Tax Lien Yield vs. Risk: How to Find the Balance

1/13/2026 12:00:00 AM

High yields look great on paper. A 16% return sounds incredible compared to what your savings account offers. But here's the catch: if that lien comes with a property you can't research, a redemption period you can't stomach, or title issues you didn't see coming, that 16% evaporates fast.

The best tax lien investors don't chase the highest interest rates. They chase the best risk-adjusted returns. That means understanding what you're actually buying before the bid button gets pressed.

The Yield-Risk Spectrum

Lower-yield liens (8-10%) many come from stable counties with shorter redemption periods. Higher-yield liens (14-18%) can signal longer waits, more distressed properties, or states with complex foreclosure rules.

Neither is inherently better. It depends on your goals, your timeline, and your tolerance for uncertainty. A 10% lien that redeems in nine months might outperform an 18% lien that takes three years to resolve.

Research Is Your Risk Filter

Balanced investing starts with eliminating avoidable risks before you bid. Pull a preliminary title report to spot senior liens. Use county GIS maps to check property condition and access. Review comparable sales to confirm the property has real value backing your lien.

This isn't about finding perfect properties. It's about knowing exactly what risks you're taking on and deciding if the yield justifies them.

Diversification Keeps You Steady

Spreading capital across multiple liens, counties, and redemption timelines smooths out the ups and downs. Maybe 60% of your portfolio sits in reliable, lower-yield counties that redeem predictably. The other 40% targets higher yields in carefully researched opportunities where you're comfortable with longer holds.

This approach prevents any single lien from derailing your overall returns. One property doesn't redeem? Your other liens keep compounding.

Setting Your Own Limits

Balanced investing requires boundaries. Maybe you cap bids at 70% of assessed value. Maybe you avoid properties over $10,000 in back taxes. Maybe you skip any county where you can't visit the property or find a reliable local contact.

These limits aren't restrictions. They're clarity. They let you pursue yield without gambling on outcomes you can't control.

High yield means nothing if risk wipes it out. Find your balance, stick to your research process, and let the numbers guide every bid.

This blog post is for informational purposes only and should not be relied upon as financial or investment advice. Real estate investments carry risk, and individual results will vary. Always consult with your team of professionals before making investment decisions. The authors and distributors of this material are not liable for any losses or damages that may occur as a result of relying on this information.