How to Determine your Yeild / Return on Tax Liens

Yield simply means to produce a return for effort or investment. The yield on an investment can be figured either as simple interest or compounded interest. Simple interest is interest paid only on the original principal, not on the interest accrued. For example, if you bought a tax certificate for $2000 at 18 percent annual simple interest, you would earn $360 each year.

The other option is compound interest. Compound interest is the interest computed on the accumulated unpaid interest as well as on the original principal. For example, if you bought a tax certificate for $2000 at 15 percent compounded annually, the first year you would earn $300. That $300 would be added to the balance. In the second year, you would earn 15 percent on $2300, which would earn the certificate holder another $345 in year number 2.