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This Is a True StoryBy
Tuesday, April 6, 2010
The older guy in front of me in line has a stack of credit cards the size of a deck of playing cards.
"So how much gas d'ya want?" the convenience store girl asks.
The guy shuffles his stack and tosses out a Capital One card.
With his penny loafers and turquoise polo shirt, the guy is dressed like a typical wealthy coastal Florida 70-year-old. But he might not be as well-to-do as he appears...
"Declined," the girl says.
He reshuffles and tosses again. "Declined again," the girl says.
I glance at his car poking out from behind the gas pump... It looks like a red Mercedes convertible, top down.
One more shuffle of the stack... The guy finally picks a winner and goes out to pump his gas.
"Living beyond their means..." the girl says to me after the guy leaves.
"Yep... He's driving a Mercedes convertible," I reply.
She says, "Ya know... he only came inside because he tried so many cards at the pump that the pump refused him."
I get a few steps out the door and I see the guy still filling his gas tank. It's not a Mercedes... It's a Rolls-Royce.
I can't say what this guy's situation is for sure. My guess is, he was in real estate (like most folks around here). As his properties went up in value, he took out loans to buy stuff. Now his properties have fallen by half, and he's broke. Even selling the stuff wouldn't do him any good... His stuff is worth less than the debts. So here he is, shuffling cards at the gas station.
I can't fix his situation, of course.
But the same set of circumstances that got this guy where he is today is creating an opportunity for anyone who didn't live quite so large. It's an opportunity to collect high income... in part because of the real estate bust.
I've been earning 18% interest here in Florida, and it's safe money (if you do just a little homework). Here's how it works...
When a guy (like Mr. Rolls-Royce) doesn't pay his property taxes in Florida, the county still needs that tax money. To get that money now, the county makes an irresistible offer to investors... It allows investors to pay his taxes for him and earn 18% interest. The interest accrues until either 1) the guy pays his taxes late or 2) the property is sold on the courthouse steps to recoup those back taxes.
The investment – called a tax lien certificate – should be very safe, as long as the value of the property is much higher than the taxes due. The details get a bit more complicated, but that's it in a nutshell.
The opportunity is huge. The returns are high, because the rate is set by the state as a penalty... It's not set by market interest rates.
Collecting 18% interest in a zero percent world sure is attractive to me... In this low interest-rate world, tax lien certificates are now one of the lowest-risk, highest-returning investments out there.
I've been buying them with my own money... You ought to look into them too.
The "season" for auctions starts in late May... so you have some time to get up to speed. Take advantage of it!
Good investing,
Steve
Further Reading:
For about a year now, Steve's been filling DailyWealth readers in on the opportunities in the beaten-down real estate sector. If you're ready to do some work... and make a two-year commitment... here's his blueprint for making a tax-free $50,000 profit on real estate: It's Time to Buy a House.
While the opportunities in your local real estate market might be huge, now is probably NOT the time to buy real estate stocks. Find out more here: Nothing Performs Better in Times Like These.
Market NotesTHE WORLD'S BIGGEST "BREAKOUT" The upside breakout in the 10-year note we've been warning you about... aka "the government's biggest nightmare"... just arrived.
To recap, the 10-year Treasury bond yield is the most widely watched interest rate in the world. This is the rate of interest Uncle Sam must pay his creditors in order to borrow money for bailouts, welfare, "free health care," and various other crowd-pleasers. It's also the rough benchmark banks use to set mortgage, business-loan, and car-loan rates.
Some analysts, like our colleague Porter Stansberry, expect this number to go much higher than the 3.6% level it traded at for much of 2009. He argues America's creditors will demand higher rates of interest in order to compensate them for the risks involved in loaning money to the sovereign equivalent of the "spend it all" town drunk.
As today's chart shows, Porter is getting "righter." Yesterday, the 10-year yield punched into the 4% level for the first time since June 2009. This is an important upside breakout. The cost of borrowing trillions for "bailouts and handouts for everyone" is rising...
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