It is difficult to think of high yield safe investments that do not carry some risk, unless you are a person who considers earning 1-2% on a savings or money market account high yield. While the best way to reduce risk is to focus your money and become educated, there are investments where the risk is minimal and the yield respectable.
Tax Liens
Tax lien certificates are safe high yield investments with returns of 8-24%, depending on the state they purchase them in, and have the potential for greater benefits in the form of real estate holdings. To purchase a tax lien certificate, you bid on them at auction. Check with the state you live in for dates and times, and be prepared; auctions are usually only held once a year.
Buying up tax liens offers a great return on your money, but they also offer the chance to buy a property for pennies on the dollar if the property forecloses. The caveats are, the investor must hold the certificate until the tax is paid or the home forecloses; and they cannot be cashed in. In addition, it can be difficult to buy a certificate on a good property, as this is a competitive area of investing because of the potential for high returns.
Raw Land Preparation
Less known is the area of raw land development, or more appropriately, preparation. Not to be confused with buying parcels ready to be built on, this is the business of obtaining government permission to prepare untouched land for future development. The companies who prepare these parcels, and wade through the bureaucracy to get plans approved, have increased the value of the land several times over, which they can then sell to builders for a profit.
This is a mid to long term investment, as it can take several years to obtain all the proper approvals, and timing is important. With the real estate market struggling, collaborating with raw land developers now can mean a lower cost of entry, while positioning you for any positive trends in the next few years.
Foreclosures and REO’s
The real estate market may be struggling, but all those foreclosures are the equivalent of a liquidation sale at your favorite shopping mall. This means great deals, and intense competition for the best properties. While it is difficult to say if the bottom of the market has been reached, if a person follows the price trends in their neighborhood of choice, it is easy to determine when falling prices have stalled, and it is time to buy.
With the right timing, and good negotiating skills, a property can be purchased with built–in equity and positive monthly cash flow from rental income. This is a competitive but relatively safe high yield investment. The key to finding the right property is persistent searching and adherence to favorable deals.
Making high yield safe investments does mean inheriting a degree of risk that it will lose value; but with truly ‘safe’ investments guaranteed to devalue fractionally every day, a little risk can be a smarter financial move.
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