Tax Lien Investing ROI Calculator
Tax liens are county-issued claims on property when owners fail to pay property taxes. Investors buy the lien at auction and collect 8-36% statutory interest until the owner redeems. If the owner never pays, the investor can foreclose and take the property.
How Tax Lien Auctions Work
When property owners fail to pay property taxes, the county issues a tax lien against the property. Counties auction these liens to investors. The auction may bid down the interest rate (Florida, Arizona) or up the premium (Indiana). Winning bidder pays the lien and receives a certificate. The certificate accrues statutory interest until redeemed.
State Rates Vary Widely
Tax lien interest rates range from 8% (some states) to 36% (Illinois). Florida is 18% maximum but bid-down auctions reduce this in practice. Arizona is 16%. Texas is 25% in first 6 months, 50% if redeemed in 1-6 months on tax deed sales. Research state-specific rules — the rate, redemption period, and foreclosure process differ significantly.
Foreclosure Risks And Rewards
If the owner doesn't redeem within the redemption period (usually 1-3 years), the investor can foreclose and take the property. Property typically worth 5-40x the lien — huge upside. But: foreclosure requires legal action, owners often fight, environmental contamination risks, and properties may need significant repairs. Most lien investors prefer redemption to foreclosure.
Source: National Tax Lien Association industry data, state-specific tax lien statutes, NTLA member best practices. Last updated: May 2026.