Rich Dad Education Blog

Last month's article discussed the pitfalls of being a one-dimensional real estate investor. Being a one-strategy investor can be successful - many seasoned real estate veterans have specialized in a field they enjoy and found great success. However, these veterans are usually well versed in numerous strategies, and eventually settled with the one that best fits their strengths and fulfills their personal and financial goals. As a real estate investor, this is where you want to be - specializing on the strategy or strategies that best suit you.

To help get you to the point you want to be, the next several real estate articles in the Rich Dad E-zine will focus on often overlooked areas of real estate investing. To say that tax liens and deeds are often overlooked might be an understatement. Many real estate professionals have no, or only cursory, knowledge of this area of real estate investing. Few novices have even heard about this strategy, and thus never take the time to investigate to see if it might work for them. This is unfortunate as many investors have found that tax liens and deeds are the perfect fit for their investment needs.

Tax Liens and Deeds Overview

Property tax is one of the primary ways cities and counties generate revenue to fund the services they provide. When taxes aren't paid, these government entities still need a way to borrow the tax money that isn't paid, and often do this by selling tax liens and deeds to investors. Tax liens are effectively loans that can be turned into a deed if not repaid after a certain period of time, often called the redemption period. A tax deed is a deed to the property which may or may not have a redemption period.

Laws vary from state to state, but here are some of the basic advantages of tax lien investing.

Tax Liens and Deeds Advantages

Priority Lien. If a property tax is not paid and a lien is placed on the property, then the tax lien position moves in front of other mortgages and trust deeds. This gives a great deal of security—if you had to foreclose on the tax lien certificate, and become the owner by getting the deed, then you would own the property free and clear.

High Interest Rates. To encourage investors and penalize delinquent taxpayers, interest rates are often set high. Interest rates can range anywhere from 8 to 50% depending on the state you are investing in.

High Security. The lien may be as little as 5 to 50% of the value of a property. If the lien is converted into a deed, then most other liens are wiped out.

Tax Lien Example: Taxpayer Pays

Here is a hypothetical example of how the process works. The process starts when a property owner is late on their unpaid taxes. The city or county will set a date, after which unpaid taxes are late and liens or deeds will be sold. The taxpayer is sent a notice of when taxes are due and how much is due. Generally subsequent notices are also sent if taxes continue to go unpaid.

If taxes remain unpaid, the county or city advertises the property for sale in a newspaper of general circulation. The sale will be open to the general public, and investors will show up to the sale, and bid on the liens or deeds by different methods, according to the state statutes. The person with the winning bid pays cash or certified funds, including all processing costs, and is issued a certificate or a deed showing it is paid and the terms of repayment, if any.

In our example, let's assume we are in a state that issues liens with 18% interest in which we invested $3,000. Liens can always be redeemed up to the last day of the redemption period, and you can typically expect the taxpayer to go to the government office and pay it off, including all processing costs, interest, and penalties. The government does all of the processing during this transaction, and then issues a check to the investor, and the lien or deed is canceled. The amount of the check will be determined by the interest rate and any penalties that state law allows for.

Tax Lien Example: Taxpayer Does Not Redeem the Lien or Deed

Depending on state law, the redemption period can vary from six months to three years. As a lien holder, you have the option to wait longer than the mandatory waiting period. If the lien holder elects to not wait any longer, he/she will start legal action to get the court to deed the property to the lien holder. This legal action can take from three months to a year depending on the state statute and the difficulty of serving the parties involved.

During this court action, the owner of the property usually will be able to redeem the property by paying all back taxes, penalties, and legal fees up to the day the court hands down a final judgment. If this does not occur, then, after a final judgment, the lien holder is the new owner of the property.

Tax liens and deeds can offer excellent rates of return, and state laws designed to encourage investing provide the framework for investors looking for secure returns. Tax liens offer investors that may not have the time or desire to pursue other real estate strategies a way to capitalize on their real estate knowledge. This brief overview of how tax liens and deeds operate is only a small fraction of the knowledge necessary to fully capitalize on this lucrative real estate strategy. If you desire to know more, Rich Dad Education offers courses that focus exclusively on tax liens and deeds.

Have a wonderful and productive month.

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The number 10 is often the first goal that a parent sets for their child when learning how to count. Wild applause and hugs usually follow when the child counts to 10 for the first time. As time passes, there are subsequent attempts to teach the child to count to 20, 30, 50, and eventually, 100. These rounded numbers, typically to the closest multiple of ten or hundred, are usually the goal.

