as high as 50%
within the second year.
Here's how it works: local governments all across the United States are forced to sell the
property tax liens created by property owners who do not pay their property taxes. The property tax
lien will remain attached to the property and will not be removed unless the back taxes are paid.
In many states even bankruptcy will not remove a property tax lien.
Even though local governments will hold a lien against the property the lien does not equal
spendable revenue for the government entity unless it is sold. Remember local governments use
property taxes to pay for many needed government services and running day-to-day operations (such
as maintaining roadways, educating our children, providing law enforcement, etc.).
In order to get the revenue needed to fund many of these services local governments can
generally do two things: 1) increase taxes, or 2) sell tax liens to private investors while issuing
certificates for the lien amount. Since most politicians know that raising taxes can be very
harmful for re-election efforts their first choice is typically to sell off the tax liens through
When the tax lien is paid off you are guaranteed the rate of interest on the certificate.
Like a certificate of deposit or CD this amount is your agreed rate of interest. This rate of
interest can range from as low as 8% to as high as 50% for redemptions occurring in the second year.
Remember that your certificate is backed by the real estate behind it, so in the event that the
lien is not paid off the real estate is yours! If you invest correctly there is no downside; you
either make the agreed upon interest rate or you take over the real estate for a mere fraction of
its market value.
What Effect Can Proper Investment in Tax Certificates Have?
Quite simply the effects are astounding. For example, let's take a hypothetical investor,
Investor A. Investor A places $3,000 in a retirement plan at age 30 with an average rate of return
of 7% per year for the next 20 years. This investor's money would double about once every 10
years. At the end of the investment term and at age 50 the investment would equal almost $12,000.
Now let's take Investor B, who uses simply uses a strategy of investing in tax lien
certificates with an average annual return of 20%. At age 30 Investor B starts with $3,000.
Investor's B's money would double about once every 3.5 years. As a result by age 50 the initial
$3,000 would have grown to over $115,000. If that investment was continued for just another 10
years that initial $3,000 would now have grown to well over $700,000! From such a small investment
you can be on your way to becoming a millionaire. One scenario that is missing from this
hypothetical is the effect to your return on investment if the property backing the certificate
becomes yours. A single tax lien certificate could yield you a profit of $20,000, $40,000, or more
if you sell the property backing the lien. This would exponentially increase your return!
Proper Information is the First Step!
As you can see investing in tax lien certificates allows you to safely use the laws of
compounding to increase your investment. A well thought out and researched strategy will allow you
to safely bypass the 'yo-yo' effect of the stock market because each certificate has an incorporated
safety net. The safety net is quite simply the real estate which backs the certificate. Best of all
the real estate usually equals a much greater return than the face value of the certificate itself.
Do companies on the New York Stock Exchange provide a safety net like local governments provide?
No they do not.
Remember there are many states which offer tax lien certificates and each state has different
rules and regulations. I always recommend learning as much as you can from people who have proper
experience and training. A lot of people ask me if investing in tax foreclosures is risky. The
truth is that doing anything when you don't have proper knowledge and training is risky. Seek out
the experts who are willing to help you. Always continue to learn and don't give in to negative
people around you.
Keep in mind that everything you want in life takes up space. Many people fail to realize
that when we want new things we have to get rid of the old things in order to make room for the
new. Old thoughts, old ideas, unjustified fears all must make room for the new possibilities and
limitless potential that each day has in store for us. Keep a positive attitude and learn from the
experts and you will be on your way to fulfilling your dreams.
I want to wish you the best of luck in your endeavors and email me if you ever need help!
Information contained within this article was not intended to be, nor should it be taken by the
reader as legal, financial or tax advice. The above article was written for educational purposes
only. If the services of a Texas attorney, or real estate mentor or coach are desired please
contact Mr. Barazandeh or seek the services of another
The author, Darius M. Barazandeh, Esq. is a licensed attorney in the state of Texas. In addition
to his legal knowledge he has a Masters Degree (M.B.A.) in Business Finance and brings experience
from numerous fields including tax sale investing, real estate construction, corporate finance,
and business consulting. Frustrated by the lack of realistic information regarding tax foreclosure
sales and other investments, he is "unlocking the secrets" to many of these creative
investment methods with his unique 'clear cut' writing style, attention to detail, and legal
knowledge. His product Texas Houses
for Pennies is the highest rated tax foreclosure guide in
the United States! 
Current Membership Includes:
- Real Estate, Probate, and Trust Law Division of the Texas Bar Association
- Business Law Division of the Texas Bar Association
- Taxation Division of the Texas Bar Association
- Environmental and Natural Resources Division of the Texas Bar Association
- Alternative Dispute Resolution Division of the Texas Bar Association
- Consumer Law Division of the Texas Bar Association
 According to the Real Estate Investment Depot,
Texas Houses for Pennies has
received a customer rating of 9 out of a possible 10 points.
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