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So, here's what went down. Last month, I was looking over loan applications for investment properties at AmeriSave when a borrower said they had just bought three homes at tax deed auctions in Tennessee. Three houses with a total investment of about $85,000 and an estimated market value of more than $200,000. Sounds amazing, doesn't it? And to be honest, tax deed investing can really change someone's financial situation if the numbers work out.
But here's the truth. The same borrower also had to pay $23,000 for title work and legal fees before they could even think about making repairs. They didn't find out until after closing that one property had a $40,000 IRS lien. Another needed a new roof and work on the foundation. Six months later, when we finished their refinance paperwork, their actual profit margin didn't look anything like the excitement on auction day.
I'm not trying to scare you away from buying tax deed properties. They are a real way to get rich through real estate, especially if the prices of homes in your area seem too high to be able to afford. But my work as a project manager and my studies for my Master’s of Social Work (MSW) have taught me that knowing the whole picture before jumping in can help people avoid making terrible financial mistakes.
Tax deed investing is a good idea if you know what you're doing. Before you sign up for your first auction, let me explain everything you need to know.
A tax deed is the legal document that gives ownership of property to either the local government or the winning bidder at an auction after the property has been foreclosed on for not paying property taxes. When someone doesn't pay their property taxes for a long time (usually 1 to 3 years, depending on the county), the government has to find a way to get that money back. They take the property back and hold a public auction. The person who bids the most gets the deed.
A lot of people miss the most important part, which is that this isn't just a casual deal. You are taking on the entire legal history of a property, which may include liens, encumbrances, easements, or title defects that weren't fixed during the foreclosure process.
Every state does this process a little differently, but I'll give you a general idea of how it works based on my work at AmeriSave, where I have seen hundreds of these transactions.
Beginners probably don't realize that the redemption period is the biggest risk in tax deed investing. Let me tell you why this is so important.
You don't really own the property completely and clearly yet if you win a tax deed auction in a state with redemption rights. The previous owner of the property still has the legal right to get it back by paying off their tax debt, plus interest, penalties, and sometimes your auction costs. During this time of redemption, you're basically stuck.
A few states have tax deed sales with no redemption period. This means that ownership changes hands right away and the old owner has no rights to reclaim it:
Source: National Association of Counties, "Property Tax Collection and Enforcement Procedures by State," updated September 2024 (accessed October 2025 at https://www.naco.org/resources/property-tax-procedures)
Most states have some kind of protection for former owners who want to get their property back:
Here's what this means in real life: If you buy a house in Tennessee with a two-year redemption period, you have an asset that you can't fully use, can't easily sell, and could lose completely if the previous owner gets their finances in order. We learned about housing instability in my MSW program, and I've seen families make amazing financial recoveries when they have time. That's great for them, but it could be very bad for your investment thesis.
Are you putting together a tax deed portfolio? We help investors at AmeriSave who need flexible financing as they grow their businesses. Once you own your properties outright, look into our cash-out refinance options to get equity and reinvest it. Please call us at (833) 326-6018 to talk about your plan.
About 60% of the people who call me about "tax property investing" get confused because they use the terms, tax deeds, and tax liens the same way. But they are two very different types of investments.
Tax Lien is the same as a debt certificate.
A tax lien is like buying someone's mortgage note in a way. You are a creditor, not an owner. A tax deed gives you ownership, not just a loan.
Last year, I helped a couple from Louisville go to their first "tax property" seminar. They thought they could buy $500 certificates that would turn into $100,000 houses on their own. Not really. Tax lien investing means you might have to foreclose on the property yourself, which means paying for lawyers, court costs, title work, and possibly 1–2 years of legal proceedings. It's a whole different way of doing business than going to a tax deed auction and being ready to buy property outright.
When we look at financing for investment properties at AmeriSave, we need to know exactly what kind of deal took place. Tax deed means that the property may have title problems that we need to fix before we can lend. Tax lien means we can't lend you money against it until you finish the foreclosure and get clear title.
The National Tax Lien Association says that about 2,000 counties in the US hold tax lien certificate sales and about 1,200 counties hold tax deed auctions. Some states offer both, but it depends on the county or the specific situation of the delinquency.
The National Tax Lien Association published the "2024 Industry Report and Survey" in January 2025. You can read it online at https://www.ntla.org/2024-report.
Let me show you what your real investment looks like, because the winning bid is just the beginning.
This can't be changed. You can't skip title work on a property with a tax deed. There are two main choices:
The truth is that a lot of title insurance companies won't insure tax deed properties until a quiet title action is finished. That means that if you want to sell the property to a buyer who needs a loan (which is most buyers), you will probably have to go through the quiet title process no matter how much it costs.
