Simulation: a fictional property for practice.

An Arizona tax lien: what will you really earn?

You can bid on a $2,400 tax lien. The rate starts at 16%, and bidders bid it down.

A fictional lien at an Arizona county tax lien sale. At the February sale, the county sells liens, not the property. (Land the state already took by tax deed is sold separately by the county.)

• Sale: County treasurer’s tax lien sale, Arizona, in February
• Lien amount: $2,400 of taxes, interest and fees
• Starting rate: 16% a year, bid down
• Parcel: A narrow strip of vacant land with no road access

Mission 1: What do you buy?

If you win, what do you get?

• A certificate of purchase: a lien that earns interest at my bid rate until the owner pays
• The land

Most liens are redeemed: plan on interest, not on getting the land.

Mission 2: What the rate means in dollars (simple interest, per year)

• Won at 16%: $384 a year
• Won at 6%: $144 a year
• Won at 2%: $48 a year
• Processing fee, not paid back: Up to $10 per lien

Competition often pushes popular liens far below 16%. Your money is tied up until the owner pays, and the payoff date is unknown.

Mission 3: What if the owner never pays?

This parcel is a landlocked strip. Is it a good lien to bid on?

• No. Bid only on parcels I’d actually want to own
• Yes. Unwanted land gets less competition, so a higher rate

Foreclosing the right to redeem is a lawsuit in superior court, filed within 10 years, and most buyers hire an attorney.

Would you bid on this lien?

Buy, investigate or pass? Work through the drill to see what an experienced investor would weigh.