Tax Deed Investing Explained (1029)
Tax Deed Investing Explained (1029)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hi.
Steven Butala: Welcome to the Land Academy Show, Entertaining Land Investment Talk. I’m Steven Jack Butala.
Jill DeWit: And I’m Jill Dewit, broadcasting from sunny Southern California.
Steven Butala: Today Jill and I talk about Tax Deed Investing Explained.
Jill DeWit: You know what? I have been really looking forward to this show.
Steven Butala: Why’s that?
Jill DeWit: I was actually being sarcastic, sorry.
Steven Butala: Go ahead.
Jill DeWit: I’m happy we’re doing it. It’s a very great way to do what we do, however, it’s not my most exciting thing.
Steven Butala: Jill gets to take a break and-
Jill DeWit: Yeah.
Steven Butala: … read a magazine-
Jill DeWit: Pretty much.
Steven Butala: … during these kinds of shows. But what I’ll tell you what I’m going to cover here. One of the greatest things about tax deed and taxing investing, is that if you’re just starting out, or if you run a Wall Street fund, they’re great vehicles, by any measure, to make a ton of money. Specifically as you’re starting out, it doesn’t take any money, you can literally buy a couple of tax deed property and own a property for 2 or 300 hundred bucks or less. Double your money, double your money and pretty soon you’re on your way. So it’s a huge, huge opportunity. It’s also pretty complicated. So if you’re a relatively intelligent person and you figure this stuff out, utilize the resources all over the internet, including ours, there’s not a lot of competition. I’m going to read you the stats and stuff once we get into the show, they’re pretty staggering.
Jill DeWit: So is it safe to say though, if you’re just starting out, this takes a little bit of work.
Steven Butala: It’s going to take-
Jill DeWit: You may not want to start here even though it sounds attractive.
Steven Butala: Let’s just say, if you have a full-time job, and a couple of kids around the house, like all of did or do, it’s going to take you about six months of research before you actually start writing checks-
Jill DeWit: There you go.
Steven Butala: … on both the buy side and the sell side and that’s if you’re doing everything right. [inaudible 00:01:57]. I don’t want to scare everybody here, but real estate investing is not for a C- high school student.
Jill DeWit: That’s really good, and it’s true.
Steven Butala: Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community, it’s free.
Jill DeWit: Danny asks, “Hello, I just heard shocking news that Zillow requires proof of ownership, such as a signed warranty deed or county tax record with my name, in order verify the submitted listings. I recently succeed in getting a bunch of option sales for the first time, and I do not own anything yet. I want to market the property first in order to purchase them eventually.
Jill DeWit: Here are my questions. Number one, what are the ways I can market the properties for option purchase if not Zillow? Number two, they mention that if I want to market properties I do not own, I need to use MLS in order to post it on Zillow. Is having a real estate agent or getting a license by myself an inevitable element of option purchase? This is a lot of work he’s looking [crosstalk 00:03:06].
Steven Butala: All the shows this week have pretty detailed and hyper-focused questions.
Jill DeWit: Okay, I’m going to have to have you… If you don’t mind.
Steven Butala: I’ll help you.
Jill DeWit: I’m getting over a cold. You can probably tell, my heads a little foggy. So you already lost me at question one.
Steven Butala: I’ll help you.
Jill DeWit: Number three-
Steven Butala: Kevin helps us here too.
Jill DeWit: Oh good. Is it wrong to focus on doing many option deals instead of simple cash sales for beginners like me? Thanks.
Jill DeWit: Well this is good. One of our members replied in, so I’m going to read some of those.
Steven Butala: Want me to do it?
Jill DeWit: Okay.
Steven Butala: Joe responds, “Zillow just asks you if you own it when you call, and I say ‘Yes.’ It’s not wrong to focus on option deals when you don’t have a ton of money. Why? Because you don’t have a ton of money. Jack [Boshe’s 00:03:48] group teaches people to do nothing but buy options. Some people might say you can just use deal funding for any big deals. I say that you need to have one mother of a deal, with a huge spread, to get a deal funded. Options are good to way to fund your own deals with little or no money. They let you stack up lots of at bats.” This is good. “They let stack up lots of at bat, they’re also a good way to get to know an area that you haven’t worked in before. They take a long time and some of them don’t work but they’re worth in the long run.”
Steven Butala: And so now, Kevin, our moderator, responds, “Danny, Zillow is a bit odd to deal with on land ads.” And this is the real value here. “They call and want to verify the ad and they give me some big description of five acres in [Seccora 00:04:41] County when I have 10 of them.” This has been exactly my experience with Zillow, by the way. “When I can’t give them the street address, or if I ask the question to clarify, they hang up. I gave up advertising on Zillow two years ago.” So did I Kevin. “It’s not worth the headache for me. You can advertise on Craigslist and in some states, selling land on an option may be construed as representing the sale of land for someone else and realtors will come down on you.” That’s right.
