Tax Lien Certificates

[Kamaria M. Johnson]

Hi I am just getting started in real estate and bought a few tax liens. I'm a bit confused. Is the interest paid to you on the winning bid amount or on the initial tax amount owed?

[John Underwood]

@Kamaria M. Johnson Actually in SC you get paid interest on your entire purchase purchase with one caveat.

The homeowners interest that he/she pays can not exceed how much back taxes they owe. So if the back taxes are $2000 then the most interest you can make is $2000. So if you want to maximize your interest potential you don't bid over $16,666.67. Once you bid over this then your effective interest rate starts going down. If they redeem the property in one of the first 3 quarters and you bid more than $16,666.67 then you can still get the full 3, 6 or 9% interest rate if you didn't hit the cap.

To find out what you should pay for max interest rate, take the back taxes owed and divide by .12.  SO in this case 2000/.12

Hope that helps.