Self-Directed IRAs

The Benefits of Tax Lien Investing Through a Self-Directed IRA

What would happen if the government started collecting your profits for you? It might sound like a pipe dream, but an arrangement like that can be found through tax lien investing. In this style of investing, an investor can purchase a tax lien and collect higher-than-normal interest rates. Failing that, in many states, the owner of the tax lien can potentially become the owner on the property. And considering that tax liens are a type of investment that you can own within a Self-Directed IRA, this can be a very lucrative way for people to invest in their retirement future. Let’s look at the benefits of tax lien investing through a Self-Directed IRA:

Benefit #1: High Interest Rates

A phrase like “high interest rates” can scare off a lot of people—but if you are on the other end of the spectrum, it’s the kind of phrase you want to hear. Collecting higher-than-normal interest rates means that you can get returns on your investment that are generous and well worth the time and effort you put in to researching tax liens.

In the case of tax liens, the process is relatively simple. You purchase the tax lien on the property—in essence, taking over the debt that’s owed to the government. But you are not taking over the paying of that debt. You are now the one who’s owed. With tax lien investments, that can mean maximum rates of 18% (such as in Florida), 16% (Arizona), or even 2% per month for 24% annual return (Iowa).

Benefit #2: Potential Takeover of the Property

What happens if the individual with the tax debt cannot pay the bills? That may lead to foreclosure, in which case the investor can decide whether they want to sell the property for a profit or even simply retain the property and enjoy the income generated by renting the property out. Because it’s perfectly acceptable to own real estate within a Self-Directed IRA, you will be able to enjoy the added benefits of the tax protections that come with retirement accounts.

Benefit #3: Passive Investing

Although there’s plenty of homework that can go in to identifying a tax lien opportunity—and you’ll want to check with legal and accounting professionals to make sure that you have everything you need—tax lien investing can be highly passive. When your Self-Directed IRA purchases a tax lien, you’re then free to sit back and let the local tax collector deal with collecting the profits for your Self-Directed IRA. Because you are the person who purchased the tax lien, that right of ownership gives you plenty of benefits—you do not have to do the raw work of collecting.

That means that you do not have to leave letters or knock on doors. You can simply wait for the interest rates owed to you to come in. And, in the case of someone who’s unable to make those payments, you may end up owning the property itself.

This works out from the local government’s point of view because it means that they get to collect some money by selling you the tax lien. And since you will then be in control of the property in the case of foreclosure, it makes the entire process simpler from their perspective.

Tax lien investing is not something that you can take on at a moment’s notice. It requires working with professionals with experience. At American IRA, we have experience in helping people with tax lien investing through a Self-Directed IRA. We do not offer specific investment advice, but we can help with the administrative and paperwork necessary.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at