Reddit Tax Lien vs Tax Deed: Which Strategy Actually Makes More Money?

The Fundamental Difference

Lien states like Arizona and Colorado auction the right to collect unpaid taxes plus interest. You become the lender. Deed states like California and Nevada auction the property itself. You become the owner immediately. Redeemable-deed states like Texas and Georgia are a hybrid: you buy the property, but the former owner keeps a window to buy it back from you by paying a flat penalty on top. All three are profitable but the mechanics are completely different, and mixing them up in your math will cost you.

My Experience in Texas (Redeemable Deed)

In Texas I buy the property itself at auction, not a certificate. The county handles the redemption payment if the owner buys it back. I never talk to the homeowner. If they redeem, I collect a flat 25% premium on what I paid (50% in year two, homestead only) - not accruing interest. My average hold time is 14 months before a homestead property redeems; non-homestead properties resolve inside 180 days.

My Experience in True Deed States

In Florida I bought a property for $8,400 at a tax deed auction. The appraised value was $85,000. I sold it for $72,000 after holding it for six months. The upside was massive but the process was more involved. I had to evict the tenant and make basic repairs.

Marcus Field: Which Is Better

None of the three is universally better. They serve different goals. If you want passive, accruing fixed-income returns, go with true lien states. If you want property acquisition at distressed prices with no redemption to wait out, go with deed states. If you want a fast, flat, statutorily guaranteed payout with property upside as the fallback, Texas-style redeemable deeds are hard to beat. I run all three. Take the Lien vs Deed Quiz to see which fits your situation.

The choice depends on your goals as an investor. All three strategies start with delinquent property taxes, but they diverge sharply in how the investor gets paid. Understanding the difference is essential before you spend a dollar.

True tax lien certificates are sold in states like Arizona, Colorado, and New Jersey. You pay the delinquent taxes and receive a certificate entitling you to collect that amount plus interest from the property owner, bid down from a statutory ceiling. You are essentially acting as a lender to the county.

Tax deed sales happen in states like California and Nevada. At a deed sale, you bid on the property itself, not the debt. If you win, you receive the deed to the property immediately, no redemption period.

Redeemable-deed states like Texas split the difference: you get the deed at auction, like a deed state, but the former owner can still redeem for a statutory period by paying you a flat penalty - 25%/50% in Texas, 20% plus 10%/yr in Georgia. It's not interest and it's not a pure deed sale. It's its own category, and treating it like either of the other two will produce the wrong math.

Most investors start with true lien certificates and graduate to deed or redeemable-deed sales as they gain experience, since the downside on a lien is more contained. I recommend the same path.

Frequently Asked Questions

Common questions about liens vs deeds.

Frequently Asked Questions

Common questions about mistakes.