Which is the better investment, Tax Deeds or Tax Lien Certificates?
We have almost completely eliminated investing in Tax Liens in favor of the much more profitable Tax Deeds. Here is the difference. Tax Lien Certificates are bid on to pay the obligation of behalf of the defaulting homeowner. The bidding starts out at an attractive initial interest rate, say 15% or 18% and you are competitively bidding downward against others until the bid is won based on the lowest interest rate someone is willing to accept. This generally ends up around the 8% range for a predetermined period of time. You are issued a lien against the homeowners’ property, not a deed because you do not own the property at this point. The only time you would ever own the property is upon default if the obligation is not repaid on time by the homeowner. You would have to then foreclose to receive the deed. This in truth only happens rarely. With Tax Deeds the County has already foreclosed and owns the property. In this case you are actually buying real property from the County. You bid