Rounded numbers also dominate our currency. After the $1 and $5 bills, bills typically jump by tens—$10, $20, $50, and $100 bills. Try to imagine a society in which $32 bills and $113 bills circulate. Even the simple $2 bill, while still in circulation, fell out of favor with the American public.

Whether it is learning to count, our currency, or the special emphasis we put on new years that start a new decade, society seems to favor rounded numbers to ten or hundred. Whether this speaks to the simplicity of the human mind or our need for a semblance of order in society will be a conversation left for another time. What we care about as traders is whether it is possible to capitalize with this fascination with rounded numbers.

Support and Resistance

A quick review of support and resistance: support and resistance is defined as "a concept in technical analysis that the movement of the price of a security will tend to stop and reverse at certain predetermined price levels"(en.wikipedia.org/wiki/Support_and_resistance). In other words, in technical analysis, it is believed that securities have predetermined price levels where they stop falling (i.e., find the support necessary to stop falling) and predetermined price levels where the stock will reverse its upward climb (i.e., when it meets a price level that resists further climb upward). An example of a security finding support can be found in Figure 1.

Figure 1


Support and resistance is one of the fundamental foundations of technical analysis. If there are indeed price levels in which stocks or other securities have a high probability of stopping the current movement and reversing their direction, then it presents opportunities to buy or sell at those price points. If a stock has found short-term support at $88, then this can be used as one indicator to buy the stock at that level. Along the same thought process, if the stock has found resistance at $88, then this can be used as an indicator to sell that stock if it approaches that price point again.

Traders should never buy or sell simply based on support and resistance, as it just one of your tools in your technical trader toolbox. With that said, it is a powerful tool and one that should be used in nearly every trade you make. It can help identify entry and exit points, and increase the probability of making a winning trade. And as we know, increasing probability is what successful trading is all about.

Predetermined Price Levels

So our basic definition of support and resistance states that the price of a security will "tend to stop and reverse at certain predetermined price levels." So, what determines these predetermined price levels? There is no singular answer to this question. Short and long-term highs and lows for the security in question can influence these potential price levels. Also, there is no magic formula to determine what a particular security’s short-term support and resistance levels are. A security may find resistance at 88.50, and then break through that and find resistance at 94.00 the next week.

Conversely, a downtrending stock may find support at 22.00 one week, only to have that support broken and find its new support level at 19, or 18, or 16.54. Trying to guess where the stock’s support level is going to be is what the amateurs do. The professionals wait to let the support level set before entering potential trades.

Support, Resistance, and Rounded Numbers

So while there is no magic formula to determine what a particular securities short-term support and resistance levels are, a funny thing happens to securities when they hit rounded numbers. When a security is hitting a rounded number like 50 or 100 for the first time (or first time in an extended period of time), there is a tendency for support and resistance to form at these numbers at a significantly higher rate than other random numbers. To fully grasp why this occurs, you cannot forget that the markets are driven by human beings who carry with them many trader’s nemesis—human emotions.

For example, let's suppose company XYZ is on a bullish tear and approaching 100 for the first time. This is a milestone for many companies and there is a tendency for traders to pause at this moment. Many stocks in this situation will find resistance at 100, and a short pullback may occur. After a few days the resistance level is often tested again. Either resistance will hold again, resulting in either stagnation or a pullback, or resistance will be broken. When resistance is broken, it often is an excellent entry point as a possible breakout could be occurring.

Suppose company XYZ has been downtrending for some time, and is approaching the $50 level. Barring catastrophic news, stocks in this situation often find support in the short term at these nice rounded numbers. Support is often tested numerous times; if it finally falters, then it provides an excellent indicator that the stock is heading further south. If support holds for an extended period of time, many excellent short-term trades may present themselves.

As with all tools in technical analysis, one should never simply buy or sell based on whether a stock is approaching a rounded number; it is simply one tool of many to increase your chances of success. Take the time to look back at stocks on your watchlist to see how they performed when they approached 30, 40, 50, and 100 for the first time. It will not only give you further insight into the stocks you are tracking, but you are likely to find real historical examples of how support and resistance form at these easily identifiable numbers. Remember, books are written entitled Dow 20,000, not Dow 18,765.

