The Uncensored Truth About Tax Lien Certificates – How Much Money Can You REALLY Make With Them?

In our current economy there are a few simple truths – People can’t always pay their bills, and people are looking for secure ways to make extra income.  So it begs the question, Is there a way to generate additional, guaranteed income?  I believe the answer is YES.

Everyone needs money to fulfill immediate needs…

…state and local governments are no different as they are responsible for providing services, law enforcement, etc for their residents.  And a large portion of this revenue is generated through property taxes.  Budgets are created based on the constant income, and they fall short when people fail to pay.

So how does the government cover the shortage?  Some counties sell Tax Lien Certificates (TLC).  Various county governments will auction TLC to cover the deficit.  They offer a guaranteed rate of return and are secured with real property.

Although this is not a new concept, it’s not well-known or understood.  However, banks and savvy investors have been buying TLC for over 100 years, and they are often seen as one of the investment world’s best kept secretsRich Dad Poor Dad author, Robert Kiyosaki, discusses the benefits of TLC in his books.

How is this possible?  When people are behind in paying property taxes, they are hit with high interest rates and fines to “encourage” timely payments.  In addition to high interest rates and fines, they must repay within a set timeframe or the property will be foreclosed upon.

What does this mean to you?

  • You can purchase the government-backed, real-property-secured, guaranteed-interest-rate certificates at auction (in effect paying the property taxes for the owner).
  • The County gets the tax revenue, and you hold a tax lien on the property.
  • The interest rate is set and guaranteed by the government (and is the responsibility of the property owner), and they can range anywhere from 8-50% depending on the area.
  • Once the back-taxes are paid, you get your initial investment plus the interest!

What are the drawbacks?  8-50% guaranteed interest sounds too good to be true.  As with any financial decision, you need to know the risks.  While the likelihood of you losing money is extremely low, there are some things to consider.

  • Your money isn’t liquid.  Until the tax payer comes current on the property taxes with penalties and fees, you don’t have access to your money.  This can be anywhere from 6 months to 4 years, much like a CD.
  • You could own hard to sell property.  If the taxes are not repaid and the property forecloses, you as the tax lien holder could acquire the property through the foreclosure.

I have read stories of people quitting their day jobs after learning how to generate income buying Tax Lien Certificates.  Maybe they are too good to be true, or maybe they have a larger amount for their initial investments and have a greater capacity for risk.  Regardless, I believe if you are willing to take some time and do your homework you can make money (and if you really invest time and effort, A LOT OF MONEY!).

If this has you wanting to learn more, now is your chance.  With a few simple steps and some due diligence, you can be on your way to making money and securing your financial future.  According to Warren Buffett “The rich invest time.  The poor invest money.”

Take your time, and you can do this right!

So…want to get started?

I have had my real estate license for the past 7+ years, so I am well-versed in real property, liens, foreclosures, and real estate law.  Even with my background and knowledge of title reports and legal descriptions, I invest in TLC only after doing my homework.

After reading this, you will be well on your way to understanding the system and have a solid knowledge base to start researching possible investments.

To begin the process, you will need to answer these questions:

  1. What is my target market?
  2. When and where are the auctions held?
  3. Where can I get a list of the properties and their descriptions?  Are there any unsold certificates available from the previous sale?
  4. What are the rules of the sale?
  5. What is the interest rate and how is it calculated?

1. Identify Your Target Market

Some of the hardest hit real estate markets are in Arizona and Florida, and they happen to be two of the states (plus the District of Columbia) that allow the purchase of Tax Lien Certificates.

Maricopa County in Arizona (including Phoenix, Scottsdale, Mesa, and Tempe) has one of the highest delinquency rates of property taxes, and sells a high volume of Tax Lien Certificates at an interest rate starting at 16%.  As of March 9, 2012 they have over 30,000 properties on the list.  As a first-time investor of TLC, this is where I would start.

 2.  Auction Basics

Find out where and when the auction is being held for the County you’re interested in.  The Maricopa County Treasurers Office held their annual online auction on February 6, and a number of the certificates were left unsold.  You may be able to purchase the certificates directly from the Treasurers office.

3. Property List

Wherever you want to invest, you will need to get a list of the current properties from the County Treasurers Office.  Some are available online and others through the mail.   Many times there is a nominal fee to receive a copy of the list.

Once you get the list, you will need to narrow it down.  There will be residential, commercial, and raw land listings included.  So depending on your comfort level and understanding of real estate, this is a great place to start.  In the off-chance the property goes into foreclosure and you become the owner, it is best to know what you are getting and if it would be something you could liquidate or use.

