Tax liens are placed on properties to guarantee that its taxes would have to be paid by the delinquent homeowners. If there is a lien on a property, it cannot be refinanced nor sold until the taxes are paid.
Real estate investors can purchase tax liens as investments that pay interest rate as profits. Liens are bought at a tax sale auction. The investor who is willing to take the lowest rate of return gets the lien certificate. Once the property is sold, the investor gets back his initial investment plus interest rate. The amount is usually bigger than the investor could make in the stock market. If the property is foreclosed, then the investor would get the right to own the property.