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Module 2 of 14

Tax Liens vs. Tax Deeds — Know Your Playing Field

Clarify investing models and your preferred strategy for maximum success

Module Progress 100% Complete
Module 2 Training Video

Tax Liens vs. Tax Deeds — Know Your Playing Field

Master the different investing models and choose your path

Duration: 32 minutes

Module 2: Tax Liens vs. Tax Deeds
Understand your investing options and strategy
32:15

Clarify Investing Models and Your Preferred Strategy

There are two primary ways to invest in tax-delinquent properties, and understanding the difference is crucial to your success.

🏦 Tax Lien Investing

You purchase the right to collect the debt, earning interest when the owner pays or potentially acquiring the property.

  • • Lower entry cost
  • • Guaranteed interest rates
  • • Longer timeline to property
  • • Higher redemption rates

🏠 Tax Deed Investing

You purchase the actual property at auction, gaining immediate ownership rights.

  • • Direct property ownership
  • • Faster path to rental income
  • • Higher capital requirements
  • • More immediate opportunities

Tax Lien States vs. Tax Deed States

Tax Lien States (16 States + DC)

How It Works:

  • • County sells the tax debt, not the property
  • • You earn interest when owner redeems
  • • Can foreclose if not redeemed
  • • Interest rates: 8% to 36% annually

Key States:

• Florida
• Arizona
• Illinois
• Maryland
• New Jersey
• West Virginia

Tax Deed States (Most Others)

How It Works:

  • • County sells the actual property
  • • You get immediate ownership rights
  • • May have redemption period
  • • Can renovate and flip or rent

Popular States:

• Georgia
• Texas
• Alabama
• Michigan
• Ohio
• Pennsylvania

Redemption Periods and Investor Rights

⚠️ Critical Concept: Redemption Rights

Even after you purchase a tax lien or deed, the original owner typically has a "redemption period" where they can pay off the debt and reclaim their property. This is where our negotiation strategy comes in.

Short Redemption (6-12 months)

States: Georgia, Texas, Alabama

Advantage: Faster resolution

Strategy: Immediate outreach to owners

Higher urgency = Better deals

Medium Redemption (1-3 years)

States: Florida, Arizona, Illinois

Advantage: Balanced timeline

Strategy: Build relationships over time

Multiple negotiation opportunities

Long Redemption (3+ years)

States: New Jersey, Maryland

Advantage: Higher interest earnings

Strategy: Patient capital approach

Compound interest benefits

Understanding Your Investor Rights

Tax Lien Rights:

Interest Collection

Guaranteed interest rate set by state law when owner redeems

Foreclosure Rights

Can foreclose to obtain property if not redeemed in time

Priority Position

Tax liens are typically senior to all other liens

Tax Deed Rights:

Immediate Ownership

Can take possession and control of the property right away

Rental Income Rights

Can rent the property during redemption period in many states

Improvement Rights

Can make improvements (with state-specific limitations)

How to Choose Your Best Entry Path

📊 Decision Framework:

💰 Your Capital

$5K-$25K: Start with tax liens

$25K-$100K: Mix of liens and small deeds

$100K+: Focus on tax deeds

⏰ Your Timeline

Part-time: Tax liens (passive)

Weekend warrior: Tax deeds

Full-time: Both strategies

🎯 Your Goals

Passive income: Tax liens

Quick flips: Tax deeds

Rental portfolio: Tax deeds

🚀 Recommended Starting Path:

Most successful investors start with tax deed states because:

  • • Immediate control and ownership
  • • Faster path to cash flow
  • • More negotiation opportunities
  • • Clearer exit strategies

Your Next Steps

📍 Step 1: Research Your State

  • • Determine if you're in a lien or deed state
  • • Find your county's redemption period
  • • Locate the tax collector's office
  • • Download sample auction lists

🎯 Step 2: Choose Your Strategy

  • • Assess your capital and timeline
  • • Set your risk tolerance
  • • Define your investment goals
  • • Select your primary approach