In order to collect money right away, the county creates what they call a tax lien certificate. The county then announces a public auction where they will sell each tax lien certificate to the highest bidder starting at the price that is owed to them by the property owner.

The winning bidder is not paying the property taxes for the property owner.  In fact, the property owner has no idea that this is happening.  The property owner knows only that they owe the county property taxes.

In order to entice investors like you and me to give the county that money, essentially giving them a loan, the county charges the property owner a penalty for being late on their taxes, and the county passes that penalty directly on to the tax lien certificate holder.

Depending on the state, these penalty interest rates range on the low side from 8 percent all the way to 18 percent!  When the property owner finally pays their taxes plus interest accrued, the county receives the money, and immediately issues a check to the tax lien certificate holder for the initial investment plus all interest accrued.

And if the property owner never pays, then the tax lien certificate holder can foreclose on the property through the power of that government tax lien!  This is the only investment where your worst case scenario is also your best case scenario!