What are the Five Best States for Safety on Your Tax Lien Certificates?

What are the Five Best States for Safety on Your Tax Lien Certificates?
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In my last post, I discuss what I thought were the best states to consistently earn a high yield on your tax lien certificates.  Today, I want to discuss the reason why I chose tax lien investing for a majority of my investment capital.  It’s all about safety of investment.   You’ve probable seen all of the hype about “no risk investing” etc etc.  I hate that crap.  There IS risk to any investment and tax liens more than others. 

However, if you know what your doing and do your due diligence, tax lien certificates can be extremely safe.

And why not?  They are ahead of just about every lienholder.  You basically step in as the government authority and the lien-to-value ratios can be less than 1% of the value of the house.  Who’s going to lose their $200,000 home over a $1,500 tax bill?  And more so, what mortgage company in their right mind would allow this to happen.

I’m not going to go on about how you can lose money in tax lien certificates–you can read my earlier post about the risks of tax lien investing.  I want to focus on those states that you can safely put your money in and rest easy every night.  You won’t earn a huge double-digit return, but I’ll guarantee its better than putting it in the bank.


Arizona tops my list for the safest place to buy tax lien certificates.  It’s a bid-down state meaning that you don’t have to bid more than the delinquent taxes and the millage rate is very low compared to other states.  For those new to tax lien investing, the millage rate is the percentage of the value of the property that is taxed.

So, you’re total investment should initially only be less than 2% of the actual value of the property.  Plus, Arizona has a three-year redemption period giving the property owner or any lienholders ample time to pay their taxes.


Florida is also a very safe state to invest in tax liens.  Your average initial investment is usually less than 2% of the value of the property.  Furthermore, Florida sells their delinquent taxes each year.  After two years, the tax lien certificate holder has the right to file for tax deed–however, in order to do this, they have to bring all of their taxes current.  This means that not only could you be redeemed out by the owner or mortgage company, another tax lien certificate holder could redeem your tax certificate when they file a tax deed application.


Nebraska tax liens benefit from a stronger, more stable real estate market than many areas of the nation.  You won’t find the fluctuations in the more industrial areas and you don’t find much blight that ruins new tax lien investors initial purchases.  The 14% rate is great and the process for applying for a deed is straight-forward.  I haven’t met any investors who bought smartly and still lost money in a Nebraska tax lien.


You’ll actually find this on my Top 5 highest yielding tax lien states too.  Hopefully, I won’t let the cat out of the bag and we have tons of investors going to Iowa to flood the next tax auction.  Why is Iowa a safe state for tax lien investing?  Because the laws completely favor the tax lien holder.  I’m not sure who’s in the legislature to make this happen, but the statutes are very favorable to the purchaser of the tax lien–from noticing to foreclosure, it’s hard to screw up and lose your investment because of a technicality.  Either the owner or other party pays the taxes or you get the property.


I haven’t really focused on Connecticut as a tax lien state–primarily because most of the cities sell their liens in bulk to larger investment companies.  However, the smaller jurisdictions offer their liens individually (or they are small enough that a deeper pocket individual investor can buy a town’s entire lien balance).  In most of the state, the real estate values are pretty high.  That, coupled with good incomes, means that your average property owner has the ability to pay their taxes–or, if you end up foreclosing, you’ll recoup your investment when it goes to auction or if you get the property.



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