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Professional football player Terrell Owens, commonly referred to as T.O., is an elite athlete that has excelled at the highest levels of professional sports. T.O. has made jaw-dropping catches, set numerous NFL records, and will likely be inducted in the pro-football hall of fame. For many observers, T.O.'s football skills are only overshadowed by his enormous ego. During one sideline rant, T.O. was videotaped in a self-congratulatory moment yelling out, "I love me some me."

Whether we would like to admit it or not, there is a little T.O. in most of us. Sure, we might not engage in the attention-grabbing antics of T.O., but deep inside we "love me some me." This is not a bad thing, as self confidence and a bit of swagger are characteristics of many successful entrepreneurs. Those that have genuine confidence are much more likely to take action then those who engage in self loathing.

In our entrepreneurial and real estate dealings, a simple mistake that many people make is that they forget that the people they are dealing with are much like themselves. In business, it very common to be dealing with confident individuals who have strong opinions about themselves and the subject matter they are dealing with. The interpersonal dealings, when conducting a business transaction, can be as important as, and sometimes more important than, the numbers surrounding the deal itself.

In your business dealings, common courtesy is always a must, but some of the best entrepreneurs and real estate professionals take it a step further. They refine their interpersonal skills, and do the little things that separate themselves from the pact. One of the simplest and most powerful of these refined skills is remembering the names of those they deal with.

The Power of One's Name

Unless you are a celebrity or are in witness protection, you are likely to keep and use the name you are born with. Our name is one of the first words a baby recognizes, it is one of the first words a child learns to write, and, as development continues, our identity is often tied in to the simple name that we were given. While they are just words, for each individual, these words carry meaning.

Examples of the meaning individuals associate with their name are abundant. Entrepreneurs will often create brands or name their business using their own name. Scientists have often named new discoveries after themselves, and university buildings are often named after someone who gave a large donation. Many individuals want their name honored now and their name remembered after they have passed. This concept is not new, as Homer even wrote about Achilles waging war so generations after would remember his name.

With the importance that people put on their own name, it behooves each us to remember the names of those individuals we do business with. Forgetting a person’s name can be an insult; while unintended, the person can consciously or subconsciously infer that they simply are not important to you. Needless to say, this is not the impression you want to make as those that feel slighted are naturally harder to do business with. If you can't even remember their name, it's hard to blame them for this feeling.

It's fairly easy for most people to remember the names of those they regularly do business with; however, there are many fields where you are constantly meeting people for the first time. This is very common in real estate. Whether through networking, or making offers on homes, or building a Power Team, the real estate professional is an example of someone who finds themselves meeting new people every day. Remembering the names of individuals during and after initial meetings becomes a powerful asset for the real estate professional in a people-driven business. Whatever your line of work, it can be just as powerful for you.

Remembering Names

Some people will simply have an easier time remembering names than others based on their short-term memory skills. These lucky individuals simply need to be attentive when they meet people in order to master this skill. For the rest of us, there are many techniques we can use to maximize our chances of remembering the names of the people we encounter.

The First Meeting

Repetition. Use the person's name several times in asking them questions about themselves. “Do you have any kids, Bill?” “Bill, did you encounter any traffic on your way here?” “What do you do for a living, Bill?” Don't go overboard, but using their name a few times in questions about themselves can help you cement their name and show interest in them as people as well.

Write the name down. Carry a contact book with you, use your phone, or simply have a piece of paper nearby. The simple act of writing it down can enhance the chance of remembering it and even serve as a cheat sheet later in the conversation.

Don't be fake. If you didn't catch their name or simply can't remember it, then don't try and fake it. Better to have a slightly awkward moment at first then be totally in the dark at later meetings.

After the First Meeting

Be organized. Whatever method you prefer, keep an organized method of remembering your contacts. After the first meeting, use your organizational method to write down their name and other information you remember about them. The more detail you write down will also provide context to the name as you go over your notes later. You can then use this before subsequent meetings to enhance your ability to remember.

Use social media. If you have a dedicated social media page to your business, then this is a must. It can help you remember your contacts better than any other method, and will give you insight into their personal or professional lives that will greatly enhance your chances of recalling their name.

In all interpersonal dealings, the person who genuinely has interest in others is more apt to succeed. If you have genuine interest in others, not only will you have a greater likelihood of remembering their name, but you will also have a greater chance of making a real human connection. While this will always help your bottom line, it will also make life more enjoyable as well.

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