Consultant’s Corner: Tax Lien Certificate Investing – Too Good to be True?


I have been told that there is an investment vehicle available through counties called a “Tax Lien Certificate,” which supposedly offers a high rate of interest and is ‘safe’ to own. I would very much appreciate any information on this subject as it appears to be either “too good to be true” or “one of the best kept secrets” in America.

State laws do vary regarding Tax Lien Certificates – interest rate, redemption period, etc. The County Tax Collector/Treasurer is the typical source of Tax Lien Certificate (or Deed) information. Investing in Tax Deeds (or Liens), like other forms of real estate investing, often involves significant financial transactions and risks. Since it is very rare that a property owner gives up a property with significant equity to a tax lien holder, tax lien investing should be looked at as a modest return, lower risk investment, and not a path to quick riches. Due to the state law variations and financial risks, an investor’s first step should be to learn as much as possible about this form of real estate investing in the area in question. Although you see a lot of advertising about tax liens, options, foreclosures, flipping and other forms of real estate activities, the fact is that real estate investing is a large, competitive industry with many risks.

Things to Consider

First, understand that tax sales are auctions and in most states extremely high interest rates will be bid down to extremely low rates. Investors do this because sometimes there are other penalties that they will get should the lien redeem. Also, once you own the lien, you can pay the subsequent taxes and get the maximum interest on that.

Also, there is no guarantee that you will get paid on your lien, but laws are on the purchaser’s side. If you don’t get paid, you can foreclose on the property. The only thing guaranteeing your investment is the property, which is why it is so important to become familiar with the property prior to investing. This helps you avoid becoming stuck with a piece of property that no one will want to buy.

The above being said, lien investing can be an excellent way to invest your money if you understand the steps you are taking.

You can see more on working with tax lien certificates at the links listed below.

Tax Lien Certificate | Investopedia

Investing in Property Tax Liens | Investopedia

Pros and Cons of Investing in Tax Lien Properties | SFGate

While you may be able to invest in tax liens yourself given proper knowledge, experience and a clear understanding of the risks, with real estate transactions it is advisable to have professional support from real estate professionals and lawyers to properly document the transactions and minimize your liability exposure.

Bill Wortman

Bill Wortman

Bill Wortman is the Chief Business Consultant for, with over 40 years of business experience. In addition to 12 years consulting small business owners, Bill’s professional career includes a big-eight CPA accounting firm, national consumer finance, big-three automotive manufacturing, Arby’s fast food, marketing, and other industries. He’s held multiple executive-level positions and fulfilled the role of CFO at large, publicly held (NYSE, NASDAQ, and AMEX) corporations. In addition, he’s been an owner of private ventures involving residential real estate development and a General Motors new car dealership.