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Tax Lien vs. Tax Deed Investing: What's the Difference?

Learn the difference between investing in tax liens and tax deeds.


[Updated: Mar 04, 2021 ] Jan 08, 2020
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Amount invested (winning bid amount) $2,000.00
11 months of interest at 8% per annum $146.67
Penalty income $75.00
Total Amount at Redemption $2,221.67
Total Profit $221.67
ROI 11%
Annualized Yield 10.56%
Delinquent taxes owed with interest $4,900.00
Current property value $50,000.00
Winning bid amount $38,500.00
Total collected by jurisdiction after sale $4,900
Total collected by lender/mortgagee after sale $33,600
Title certification $2,000
Total invested $40,500
Total profit $8,000
Cash-on-cash ROI 20%
tax liens and deeds state map

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Image source: TaxLiens.com
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Tax Lien Investing Tax Deed Investing
• Does not transfer ownership at public auction; the lien acts as a loan accruing interest and penalties until redeemed.
• Inexpensive, with tax lien certificates costing as little as a few hundred dollars to a few thousand.
• Passive investment requiring very little work after initial due diligence and auction participation.
• Redemption period or expiration date of the lien varies by jurisdiction.
• Transfer of ownership at public auction, where the property is deeded to the winning bidder.
• More expensive investment than a tax lien, costing anywhere from a few thousand to tens of thousands of dollars.
• Active investment requiring investor participation after the property is sold at auction.
• Sales can be redeemable or not depending on the state.
Get our 43-Page Guide to Real Estate Investing Today!

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.