Jill DeWit: It’s true.
Steven Butala: You need to have a license for that technically, but you will figure it out. And again, he’s exactly right. “You can do these land deals and you will find out what advertising works for you. Good luck.”
Steven Butala: So what they’re both saying is, in my opinion, just figure it out man. Don’t quote me on this, if all of us in this group really didn’t have the entrepreneurial spirit, and we were reading out of a manual and we never veered from exactly what happened in that manual or what the rules are anywhere, we would all be broke in two weeks.
Jill DeWit: And we didn’t know how to adjust and change and figure it out and get creative, we wouldn’t make it. I was going to add too, that it’s one of the easiest, instead of doing one-offs like this, if you’ve got a good enough property, spend the 100 to $300, whatever it costs, and it on something like Broker Direct, MLS and it’ll automatically syndicate for you. You still might have that phone call eventually, but it’s going to hit 20 to 40 places where it’s syndicated and you don’t have to do the individual work.
Steven Butala: Yeah. The MLS, the way the internet is in the last 24 months, is more and more increasingly becoming a place to sell land. When we started… actually when we started in the real estate business, it was impossible for us to even get anything on the MLS unless we hired a full-price real estate agent. And back then, it was to expensive, cost us 6 to 10%.
Jill DeWit: Or they didn’t want to do our deal too because the commission was too small. They’re like, “I don’t want 3% of 10,000.”
Steven Butala: Yeah, and that was before land.com, it was before Land Watch. I mean we were really, really one hand tied behind our back. This day in age, we’ve got probably 10 plus places to post property. And I’ll tell you, the real answer to this question is, post it everywhere.
Jill DeWit: Yup.
Steven Butala: Post it everywhere and after about 20 deals, you’re going to say, “Man, this is area is… Craigslist is perfect for this area.” Or even Ebay. Jill and I have tons of property on Ebay constantly. Do we maximize the price when we sell it? No. Quite honestly, we probably sell everything for way to cheap but the machine moves. The train just keeps moving on Ebay. So you’ll figure it out.
Jill DeWit: It’s funny, I bet if we… it’d be fun to play this game maybe on one of our weekly member calls, see how many places we can come up with just off the top of our head to post property. I bet that we’d have like 30 to 50 because there’s 10 alone on social media.
Steven Butala: I mean we’re getting reports back now because ParcelFact 2.0 is out, that all people do is buy a piece of property and then they go on ParcelFact, find out who owns all the properties around it, and they send them a letter and they sell property that way. I personally haven’t done that yet. I don’t know why. It’s probably because we have to produce this show every week.
Steven Butala: Today’s topic, tax deed investing explained. This is the meat of the show. Tax deeds, depending on your personality type, can be the greatest thing or the worst thing that can happen to your real estate investing career.
Jill DeWit: I’m comfortable with my personality type. Are you comfortable with yours?
Steven Butala: Yeah. What is your personality type?
Jill DeWit: That I am not… I love selling these when they’re done. It’s the whole process of getting them done, because there’s a lot of steps.
Steven Butala: Well tax deeds, this is tax deeds.
Jill DeWit: Okay.
Steven Butala: Tomorrow’s tax liens.
Jill DeWit: Okay.
Steven Butala: See, personality type.
Jill DeWit: Thank you. I’m out. Just kidding.
Steven Butala: Here’s the difference. I’m going to name the states that are tax deed states and tomorrow I’m going to name the states that are tax lien states. But here’s the difference between the two. There’s 31 tax deed states by the way, I’ll name them in a second. Tax deeds, every county in every state has a set of rules for when property owners stop paying their taxes. So I’m sure you’re sitting there saying, “Why the heck would anyone stop paying their taxes on a perfectly good piece of property?” And 9 times out of 10, the answer is because they’re dead. They’re dead and their heirs, maybe they didn’t have any heirs or people, in general, just don’t estate plan. And the kids or the heirs never knew that they had the property. It’s shocking to me how many old guys have property that no one knows about because they have some plan in their head to use it someday and it just never comes to fruition.
Jill DeWit: Exactly.
Steven Butala: Or there’s huge disputes. Maybe there a big dispute in a family, 22 people on the property and no one can get along so everyone just stops paying the taxes. And so there’s a lot of reason why people stop paying the taxes.
