Forum : Can you give me an example on how buying tax lien works?

Let's say that you purchase tax liens and if the homeowners don't pay, in (say) two years time you can spend $5,000 to foreclose on the property, and then you become the owner.

The problem is that if a property has $1200 on a tax lien and it is worth $300,000 they will pay the taxes. If it does go to foreclosure it generally turns out to be really worthless piece of property. Again, you will still earn the interest rate, but don't expect to own a $400 000 house with $1000 of investment.