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The rates of return can be highly attractive. For example, Florida (a popular tax lien state due to its growth and investor-friendly rules) is a "bid down the interest" state with a maximum rate of 18% (1.5% per month). However, Florida law guarantees a 5% minimum return regardless of the rate bid (except if the bid is zero percent) or when the lien is redeemed. Thus, if a certificate is purchased one day at 0.25% (the lowest possible rate greater than zero percent) and redeemed the next day, the investor will earn 5% over the certificate price for one day's holding, or a mind-boggling 1,825% return! (Loftis, the author mentioned above, in his book tells another story where he went to pay for a lien, only to find a redemption check waiting for him on the lien he bought; thus, he actually obtained a return rate of infinity.) Iowa, another tax lien state, offers a guaranteed 2% return per month (or 24% return per year). And, in practice, most liens are redeemed before the property is foreclosed.
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