What are Tax lien Certificates?

A Tax Certificate is legal document, representing unpaid delinquent real property taxes, non-advalorem assessments, including special assessments, interest, and related costs and charges, issued in accordance with state statutes, against a specific parcel of real property and becoming a first lien thereon, superior to all other liens, except liens, restrictions and covenants surviving or protected as provided by State Statutes. Tax Certificates bear interest at the maximum rate allowed by law unless the bidder specifies a lower rate.

Many investors say that tax lien certificates are probably one of the safest, most lucrative and undiscovered investing methods in the world.

Here is why; Tax certificates routinely provide an investment return to investors of 15 to 36 percent per year. In the second year, many states tack on a substantial penalty so the investment returns in the second year can exceed 24 percent. And in some cases, tax lien investors can walk away with an entire property for only the taxes owed.

Because state governments issue tax liens and monitor the sales, the investment risk is low. Also, the certificates are backed by the property they are issued against. If the defaulter does not pay the investor all money and interest due, they lose their entire property for only the taxes and penalties owed. People get very motivated to pay up if the alternative is to lose their home.

They are an undiscovered investing method. This is because few people have even heard of tax lien certificates and very few books have been written on the subject of tax lien investing.