Winning the auction doesn't mean you don't have to pay your taxes. In some counties, you only have to pay the back taxes that caused the foreclosure. You are now responsible for paying your current year's taxes, any special assessments, and any future tax bills.
Let's say you win a house in August 2025. You could owe:
Depending on the state, property taxes on a $100,000 home usually range from $1,000 to $3,000 per year. You could pay $2,800 a year in Texas. It might cost $1,100 in Louisiana. These costs stay the same whether you live in the property, fix it up, or leave it empty during a redemption period.
Not all liens go away when a tax foreclosure happens. Most of the time, federal tax liens from the IRS stay in place even after a county tax foreclosure. Some HOA liens in some states do too. Depending on state law, utility liens can sometimes stay in place.
Last year, I looked at a case where an investor bought a house at auction for $45,000, thinking they were getting a great deal on a house worth $120,000. The property had a $38,000 IRS lien on it that stayed in place even after the tax foreclosure. The investor had to talk to the IRS for months before they could sell, and in the end, they paid $32,000 to settle the lien. They lost all of their profit.
There are no guarantees about the condition of tax deed properties when they are sold. In many cases, you're buying without seeing it first, or just driving by quickly. Properties that are foreclosed on for taxes often sit empty for months or even years.
When you need $40,000 in repairs before the property can be lived in or sold, a "great deal" at $50,000 stops looking so great. We can't help you pay for renovations at AmeriSave until you have clear title. This means you'll have to pay for them yourself or get a hard money loan with an interest rate of 10% to 14%.
During a redemption period, it will be hard to find standard homeowners insurance on a vacant property with a clouded title. You will need either vacant property insurance or builder's risk insurance, which usually costs two to four times as much as regular homeowners insurance. For coverage that usually costs $1,200 to $1,800, we're talking about $2,500 to $6,000 a year.
You pay the following every month that you own that property without making money:
Let's do some quick math on a common situation:
In Tennessee, if you have to wait two years to redeem your property, you'll have to pay $18,000 just to hold it before you can start fixing it up or selling it.
Example: Real Numbers on an Investment in a Tax Deed
Let me show you how the math really works by using real numbers from a typical tax deed case.
That 29.4% return sounds solid, right? And it is, if everything goes smoothly. But notice a few things:
I'm not trying to discourage you. I'm showing you the complete picture because realistic expectations prevent financial disasters. The investors who succeed in tax deed properties are the ones who run these numbers cold and hard before they ever raise their hand at auction.
Okay, you've made it this far, so you're serious about this. Here's how to actually do it right.
Every county publishes its tax sale calendar online. Google "[County Name] tax deed sale" and you'll find the treasurer's or tax collector's website. Sign up for email notifications so you know when new properties get added to upcoming auctions.
Each county has its own quirks. Some allow you to inspect properties with advance notice. Others absolutely forbid it. Some require cashier's checks within 24 hours. Others allow wire transfers within 72 hours. Know the rules before you bid.
Market Comparables: Research recent sales of similar properties in the same neighborhood. Zillow, Realtor.com, and county property records show you what properties actually sell for, not just what they're listed for. If similar 3-bedroom homes in good condition sell for $150,000, your tax deed property in rough shape might realistically sell for $110,000-$130,000 after repairs.
Some of this information requires paid reports from title companies. A preliminary title report typically costs $150-$350 and is worth every penny before you commit $50,000+ at auction.
This is where people get themselves in trouble. Auction fever is real. You see other bidders, you feel competitive, and suddenly you're bidding $85,000 on something you promised yourself you'd stop at $65,000.
Here's the formula I recommend:
Maximum Bid = (Market Value × 0.7) - Renovation Costs - Title/Legal Costs - Holding Costs
Let's use that Florida example from earlier:
The 0.7 factor (30% discount) accounts for risk, uncertainty, selling costs, and profit margin. If you can't acquire the property at that number, walk away. There will be another auction next month.
Write your maximum bid on a notecard before the auction starts. Look at it every time someone else bids. Discipline beats optimism in this business.
Most counties require pre-registration anywhere from 24 hours to 2 weeks before the auction. You'll typically need to provide:
In-person auctions typically happen at the county courthouse on scheduled dates. Online auctions run through platforms like Bid4Assets, Grant Street Group, or RealAuction. Online bidding has become increasingly common since 2020.
This part is critical. If you win a bid and fail to pay within the county's specified timeframe (usually 24-72 hours), you forfeit your deposit and the property gets re-auctioned. No exceptions.
