Tax Lien Investing Explained (1030)
Tax Lien Investing Explained (1030)
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 lien investing explained. Yesterday we talked about tax deeds, today we’re going to talk about tax liens. Jill is just as underwhelmed today about this as she was yesterday.
Jill DeWit: They are really good … It’s good. I mean, when you get going, if you’re looking for another way to find some properties inexpensively, roll them in, these are all good things and you should, no matter what, know about them. When you see transactions come through, you see a treasurer’s deed, you know what it is and things like that.
Steven Butala: In our little investing operation, Jill learns about it, once it hits our system. She doesn’t know how it gets there. She’s more involved in it than that, but she doesn’t care I’ll say.
Jill DeWit: Back in the day, how about that?
Steven Butala: If stuff hits the system, hits the CRM and it’s in an acquisition process, it could be a tax lien, it could be a tax deed, chances are it’s from the mailer. Like 90% of them are from the mailer, but once in a while, a lien foreclosure like we’re going to talk about here in a second, or a tax deed hits it. The profit margins on those are extraordinary.r
Jill DeWit: Right.
Steven Butala: It takes a lot more effort and a lot more time, and quite honestly, a lot more raw IQ score to get through the tax deed and tax lien process as it does to send out mail. The point is, she doesn’t care. She just has something to sell and she sees how much it costs and she’s like, “Well, yeah. I can sell it for more than that.”
Jill DeWit: The last time I checked, because that’s your role. It’s part of why we have a beautiful thing. That’s your thing.
Steven Butala: We have a beautiful thing together, Jill and I.
Jill DeWit: We do. No, honestly, I know about them. I know how to do them, but I don’t do them. That’s kind of your side of the sheet. My side of the sheet is all the other stuff.
Steven Butala: Yeah.
Jill DeWit: Thank you.
Steven Butala: Hey, before we get into it, let’s take a question, a very, very lengthy question potentially, posted by one of our members on the landinvestors.com online community. It’s free.
Jill DeWit: Lou asked, “Hi all. I just downloaded my first data set. Yay. The only problem is that there are no mailing addresses on the spreadsheet. Did I do something wrong? Luckily, this county had only 500 people that met my criteria, so I’m only wasting $50, but I would much rather get a list with mailing addresses in the future and not waste any money. Any advice is appreciated. Thank you, Lou.” One of our moderators, Kevin, responded right away. “Lou, that is a real disappointment. In the future, you should spot check the data before downloading by clicking on a few of them at random and then copy the APN. You can look up each sample and make sure that the mailing addresses are included in the assessor data. Some counties have really bad data.” That’s the point here, and some counties may withhold mailing addresses, so it’s real.
Steven Butala: That’s exactly right, and then there’s one more comment here, but the fact is this. RealQuest, and DataTree, and everybody else on the ChannelPro 24/7, they’re data aggregators. That’s what they do. They don’t create the data. They don’t have somebody sitting there spot-checking data. They get a data feed from all 3144 counties, and the data comes in, in all different formats. Jill and I have had meetings with the people at … the executives at all of these companies. That’s why we’re license providers. They all have stories about, “Oh, yeah, Arkansas sends a handwritten note”, or, “We had to finally put a guy in the county-”
Jill DeWit: In the office.
Steven Butala: “Arkansas to manage data because it’s so loosey-goosey.” There’s a lot of different reasons why this might happen, and our moderator is exactly right. You have to check the stuff before you download it or else it’s going to be datafied.
Jill DeWit: It’s true.
Steven Butala: You got to kiss the girl before you marry her, man.
Jill DeWit: The data is only as good as what the assessors input, and they are … So often, they’re real people. That’s it. They might put stuff in wrong. So now and then, things happen. Then along that regard, you want me to read what Daniel wrote?
Steven Butala: Yeah.
Jill DeWit: So Daniel, one of our members, also responded. “Lou, I just did that very same thing. I forgot to check the data in a rush mailer when I was trying to get out before I went on vacation.”
