When you purchase a tax deed there is really only one way that you can make a profit on your investment and that is to sell or rent the property. But when you purchase a tax lien certificate, there are three ways that you can profit from your investment. The three ways that you can profit from a tax lien are summarized in this article. Read on to find out more about them.

The first and most obvious way that you make a profit on your tax lien certificate is by redemption of the lien. The property owner redeems the lien and you as the lien holder will be paid the certificate amount of your lien plus any interest and penalties. Because in most states the rate of interest is an annual rate, the longer the lien is held the more money you will make when it is redeemed.

If the lien is not redeemed, once the redemption period is over, you may start foreclosure proceedings on the property in order to be paid what you are owed on the lien. This process can be complicated or easy depending on what state your tax lien certificate is issued in. In some states you only need to petition the county court, or go through an application process, to get the deed to the property. In other states you will have to go through a foreclosure process with an attorney, and this may take a lot of time and money. If the property has to go through a foreclosure sale, you may not receive the property, as it will go to the highest bidder at the foreclosure sale, but you will get paid on your lien.

In some states there is a third way that you can profit from your tax lien investment without foreclosing or redemption, and that is assignment of your lien to another investor. Some states allow for the assignment or sale of a tax lien certificate from one investor to another. This is a way that you can realize profit on your lien without waiting to go through the foreclosure process. Of course you are giving up the opportunity of possibly coming away with the property, but you are collecting your profit sooner rather than later.