Tax Lien Foreclosures Are a Great opportunity for Cheap Land!

Tax Lien Foreclosures Are a Great opportunity for Cheap Land!

Tax Lien Foreclosures are a little known method to acquire properties for as little as 5-10% of the true market value of a property.

As I explain on my website , in the US, every year hundreds of thousands of property owners do not pay their Real Estate property taxes on time. As a result in 18 states there are laws allowing the Counties to do so called “tax Lien Auctions” and auction off the Delinquent Tax obligations to investors in exchange for them receiving several rights.

Right #1: the right to collect a (usually high) Interest rate:
In many states these interest rates are 16% and higher and (in Illinois they are 18% per half a year for a total of 36% per annum). Usually the rates are between 12% and 36% with some exceptions where instead of a rate which is prorated if the owner “redeems (= pays off the taxes), the state allows for a Penalty, meaning the property owner has to pay a fixed percentage no matter if they redeem the property in 1 day or 11 months and 30 days.

Right 2: The Right to Foreclose on the property:
Once the investor pays the outstanding property taxes to the county, a lien is being placed against this property to make sure the Investor get’s paid back his investment plus interest when the property is sold.

However if the property is not sold or the owner does not redeem the Tax lien Prior to a Tax Lien Redemption period, the Lien Holder has the right to foreclose on this property.
Redemptions periods very from state to state but usually range between 3 and 5 years.
Depending on which state it is, the foreclosure can be fast (in some cases the State does the foreclosure for the investor) or take up to a few months. But in most states, the Tax lien supersedes most other liens including Bank Mortgages and Mechanics liens. The only exceptions are Federal and State IRS Liens and very few other, rare liens. As a result a Tax Lien Foreclosure usually leads to a free and clear title to the property. Please go to for more details.

Right 3: To buy the subsequent year’s Tax liens in advance without competition.
Most Tax Lien States have a provision in their statutes allowing Holders of Tax liens to purchase the next year’s delinquent property taxes as soon as they become delinquent, without competition and therefore months in advance of the next tax lien auction.

As a result Tax Liens are a very safe investment which in the worst case results in the investor making an EXCELLENT return on his/her investment and in the best case results in the investor making getting the actual real Property worth up to 20 times the amount the investor paid in property taxes.

Example (assuming the property owner does not redeem the tax lien and the Redemption period is 3 years):

Property value: $100,000
Annual Property Taxes (including some fees and Penalties): $1,500

In this example:

The Investor Pays to the county:
– In year 1: $1,500.00 in exchange for a TLC for that amount.
– In year 2: $1,500.00 in exchange for a TLC for that amount.
– In year 3: $1,500.00 in exchange for a TLC for that amount.

After year three is over, the investor forecloses on the property which costs him another $1,000.

Total investment made:

$5,500 and the value of the property is $100,000.00

The investor now hit the “jack-pot” and can decide what to do with his property. Sell it, move in, build on it (if it is a vacant land parcel) or just hold on to it for future appreciation. If you find this interesting, check out for even more resources.

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Facebook comments:

  • Edward
    Posted at 00:12h, 24 March

    Hi Jack,
    The big problem with tax liens is the competition.How to deal with big guys (Banks and big institutions) when they bid to 0% interest in State like ARIZONA or 1 % on ownership in State like NEBRASKA?
    Thanks Edward

  • Jack Bosch
    Posted at 14:39h, 29 March

    Hi edward,
    simple: you go for properties they are not after.
    they go for the houses and higher value properties because they have to spread a LOT of money and their logical thing to do is to buy as high $$ tax liens as possible. Therefore he competition for lower priced tax liens is lower. A friend of mine just bought a bunch of Tax liens in the Maricopa, AZ auction and got 16% on all of them because he focussed mainly on land properties.
    hope that helps

  • Mookie
    Posted at 16:53h, 04 February

    After the tax lien redemption period is over doesn’t the property go on tax deed sale auction where there is bid war or the the certificate holder has first preference?

  • Jack Bosch
    Posted at 14:58h, 16 June

    In some states it works like that for example Florida but most other tax lien sites are setup a little different.
    Check out for more information on Tax Liens or to get a state specific guide to the auction process.

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