FREE COURSE TRANSCRIPT TSFC Mod #1

Allan Susoeff, Jr., PE, PhD [Publish Date]

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Hi everyone Allan Susoeff here with AskAlHow. I would like to welcome you to the free version of my tax sales course. Consider this the minicourse. First of all let me congratulate you for enrolling in this course I feel like you made a good decision and I know that if you’re looking at Tax Sales then you’re the kind of real estate investor that’s looking for an edge, some way to bust out just a little bit better than the competition and establish yourself as one of the leaders in this business. I am the same way, so pleased to meet you and let’s go make some money, right? I promise you, you’re going to gain a wealth of information over the next 7 days or so and I want you to know exactly how the course works so here it is. Over the next seven days every day you will receive a brand-new video that you can watch, just like this one. There will be a spot for comments and questions at the bottom of the page and I want you guys to put in all your questions and I will get to them as quickly as I can. Your questions really help. Those questions become a knowledge base that will not only be helpful to you but helpful to all of the other students as well and that just keeps expanding bigger and bigger as we go along. Now today’s mostly going to be about an introduction and some basic terminology. I’ll give you a few definitions so that you have a solid understanding of what were talking about as we move forward. Fair enough? In the next module will actually start getting into the investment process itself.

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➢ Entered the Trades: 1982

➢ Became a Builder: 1987

➢ 1st home at 25: 1990

➢ Started Flipping: 1990

➢ Went Full Time: 2005

In 1982, rather than going to college like most of my friends I decided I wanted to get into the trades and in Northern California I went to apprenticeship training and became a journeyman painter as well as a journeyman carpenter. In the mid-80s I moved to Arkansas, and ultimately started my own construction business. By the early 90s I was building homes all over Arkansas and Oklahoma and once in a while in Western Tennessee, Southern Missouri, and northern Louisiana. At 25 I bought my first home, it was a HUD home that had been foreclosed on, the bank now owned it, and I bought it for a whopping total of $15,000. I remodeled it and lived in it till I left for college at University of Arkansas to study engineering. During that time I dabbled with what is now called house flipping. At the time there was no real name for it. I would buy about 2 to 4 houses a year and work on them when I wasn’t working on other projects and make on average 10,000 to 20,000 per house after I paid all the expenses. Once I got my degree and tried to enter corporate America, I realized exactly how little I was going to make as an engineer. If there’s engineers in the room you know exactly what I’m talking about, civil engineers are not known for high salaries. That was in 2000. At that point I started flipping again, to make up for the money I was not making as an engineer. Yes, I questioned myself as to why even started the college degree to begin with. You guys will find that I’m big on education, however if I had to do it all over again, I’m not so sure that the student loans I incurred justified the money I didn’t make in that business. At that point I started flipping an average of about one house per month. And if you guys remember anything about the real

estate market pre-crash of 2008, that was just the beginning things were about to get hot and I was smack dab in the middle of it. By 2005 engineering had become hobby level in terms of the money. At that point I’m flipping an average of around two houses a month and making about 20 to 30,000 per house. I’ll let you guys do the math on that. That was the point at which I quit the engineering to devote more time to real estate, and of course I was also enjoying all the money I was making.

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By 2007 I was flipping houses like it was going out of style because as you guys know the market was the hottest it’s ever been in anything even remotely related to recent history. At that time, easily half of the homes that I purchased and resold were rehabs or at least needed a little bit of work. I still under construction company so I was getting that done pretty easily and one house would finance the next over and over. The money was flowing free, the economy was hot, and we were buying houses with credit card advances, and flipping them 30 to 60 days later. When the crash of 2008 happened, I was busily having a blast as a real estate investor. The picture that is on the slide was my first billboard the day that it went up in spring of 2005. Earlier I had made the jump from part-time real estate investing to full-time. I gave up a career as a licensed civil engineer to go mess around with flipping houses. First of all it was a lot of fun, but the other thing was I could make more money in a month or two that I made in the year as an engineer. I'm a firm believer that at the end of the day the numbers don't lie, you go with the biggest bucks. Largely due subprime lending but truly due to many factors that are way past the scope of this course the market was beyond hot. It was on fire. Hell it was burning out of control. At that time I was primarily a rehabber. I owned the construction company, I owned the holding company, and I owned the management company so there was no reason for me not to buy these ugly piece of crap houses in edgy neighborhoods throw a few bucks into them and flip them 30 or 60 or 90 days later.