Have your funds ready before auction day. Wire transfers from your bank can take time to set up if you've never done one before. Cashier's checks need to be obtained during banking hours. Don't let a weekend or holiday hold up your payment and cost you the property.
I mentioned this earlier, but it's worth repeating. Know whether you're planning to:
At AmeriSave, we see investors most commonly pursue the renovate-and-sell strategy because it offers the best balance of profit potential and timeline. Rental properties work great for building long-term wealth but don't help if you need to free up capital for your next auction purchase.
Let me spend a minute on tax liens since they're related but different enough to warrant explanation. Some of you might actually prefer tax lien investing once you understand how it works.
Instead of the county selling the property, they sell a certificate representing the debt owed. You pay the delinquent taxes on behalf of the property owner. Now that owner owes you instead of the government.
Here's what happens:
Lower Initial Investment: Tax lien certificates on residential properties typically cost $500-$10,000, far less than tax deed purchases.
High Interest Returns: States set interest rates from 8% up to 24% annually. Even if the property owner redeems, you earn guaranteed returns that beat most traditional investments. In Arizona, tax lien interest runs 16% annually. In Illinois, 18% for the first 6 months, then increases to 24%. According to the Tax Lien Investing Association, average annual returns for lien investors run 12-18% depending on state and redemption rates.
Passive Income: You're not managing a property, dealing with contractors, or handling tenants. You're simply a creditor earning interest.
First Position: Tax liens typically take priority over other debts. If the property sells, you get paid before most other creditors (though IRS liens may supersede).
No Property Asset: Unless you foreclose (which costs money and takes time), you don't own anything except a piece of paper.
Foreclosure Complexity: If the owner doesn't redeem, you have to hire attorneys, file court paperwork, and potentially go through 6-18 months of legal proceedings to actually take ownership. This easily costs $3,000-$8,000 and isn't guaranteed to succeed.
Bankruptcy Risk: If the property owner files bankruptcy, your lien might get discharged or you might get pennies on the dollar. You're an unsecured creditor in many bankruptcy proceedings.
No Guaranteed Profit: Most property owners do eventually pay their taxes. You make decent interest, but you might never get the property you thought represented amazing value.
Competition: Tax lien auctions in states like Arizona and Florida attract huge institutional investors who bid down the interest rates. Some certificates sell at 0.25% annual interest because the real goal is acquiring the property if it doesn't redeem, not earning the interest.
About 26 states plus Washington D.C. offer tax lien certificate sales. Popular states include:
Each state sets its own interest rates, redemption periods, and foreclosure procedures. Research your target state thoroughly before investing.
Let me share the mistakes I see repeatedly from investors who contact us at AmeriSave after things go sideways.
I cannot emphasize this enough. The single biggest disaster scenario is winning a tax deed auction without understanding what liens and claims exist against the property. One investor I worked with bought a property at auction for $92,000, only to discover later that there were three separate mechanics liens totaling $64,000 from contractors the previous owner never paid. The liens survived the tax foreclosure under state law. The investor had to settle those liens before they could get clear title, and their profit evaporated.
Title research needs to happen before you bid, not after. Yes, it costs money ($150-$500 for preliminary title work). Yes, it takes time. Do it anyway. The alternative is much worse.
Contractors are expensive. Materials are expensive. Surprises are guaranteed. When you walk through a tax deed property thinking "this needs paint and flooring," you're probably looking at structural issues hiding behind those cosmetic problems.
I recommend getting at least three contractor estimates before bidding on any property that needs work. Walk the property with a licensed contractor if possible. Add 20-30% contingency to whatever estimate you get, because something always costs more than expected.
Some investors completely overlook redemption rights. They win an auction in Alabama, immediately hire contractors, invest $35,000 in renovations, and then 14 months later the former owner redeems the property. The investor gets their auction payment back plus statutory interest, but they're out the renovation costs entirely.
If you're in a state with redemption periods, factor that into your strategy. Either accept that you might not keep the property, or wait until the redemption period expires before investing heavily in improvements.
You need substantially more money than just the winning bid amount. Between title work, repairs, holding costs, and unexpected issues, plan to have 40-60% more capital available beyond your purchase price. If you're bidding $50,000, have at least $70,000-$80,000 accessible. Otherwise you're one surprise expense away from a distressed situation.
Hard money lenders will finance tax deed properties, but they typically want you to have clear title first (which you can't get until after you've paid for quiet title proceedings). So you're likely covering most costs out of pocket initially.
This happens constantly. Someone attends their first auction, gets caught up in the excitement, and bids $15,000 over their planned maximum "just to win." That $15,000 often represents their entire profit margin.
