Hey Moguls, Corey Taylor here… back with ya again for my second Mogul lesson! Yep, I’m still a newbie Faculty Advisor, but I’ve got tons of expertise in the niche of all things taxes.
And, in case you missed my first lesson, which was packed with loads of helpful tax deed and lien info, make sure you check it out. And, while you’re at it, look into my awesome training call, too.
But let’s dive in for today’s lesson…
We all have a favorite thing right?
A favorite food… favorite car… favorite football team… favorite TV show, even a favorite hobby.
It’s no different on the investing side; we end up with favorites. It’s a tactic or a strategy that seems to come through reliably every time and give us that accomplishment or sense of satisfaction that makes it become a “favorite.”
Let me tell you about our favorite in our company, Fortris.
This is one of the strategies that I didn’t even know existed for investors to OWN properties through tax sales. I was oblivious to this, and this ignorance kept me out of tax sales way too long. I missed a ton of opportunities over the years by simply not knowing!
So I’m really excited to share it with you.
The Big Reveal
We like buying liens. That’s it, isn’t that great?
Yes, I’m pulling your chain, there’s more... We buy not just any lien, we buy liens that we know are very unlikely to redeem.
You remember what redemption is? It’s the period of time between when the lien was purchased by the investor at the auction and the time the property owner has to pay the taxes on the lien to keep the property out of tax foreclosure.
Usually there is a 97% chance a lien will “redeem” and pay the investor plus his fees and interest. This is great if you want interest, it’s not great if you want properties to own.
So how do we get ourselves out of the 97% group and into the 3% group? You have to peek behind the curtain a little and recognize the signs. Thankfully they aren’t hard to recognize when you look for them.
First let me remind you that most lien investors who are attending the auction want to earn interest on the liens they purchase. They’re picking properties in pretty good shape, and occupied. That makes them feel super-safe on their investment because they don’t want to own, they want to get paid. They WANT the 97% chance of redemption.
One Man’s Trash Is Another Man’s Treasure
The good thing for us is that we don’t want in on that 97%... and we aren’t buying “trash,” my point is the properties they want at auction are not the ones we want.
These are the kinds of things we want to look for in props:
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Vacant
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High grass
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In need of rehab
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Deceased owner
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No obvious probate issue
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3 or less interested parties being notified of sale
If a property has these characteristics, it’s very likely it will stick in the 3% of non-redemption liens.
Do you see the beauty of it? The very same properties ignored by all the investors at auction are the ones we want! While they’re scared to own, we’re crossing fingers and dancing a jig hoping we own it until the redemption date.
Notice a few of the items were property defects, and the others were title defects.
It doesn’t really matter which defect you check first, they both need to be there. However, we often check title first because we only want to spend time on the ones with deceased owners before we look at a lot of properties. It’s a simple fact that a lot of heirs don’t want to keep property they have coming if it’s in rough shape needing a rehab.
You can check the title easily by going down to the courthouse, if you’re in that state. Or another option is to call down to the courthouse and ask for a searcher who’s already there to do some freelance work for you to check a few things. You don’t need a full search, you’re just checking a current status.
So now you know how to get properties through buying the liens, and why that strategy works well...
Saving a Bundle While Bundling
Here’s the second main reason we like to buy liens that will likely not redeem and become owned by us.
When you’re buying liens, you’re paying the tax amount owed, typically a few grand, not bidding up on value of the property. The taxes owed are normally a FRACTION of the property value. You’re in so cheap it’s embarrassing. It makes talking about a maximum payment of 60% of ARV kind of laughable.
Do we have to wait through a redemption period? Yes, but that’s a small price to pay to get properties this cheap, AND we buy them in batches anyway. We’ll buy 10 liens this way, knowing we’ll get half or more when redemption ends. You would simply buy as many as you need in that particular market to end up with the number of deals you want when redemption ends.
You really don’t have a deal-flow problem anymore because these liens are lying around everywhere like acres of diamonds.
When Matters, Too
The final piece you need is WHEN to buy these liens.
We like buying them AFTER the auctions, not at the live auctions. Buying liens afterward is often called assignment sales or OTC. Why compete for them when they’ll be handed to you on a list? Just review the list of remaining liens for the characteristics above and get deals, it couldn’t be easier.
I hope you found this useful and will consider making it one of your own favorite investing strategies!
Enjoy!
Corey Taylor
Questions, Comments, Thoughts?
Got any tax lien questions? Perhaps another auction tip? Hit me up in the comments below.
Understand that you want to get in on the 3% of non-redemption liens.
Recognize the kinds of things to look for that 3% - vacancy, high grass, in need of rehab, etc.
Wait until after the auction; grab the list of props that weren’t scooped up and get
all of them.
Corey Taylor
is an active Real Estate Entrepreneur with a specialized focus on investing in tax sale properties. He's also an investment trainer with a highly successful Investing Course called Elite Tax Sale Training.
After graduating from the US Naval Academy in 1997, Corey accepted a US Marine Corps commission as 2nd Lieutenant. Corey began real estate investing around 2001 between deployments. He bought every real estate course under the sun and took action. Having built an investment company part-time, he got out of the Marine Corps in late 2004 and became a full time investor. Within a few years he had over 200 transactions worth of experience in rehabs, wholesales, short sales, lease options, owner financing, note selling, self directed IRAs, and managing millions in private money.
Corey admits his first taste of failure during the Real Estate downturn. He got back up by problem-solving in a down market and discovered how Tax Sales provide both discounted property as well as huge interest returns on capital and that’s where he has focused his efforts ever since.
In addition to working his Tax Sale Investment Strategies full time and speaking around the country, Corey also voluntarily leads hundreds of people through Dave Ramsey’s Financial Peace University every year and advocates true financial wisdom. Corey and his beautiful wife Andrea have 2 young children.