Here are the rules for the tax lien sales in Alabama:

Interest rate: 12%
Bidding type: Competitive Bidding
Redemption Period: 3 years + 3 years possession (6 years!)
Opening bid: Comprised of the back taxes, penalties, fees and other charges.

In Alabama there are two redemption periods. The first redemption period starts as soon as the tax lien certificate is issued and lasts for three years.

In Alabama there is a requirement that the purchaser of the tax lien certificate must possess the property for an additional 3 years after they get the deed! This is a significant downside to investing in Alabama tax liens.

The tax lien auctions are held in May of each year. As a holder of the tax lien certificate you are entitled to a 12% interest return per year. Interest is earned on the TOTAL purchase price paid for the property at auction.

There is a way to get around the 3 year redemption period; that is you can buy lands held by the state. These are parcels that did not sell at the primary auction and are being offered by the county for resale. You can effectively reduce the 3 year redemption period by how long the county has offered the property for sale. However, you still must possess the property for 3 years after the initial 3 year redemption period.

My take on Alabama: Due to the long redemption period and also the fact that you have to possess the property for 3 years makes this an unappealing state for us to invest in.

On wednesday we will look at the state of Arizona!