There are several terms used in tax lien investing. In order to make good choices when investing in them, an investor must understand the various terms used. The following is an explanation of the differences in these terms:

Tax Lien Certificates – When property owners fail to pay property taxes, the county often auctions off certificates. This certificate gives the investor the right to receive the amount paid for the certificate plus interest. The interest rates are often higher than what can be earned in the stock market or in other investments. This type of investment is less risky than the stock market. The certificate puts the investor ahead of the government and mortgage lender in line to receive payment.

Tax Lien Deeds – If the property owner does not pay their property taxes, the investor can apply to the Tax Collector for a tax deed in order to own the property. Some counties do not fool around with a tax certificate. The county goes straight to selling the property through a tax deed sale. Deeds are a more risky and more expensive form of investing than purchasing certificates.

Redeemable Tax Deeds – When lien deeds are sold, they often contain a clause. The clause states that the delinquent property owner can come back and redeem the property. This makes a deed with a redeemable clause a much riskier investment.

If someone wants to invest in tax liens, they need to make sure they understand the terminology. Understanding what they are investing in will save frustration. Once the investor understands what the differences are, they can move forward to decide what to pursue investing.