How to create a business with tax liens


Tomorrow we begin our International Investing course in Orlando and one session will be about how to create a business with tax liens. This makes an ideal opportunity for a business on tour own or with other investors (at home or abroad) as the following reader has proven to me.

Here is what a reader recently expressed.

Dear Gary and Merri,

I received your World Reports and I have been busy reading it this evening. I have been to and bought tapes of many of your courses and conferences (in Naples, Florida and Ecuador), and the light is beginning to shine. I not only understand a lot of what you are saying now, but I find myself agreeing with almost all of it.

I am a retired M.D. with degrees in physics, microbiology, and biochemistry and agree completely with your seven golden rules of investing. I wrote the original article for International Living on the French Leaseback Program. I last emailed you when we were discussing timber and land investments. I was therefore floored to read your insert about tax liens. This is exactly the way I have been investing for more than ten years in Georgia, Florida, Arizona, and South Carolina to name a few. I am acquainted with Ted Thomas and have been buying tax deeds, the overwhelming majority of which have been farms or land and timber. I carefully read what your insert had to say about the safety of tax liens. If you do not do your due diligence, it is quite possible to lose money on these. The laws generally do guarantee the interest rate, and the ability to own the property does exist, but it is still possible to buy a lien on a worthless piece of land. I have seen this happen a number of times. Caveat emptor!

Three weeks ago I purchased a deed to a 30-acre farm in deep southwest Georgia, and the tax commissioner tells me that it has already been redeemed for a 20% return (the check is in the mail, we hope). This is the one we will not own.

A partner and I have bought seven properties together, and I have placed one in my ROTH IRA. By the way, the ROTH is an entire other subject, and is an excellent way to own taxdeeds or liens, indeed even foreign real estate. I have noticed that the commentators in the media have been arguing over age as it relates to having a ROTH or a traditional IRA. I don't think that age is the most important factor, but rather whether or not one intends to use the ROTH as an investment and asset protection vehicle. In those regards, I find the ROTH to work better than an LLC, and with less paperwork.

One property recently sold and split for close to a $10,000 profit was a 38 acres of mixed pine and hardwood timber, and it was sort of an ephemeral experience for me in the sense that we negotiated the sale without a real estate agent, and without my ever physically viewing the property. Closing costs were a little above $100 for the lawyer involved.

Late this summer there were 9 acres just north of Dublin, Georgia, with paved highway frontage, approximately two to three miles from the I-16 entrance ramp. It was an attractive property with 30-year-old mixed pine and hardwood covering all but about one-half an acre. As we often see in Georgia, this was an "estate" sale. One of the heirs attended the auction and I was able to speak with him. Neither the county nor this man had any idea where or who all the legitimate inheritors were. In this case, the tax sale was literally the only way to clear title to the land. I was very fortunate in that I was bidding against locals only, and I was able to secure this property for $9000 or $1000 per acre. We did pay an additional $12 to record the deed.

The next property purchased was outside of Forsyth, Georgia. This was also a very good sale, with several houses in the $100,000 to $150,000+ range. When I got to the sale, there was a young man buying basically everything. He proved to me very graphically, by the way, the advantage of large liquidity at these sales. He purchased the tax deed to the $150,000+ house for $85,000. I spoke with him after the sale. He represented a company that formed partnerships with well-off investors. The investors were required at a minimum to put up $100,000, plus a $900,000 line of credit.

These people were quite organized and had run title searches on all the properties prior to the auction. That was another department, the young man was only there to bid, for which he received 3%. In the 45 minutes that the auction lasted, he earned around $6000, with his total work being to bid.

However he did let me have one property, 5.37 acres about nine miles from town. It was assessed by the tax authorities at $27,000, and I was able to get it for $6500. It had a junker trailer on the property, but the good news is that once it is gone, there is a very nice house site with septic, water, and power. It is located on a paved road, again not far from an interstate entrance ramp, in this case I-75.

What I personally liked the best when initially canvassing the property was an immense old oak tree spreading its boughs behind the house site. I viewed the property after the sale and discovered the best news of all. Behind that oak tree were four acres of approximately sixty-year-old pine, nice big boys! A controlled cut will remove the big trees and leave the younger trees to grow.

In general, I try to get a property for 20-60% of the assessed value by the county. County tax assessors vary in the values they put on properties, but often their retail value will run 10-25% more than their assessed value. Best regards to you and the conference.

There you have it business (inspecting, buying and bidding for others) and investing opportunities all tied together. This is a business you can take anywhere. For more details you can go to www.garyascott.com/tedthomas/ or send me your questions.

This is an especially attractive idea for those who want a business that will bring travel. Non U.S. business people can travel to the U.S. on behalf of others to look at and bid on property. U.S. business people can travel abroad to find investors.

I spent nearly two decades traveling the globe signing up investors so I have a lot of experience in this field. If you have questions, don't hesitate to ask.

Until next message I hope your business will always be good.

Gary


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