Steven Butala: In a tax deed state, let’s just use California as an example, a certain amount of time passes, several years actually, the county sends notice, after notice, after notice to the owner of record on the assessor database. Then no response, no response, then they start sending certified mail for maybe a year, no response. And their state statues that dictate what has to happen. And so in California, the state statute say, in all tax deeds states say, the taxing authority, which is always the county, in very, very few situations is the city, the county taxes the property back into it’s possession and literally the deed says State of California or State of Arizona or State of New Jersey.
Steven Butala: Then there’s a statutory process for them to get rid of it, that’s tax deed investing where I would go buy the property. Sometimes it’s a live auction with a gavel like it’s 1978, sometimes they have, now… California has, almost all counties in California have their online auctions, essentially the same as a gavel auction but it’s online and it’s televised on Bid4Assets, B-I-D, number four, Assets.com, and it’s almost perpetual. I just read, right before recording this that 3000 tax deeds and liens are purchased every single day. So this never goes away. Every year new tax deeds and tax liens come up.
Steven Butala: It’s a fantastic way, if you’re an engineering type, aerospace type or data person, it’s a fantastic way to buy properties that worth 30, 40, 50, 100, 000 bucks for 2 cents on a dollar, sometimes less than $1000, often less than $1000. So I mean, every single time, even this point in my career, I go through these lists and-
Jill DeWit: I have some questions.
Steven Butala: … go through these lists and I’m shocked that no one’s purchased this property yet. Yeah, go ahead.
Jill DeWit: Would I know this when I’m staring at a treasurer’s deed, that’s where it came from?
Steven Butala: Yes.
Jill DeWit: Thank you.
Steven Butala: Yes Jill, that’s exactly right.
Jill DeWit: I know. I’m not that out of it. Thank you. Also, I’m trying to think of questions that have come to me that people have asked. What if I bought from a treasure’s deed and now I’m trying to sell the property and I got a phone call from a guy that says, “Wait a minute, that’s mine.” What do I do with him?
Steven Butala: What do you do? So explain it to me again, what happens?
Jill DeWit: We went through the process, let’s just say. I’m thinking of some questions that our members have asked us. So say I went through the whole process, I did it all correctly. We all know… eight, it’s probably eight years at this point, by the way.
Steven Butala: You mean the seller did.
Jill DeWit: Hold on a moment. I bought from the county, I have treasurers deed, I own it. By the way, that treasurers deed essentially wipes everything out. I mean, and that’s official. So when I have a guy that-
Steven Butala: She means all the liens, or potential liens.
Jill DeWit: Exactly, it’s kind of starting fresh. I like these because of that. It’s technically starting fresh. So I have Joe Shmo says, “Hey, that’s my property. What are you doing selling it?” Just refer him back to the country?
Steven Butala: If Joe Shmo comes up and says, “Hey, that’s my property.” And you bought it at a tax sale?
Jill DeWit: Yup.
Steven Butala: First of all, in all the tax deals I’ve ever done, both lien and deed, this has never happened.
Jill DeWit: People come up with these questions, so I’m just trying to address it right now.
Steven Butala: You would just say, “Look, I bought it at a tax sale. I would recommend that you get an attorney.” Not just in this situation, when anybody comes up with some kind of thing like this, my answers always to give them something to do and they’ll just away, 9 times out of 10.
Jill DeWit: Actually that’s true.
Steven Butala: So what I would say in that case, I would say, “I bought it at a tax sale last year, it’s all fair and square. I would recommend that you get an attorney and have them call me. If you think you own this in any way, there’s a legal proceeding and a processing. I’m happy to see you in court. I’ve got nine lawyers so let’s go.” And then they would never hear from them again. That’s all true, by the way.
Jill DeWit: Yeah, I didn’t mean to throw you under the bus.
Steven Butala: No, that’s okay. Tax lien and deed investing is very deep and complicated and there’s bachelors degree, masters degree and PhD level stuff. And so, in a silly little show like we have here, I’m just trying to skip along the top-
Jill DeWit: I understand.
Steven Butala: It’s introduction to tax deed investing explained kind of thing.
Jill DeWit: Got it.
Steven Butala: That’s what we should’ve called it.
Jill DeWit: Okay. Can you explain with this with over the counter?
Steven Butala: Yeah, so that’s a great point.
Jill DeWit: Thank you.
Steven Butala: You just heard me explain how the taxing authority has a gavel auction and they sell all this property. Very, very often none of it sells, it doesn’t sell at all. There’s people sitting in the audience, let’s say, they just don’t bid on the property for whatever reason or the property’s really bad. There’s a lot slivers of property out there that APNs associated with them that the owner of record get a tax bill every year and says, “I don’t want this property. It’s a sliver piece of garbage.” You see this a lot in urban counties verses rural. Then, they go to what’s called an over the counter list, that’s what it’s called out West, there’s a lot of different… that’s the end of the line. Lots of different descriptions for it back East.