Steven Butala: We’ve all done that, too.
Jill DeWit: I’m sure many others have done the same thing. “I just pulled another county and got it in the mail, and now I’m lying in bed in the evening, scraping the tax site for addresses to paste into my data. Hopefully it pays out, since I would think it’s an untapped county.” That’s another way to look at it too, by the way. If you pass on that county, and then someone like Daniel here is sitting here inputting addresses, because he doesn’t think anybody else is doing the work, there might be something there.
Steven Butala: I mean, talk about making lemonade out of lemons.
Jill DeWit: Exactly.
Steven Butala: That’s brilliant, actually.
Jill DeWit: I would actually-
Steven Butala: That’s dedicated.
Jill DeWit: The only thing I would do differently is hire someone else to input that for you overnight, while you’re sleeping, for much less money, if you really want to do that.
Steven Butala: You’d probably doing this on vacation, too.
Jill DeWit: Yeah.
Steven Butala: I’ve done mailers on vacation. Just ask Jill.
Jill DeWit: Maybe he’s avoiding vacation with people because of this. “Sorry, baby. I’ve got to do this. What do you think pays for this vacation, baby?”
Steven Butala: Before Jill and I started Land Academy, we used to come out … We live here now, but we used to come out to the beaches of Los Angeles here, and there were several times when Jill went to the beach when our kids were little, and I went to the library, all day. They never understood that.
Jill DeWit: Sometimes both of us did.
Steven Butala: I don’t think they actually fully recovered from that ever.
Jill DeWit: There were times we were out here with no kids. Remember that? We used to have a thing. Our deal was 4:00 wheels up, we would both go do our work, and our deal was meet in the driveway on your bike at 4:00.
Steven Butala: Yeah, I do remember that. That was fun.
Jill DeWit: That was fun. It was good.
Steven Butala: Those were the good ole days, Jill.
Jill DeWit: Uh-huh.
Steven Butala: We were working … I mean, we work pretty hard now, but …
Jill DeWit: We should do that today. 4:00 wheels up.
Steven Butala: I like it.
Jill DeWit: That was our thing.
Steven Butala: Let’s do that again. Today’s topic: Tax lien investing explained. This is the meat of the show.
Steven Butala: I promised yesterday I would name the states; tax lien states and tax deed states, and I forgot. So, I’m going to do it right now. This is a list of the tax deed states. The states are either one or the other. In very rare cases, like Texas and Arizona, they’re both. They’re called redeemed deed states. This is way beyond the scope of this conversation, but all you need to know through this is that the state is either a lien state or a deed state.
Steven Butala: Here are the tax deed states from yesterday: Alaska, Arkansas, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Kansas, Maine, Michigan, Missouri, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, Washington, and Wisconsin. All the other states are lien states. When liens fail, they only get so old. They become deeds. In theory, every state’s a deed state. There’s a lot of people that could disagree with that, but we’re talking about liens today.
Steven Butala: Here’s how tax liens work. It all starts with people not paying their taxes. Like we talked about yesterday, there’s a lot of reasons for this, but it all centers around either the fact that they pass away, or whoever owns the property doesn’t believe that it’s worth the amount of taxes any longer, or they’re just lazy, or drunk, or some reason they just stopped paying taxes.
Jill DeWit: Why does drunk come in? Maybe they had a life change event? Maybe they’re somebody who lost their job. Maybe something big happened-
Steven Butala: Okay, that’s good, too.
Jill DeWit: They’re not just drunk in the corner.
Steven Butala: Maybe they had a 360 day bender and they didn’t stop to pay their taxes.
Jill DeWit: All right. Oh, man.