The market was so hot that the houses typically sold before I was even done with them. In fact, the market was so hot that many times the banks could not keep up with the demand. The banks I was working with and I worked out a deal that they were working out with many investors at my level. The deal was basically free money. Unsecured debt in the form of lines of credit called signature loans at the time and credit cards. Credit cards with very large limits and very large cash advance options. I'm not kidding you guys, I could and did cash advance credit cards often, to buy homes in Arkansas where I was doing most of my business at that time. What we would do is, I would cash advance a credit card or hit a line of credit for say $25,000 or maybe $35, 000 to buy some beat up house on the edge of the hood. Then my crews would get to work on it. While they are busy getting it put back together and remodeling it, I was already advertising it and the money was flowing so freely that it was under contract usually about the time I was halfway done. If I was lucky, the bank had closed on the construction loan for me and I paid the credit card back but many times I paid the credit card back from other deals that were closing or when I sold the house 30 or 60 days later. It was fantastic. Addictive. It all started around April and May 2007. Several of the companies specializing in subprime mortgages went belly up. Then the banks started tightening up. Then as you know on September 29, 2008 the stock market fell more than 750 points. During that summer, I got a call from all three banks I was working with within a week of each other basically saying the same thing, "we stop here". I was like, "what do you mean we stop here I've got stuff under construction we can't just stop here".' Long story short I got left holding the bag with approximately $250,000 in credit card and other unsecured debt. That doesn't include the mortgages I had guys. I had many houses in various stages of construction. Some were ready to sell. Some were actually in the midst of selling and the deals fell through. Most were in various stages of disrepair because of rehab. Let me say that again. $250,000 in credit card debt alone. Then, Something else happened. In November 2008 I was in Dallas at a consortium of a bunch of real estate investors. We were trying to figure out how we were going to extricate ourselves from the situation and I woke up at the hotel room one morning with, how to say this, with a little pee in my blood. It was bladder cancer and I spent the next six months having multiple operations and chemotherapy. Not long after that I split with my wife of more than 20 years for the second and last time. All in all it was a fairly crappy time. Now, I tell you all that because over the next couple of years things got tight. They got really tight. You guys remember they were tight for everybody. We were in a really really bad economy. And it was worldwide so not like I could go any place to escape this.

I say all that to say this, my pain is your gain. Having done this real estate thing in one form or another since the 80s, and by the way I still actively invest, having a background in engineering and construction, having been trained by some of the brightest minds on the planet as it pertains to these sorts of investing strategies, and finally having survived the crash of 2008 with flying colors, ( in fact I actually made money during that time when everybody else was going bankrupt but I’ll tell you about that another time), having done all that I am certain that I know enough about the subjects they teach to be able to help you become as successful as you want to become moving forward with real estate.

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➢ First Position Lien on Real Estate

➢ Counties Need to “Keep the Lights On”

➢ You ARE NOT Buying the Property

So let's talk about this for a minute. What exactly is a tax lien certificate, right? Very simple. A tax lien certificate is a first position lien on a property due to delinquent property taxes. So what happens is this over 3100 jurisdictions across the United States, once a property owner becomes one year delinquent on the property taxes, the county government is going to hold a sale. Here is a simple fact. The counties need the money generated from taxes. What are they using this money for? Services and infrastructure. And then you've got fire department, police departments, parks and RECs and everything else. So what happens is that since the county needs to keep the lights on, they sell their interest in the property which a first position lien on the property for the taxes essentially to the highest bidder, so that they can keep doing business. Now, I need to be clear about something. When you’re buying a tax lien certificate you are not buying the property you are simply buying a lien on the property. There’s a common misconception out there that when you’re doing tax liens you’re buying the property. That being said when you buy a tax deed you are in fact buying the property that will talk about that here in just a minute.

