Did you know that you could make money by paying someone else's property taxes? Thirty-one states provide a little-known investment opportunity that might be perfect for you.

You could even see an annual interest return from 18% to 50%.

The returns are available through tax lien and tax deed certificates sold by the county. Tax liens are placed on a property when the real estate taxes are late. Many local governments auction the liens off to investors once or twice a year as a way to get their owed money. These are called tax sales.

For example, if Mr. Jones owes $2,000 in real estate taxes and hasn't paid it, the county will place a lien on his property. Eventually the lien will be auctioned to an investor. The investor may get the lien for $2,000. The county gets the money it needs right then. The treasury or finance department will start going after the money from the delinquent tax payer. They send nasty little notes, warning them of future actions. They charge penalties and interest rates of up to 50%. The local government can then turn around and pay the investor a large return.

You can find these investment opportunities through your local treasury or finance department. There are also many websites that keep the information in an up-to-date compilation. You may have to pay for the information. The best way is to contact your local department instead of paying for a national service.

These are short-term investment opportunities. After the lien has been auctioned off, the county lets the owner know that they might lose their property to the lien certificate holder if they don't pay the taxes, interest and penalties. This gives the owner another chance to pay the bill and keep the property. If they don't pay, the lien certificate holder can foreclose on the property.

In some areas, the government will forego the investment opportunity and outright sell the tax deed to the property. This means if they don't pay the taxes, you are the owner of the property straight out.

There are many stories about making a lot of money buying tax deeds. A man in Oklahoma is rumored to have bought land for $17 at a tax sale only to sell it for $4,400.

Some people have been lucky, but there are risks and hazards with tax certificates. The property could be trashed, you could lose your money if you don't follow the proper procedures, the title could be clouded, and the former owners might be irate and armed with ammunition.

Due to the auction property, a nice property might only be available with some not-so-nice terms attached. You might "win" the property only to then be responsible for all the unpaid taxes and mortgages. If you have to foreclose, you may have a lot of costs come up. The owner might be able to invoke the "equity of redemption" right that allows him or her to re-acquire the property after a foreclosure.

Make sure that you know all of the risks before you jump into tax sales. Research the properties, which are usually listed in the local newspaper a few weeks before the sale. Have a thorough understanding of your potential obligations, know what the rules are, speak with your attorney and realize that your best plans may not work out.

Ninety-eight percent of impacted property owners will pay their taxes. Most of the investors into these certificates make money on the interest paid on the tax bill.