So there are two possible outcomes of investing in a tax lien. First, and most likely, is the outcome that you will earn interest at a stated rate that can be as high as 18 percent. The other possible outcome is that the lien is never paid off (redeemed) and you get the property. These two outcomes are the basis for the two different tax lien investing strategies.
While it may seem to be the luck of the draw whether a tax lien is redeemed or not, in fact there are several factors that can give a strong indication of which outcome is likely to occur. Because of this, anyone investing in tax liens should first decide how tax lien investing fits into his investment strategy. Do you want the interest, or is your goal the underlying property?
You really must decide what you hope to get out of your tax lien investment up front because this decision will affect everything else you do pertaining to tax lien investing. Why? Primarily because the type of property for which you are willing to buy the lien is going to differ based on the interest rate investment strategy versus the property acquisition investment strategy. The type of property owner will also be a factor, since some property owners are more likely to pay their liens than others.