Zero Risk Real Estate: Creating Wealth Through Tax Liens and Tax Deeds

What Is a Tax Deed?

A tax deed, on the other hand, means that the county has already taken actions beyond the tax lien stage. The taxing authority filed the tax lien some time ago, and has already legally foreclosed upon and taken tax possession of the property, and is now ready to transfer ownership of the property to you. This also means that you are buying the property for a substantial discount with an already built-in equity. But remember, there’s a reason why someone decided not to pay the taxes, and your job is to figure out why. Some of these properties may be easements, landlocked properties (meaning they have no access to common roads), alleyways, or other types of property that have little or no value.

The best tax deed investments are properties that are purchased for at least 30 to 50 percent below the fair market value of the property. This way, you receive the highest rate of return on the investment and help eliminate potential risk.

Like tax lien certificates, tax deeds are also offered through public auctions or over-the-counter. The rules and guidelines for bidding on tax deeds can usually be found on the county’s website or by contacting them by phone or in person. So that you get an idea of how a tax deed works, here’s a transaction I completed earlier this year.

I purchased a tax deed at a county auction for $15,000. This included all of the principal, interest, and penalties the county was owed on the property, plus slightly more since I had to outbid another ...