Taking Heloc to invest into Tax Lien Certificates, good bad ????

[Adam Mazzochi]

So is it foolish to take home equity and put it into Tax Lien Certificates????? Let’s say someone has a dozen rental houses paid off collecting rent would it be foolish to take the equity in those houses and make even more money in tax lien certificates????? I would be paying interest on the heloc like 4 percent and shooting for a higher interest rate on the tax lien certificate at like 20-30 percent. Your thoughts are VERY much appreciated and hope everyone is having a great holiday :-) :-) :-) :-) :-)

[Ned Carey]

@Adam Mazzochi Tom is right. There is a LOT more to tax lien certificates. One member here @David Krulac says tax sale is one of the riskiest ways to invest. 

You have been misled if you think there is no risk. First tax certificates rarely pay 20-30% interest. They are sold at auctions and they auctions can be very competitive. Some auctions have the interest rate literally get bid down to zero. You are often bidding against big money like hedge funds. They have a low cost of capital and can work on very low spreads. 

Next is that your security for the lien is the property itself. You view foreclosing on a property as a good thing. It can be, that is my business model.  However I have certainly lost money on some tax liens.  What do you think happens when there is a fire and a property burns down?  You now have a tax lien on a burnt pile of sticks. There are many hidden risks and hidden costs in tax sale.