A tax certificate is a certificate of sale, which is issued by county or taxing district to an individual person that purchases a tax lien. If you purchase tax certificate on a property you will receive the interest rate from the property owner that will directly go to the taxing district or the municipality. The interest rate can be anywhere from 8-36% in a year depending upon the state from where the certificate is purchased. It is proof that the individual person has purchased tax certificate on property in at taxing district

How Tax certificate works:

To meet the budget United state municipalities or taxing district collect property taxes for to fix the road , pay fireman , teacher , policeman, and for building schools. If the owner of the property will not pay the tax , the taxing district has two option. Either they sell the property for back taxes. Or either they can sell the taxes to an investor and give more time to owner to pay up the tax.

Deed States are those states who sell the property for tax bill payment. And the states which sell the tax bill to an investor is known as State lien. The taxing district in states that sell Tax certificate has a tax lien auction once in a year where they auction the tax Certificate available to the investors. There are different interest rates on the lien, it is according to the states in some states interest rate on lien is high an somewhere it is less. States also vary in how much the property owner will pay the lien, it is known as redemption period.

 When the lien is purchased in the auction, the lien bidder is issued a tax certificate. And this certificate is recorded by the country clerk as lien against the property. When the property owner will decide to pay the lien then the investors gets paid on the certificate. if the property owner will not pay the lien in a redemption period then the lien holder can apply for the deed to the property  to satisfy the lien.

Tax certificate are becoming very popular investment in now days. So when you will invest?