3 Mistakes First-Time Tax Lien Investors Make (and How to Avoid Them)
Written By Tony Martinez
Main Points
Tax lien certificate investing can be a get way to get started in the real estate industry. Many first-time investors jump in with excitement only to run into frustration, low returns, or costly lessons. The truth is, success comes from preparation, realistic expectations, and persistence.
It’s also important to understand the difference between tax liens and tax deeds. Tax liens give you the right to earn interest when delinquent taxes are repaid, while tax deeds allow you to acquire the actual property itself, often at a steep discount. Both strategies have their place, but knowing how they differ will help you set the right expectations from the start.
In this article, we’ll break down the those common mistakes first-time tax lien investors make and, more importantly, how you can avoid them. By understanding these pitfalls upfront, you’ll be better equipped to approach auctions with confidence, protect your capital, and set yourself up for long-term success in tax lien investing.
1. Skipping the Proper Research
One of the most common mistakes is diving into a lien without doing enough due diligence. A tax lien certificate isn’t just a piece of paper, it’s tied to a real property, with real obligations and risks.
Too many beginners focus only on the advertised interest rate and ignore what’s behind the lien. They don’t look at:
Whether the property is occupied or abandoned
If there are other liens (HOA dues, IRS liens, code violations, mortgages)
Environmental concerns that could cost thousands to clean up
The true market value of the property
The result? Investors end up with liens on worthless land, rundown properties, or assets with hidden debts that wipe out profits.
The fix: Always research the parcel before bidding. Learn how to pull public records, check property conditions, and understand the laws in the county you’re buying in.
Research is essential, and can be considered the most important part of the process. It is good to know that not all liens are good liens, and it is your responsibility to understand that and act accordingly.
At USTLA, we emphasize research as the foundation of every successful deal.
Our coaches walk students through proven methods for evaluating properties, uncovering red flags, and calculating realistic returns. From pulling public records to analyzing auction lists, we teach you how to approach each opportunity with confidence and avoid the costly mistakes that trip up most beginners.
2. Misconceptions About How Much They’ll Make (and When)
Another big mistake is expecting instant profits or property ownership from tax lien certificates. Many first-time investors hear stories about “buying a house for the price of back taxes” and assume it’s the norm.
To be clear, with tax lien certificates, you are not acquiring the physical property; rather a certificate to the right to collect the taxes.
And in reality, most tax liens are redeemed by the property owner. That means you’ll earn interest but you won’t walk away with a property. And if redemption happens quickly, your total return might be smaller than you expected.
On the flip side, if redemption takes years, your money is tied up much longer than you planned.
Tax lien certificate investing is not a form of passive income.
The fix: Set realistic expectations. Think of yourself as a short-term lender, not a bargain homebuyer. Your best returns will come from steady interest payments across multiple liens, not one “jackpot” property.
This takes time and patience, and it is honestly quite hard to build wealth with tax lien investing alone.
The exciting news is that if your goal is to obtain physical property, you can do so with tax deeds. With tax deed investing, you gain ownership of real estate outright, often at a fraction of its market value.
Here at USTLA, we teach our proven “Get the Property Every Time” strategies to help you acquire property outright for only the back taxes owed. It’s one of the fastest, most reliable ways to turn tax sales into real wealth.
3. Lacking Persistence
Finally, many new investors give up too soon. They attend one auction, lose a few bids, or only buy one lien, expecting overnight success. When it doesn’t pan out the way they hoped, they quit.
The truth is, tax lien investing takes time, consistency, and patience. You’ll likely attend many auctions before landing a solid deal.
Even after you win liens, it may take months or years before you see the full return.
The fix: Approach tax lien investing as a long-term strategy. And try pairing it with other investments. Build persistence into your mindset. Each auction you attend teaches you something. Each lien you research improves your process.
Come into the auctions with plenty of options and be okay with knowing that you may not get your first choice.
Success isn’t about one certificate; it’s about sticking with it, building a system that works over time, and then turning that system into acquiring physical properties through tax deed strategies.
Also, pairing tax lien investing with tax deed investing can be a valuable strategy. While tax liens don’t typically generate large profits, tax deeds offer much greater potential, and using both together, or eventually transitioning to tax deeds alone, can work to your advantage.
Building Long-Term Investing Skills and Getting Physical Property
First-time investors often stumble by skipping research, believing myths about quick profits, giving up too soon, or just don't know what strategy is right for them.
In reality, tax lien investing is often just the beginning; a stepping stone that opens the door to real wealth-building opportunities with tax deed properties. That’s where our proprietary "Get the Property Every Time" strategies come in.
At USTLA, we’ve spent decades helping investors avoid these pitfalls and succeed with proven systems for acquiring physical properties at massive discounts.
If you’re ready to go beyond interest income and actually secure real estate free and clear with no mortgage, explore our Free 3-Module Crash Course today where you can start your investing journey from the comfort of your own home.
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Featured Lessons
Vital Information Beginner’s MUST KNOW FIRST so you can Get Started Right
Lesson #1
What is Tax Lien Investing & How Can it Help You Achieve Financial Freedom
Lesson #2
How to Acquire Properties for the Back Taxes & Penalties Only
Lesson #3
How Much Investment Capital is Needed to Get Started?
As with all investments, there is always an element of risk. Even if the interest rates are written into state government law, mandated by state government law, and are regulated by state government law, there is a chance of you losing part or all of your investment. You must always try to get the best education and practice safe investing, no matter which investment vehicle you choose.