Diversification has long been a guiding principle in real estate investing. While many investors focus on traditional assets like rental homes, commercial buildings, or development projects, tax liens and tax deeds offer another pathway to diversify holdings with assets secured by real estate. These opportunities exist because counties rely on property taxes to fund schools, roads, and essential public services. When taxes go unpaid, states have statutory processes that allow governments to recover these funds.

Tax lien and tax deed systems vary from state to state, but both provide structured methods for acquiring interest in real property. Understanding how these instruments function can help investors evaluate whether they complement a larger portfolio strategy.

Tax Liens and How They Work

In tax lien states, the county sells a lien not the property itself to recover unpaid taxes. The lienholder is entitled to interest or penalties upon redemption, depending on state regulations. These liens can diversify a portfolio by offering:

• A claim backed by real estate
  
• Predictable, statutory interest structures
  
• Opportunities for shorter duration holding periods
  
  

Tax liens are not ownership. They are a legal claim, and due diligence is essential to understand senior liens, environmental considerations, and local regulations before purchasing.

Tax Deeds and How They Differ

Tax deed states operate differently. Instead of selling the lien, counties sell the property itself at auction. In Texas, where CORE Tax Deeds focuses its activity, monthly auctions are held across all 254 counties. Because these properties come to auction for tax reasons rather than normal market factors, they often fall into consistent categories, such as:

• Vacant residential lots
  
• Small acreage tracts
  
• Commercial parcels
  
• Confirmed vacant structures
  
• Struck off properties available post auction
  
  

Responsible acquisition practices are critical in tax deed investing. CORE Tax Deeds maintains strict safeguards including occupancy verification, lien research, inspections, and community impact standards. In over 30 years of founder activity and fund operations, properties acquired have been vacant at the time of purchase, ensuring no displacement and supporting responsible stewardship.

Why Investors Use Liens and Deeds for Diversification

Tax liens and tax deeds offer characteristics that differ from traditional real estate, allowing investors to balance a portfolio with alternative real-estate-secured assets. Some benefits often considered in diversification include:

• Exposure to multiple property types
  
• Opportunities in both urban and rural markets
  
• Assets backed by physical real estate
  
• Statutory processes that define redemption or ownership
  
• Potential to acquire property at a fraction of market value, depending on auction outcomes
  
  

However, as with any investment, risks exist. Investors evaluate factors such as title conditions, environmental issues, redemption timelines, and the cost of clearing or managing a property. Reviewing county documents and SEC filed disclosures is a standard part of responsible decision making.

The Role of Due Diligence in Portfolio Stability

A diverse portfolio is only as strong as the research behind it. Tax lien and tax deed investors typically focus on:

• Verifying property condition and vacancy
  
• Understanding zoning and access
  
• Reviewing all outstanding liens
  
• Conducting physical or proxy inspections
  
• Confirming market activity and comparable sales
  
  

Organizations committed to responsible practices, such as CORE Tax Deeds, emphasize these protections to ensure that the properties acquired help restore municipal revenue, reduce blight, and return vacant parcels to productive use. CORE also supports the NTLA Foundation by pledging a portion of fund profits toward helping seniors and veterans remain in their homes.

Building a Portfolio with Public Benefit in Mind

One unique aspect of tax lien and tax deed investing is its alignment with community outcomes. When local jurisdictions recover tax revenue and properties return to productive use, neighborhoods benefit. Over decades of operations, CORE and its leadership have never displaced a resident, focusing instead on vacant land, infill lots, and confirmed vacant structures. These documented practices help align portfolio goals with public benefit.

Final Thoughts

Tax liens and tax deeds can serve as valuable components of a broader real estate portfolio. While no strategy is without risk, these instruments offer alternative ways to access real-estate-backed value, support counties, and participate in processes that help reduce property abandonment.