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➢ 21 States Sell Tax Deeds

➢ With Tax Deed You BUY the Property

➢ Liens that Do Not Redeem can be turned into Deeds

21 states have tax deed sales and it’s important that we differentiate what a tax lien is from a tax deed. With a tax deed you are in fact getting the property however even then there still some issues to work through. Will go over those issues in a different module. You will be buying these auction much like the tax lien certificates or occasionally really be able to buy them over the counter. Again we’ll go over that a bit later in more detail. The other thing that you’re going to need to note is that liens that don’t redeem will be turned into deeds. Sometimes a County will do the foreclosure for you and that’s called a self executing deed and other times you’ll have to do it yourself through a judicial or nonjudicial foreclosure process but it’s important to know about tax deeds as well as tax liens because even if your goal is only to works with tax liens, there is a percentage of those that are going to turn into deeds one way or the other.

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➢ Essentially It Is a “Grace Period”

➢ Liens States: 6 Months to 4 Years

➢ Deed States: 30 Days to 5 Years

➢ Hybrid States: 6 Months to 2 Years

I mentioned Redemption In one of the other slides so I think it’s important that we talk about it as well and define it for you. Essentially, the redemption. It is a grace period above and beyond the due date for a property owner to have paid the taxes. It is their second chance so to speak. All tax liens have a redemption period. That’s why were investing in them. We want the owner to redeem. Ideally, we want them to redeem in the longest possible time so that we maximize our return. Now that’s a bit of an oversimplification, sometimes you might want them to turn around and pay you right away for maximum return, but that has to do with a strategy and tactic that I need to explain in a completely different module which will be devoted specifically to the various ways that we can make money with tax liens. Generally, the redemption period is 1 to 2 years but can be as little as six months as in Maryland and Washington DC and as long as four years in the state of Wyoming. A few jurisdictions that sell tax deeds offer a right of redemption after the sale which will allow the homeowner to get their home back. Typically the owner will have to reimburse the investor for the amount paid at the sale plus interest within a specific timeframe which is called redemption. Those sort of redemption periods are from 30 days to 18 months typically however the state of California is an outlier in that the owner has five years to redeem. Note I think it’s also fair to mention that the bulk of the deed states do not have a redemption period. In 15 of the 21 deed states when you get the deed, the owner has lost the property. You may still have to do evictions and get the title quieted but you will in fact have the deed to the property, meaning you will own it.

We have not talked about the hybrid states yet, but the Redemption Period in Hybrid states can be anywhere from six months which is the case in Connecticut to two years in New York and Texas.

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➢ Property Owner Pays (Redeems)➢ Interest➢ Penalties➢ Fees

➢ You Foreclose and Get Property

When you buy a tax lien one of two things is going to happen. One, the property owner pays off their back taxes, and you get all of your money back. Plus, let's say 18% interest, penalties, & Fees depending on the state. The second scenario is that the property owner does not pay off the back taxes, then you can foreclose on the property take title to the property for the price of the backpack, back taxes, penalties and fees only. Straight for minute. One of the many cool things about investing in liens is that everything is fixed and guaranteed. You know if you have a CD at the bank you can get a guaranteed rate of or about a percent. Look at that guarantee up to $250,000 of court of FCIC. Well, liens are similar to that. With a lien you’re going to get some guaranteed interest rate and the county is going to guarantee it. And you know what, your interest rate is probably going to be a lot better than 1%, of course it would, because if it wasn’t you wouldn’t be investing right? And the other thing is it doesn’t matter how many liens you have the county’s own is going to guarantee them.

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➢ EVERYTHING is Guaranteed by Law

➢ Interest

➢ Penalties

➢ Foreclosure Rights

One of the primary reasons I really love TAX SALES is that the law is 100% in my favor as an investor. You know this is not some get-rich-quick fly-by-night sort of a scheme. This is been available in United States for over 200 years. In fact, I’ve heard that one of the oldest liens was dated around 1698 which was 100 years before we even became a country. Also here’s a little tidbit for you, Thomas Jefferson came two weeks away from losing Monticello due to delinquent property taxes in fact the only reason he didn’t lose it was because John Adams another president lent him the money to fix it. And really that’s what I’m trying to have you guys understand is that all this is regulated by the government. It’s always state law. So, if you getting paid 24% because that 24% interest rate is written into law the law is backing what you’re going to get paid. The laws dictating that your investment is protected for an unlimited amount of money. For that matter, the law dictates that you’ll get to take the property through a foreclosure proceeding if the owner fails to pay the lien. Whatever penalties you get, there absolutely guaranteed by law. If the owner fails to redeem and you get the property it’s absolutely backed by law. At the time of recording the stock market is more volatile than it’s ever been in its history. Drops and increases of a thousand points per day have been, almost commonplace. On top of that we got this coronavirus issue that’s mucking up the economics of the entire world. Having the backing of state law gives us a level of control as investors that we don’t typically have in our investments. This concept alone is what makes investing in tax liens and tax deeds such as safe investment compared to other investments out there.