Steven Butala: So what happens is, they start to get notices, just like a tax deed state, notices, and notices, and notices from the tax deed authority. I would highly recommend you listening to yesterday’s show to fill in the pieces for this one. And the liens, the tax lien authority places a lien on the property. I, as an investor … If Jill owns a piece of property, she stops paying her taxes, they place a lien on her property, I, as an investor, can go purchase that lien. I’m not buying the property. I’m just purchasing the lien. So what does that mean? I essentially paid her back taxes for her to the taxing authority, so now they’re happy. They’re like, “Yeah, man. That actually worked. We got our money.”
Steven Butala: So the oweness is on me to do one of two things: get her to pay me the taxes, because I’m going to get a real healthy interest rate on top of what I paid, plus administrative fees. It’s like, if you bought a piece of stock and it went up. That’s what would happen. It’s the equivalent of that. Think about it like that. If I can’t find her, which happens 99% of the time, or I don’t care, I foreclose on the lien to own the property, which is a tax foreclosure judicial … It’s a judicial action in the court system.
Steven Butala: I have two choices. Find her and get my money, or foreclose on the property and own it. This whole late night TV infomercial because you can’t sleep because you want to be a real estate investor, you’re watching that stuff and they’ve got these beautiful pictures of “how you can be a millionaire in days.”
Jill DeWit: Right.
Steven Butala: “I bought this house for $4000. I bought this building for just the back tax amount.” All of that is true. All of it. And, we’ve done all of it, and do all of it. That’s the whole concept of tax lien investing. You pay somebody’s taxes without their consent, and you foreclose on the property, then you own it. So, “Wow! Sounds great! How do I get started?” “Wait, that’s great Steve. How easy is that?” It’s a lot more complicated than that, and there’s huge … The data component to this is massive.
Jill DeWit: Right.
Steven Butala: There’s huge lists. There’s really useless property in every single one of these lists. Some of the properties have accumulated IRS liens, and all kinds of stuff that … And each state, to make it worse, is different. You’ve got to understand their rules.
Jill DeWit: Right. There’s a lot of steps.
Steven Butala: Again, this is why we seriously recommend sending out mail, blind offers to everybody. If you don’t know by now, our constituency in our group has crazy incredible successment. You’re probably just brand new, and that’s okay. But tax lien investing, from a money standpoint and a markup standpoint, it can be incredibly profitable and fun. Who doesn’t like to make $30,000 on a piece of land that you paid $800 for?
Jill DeWit: Right.
Steven Butala: We’re doing a deal right now, a tax lien foreclosure, that looks like it’s going to happen. We’ll be all into it, after fees and everything, for about $1800. This is with title insurance at the end. It’s probably worth $100, and we’ll easily probably get $30,000 out of it. The person we sell it to is going to make a ton of money.
Steven Butala: That’s tax liens. You have any questions on it?
Jill DeWit: No. It’s such an interesting concept that I want people to believe that it really happens, but it’s really true. At the end of the day, the worst case scenario is to avoid foreclosure, the person who owns the property is going to anty up and reimburse you, and you do get all your money back, plus a percentage, plus what you said, the admin fees and things like that. There’s rules of what they have to follow to wipe out that lien.
Steven Butala: And all the legal fees, in Arizona anyway. You can recoup their legal fees.
Jill DeWit: If you start down the foreclosure process, so you do get reimbursed. The only thing about these is it does take time. I mean, these are six months easy deals by the time you own it.
Steven Butala: And there’s lawyers involved, and legal process-
Jill DeWit: You have to plan for. So yeah, if you don’t have the money, or the time, or the energy to spend six months on that, this is not where you want to be. That’s why sending out mail, and you could be cash flowing in 30 days.
Steven Butala: That’s right.
Jill DeWit: That’s what we do.
Steven Butala: Or, you can do both, which is really what we do.
Jill DeWit: That’s exactly right.
Steven Butala: Hey, we know your time is valuable. Thanks for spending some of it with us today, anyway. Join us next time for the episode called, The Benefits of Networking at Live Events and Online Webinars.