Set your maximum bid in advance based on cold math. Stick to it absolutely. If someone outbids you, congratulate yourself on discipline and wait for the next opportunity. There's always another auction.
Real estate markets cycle. Buying tax deeds during a hot market with rapidly appreciating prices gives you a cushion if things take longer than expected. Buying tax deeds when the market is declining or stagnant means you might hold a property for 2-3 years waiting for values to recover before you can sell at your target price.
Pay attention to local market trends, days on market, and absorption rates. If properties in your target neighborhood sit for 6+ months before selling, factor that holding time into your calculations.
Thinking about your next move after acquiring a tax deed property? AmeriSave offers investment property financing and refinancing solutions once you've cleared title. Whether you're looking to pull equity out or secure financing for your rental portfolio, we can help. Get started online or call (833) 326-6018.
Tax deed properties offer a legitimate path to real estate investing without the sticker shock of traditional home purchases. I've seen clients build substantial portfolios by systematically purchasing tax deed properties, clearing title, completing renovations, and either selling for profit or holding as rentals.
But I've also seen people lose tens of thousands of dollars by jumping in without adequate research, underestimating costs, or failing to understand local redemption laws. The difference between success and failure in tax deed investing comes down to preparation.
Tax deed investing isn't a get-rich-quick scheme. It's a business that requires capital, knowledge, patience, and tolerance for risk. Done right, it can generate excellent returns while helping you build real estate wealth. Done wrong, it can eat through your savings faster than almost any other investment mistake.
Not at the auction itself, and usually not right after it. This is the realistic timeline: You buy something at an auction with cash, and then you spend four to eight months clearing the title through quiet title proceedings or title certification. A mortgage lender like AmeriSave can only give you money if you have clear, marketable title. Most traditional lenders want title insurance, so you need to finish the quiet title work first. Hard money lenders may be able to get you tax deed properties faster, but they charge much higher interest rates (10–14%) and have lower loan-to-value ratios (usually 60–70% of the property's value). If you plan to rent out the property or flip it after making some changes, you'll probably need to pay cash at the auction and then refinance later when the title is clear.
Title defects, redemption rights, and surprises about the condition of the property are the three biggest risks. Title problems could be IRS liens, mechanics liens, or HOA liens that stay in place after the tax foreclosure and become your problem. I've seen investors lose between $30,000 and $50,000 paying off liens they didn't know about until after the auction. In states like Tennessee and Florida, redemption periods give former owners 1–3 years to get their property back by paying back taxes. This means that you could lose the property after spending time and money on it. It's hard to know what condition a property is in because you usually don't have a chance to inspect it before you buy it. Properties that were empty for a long time because of tax foreclosure often have a lot of problems, like vandalism, theft, damage to the structure, mold, and code violations. Plan to spend at least 20–30% more than you thought you would on the renovation to cover any surprises. The investors who do well are the ones who plan for these risks ahead of time instead of just hoping for the best.
The website for your county's tax collector or treasurer's office is a good place to start. Every county in states that hold tax deed sales posts a calendar of auction dates on the internet every year. To find the official county page, type in "[County Name] tax deed sale" or "[County Name] property tax auction." Most counties now have email notification lists that let you know when new properties are added to upcoming auctions or when the dates of the auctions change. National auction sites like Bid4Assets, Grant Street Group, and RealAuction collect tax deed sales from hundreds of counties and let you search by location, type of property, and price range. Some investors also pay a membership fee to use private services like the National Tax Lien Association or Tax Sale Resources, which collect auction information from many states. When I'm helping AmeriSave clients look for opportunities, I always tell them to start at the county level. This is because those official sites have the most up-to-date information about redemption periods, minimum bids, and local auction rules.
You get back the amount you paid at auction plus interest at the rate set by state law, but you lose the property if redemption happens. The interest rate changes from state to state, but it usually ranges from 8% to 12% per year, which sounds good until you add up all the other costs you've had to pay. When redemption happens, you usually don't get back: attorney fees for the first title work, insurance costs during the redemption period, property taxes you paid while you owned the property, costs for maintaining and securing the property, and the time you spent on it. You bought a house in Florida for $60,000 and have two years to pay it off. The old owner gets back their money fifteen months later. You get back about $67,500 (your $60,000 plus 10% interest), but you've already spent $4,500 on insurance, $3,000 on property taxes, $1,800 on basic maintenance, and $2,200 on legal consultations and title work. You made $7,500, but you spent $11,500, so you lost $4,000 and all the time and effort you put in. This is why it's so important to know about redemption periods and include them in your investment calculations before you bid.
