Tax Lien Investing – Interest Rate or Property Ownership

When it comes to Tax delinquent Property Investing and Tax Lien Investing in particular the investor (=you) has two choices.

1. Does he want to go for the high interest rate offered by “Tax Lien Certificates”
2. Does he want to go for the chance to get the property through foreclosure of the Tax Lien Certificate?

Although I personally like the Second option better and am actually a fan of yet a third way of buying tax delinquent property directly from the owner outside of auctions for as little as $100 to $500 and sell it within days for many thousands of dollars.

Purchasing Tax Lien Certificates

It is never a pleasant experience when a property owner loses the ability to pay their annual property taxes. However, when a property owner does becomes a delinquent taxpayer, it is up to the municipal government to collect owed property taxes. As such, the local government initiates a tax sale where a tax lien certificate, representing your unpaid taxes, can be auctioned off to the highest (or lowest) bidder.

Tax lien auctions work like this: A jurisdictional court orders a tax lien auction to sell tax lien certificates representing all the unpaid property taxes in the county. Depending upon the state, and the nature of the tax sale (it can be an auction for Tax Deed Sales or Tax Lien Certificates), you can buy a tax lien at these tax sale auctions held once a year by the taxing authority. Depending upon your operating jurisdiction, there may be several types of auction bidding. Sometimes, not all Tax Liens are sold at the auction. This could be because of either a lack of bidding or because there were no acceptable bids. In this type of scenario, the Tax Lien can be purchased over the counter at a later date.