Jill DeWit: And we answer your questions posted on our online community at landinvestors.com. It is free.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: Cool.
Steven Butala: That’s a good overview of tax liens and tax deeds.
Jill DeWit: Did you know what I was going to say? I have story about someone I knew that did a 360 day bender. Not kidding.
Steven Butala: Okay. I want to hear this.
Jill DeWit: You said it.
Steven Butala: I hope it’s not about me.
Jill DeWit: No, it’s not you. No. I dated a surgeon one time.
Steven Butala: This is great stuff.
Jill DeWit: This is really good. So, I dated a surgeon who had a very good business. Well, there was a problem. He basically … Something changed in his business, and he decided to cash out and walk away. He walked away with a lot of money in the bank. Right? So, he went and checked himself into a hotel in Mexico for about a year, and pretty much was on a 360 day bender. And then decided after a year, was like, “All right. This is not how … I’m going to die. I can’t live like this. I’ve got to get back and on my feet.” Even though he could afford not to, he decided to get back in and start doing something else. I met him after the 360. I met him after that. It was just kind of funny. But, he was telling me a story about how he really went and disappeared.
Steven Butala: So, I have several questions.
Jill DeWit: Okay. Go ahead.
Steven Butala: How did this relationship start with you and this surgeon, and how did it end?
Jill DeWit: Oh, it started … Wow. When I met him, because he was just doing something to keep busy, basically like handyman stuff. Not kidding. Showed up to fix a wall in my house.
Steven Butala: Okay. This doesn’t make any sense. Go ahead.
Jill DeWit: I’m not kidding.
Steven Butala: Why would he be a handyman if he’s a surgeon, and with all this money in the bank.
Jill DeWit: Just something to do. He was just looking for something to keep himself busy, and fixing walls. I don’t know.
Steven Butala: Don’t buy it.
Jill DeWit: All right.
Steven Butala: He wanted to meet a pretty girl.
Jill DeWit: Okay.
Steven Butala: And, it worked.
Jill DeWit: Anyway, well it’s just actually … maybe that’s true because he ended up, as he’s fixing the wall, asking me out for dinner.
Steven Butala: Yep. Keep going.
Jill DeWit: All right. It was only a couple months. You know what else? He was former pro-Hockey player.
Steven Butala: Oh, of course. Yeah.
Jill DeWit: So there might have been some-
Steven Butala: He’s the Vice President of the United States, too.
Jill DeWit: No, he really was. I’m serious. I’m not going to go any further with that. He was a former pro-Hockey player too, so I’m not going to say who or where, but maybe there was a head injury involved, too.
Steven Butala: Yeah. He’s a former NHL surgeon, fixing your wall.
Jill DeWit: No, he was a hockey player who went into the military, and then became a surgeon.
Steven Butala: Oh, he’s military, too.
Jill DeWit: Yep, that’s true. I’m serious.
Steven Butala: All right. Good.
Jill DeWit: I’m not kidding. Anyway, let’s leave it at that.
Steven Butala: I think you missed the boat, there.
Jill DeWit: No, no, no, no, no. I did not. Way too OCD for me.
Steven Butala: Oh, yeah?
Jill DeWit: Oh my goodness. Way too OCD for me. I couldn’t do it. There’s no way. I think it was the surgeon in him that like everything had to be really perfect. I mean, we’re talking sterilized.
Steven Butala: Oh, man. What fun is that?
Jill DeWit: That’s not me. It’ll never work.
Steven Butala: It just makes like 30 jokes, in the filth pit that we live in makes sense now.
Jill DeWit: As Jack hacks up on the microphone. Just kidding. And I’m over here sick, too. This is great. We clearly don’t have that in our house. Oh, man. All right. Wherever you’re watching, or wherever you’re listening, please subscribe and rate us there. We are Steve and Jill.
Steven Butala: Information
Jill DeWit: And inspiration
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