Tax deed investing can be good for beginners, but only if you're willing to spend a lot of time learning about it before you put any money into it. Before making their first purchase, the successful beginner tax deed investors I've worked with usually spent 3 to 6 months going to auctions as observers (not bidding), researching properties, getting to know contractors and lawyers, and learning about their local market. They also started with properties that were cheaper so that mistakes wouldn't cost them a lot of money. I don't usually suggest that people buy tax deeds as their first real estate deal because there are too many ways to lose money if you don't know what you're doing. If you've never worked with contractors, title companies, or property renovations before, you're making things harder for yourself. Most beginners would be better off working with an experienced tax deed investor on their first one or two deals, even if it means splitting the profits. You learn how the process works, see how title work really happens, experience how auctions work, and know what surprises usually come up during renovations. After that phase of learning, you're much more likely to do well on your own. People who fail usually go to a weekend seminar, get excited, and then start bidding at auctions right away without knowing how the local market works or how complicated the title is.
Yes, in theory, but probably not in practice. The problems are that you probably can't get clear title right away, most buyers need financing, which means you need title insurance, and you haven't added any value to justify a profit margin. The truth is that if you win an auction for a property worth $150,000 for $65,000, other investors at that auction saw the same chance. The winning bid usually goes up to match the property's true value after taking into account all known problems. That $65,000 winning bid could be the fair market value for a property that has title problems, needs repairs, and could be at risk of losing its value. You would need to find a buyer who is willing to pay a lot more and take on the same risks you just took on in order to flip it for a profit right away. Other experienced investors who know they could have just bid at the auction themselves are the ones who are willing to do that. In tax deed investing, the way to make money almost always involves fixing title problems, finishing renovations, or waiting through a redemption period. All of those things take time. Sometimes you can get quick flips when you find value that other bidders missed, but that takes better research and analysis, not luck.
The county sets the minimum bid, which is usually the amount of back taxes owed plus interest, penalties, and administrative costs. The actual selling price is whatever the winning bidder pays, and it can be a lot higher if more than one person wants the property. Here's a real-life example from an auction in Florida that just happened: The county set a starting bid of $28,000 for a piece of land. This was made up of $22,000 in unpaid taxes and $6,000 in fees and penalties. The market value was thought to be $180,000. The bidding started at $28,000 and went up in increments of $7,000 until it reached $89,000. That's $61,000 more than the minimum bid because more than one investor thought the deal was worth it. The extra money ($67,000 after the county kept its $22,000 in taxes owed) usually goes back to the person who used to own the property, not to you, the winning bidder. In competitive markets, final auction prices are often 60% to 80% of market value, which makes it much harder to make a profit. This is why it's so important to set your highest bid before the auction starts and stick to it. Competition makes prices go up quickly, and it's easy to get caught up in bidding more than you can afford.
It all depends on the county. Some counties still only hold auctions in person at the courthouse on certain days. Some have moved all of their business online. A lot of them now let you choose whether to go in person or bid through their online system. I'd say that about 60–70% of counties now have some kind of online bidding, thanks to the pandemic speeding up the process. Counties don't have to worry about the technology side of things because online platforms like Bid4Assets, Grant Street Group, and RealAuction take care of it. You sign up online, link your payment method, and bid from afar. Online bidding lasts for hours or even days, unlike in-person auctions, which happen quickly. You can bid online from anywhere, do your research on properties without having to travel, and look over information at your own pace. The downsides are that you can't see the properties in person before you buy them, you're up against investors from all over the country, and technical problems sometimes happen. You can see who you're bidding against, read the room, and sometimes even inspect the property at the last minute at in-person auctions, but you have to be there on the day of the auction. Look on the website of the county you want to bid in to find out how their auctions work. Most of them give clear instructions on how to register, when to pay, and whether or not they let you bid online.
If you buy a tax deed property at auction, you should expect it to take 8 to 18 months to sell. This is a realistic breakdown of the timeline:
That's if there are no problems with the redemption period, no major title problems other than normal defects, renovations go pretty well, and the property sells within a few months of being listed. When everything is just right (no quiet title needed, light renovations, cash buyer), I've seen deals close in as little as six months. I've also seen deals take more than two years when the title work gets complicated, there are big problems with the structure during renovations, or the market slows down and the property doesn't sell. Investors who plan for 12 to 18 months and are pleasantly surprised when things move faster are the ones who do well. Tax deed investing is probably not the best way to get your money back in 3–6 months. This is a long-term investment that needs patience and enough money to last a long time.
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