Another way to select target properties is looking at the “Amount Owed” versus the “Assessed Value”.  Ideally you can identify properties with little owed and a high value.  An owner is more-likely to repay the taxes quickly, so you would get a return on your investment without a long wait.

If the property does end up going into foreclosure, a higher assessed value can mean more money for you down the road.  Make sure to view some comparable properties to help you determine that actual value if you were to sell it in the future.

You are responsible for doing the necessary due diligence and educating yourself on the properties.  The worst case scenario would be ending up with raw land in the middle of the desert that you can’t sell and are now responsible for taxes on, or acquiring a property that needs large amounts of additional money to get into sellable condition.

Research shows that 98% of tax lien certificate holders receive payments to the value of their investments within two years.

You will need to put in the time to research the properties and make determinations on the risk versus the reward.  The initial investment of your time could prove the most valuable in securing your future.

4. The Rules of the Game

Every auction has rules you need to know before going in.  In some markets, the auctions are based on the interest rate.  The auction will start at a set percentage and go down until they have a bidder that is willing to take the lowest interest rate.

By committing to your target area, you will always know the rules.  Until you are either comfortable with the process or have a large sum for your initial investment, you are much better off purchasing within a specific area.

You may be required to register as a bidder with the Treasurers office.  Once registered you are given a bidder number and password so you can login to the bid site and bid on certificates you are interested in.  The auction will “close” on a specific date or time and you can make entries up until that point.

Cash is king at an auction, and you must either bring cash or a cashier’s check to finalize the sale of the certificate.  Personal checks are not accepted.  Some require the money on the spot, and others give you up to 72 hours and will allow an auto-withdrawl from your account.  Know this before you go in so you are prepared.

5. Finding Out the Return on Investment

Every state and county sets their interest rate and determines how it is calculated.  To use my example of Maricopa County, the base rate is 16%.  Depending on the number of active bidders on a property, the interest rate can go down to zero.

You must know your tolerance for risk before going into any auction.  If your tolerance is high, you may be able to take a lower interest rate in hopes that you will end up owning the property in a foreclosure.  You could potentially own a home worth $70,000 for a $2,000 investment – that’s a huge return on your investment!

If you have a lower tolerance level, it would be wise to set your “floor” interest rate and stick to it.  Even if you end up at 8%, that is much better than investing in a CD, leaving your money in a savings account, or investing in a volatile stock market.

In Iowa, the interest rate is 2% per month, so if the taxes are delinquent for a year your return on investment is 24% – which is fantastic.  Every state and every county calculate interest differently and have a different base rate.  In going back to the first step of knowing your target area, you will have a solid understanding of your possible ROI.

Security in Uncertain Times 

The economy has taken a toll over the past few years, and very few have been fortunate enough to avoid financial fallout.  But there is hope and there are options for creating wealth if you are willing to look for opportunities and put in the time.

I know that Tax Lien Certificates are a way to do help achieve financial freedom.  There is little risk involved and the rewards can be great.  As with anything worthwhile, you have to be willing to invest time and energy.  But with the possible upsides, it is definitely worth considering.

You now have a solid understanding of what Tax Lien Certificates are, what they can mean to you, and how you can purchase them.  So what’s stopping you?  Where else can you find low-risk investments typically achieving 15-50% annual returns?  Put in the time, do the work, reap the rewards.  It all sounds simple and in honesty, it is.

A few recommendations -

If you read my article in detail, you’re not only HOT for learning more about how to cash in on one of the safest and most profitable REAL business models out there but you probably want start right now! And why not…thousands of people out there have created a passive stream of income with tax lien certificates (and others, REAL wealth!).

So…without further a due, two great reads you got to get your hands on:

1. Melford & Concetta Bibens’s  “Tax Liens Made Easy” ( Great course full of top notch WORKING strategies on how to make it big time with tax lien certificates. Melford and Concetta have truly done an outstanding job in teaching people with zero experience and little cash to make it big in this business. Worth every penny!

2. Larry Loftis’s book “Profit by Investing in Real Estate Tax Liens: Earn Safe, Secured, and Fixed Returns Every Time” is in my opinion one of the leading books on the subject. Fresh, unique, out-of-the-box strategies, all well explained in much detail and based on REAL life  experience.

Larry walks the talk so to speak! The guy manages a tax lien pool of over $12 Million and knows every trick and strategy out there. He has been cited as a tax lien expert in The Wall Street Journal, Entrepreneur magazine, Wealth magazine, Msn.Money, and more. You can grab a copy of his book at

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