How to calculate your actual ROI on a tax lien (accounting for time)

People look at the interest rate and think that's the return. It's not. Time matters.

The simple version:

If you earn 18% interest on $5,000 over 2 years, you made $900. That's 18% total, or 9% annually. NOT 18% per year for 2 years.

If you earn 24% interest on $5,000 over 1 year, you made $1,200. That's 24% annually.

Same statutory rate (let's say 18% in both cases), completely different actual returns depending on the redemption timeline.

The real formula:

(Interest earned / Capital deployed) / Years held = Annualized return

Example: $5,000 lien, 18% statutory rate, 2-year redemption = $900 interest / $5,000 / 2 years = 9% annualized.

Why this matters:

A 3-year redemption period in Arizona at 16% looks worse on paper than a 1-year redemption in Iowa at 24%. But annualized, they're similar:

Arizona: $800 interest / $5,000 / 3 years = 5.3% annualized Iowa: $1,200 interest / $5,000 / 1 year = 24% annualized

Pick your counties based on annualized returns accounting for time, not just the statutory rate.