EP50 Tax Lien and Tax Deed Investing: The Solo Flipper’s Backdoor to Below-Market Properties

Episode Description:

Troy breaks down how solo investors can use tax lien certificates and tax deed auctions to acquire deeply discounted properties without competing in the MLS frenzy. Covers state-by-state nuances, redemption periods, due diligence shortcuts, and how to chain a tax deed acquisition directly into a BRRRR or fix-and-flip exit strategy.

Speakers:
Host: Troy Walker
Guest: Jessica Torres

Transcript (Speaker-Formatted)

Troy: Hey everyone, welcome to Cash4Flippers! I’m your host Troy Walker, and today we’re pulling back the curtain on one of the most overlooked backdoor strategies for getting into properties way below market — tax lien and tax deed investing.

Troy: Joining me is Jessica Torres, a solo investor who has built a portfolio of distressed properties almost exclusively through tax sales and county auctions. Jessica, really glad you’re here.

Jessica: Thanks Troy, happy to be on. And yeah, I think most people scroll right past tax sales because they sound complicated, but honestly once you understand how they work, it’s one of the most powerful tools a solo flipper can have.

Troy: Let’s start at the ground level because I know some folks listening might be hearing these terms and thinking they’re the same thing. Tax liens and tax deeds — break that down for us.

Jessica: Sure, so they’re related but they’re two different animals. A tax lien happens when a property owner stops paying their property taxes. The county needs that money, so they sell the lien to an investor. You’re basically paying the taxes on behalf of the owner, and in return you get a certificate that earns interest. If the owner never pays you back, you can eventually foreclose on that lien and potentially end up owning the property.

Troy: And a tax deed is a step further down that road, right?

Jessica: Exactly. A tax deed is what happens after that redemption period expires and nobody paid off the lien. The county actually takes title to the property and then auctions it off. You’re bidding to own the property outright. No lien, no waiting — you buy it, you own it.

Troy: So for someone who’s flipping, the tax deed auction is where the real action is.

Jessica: For flippers, yes, usually. Tax liens are more of a passive income play — you’re collecting interest, sometimes eight, twelve, even eighteen percent depending on the state. But if your goal is to acquire a property and flip it, the deed auction is where you want to focus.

Troy: Walk me through what a typical tax deed auction actually looks like. Like, can you just show up and start bidding?

Jessica: You can in a lot of counties, but you don’t want to show up blind. Most counties publish their auction lists weeks in advance, sometimes online now which makes it a lot easier. You get the list, you do your homework on the properties, you check the condition as best you can — drive by, look at satellite images, pull any permits — and then you show up or go online for the auction.

Troy: What are the big mistakes you see new investors make at these auctions?

Jessica: Overbidding is the number one killer. People get caught up in the excitement and forget they’re at an auction. There’s a psychology to it — someone else bids and suddenly you feel like you have to win. You have to know your max number before you walk in and stick to it like your business depends on it, because it does.

Troy: I’ve seen that happen at foreclosure auctions too. People walk in with a number and walk out having spent thirty grand more than they planned.

Jessica: And at a tax deed sale, you also have to think about what liens survive the sale. In most states, tax deeds wipe out the mortgage, but there could be IRS liens, HOA liens, code violations — those can follow the property. Always, always do a title search before you bid.

Troy: That’s a huge point. Title issues can absolutely kill a flip before it starts. Do you typically get title insurance on these deals?

Jessica: It can be tricky. Some title companies won’t touch a tax deed property right away. You often have to either quiet the title through the court first, which takes time, or you hold it for a certain period before a title company will insure it. It’s not impossible, just takes planning.

Troy: Let’s talk about the finding and research side. You mentioned the county publishes lists — what else are you doing to evaluate these properties before you bid?

Jessica: A lot of driving. Seriously. I get in my car and look at every property I’m considering. You’d be surprised how many investors skip that step. I want to see the condition, the neighborhood, what comparable properties are selling for. I’m also pulling the property appraiser records, looking at square footage, year built, any improvements. Then I’m running my numbers — ARV minus repairs minus my profit margin minus the cost of the deal. If it doesn’t pencil out, I walk.

Troy: What’s your target spread on a tax deed flip?

Jessica: I like to see at minimum twenty to twenty-five percent of ARV as my profit after everything. Some deals I’ve done better, some worse. But that’s my floor going in.

Troy: Let’s talk states for a second because this isn’t the same everywhere. Are there better states for this strategy?

Jessica: Definitely. Florida is huge for tax deed investing — very investor friendly, properties go to auction relatively quickly. Georgia has a great system too. Texas does things differently with their tax sales. States like California are much harder because the redemption periods are long and the process is slower. I always tell people, learn the rules in your state first before you even look at a list.

Troy: And for someone who’s brand new to this, where do they even start? Like, what’s step one?

Jessica: Step one is going to your county’s website and finding the tax collector or property appraiser section. Most counties list their upcoming sales right there. Sign up for their notifications. Then just start researching the list — even if you’re not ready to bid yet. Get familiar with the process, go watch an auction, understand the bidding dynamics. That education is free and it’s worth more than any course you’ll pay for.

Troy: That’s solid advice. You’re basically doing a dry run.

Jessica: Exactly. And connect with a local real estate attorney who understands tax deeds in your state. That relationship is invaluable. They can help you understand redemption periods, what liens survive, how to quiet title — all the stuff that can trip you up if you don’t know.

Troy: What about funding? These auctions often require cash or certified funds same day or very quickly. How does a solo flipper handle that?

Jessica: That’s where having your financing lined up in advance is critical. Hard money lenders who specialize in distressed properties will sometimes fund tax deed purchases, but you need to have that conversation before auction day, not after. Some investors build up a cash war chest specifically for these deals. Others use private lenders — someone in your network who wants a return on their money and trusts you to execute.

Troy: Yeah, showing up to a tax sale without funding figured out is like showing up to a poker game with no chips.

Jessica: Perfect analogy. And some counties have strict timelines — you might have twenty four to seventy two hours to pay in full. If you can’t close that fast, you lose your deposit and your bidding privileges.

Troy: Alright, let’s bring it home. This has been a really solid conversation. For anyone listening, here are the big takeaways. First, know the difference — tax liens earn interest, tax deeds give you ownership. Second, always do a title search before you bid on anything, and understand which liens survive in your state. Third, drive every property on your list and run your numbers cold, not emotional. Fourth, understand your state’s specific rules and build a relationship with a local real estate attorney. And fifth, have your funding locked in before you ever raise your paddle or click that bid button.

Troy: Jessica, any final thoughts for the solo flipper who wants to take their first step into this space?

Jessica: Start with your county tax collector’s site to get familiar with your local process, and keep coming back to Cash4Flippers — Troy breaks this stuff down in a way that actually makes sense for solo investors.

Troy: Love it. Jessica, thanks for dropping all of this knowledge today, genuinely great stuff. And to everyone listening, that’s a wrap on another episode of Cash4Flippers. If this helped you, do us a favor and hit subscribe or follow wherever you’re tuning in — it really does make a difference. We’ll see you on the next one.