Steven Butala: These OTC lists are packed full of property that nobody purchased at the auction and it’s just sitting there ready for you to buy. I just went through it this weekend, a whole list of property where there’s houses in there for four grand. And again, I’m sitting there saying… which we’re buying, “I can’t believe no one…” and to the public, you just go on the country website, it’s sitting there.
Jill DeWit: Those are my favorite, by the way. I love OTC property.
Steven Butala: I know you do. OCD here-
Jill DeWit: OCD, OTC.
Steven Butala: …. attention deficit disorder, loves just to… the easiest way.
Jill DeWit: Thank you.
Steven Butala: So I hope that clarifies at least at a 35,000 foot level, what happens with tax died investing. We’ve been doing it long before we ever started sending out… If you’re familiar with Land Academy, all we do is send out mail now. But there was a time before that, it wasn’t feasible because of datasets weren’t where they needed to be, where [inaudible 00:15:50] wasn’t where it is today.
Jill DeWit: It’s true.
Steven Butala: And the only place you could get a good dataset was from the county, and that’s a disaster. If you’ve ever got a dataset from the county, it’s-
Jill DeWit: Funny.
Steven Butala: … a total mess. The answer is, do a ton of research and find out… There’s a couple states that have tax died problems that are state centralized, Arkansas’s one, and Florida’s one. So they don’t, for whatever reason, they don’t want the counties, or it’s just organized that way to manage this process, so it’s at the state level. The great news for you is that it’s one centrally located place where you can… I mean we buy properties in Arkansas for $25 regularly and so do our members. Florida’s a little bit more complicated, but if you just want to get into the business and see how it works, those two places are a great place to start. Another place to start… good place to start is Michigan. They have an annual online, very well organized state-driven tax died auction, and it’s all mapped out, it’s beautiful actually. Jill and I bought property right on the Great Lakes one time there.
Steven Butala: Hey, we know your time’s valuable, thanks for spending it with us today. Join us next time for the episode called the tax role data plays in taxing and investing explained. Actually-
Jill DeWit: And we answer your questions… Oh.
Steven Butala: … the title is, this is the title.
Jill DeWit: Okay.
Steven Butala: Tax Lien Investing Explained.
Jill DeWit: Okay.
Steven Butala: The writer of these scripts, I’m going talk to him. No, it’s me.
Jill DeWit: I know. And we answer your questions posted in our online community at landinvestors.com, it is free.
Steven Butala: You are not alone in your real estate ambition. You were going to ask me a question?
Jill DeWit: No.
Steven Butala: Did you change your mind or forget?
Jill DeWit: No, I didn’t have one. Did I look like I did?
Steven Butala: I don’t know.
Jill DeWit: No, I just [inaudible 00:17:33]. I don’t have one.
Steven Butala: I love tax season, in case you can’t tell.
Jill DeWit: Yes.
Steven Butala: I love it. Here’s the downside though. We talked about all the good stuff.
Jill DeWit: Right.
Steven Butala: Let’s say all your wishes come true and you find a county that’s got a tax deed list, maybe you’ve called them, it’s not even posted on the internet. And they said, “Oh yeah, you know what, I’m going to dust this thing off. No ones asked me for this for two years.” And they send it to you and it’s big, thick IBM green and white dot matrix printout, this has literally happened to me recently, and it’s half the size of a phone book.
Steven Butala: And so you just can’t contain yourself because there’s hundreds, probably 10, 15, $20 million of profit margin in there. That’s the good news. The bad news is, it’s impossible, unless you have a team behind you, to start looking up every single one of these properties and see if you want to buy them, see if it’s worthy. So now you’re analyzing… What Jill and I preach at Land Academy is, send out all the stuff, send it out and have it come back to you. Have the sellers reach out to you and they’re already willing and ready to go. And you can do way more deals that way then you could flipping through a green bar sheet analyzing every single deal. On the 34th sheet, you’re going to need some coffee and you’re going to stop, that’s what’s going to happen.
Steven Butala: It takes a lot of organization and you need to know… you really need to know the states really well and the countries really well that you’re doing this in to know that, “Oh yeah, I really want to buy an APN scheme 107,” or something like that. So this a good skipping along the top.
Jill DeWit: Thank you. Wherever you’re watching, wherever you’re listening, please subscribe and rate us there. We’re Steve and Jill.
Steven Butala: Information-
Jill DeWit: And inspiration.
Steven Butala: To buy undervalued property.
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