Is the American Dream of Homeownership over? by Tony Martinez
In a June 17, 2021 article, Bloomberg writer Karl W. Smith argued that affordability and stability in housing has come to an end, and people should begin to embrace renting to buying. In 2004, homeownership reached a peak of 69% but has been trending lower.
A 2014 New York Times article argued that the math is changing for the rent-or-buy debate in favor of renting. While the math changes like a yo-yo, in 2014 renting was winning because housing was more expensive. (You can use The New York Times calculator to see for yourself.) So, what should aspiring homeowners do, and what does this mean for tax deed and tax lien investors?
Aspiring homeowners dealing with rising home prices and huge demand—not just other homebuyers, but from private equity funds—have two options for finding affordable housing: tax deeds and tax liens.
A tax deed is the right of ownership to a home that was foreclosed on by a state or local government because the previous owner didn’t pay property taxes. The deeds are sold at auction in an attempt for the municipality to recoup unpaid taxes. These homes are often sold well below market price but could require a few home improvements by the deed buyer. Additionally, homebuyers using deeds will have to be flexible on the neighborhood and maybe even the city they’re willing to buy in.
Not all states have tax deed auctions, but most states have tax lien sales. A tax lien is a claim against a home by a state or local government for unpaid taxes. Governments sell these liens to investors to meet budget demands. In return, the investor is paid a certain amount of interest, usually around 10% – 12% when the lien is paid, in addition to the return of the money invested.
If the home goes into foreclosure, the lien holder may acquire the property assuming that the home is clear from other liens and claims, such as a mortgage. This avenue is much less likely to result in a home than with a deed, but it does happen. And, at a 10% – 12% return, an aspiring homebuyer can save for a down payment at a much faster rate.
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Deed and Lien Investors
There’s a constant debate among deed and lien investors as to what they should do with a home once acquired: sell or rent. Of course, some people just do not want to deal with renting, and they won’t be convinced otherwise. This is perfectly fine. However, for those who are considering renting, it appears the arguments for becoming a landlord are increasing. Recently, private investment firms like BlackRock are buying up residential real estate for rental properties. Now, it appears the market for renting is increasing because it’s making greater financial sense for consumers.
Let’s look at some numbers. In the last decade, the cost of renting has risen on average more than 30% in the United States. That’s only 3% per year. The median rent in 2020 for a two-bedroom home rose 1.8%, while a one-bedroom home gained 4%. Rents appear to be rising at a faster rate than in the past 10 years. It’s another point in the case is growing for renting versus selling.
If the American dream of homeownership is still in your heart, there are ways to affordable housing. However, if you’re already in the midst of investing in deeds and liens, then it may be time to start considering renting over selling. No matter what the housing market does, deeds and liens give investors good options.
Tony Martinez is the Founder and Chairman of the US Tax Lien Association, which is an organization that is committed and dedicated to helping others achieve total financial freedom through the power of investing in Tax Lien Certificates. With over 30 years of expert experience, Tony is the world's #1 authority on the subject of creating enduring wealth through the little know strategy of investing in Tax Lien Certificates, which gives anyone the opportunity to earn guaranteed fixed rates of returns of 18% – 36% interest per year, and acquire valuable real estate for approximately 10% of market value.