Last Updated on August 30, 2025
Table of contents
- Paying Off Back Taxes: Guide for New Investors
- What Does “Paying Off Back Taxes” Mean?
- Why Counties Let Us Buy Tax Liens or Deeds?
- Why I Like Paying Off Back Taxes?
- Always Do Your Research
- Rights and Responsibilities
- Five‑Step Guide to Your First Tax Lien Investment
- Mistakes to Avoid
- Pros and Cons of Paying Off Back Taxes
- Don’t Rush
Paying Off Back Taxes: Guide for New Investors
For over twenty years, I’ve been buying houses and land very cheaply by paying off back taxes. When a homeowner owes property taxes and doesn’t pay, the county needs that money to fund schools, police and other services. You can step in, pay what they owe, and either get your money back with interest or sometimes get the property itself.
What Does “Paying Off Back Taxes” Mean?
- When someone stops paying their property taxes, the county puts a tax lien on the property. This means the taxes must be paid before the owner can sell the property.
- In some states, the county sells a tax lien certificate to investors. If you buy this certificate, you pay the unpaid taxes. The homeowner then has to pay you back what you paid, plus extra money called interest.
- In other states, the county sells the house or land itself through a tax deed. When you buy the deed, you become the new owner once you pay the back taxes.
Why Counties Let Us Buy Tax Liens or Deeds?
County governments need money to run schools, fire and police departments, and fix roads. When some people don’t pay, the county lets investors pay off back taxes to keep the services running. We help our towns and can make money at the same time.
Why I Like Paying Off Back Taxes?
- Good profits with low risk – If you buy a tax lien certificate, you get interest on the money you paid until the owner pays you back. Because the government promises this interest, the risk is lower than in other investments.
- No middlemen – You deal directly with the county. You don’t need a real estate agent or lawyer, so you save money.
- Start small – You can start with a few hundred dollars instead of buying a whole house.
- Help your community – By paying back taxes, you help keep important services running and can fix up empty or damaged homes.
Always Do Your Research
Before you buy, you need to do some simple research:
| What to check | Why it matters |
| State rules | Each state has different times for owners to pay you back (called redemption periods) and different interest rates. |
| Property condition | Look at pictures or visit the property. A house could have serious damage or other debts that make it a bad investment. |
| Value of the property | Compare the county’s value to similar houses or land in the area. Sometimes a cheap tax lien is cheap because the property isn’t worth much. |
| Your budget | Decide the most you want to spend before you bid. Don’t get carried away in an auction. |
Rights and Responsibilities
When you pay off back taxes, there are rules that protect both you and the homeowner:
- Who can pay and collect – In most places, anyone can buy a tax lien certificate at an auction and collect the money owed.
- Time for owners to pay you back – Homeowners have a set amount of time to repay the taxes and interest. If they do, you get your money and interest. If they don’t, you may be able to take over the property.
- Guaranteed interest – Counties usually guarantee the interest rate you will earn if the owner pays.
Five‑Step Guide to Your First Tax Lien Investment
Follow these easy steps if you want to try paying off back taxes:
- Learn the rules
Read your state and county rules. Many counties have guides or videos for beginners.
- Choose a location
Pick a county you understand. Look for areas where homes hold their value. Avoid places where many people are moving away.
- Go to a tax sale
Register for the auction. You can often bid online. Listen carefully and don’t go over your budget.
- Keep track of your certificates
If you win, note when the owner must repay. Make sure you follow the steps to get paid. If the owner does not pay in time, follow the county’s process to take the property.
- Grow slowly
Start with a few certificates. As you get your money back with interest, you can buy more. Work with a mentor or experienced friend if possible.
Mistakes to Avoid
- Not doing research – Never bid on a property without learning about it.
- Paying too much – If you bid too high, your profits will be small.
- Missing deadlines – Counties have strict timelines. Mark dates on a calendar so you don’t lose your rights.
- Ignoring property upkeep – If you become the owner, make sure the property is safe and insured until you decide what to do with it.
Pros and Cons of Paying Off Back Taxes
| What happens | Good things | Not‑so‑good things |
| You earn interest | Interest rates can be high and give steady income. | You have to wait until the owner pays or the redemption period ends. |
| You may take the property | You could get a house or land for a very low cost. | The property might need repairs or have other debts you must pay. |
| Simple process | You don’t need agents; the paperwork is often simple. | Rules change from state to state, so you need to learn each one. |
| Helping the community | Paying off back taxes funds local services. | If you take a property, the former owner will lose their home. |
Don’t Rush
Paying off back taxes is not a quick way to get rich. It requires patience and learning. By taking it step by step, you can make money, help your community, and maybe even own a home for much less than its market price.
Final Words
I’ve used this strategy for more than twenty years and taught many people how to do it. Paying off back taxes lets you start investing with little money, earn interest, and sometimes get property for a bargain. If you do your research and follow the simple plan above, you’ll be on your way to success in tax lien and tax deed investing.
If you have more questions about tax lien and deed investing, shoot us an email. We’re happy to help!
-Dustin
