No, You Won't Get Monthly Checks: Understanding Real Tax Lien Payment Schedules
Written By Tony Martinez
Main Points
Contrary to what you may have heard online from ‘gurus,’ tax lien investing does not generate monthly income like rental properties.
One of the most persistent myths in this industry is the notion that investors receive regular “government checks in the mail” as a form of passive income. This misconception is widespread, and unfortunately, it's led many newcomers to develop false expectations.
In no way is tax lien investing a passive investment. In reality, investors are paid in a single lump sum, and only when the property owner redeems the lien.
This structure often catches new investors off guard, especially those expecting steady cash flow. So, if you're wondering when and how you actually get paid as a tax lien investor, keep reading; we're breaking it all down for you.
What Happens After You Buy a Tax Lien Certificate?
Let’s say you bought yourself a tax lien certificate; congratulations! You’ve taken a big step in your journey to become a real estate investor. So, what happens now? Well, now you wait.
The moment you purchase that certificate, you’ve essentially stepped into the role of the county’s lender. The property owner now has a legally defined redemption period to pay off their delinquent taxes, plus interest. And you, the investor, get paid only when they redeem the lien.
Your initial investment is tied up for now, although it is earning interest.
Once the purchase is complete, there’s no hands-on work required; your money is now doing the heavy lifting. The investment quietly earns interest while the redemption clock ticks.
Getting Those ‘Double-Digit’ Returns
Let’s take a closer look at one of the most commonly repeated claims in tax lien investing: those eye-catching, double-digit returns. While earning 12%, 18%, or even 24% is possible, it’s not as automatic or effortless as some “gurus” would have you believe. There are important factors, such as timing and property type, that influence your actual return.
Here is an example:
Let’s say you invest in a tax lien certificate with an annual interest rate of 18%.
Your initial investment is $2000.
If the homeowner redeems after 12 months:
- Interest earned: $2,000 × 18% = $360
- Total returned to you: $2,360 (your $2,000 investment + $360 interest)
However, if the homeowner redeems after 3 months:
- Prorated interest (3/12 of 18% = 4.5%): $2,000 × 4.5% = $90
- Total returned to you: $2,090 (your $2,000 investment + $90 interest)
This example illustrates how annualized tax lien interest is prorated when the lien is redeemed before the end of a full year.
Although it is possible to earn double-digit returns, it does not always work out in the investor's favor. If a property owner redeems the lien quickly, your actual return may be significantly reduced.
Where the Real Profits Come From
If you’re looking at those numbers and thinking, that doesn’t sound like a life-changing return, you’re right; tax lien certificates alone don’t make people rich. They’re an excellent way to earn secure, consistent income, but the real wealth often comes from what happens next: acquiring physical property through tax deeds.
Through our USTLA "Tax Sale Quick Flip" strategy, investors can purchase OTC (Over-the-Counter) tax deed properties directly from counties for just the amount of back taxes and penalties owed, often just pennies on the dollar.
These properties are typically owned free and clear of mortgages, giving investors the opportunity to sell them “as-is” for a significant profit, without spending a dime on renovations.
So, the real profit lies in the potential to resell physical property acquired through tax deeds; something tax lien certificates alone simply don’t provide.
While tax lien certificates do offer returns, they’re not always substantial; one reason is because you’re relying on the property owner’s repayment schedule to collect your profit.
Why Your Payout Depends on When the Homeowner Redeems
If you’re a tax lien investor, the homeowner is in control of when you get paid.
Your investment is helping the homeowner by giving them more time to catch up on their tax debt and keep their property. Once they pay the county, you will receive your money, which includes your original investment plus interest.
The homeowner can redeem the lien at any point during the redemption period, whether it’s one day, one year, or even later, depending on the state's laws. This timing is unpredictable, and it’s something every investor needs to consider carefully.
In fact, some investors lose money when the administrative fee (often around $25) ends up being more than the interest earned, especially if the lien is redeemed quickly. That’s why understanding the fine print and calculating potential outcomes is critical before making any investment.
The Truth About ‘Passive’ Income in Tax Lien Certificates
While tax lien investing is often marketed as passive, it’s not truly hands-off in the way most people imagine. Yes, you don’t have to manage tenants or fix up properties, but you also don’t have access to your capital until the lien is redeemed. Your return is paid back in a single lump sum, not through ongoing payments. That means your money is tied up sometimes for months or even years while you wait for the property owner to repay.
Despite the “set it and forget it” misconception, tax lien investing doesn’t offer liquidity. Unlike other investments that provide monthly income or flexible access to funds, tax liens require patience.
For many investors, the security of a fixed interest rate backed by real estate is worth the wait; however, it’s crucial to understand the timeline before getting started. And for those who prefer faster, more tangible results, tax deeds offer a different path — one where you can acquire property outright rather than waiting on redemption.
Your Next Step: Getting Started With a Realistic Plan
If you are looking for more information or want to grow your portfolio from the comfort of your own home, check out our helpful resources.
And if you’re ready to take your investing to the next level, either earning interest from liens, or start acquiring real properties through tax deeds, we have the tools and guidance to help you get there.
At the U.S. Tax Lien Association (USTLA), we focus on teaching strategies that are realistic, repeatable, and proven through decades of experience. You’ll learn how to identify the best opportunities, understand timelines, manage capital requirements, and maximize returns.
Our FREE 3-Module Online Tax Lien Investment Crash Course is the ideal first step to gain the tools, knowledge, and confidence you need to move forward wisely.
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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.