If you want to invest in tax lien certificates, one of the first principles that you need to be aware of is redemption. A tax lien certificate is simply a lien that the county has sold to an investor for the delinquent taxes. The investor then waits for the property to "redeem," which simply means that the homeowner has paid off the tax lien with interest and penalties to the investor. If the homeowner does not pay off the tax lien within a specified period of time, called the "redemption period," then the investor has the right to foreclose on the property and potentially pick up a property at pennies on the dollar! So, from an investor's point of view, it's really win, win!

So, when could a redemption occur? It could occur the day after you buy the lien. It could occur weeks, months, or years later. It just depends on the situation.

Before you invest in tax lien certificates, you need to figure out the redemption period. This varies from state to state. Some states have very short redemption periods. Others have very long redemption periods. If you just want to get the very high interest rates (as much as 24%) that you can get from tax lien certificates, then visit states with long redemption periods. If you ultimately want to acquire dirt cheap property, then visit other states with shorter redemption periods.

Other states are more of a hybrid with regard to redemption periods. How can it be a hybrid? In Florida for example, you can foreclose on the property in as little as two years. However, you are not actually required to foreclose in Florida until the lien is seven years old. So, it really is the best of both worlds. If you want to keep letting the interest accrue, then you just let the lien sit. If you want to get the property, then you file a quick foreclosure after the two years.

During the redemption period, there may be pre foreclosure activities that you are required to do with your tax lien certificate. These could include giving the homeowner notice that you have the lien, filing court papers and giving notice in a newspaper and title searches. Don't worry too much about this stuff. It is usually handled by an attorney who will do these things on your behalf. In nearly all states, the attorney fees will be added to the total value of the lien and reimbursed with interest at redemption.

However, it's imperative that you understand your state and local laws extensively before you attempt to purchase tax lien certificates. In many areas, if you don't follow the pre foreclosure activities to the letter, then your lien may be declared invalid and you will lose your entire investment.

Like anything else in tax certificate investing, redemption is a concept that you will see over and over. With this short lesson, you learned what to do and what to look for regarding redemption. Now do your research and go take massive action!

Carlos Scarpero is an experienced real estate investor who specializes in tax liens and deeds. Visit his tax lien and deed blog at http://www.scarpero.com/real_estate.

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