Quote:
Originally Posted by kstarnes
Eric's explanation makes sense, i.e. the folks or "market" bid down the yield to an acceptable risk/reward ratio based on the property.
If there were truly a guaranteed return of 16%, money would flow to it like a pack of wild dogs to a three legged cat (thanks to Mike, IROC, for that quote!).
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However, as you point out (and only makes common sense), if there were an investment where you were guaranteed to not lose your principle, and were guaranteed 16% interest on your principle until repayment, people would not be getting paid $XXX million per year to manage funds to try to beat the S&P.
I'm not saying that tax liens can't be a good investment. But there are risks, it is possible that at the end of the day you lose all of your investment, or even more than your initial investment if you count additional expenses (like legal) if things go sideways. Things can happen, such as a bky filing, that can throw a wrench in things, including in lien priority.