Tax lien investing has earned a bit of a reputation, and not always an accurate one. From social media “success stories” to casual conversations at auctions, plenty of myths float around about what this business really looks like. Unfortunately, those misconceptions can quietly drain your profits and cloud your judgment long before you realize it.
Let’s clear the air and get back to what actually works.
One of the biggest myths out there is that every tax lien leads to property ownership. It’s an appealing idea. The thought that you can pick up real estate for the cost of unpaid taxes. But the truth is, most liens never result in ownership. In many cases, the property owner redeems the lien, paying you back with interest. That’s the goal for most investors. Foreclosure can be profitable, but it’s also time-consuming, legally complex, and not something you should bank on with every purchase. Thinking of every lien as a “path to property” can push investors into risky or overpriced bids.
Another common misunderstanding is that redemptions are failures. Some investors feel disappointed when an owner redeems quickly, as if they’ve missed out on something bigger. In reality, redemptions are often your fastest and easiest wins. They deliver a steady, predictable return with minimal effort, no court filings, no maintenance, and no surprises. A redeemed lien means your capital comes back, often with double-digit interest, ready to reinvest. That’s not a loss; that’s efficiency.
Then there’s the idea that higher interest rates automatically mean higher profits. On paper, a lien offering 18% interest might look like a gold mine compared to one offering 8%. But if the 18% lien redeems in a month and the 8% lien takes a year, your actual return might not be that different. And if the higher-rate lien is in a struggling area with low property values, you could face much higher risk. Chasing rates without understanding the broader picture — market stability, redemption timelines, and property condition — can quickly turn a “great deal” into a bad one.
A related myth is that all counties run their auctions the same way. Every jurisdiction has its own rules, redemption periods, and bidding formats. Some use premium bid auctions, others use bid-down interest, and a few rely on random selection. Assuming they all work the same is a quick way to make mistakes. Successful investors take the time to understand each county’s system before bidding, and they never assume yesterday’s rules apply today.
And here’s one that trips up a lot of new investors: believing that more liens mean more profits. Quantity doesn’t guarantee success. Managing multiple liens across different counties can get complicated fast, especially when you’re tracking redemption timelines, interest accruals, and potential foreclosures. Without a strong system in place, the administrative side alone can eat into your returns. Sometimes, focusing on fewer, better-researched liens pays off far more than spreading yourself too thin.
The last misconception might be the most dangerous: thinking emotion has a place in the bidding process. It’s easy to get swept up in the excitement of an auction. But letting emotion override your limits is one of the fastest ways to lose money. Every bid should fit within your framework for ROI, property value, and risk tolerance. When you stick to your process, you protect your profits and your peace of mind.
At its core, tax lien investing is a strategy rooted in patience and precision. The investors who thrive aren’t chasing every opportunity or hoping for lucky break. They’re focusing on what’s real, not what’s hyped.
So the next time you hear someone boast about “buying houses for pennies on the dollar,” smile and nod. Then go back to your research, your numbers, and your plan. That’s where the real profits live.
This blog is for informational purposes only and should not be relied upon as financial or investment advice. Real estate investing carries risks, and individual results will vary. Always consult with your team of professionals before making investment decisions. The authors and distributors of this material are not liable for any losses or damages that may occur as a result of relying on this information.
