If you invest in a property tax lien, you’ll have to wait for your return, perhaps for a long period of time. In the meantime, you may have to keep paying the property taxes.
Eventually, most tax liens will be redeemed, giving investors a substantial return.
If a lien isn’t paid off, after some period of time (perhaps two years) you can foreclose and take over the property. As a result, you can own real estate for pennies on the dollar. In many states, all other interests in the property, including mortgage obligations, are wiped out so the tax lien holder will own the property free and clear.
However, not every tax lien investment will be a winner. You might buy a lien on a property with environmental contamination. Thus, you should approach tax lien certificates as you’d approach any type of investment: by doing your homework thoroughly.
Your local newspaper likely will carry notices of tax lien auctions. Once you have that information, you shouldn’t just go and bid blindly. Inspect the property beforehand to see what’s there. In case you own it someday, you’ll want to be able to sell it at a sizable profit.