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Investing in Tax Lien Certificates and Tax Deeds Earn Investors High Rates of Return

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By : Karim El Sheikh    99 or more times read
Every investor’s goal is to find an investment that gives him or her a high rate of return.
Investing in distressed properties such as foreclosures and short sales are the most popular choices today and you do receive a good rate of return because you are buying properties at substantially discounted prices.

However, there is another way to invest in real estate and receive a high rate of return on money and that is purchasing tax lien certificates or tax deeds, which are offered by municipalities when property owners default on their property tax payments and municipalities place tax liens on the properties.

Tax Deeds and Tax Lien Certificates

Some states and municipalities auction or sell tax lien certificates. The municipalities pay investors a high rate of interest on these tax lien certificates. The lucky bidder buys them at auction by paying the back taxes and any fees, interest or court costs.

The municipality pays you annual interest on the tax lien certificate during the time period that the former owner has a redemption period in which to buy the property back from you by paying you the costs of acquiring the tax lien certificate, fees, costs and a redemption fee.

If the owner does not redeem the property, then you can foreclose, and you now own the property for what you paid at the tax lien auction, which is usually substantially less than the property’s fair market value.

So let’s say you paid $5,000 in back taxes, fees and costs and the home is worth $100,000, you now bought a property for $5,000 and have $95,000 equity.

Other states auction their tax delinquent properties, and the lucky bidder receives an ownership deed for pennies on the dollar. If the owner redeems the property within the statutory redemption period, they have to reimburse you for the purchase costs of the property, fees and your costs and pay you a redemption fee.

Either way you win, because you are receiving a high rate of return in interest or by acquiring a property at a substantial deep discount.

Annual Returns on a Tax Lien Certificates and Tax Deeds

Each state has different laws that set forth the rate of return you can expect to receive on a tax lien certificate or tax deed. The following gives you an idea of what you can expect to receive:

Sample annual return on tax lien certificates:

  • Illinois – 36 percent annual return

  • Indiana – 15 percent annual return

  • Florida -- 18 percent annual return

  • Iowa – 24 percent annual return

  • Arizona – 16 percent annual return

Sample annual return on tax deeds:

  • Georgia – Redemption fee 20 percent annual return. If the owner redeems the property from you within one year, you will receive a 240 percent annual rate.

  • Texas – Redemption fee 25 percent of the aggregate cost of the property when redeemed by the former owner from you within at least six months. If the property is redeemed within a month, you will get a 300 percent return.

  • Delaware – Redemption fee 15 percent annual return. If the property is redeemed by the former owner within a month from you, annual return of 180 percent.

Investing in tax lien certificates and tax deeds are safe and easy investments that give you a high rate of return on your money. They are guaranteed by municipalities who use the revenues to run their cities so you are helping cities to provide services to their residents when you invest in tax deeds and tax liens.

If you are looking for diversity and safe investments for your investment portfolio, you should consider investing in tax deeds and tax lien certificates. is the site for all tax lien investing. Search tax liens for sale nationwide.

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