Tax liens and tax deeds are similar except in how they are auctioned and how the investor generates returns. With a tax lien sale, you bid on a certificate produced by the state or county in the amount of past-due property taxes owed on a property. Essentially, you bid the interest rate paid on the certificate. Tax lien certificates are offered with the maximum rate payable by the state. To reduce its costs, the state awards the certificate to the lowest bidder. The property owner has a certain amount of time to redeem the certificate, at which time the investors receive the interest. With a tax deed sale, you bid on the property title. The tax deed is transferred to the highest bidder, giving them an ownership interest in the property. If the property owner pays the back taxes, they can redeem their ownership interest.  In both cases, if the property owner cannot redeem the certificate or the title, the investor receives the property, and they can sell or manage it for rental income.