So, you’ve just won a tax lien at auction—congrats! Now what? Well, this is where the real potential for profit comes in. As the lien holder, the property owner now owes you for their unpaid taxes, plus a little something extra in the form of interest. Sounds like a pretty good deal, right?
Here’s how the process works.
Once you win that tax lien, you're essentially stepping into the shoes of the local government. You’ve paid the taxes the property owner didn’t, and now it’s up to them to repay you. But it's not just the back taxes they owe—interest comes into play too. Local authorities set the interest rate, and it’s this extra bit that can make tax liens such a savvy investment.
Now, the property owner isn’t completely out of luck. They have what’s called a “redemption period,” which is a window of time to pay off the debt. If they settle up within that period, you’ll get your initial investment back, plus any interest that’s built up. This is your sweet spot—the moment where your patience pays off, sometimes quite literally.
But what if the property owner doesn’t pay up? Well, that’s where things get a bit more interesting. If the redemption period passes and no payment is made, you could be looking at the next step: foreclosure. While this part of the process is more involved, it could mean you end up owning the property outright for just the amount of those unpaid taxes. Not a bad deal if the property is worth more than what was owed.
Of course, it’s not always about taking ownership. Many investors are happy enough with the returns from the interest alone, which can be much better than what you’d get from other traditional investments like CDs. Once the debt is paid off and the lien is redeemed, you’ll have some decisions to make. Do you take your earnings and reinvest in more tax liens, or do you explore other opportunities? Either way, the key is in knowing the ins and outs of the collection process.
In the end, being a tax lien investor is about patience and understanding the steps that come after you win the lien. It’s a mix of waiting, collecting interest, and—if it comes to it—navigating the foreclosure process. But with the right strategy, you’re well on your way to seeing those returns.
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.
