Tax Lien and Tax Deed Investing

What are tax liens and tax deeds?
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•You can make double-digit returns on your money with low risk and low maintenance
•Enjoy safe and passive cash flow
•Not subject to government interest rate changes
•Property tax lien is secured to real property as a first priority lien at a fraction of its market value
•Low investment needed. Tax liens can be purchased for as little as a couple hundred dollars - if that much.
Background: What are tax liens and tax deeds?

When property owners don't pay their property taxes, they become delinquent. There are over 3,000 counties in the United States and the tax collector for each county is primarily responsible to collect the unpaid taxes through a process by selling, at public auction, either a Tax Lien Certificate or a Tax Deed, depending on the state the property resides in.


Tax Liens vs. Tax Deeds: What's the difference?

The difference between these two types of processes is the "bundle of rights" sold to the purchaser.


Tax Deed States: If the taxes are not paid, the county will sell full ownership and possession rights to the investor at a public foreclosure auction or later assignment process. The property is sold for the unpaid taxes plus any fees, interest charges, and court costs. Since the unpaid property taxes are usually a small percentage of property's market value, perhaps less than 10%, you, as a tax deed investor, can buy full property rights at a fraction of the market value. You need to be aware of any redemption periods some states give the delinquent property tax owner.


Tax Lien States: The county auctions off just the right to the tax lien or tax claim on the property, not the property itself. This lien is an encumbrance or enforcement right held by the county.


As an investor, the tax lien certificate you buy gives you two important rights:

[1] The right to receive interest penalty charges if the lien is paid off by the property owner and

[2] The right to foreclose the tax lien and take title to the property if the lien is not paid by the redemption period.


A nice feature of the tax lien is that it is a "high priority lien," i.e., this lien comes before judgment liens, mortgage liens, trust deeds and other private liens.


The interest penalty income can be substantial, depending on the state.


Here's a few examples of the interest income you can earn:

Arizona: 16%

Florida: 18%

Illinois: 18%

Iowa: 24% Kentucky: 12%

Mississippi: 18%

Nebraska: 14%

New Jersey: 18%

Ohio: 18%

Wyoming: 15%

Not too shabby!