Here’s an excerpt from the 2016 book "Tax Lien Investing Secrets: How You Can Get 8%-36% Return on Your Money Without the Typical Risk of Real Estate Investing or the Uncertainty of the Stock Market." This section is from Chapter 3: Finding the Best Place to Invest
The Six Things You Need To Know
There are 6 things that you need to know about tax lien or tax deed investing before you get started.
1. The statutory interest rate – this is the rate that the county charges delinquent tax payers and the rate that investors get on their money when it is not bid down at the tax sale.
2. The bidding method – What is actually bid at the tax sale, whether the amount paid for the lien is bid up, or the interest rate is bid down, or something else entirely is bid, or there is no bidding at all and winners are randomly chosen.
3. The redemption period – The period of time that the property owner has to redeem the lien or redeemable deed before the lien holder can foreclose on the property.
4. The expiration period – The "life" of the tax lien, after which the lien will expire worthless if no action is taken by the investor.
5. How subsequent taxes are handled – Whether or not the lien holder gets to pay the subsequent taxes if the property owner doesn’t pay them, and what interest or penalties are paid on the subsequent tax payments.
6. Additional Penalties – Are there other penalties that the lien holder gets when the lien or redeemable deed redeems?
These six things make a huge difference in your profit and are the reason why tax lien investing is very different in different states. Let me give you examples from three different states that all have auctions where the interest rate is bid down, but because of the other 5 factors mentioned in this chapter, investing in each of these states is quite different.