What Is Tax Lien Investing and Is It a Good Way To Make Money?

You want to diversify by adding some alternative investments to your portfolio. As you research options to help you build wealth, your interest in real estate investing grows. But you also have many opportunities to consider.

Does buying a single-family rental make sense? Should commercial real estate be on your radar?

Passive investing in Real Estate Investment Trusts (REIT’s) might be better than buying physical property. But learning about tax lien investing has you wondering if they are a good way to make money?

What is a Property Tax Lien?

When you purchase a home or vacant lot, you’ll be required to pay property taxes. Property taxes fund a municipality’s public safety and services, schools, roads, parks, libraries, and more.

If an owner fails to pay taxes, the city or town government can make a legal claim or “lien” against the property for the amount owed. For the municipality to recover the money the property owner hasn’t paid, they sell tax lien certificates to investors.

The delinquent home or landowners then have a period of time (usually six months to three years) to pay the investor the tax, penalties, and interest owed. If they fail to pay off the delinquent amount, the investor…