The Truth About Getting Rich with Tax Liens: Reality vs. Marketing Hype
Written By Tony Martinez
Main Points
If you have heard about making money through tax lien investing, that is for good reason. When done correctly, tax liens are a solid investing strategy that offers fixed returns with few downsides.
That said, bold claims online suggest that tax lien investing delivers double-digit returns overnight. But let's make sure to get something straight: tax liens are not a get-rich-quick scheme, and here’s why.
Starting your tax lien investing with small funds often yields modest returns due to time constraints and prorated interest rates. There are long waiting periods, and investors do not get paid until the lien is redeemed or the property is foreclosed upon, which can take months or even years.
This strategy is not a get-rich-quick scheme or about acquiring physical property. Instead, it is a strategy built on earning reliable, real estate-backed returns through patience, precision, and a clear understanding of how the system works.
In this article, we’ll walk you through exactly what tax lien investing involves, how and when you actually get paid, and why this approach, when done right, can be a powerful foundation for long-term financial growth. No hype, just the truth. Let’s get started.
What is Tax Lien Certificate Investing?
When a homeowner owns property, they’re responsible for paying annual property taxes which help fund essential public services like schools, police, and fire departments. If those taxes go unpaid, the government doesn’t seize the property; instead, the government sells a tax lien certificate to recover the lost revenue.
Investors purchase that tax lien certificate, paying the county the overdue taxes. In effect, the investor is providing the homeowner with a short-term loan, and in return, investors earn a fixed, secured interest rate backed by the property.
The homeowner still owns the property. They just repay the taxes and interest. Most of the time, they pay it back over the next few years.
A tax lien investment leads to one of two outcomes:
1. The property owner pays off the delinquent taxes, redeeming the lien, and the investor earns interest on the investment.
2. If the owner fails to pay, the lien holder may eventually have the legal right to foreclose and take ownership of the property. (This happens less than 1% of the time.)
This system creates a win-win-win scenario: the county gets the funds it needs without delay, the homeowner is allotted extra time to pay their taxes, and the investor can earn a solid return. Understanding how these outcomes unfold is crucial to assessing the potential of tax lien investing.
While this strategy can be effective, it's important to take a closer look at the common claim that you can quickly “get rich.”
Debunking The Marketing Hype: 3 False Claims
Now, let’s break down and debunk some of the misleading promises made by internet gurus and claims that are often far from the truth.
Claim: “Buy a house for $500 with a tax lien.”
Reality: You might buy a tax lien certificate for $500, but you’re extremely unlikely to acquire the house. You are simply purchasing the right to the debt owed, and more than 99% of the time, the homeowner redeems their liens which means you do not get the property.
Claim: “Earn 24% interest!”
Reality: Yes, some states offer interest rates up to 24%, but if the homeowner redeems quickly, you only earn interest for the period they were delinquent. For example, on a 12% lien, if they pay in three months, you only earn 3%.
And because counties often charge administrative fees when you acquire a lien, that small return can be entirely offset, or even turn into a loss.
Claim: “No risk, all reward.”
Reality: While tax liens are backed by real property and offer secured returns, risks still exist. Foreclosure can involve extra fees, legal processes, and the chance of acquiring a low-value property.
That’s why proper research, due diligence, and knowing how to avoid undesirable properties are essential, while the reward is real, so are the responsibilities.
Why Double-Digit Returns Aren’t Making Investors Rich
True wealth-building comes from strategy, not luck. And although tax liens do have fixed secure returns, they are not all the high returns most marketers are sharing.
It’s essential to note that property taxes are based on the property's assessed value. The higher the property value, the higher the property taxes, which means the higher the investment for the tax lien certificate.
Tax lien certificates are a fantastic investment vehicle for earning fixed, secured returns; however, it’s challenging and nearly impossible to build true financial freedom solely by investing in tax lien certificates alone.
Allow me to illustrate: Iowa Tax Lien Certificates offer the highest interest rate in America, with a maximum annual interest rate of 24% and a 2 year redemption period.
Here’s what a person would earn in 1 year based on how much was invested:
$200 investment at 24% interest = $48 / year
$10,000 investment at 24% interest = $2,400 / year
$100,000 investment at 24% interest = $24,000 / year
That’s a solid return by many standards. However, here’s the key consideration: once that investment is redeemed, your capital is returned, and the process starts over. You’ll need to research new liens, evaluate property risk, check for red flags, and reinvest all over again. Even after you reinvest, you’re playing a waiting game.
For everyday investors with limited time, the effort to repeat this cycle can outweigh the typical returns, especially if you're only earning a few hundred dollars at a time.
Strategies to Avoid Investment Pitfalls
Building real wealth through tax lien investing isn’t just about chasing high interest rates; it’s about making informed, strategic moves. To avoid low-yield outcomes and steer clear of risky or worthless properties, you need to understand how to conduct proper research, spot red flags, and gradually shift into advanced acquisition strategies that can lead to real estate ownership.
Wealth accumulation takes time, discipline, and diligence. The most successful investors don’t go it alone; they surround themselves with the right tools, proven systems, and expert guidance. With the right support and education, you can make smart decisions, minimize risk, and unlock the full potential of tax lien investing.
If you're serious about getting started the right way, we invite you to access USTLA’s FREE Comprehensive 3-Module Tax Lien Investment Online Crash Course. This self-paced program walks you through everything from foundational strategies to advanced techniques used by experienced investors to acquire properties and build lasting wealth.
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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.