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➢ Institutional Bidders ARE Doing It

➢ Stockbrokers CAN’T Do It

➢ The Rest Are Not Talking About It.

If all this is true then, why aren’t more people doing this? Well the truth is they are, the just not talking about it. Sure your stockbroker is not going to offer you tax liens because there’s no way for stockbroker to make a commission on a tax lien. However, large institutional bidders which typically are investing on behalf of banks, credit unions, large real estate syndications, and REITs have a big presence at many of these auctions. In fact, they can be the biggest competition at the auctions, but I have some tactics and tricks to get around that as well.

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➢ County Gets Revenue

➢ Owner Gets Redemption Period

➢ Investor Gets Money

One of my mottos for conducting business is that everybody wins or we don’t play. Perhaps the biggest reason that I’m successful in real estate is because I will not take a deal unless I can make everybody in the equation feel like they came out a winner. Tax Sales are unique this way. The county gets their much-needed revenue. They win because they can continue to pay the cops and the fire departments and the maintenance on the roads and other infrastructure. The property owner wins because through the redemption period, You just gave him a little more time before he loses his property. What you did is you paid someone's delinquent property tax bill for them. When You purchase a tax lien, you came in someone needed some help financially, you helped them out Financially by putting up the money. In return, you receive the tax lien certificate now they still owe the money to the county, but they owe it Through YOU. You of course win because you get the interest, the penalties, and perhaps the property. Let me say it this way: Tax Lien certificates are a socially responsible and sustainable investment vehicle because you’re not JUST helping yourself, you are helping individuals and more importantly, helping local communities all over the USA.

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➢ Live Auction

➢ Online Auction

➢ Over the Counter (OTC)

Okay the last thing I want to touch on in this module is the three ways to purchase liens and deeds. The first is the live auction. Most counties you’re going to deal with are going to have live auctions. Sometimes you will be Allowed to mail in the bid; that’s going to depend on each individual County ever going to talk later about the rules of the road where that stuff is concerned. Personally I like the energy of a live auction but that’s can be all a matter of personal preference. I’m going to discuss live auctions in a later module The second is online auctions. More and more we are seeing counties go to this method and, in California for example, which is a deed state, every County conducts their auctions online. The big players here are ZeusAuction.com, Bid4Assets.com, and RealAuction.com. I’m also going to discuss online auctions in greater depth in a later module. Finally the last way that you can purchase liens and deeds is over-the-counter. You hear people talk about in terms of OTC. Now a quick caveat. Properties in liens that are available over-the-counter are there for a reason. These are properties that for some reason or another did not get bid on at the actual auction. That means there’s probably a problem with it. Now in my full-blown course I go through some of the common problems and how to fix those problems but I want to mention it here because I don’t want you thinking you can just go up and buy a property over-the-counter and come out smelling like a rose every time. Buying properties over-the-counter and buying liens over-the-counter is the riskiest way to do this business. Are there big payoffs? Yes there can absolutely be payoffs in fact some of the biggest payoffs I’ve ever

received were from buying over-the-counter properties. But it’s fair to say you can also get your head financially ripped off of your shoulders if you don’t know what you’re doing with this particular type of purchase option.

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“Chance Favors the Prepared Mind”

Louis Pasteur

I am going to close out this module with a quote from Louis Pastuer. Chance favors the prepared mind. Guys would like you to do is post your comments and questions in the comments section below. If you’ll do that I can answer your questions and who knows if we’ve got enough of the same sort of questions perhaps I can even add in a few modules. Until next time this is Alan Susoeff with AskAlHow and you guys have a fantastic day!

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