Anyone deal with Tax Lien Vault?

Question

Hi all...

Has anyone actually used the Tax Lien Vault company to purchase tax liens and if so, what was your experience?  Last July I went to one of those house flipping seminar road shows here in San Antonio and while I wasn't sold on their $20,000 course, the bonus sales pitch about purchasing tax liens did intrigue me.  I bought their educational system, which was quite informative, but haven't had much luck with the searching for and purchasing of tax liens or deeds.

So today, I get a call from one of their reps asking if I'm still looking at investing in tax liens.  His pitch is that he will put together a portfolio of seasoned tax liens in the $ amount of my choosing and e-mail it to me.  They, as a hedge fund, buy huge quantities of tax liens at a discount that they have already vetted as being "good deals" then sell them at face value to me, a member of the Tax Lien Vault.  They make their money off of the difference, I don't pay them anything.  I have 24 hours to decide if I want to purchase so that they can be released back into the inventory if I pass.  He said he would be sending me tax liens for unimproved lots as opposed to SFR, etc. because the owners are more likely to redeem.  I didn't really follow the rational on that one but then I'm totally new at this which is why I'm putting this question out here!

I'd appreciate any thoughts and comments!

Kristen

Ned Carey · Answer

@Kristen Sinclair  I am not familiar with Tax Lien Vault. Knowing what I know about the tax lien business, I believe it is hard for a tax lien company to make a profit themselves while still providing a good return to their customers.

I firmly believe the pitch you got was bogus.

• In virtually all situations the starting bid at an auction is the amount of the taxes owed. Big buyers DO NOT get a discount as most of the buyers are big buyers spending $millions at a time.
• In my experience the big money is not the smart money in this game. Some of the biggest bidders are also the highest bidders and accept very low interest rates. 
• Usually in instances where liens are sold at below face value, it is because they are crap liens that didn't sell at face value the first time out.
• Unless you really know both the rules where the tax lien is from or the market there; you really don't know what you are buying. I have had liens that I would have gladly sold at face value because I would up walking away and writing them off as the cost to take the property was more than the property was worth.

Tax lien investing can be very profitable but I don't think that is the place to start.

Good luck - Ned

PS: I don't mean tax liens are not the place to start but that the specific offer you received is not the place to start.

Moshe Eisenberg · Answer

@kristen

Hey y'all. A few quick points on this subject.

First, I had a similar story as Kristen. I went to their seminar in my area. As a bonus they offered a package on tax liens which interested me more than the training on flipping. They sold a "guaranty" for around $1,600 that if you bought 10 liens, you will foreclose on at least of them within 6 months. If not you will be able to buy a deed from their vault. I bought that guaranty and that got me into the tax lien business and I happen to be grateful of them opening my eyes to the unique opportunity within this industry. As far as the guaranty I think it's a scam because the foreclosure process takes more than 6 months.

I would absolutely not buy any liens on vacant land, certainly not in your local area.

To explain the "discount" they are saying. Based on what you're repeating what they said, they buy seasoned liens on the secondary market. The redemption value at the time of sale (or assignment) includes priciest plus interest. Let me give you an example. (I buy liens in NJ so I will use the 18% interest)

ABC Fund Inc. bought a tax lien for 2012 taxes on a SFH. Certificate amount at the auction was $10,000. Lets assume there was no bidding on this, 12 months later the redemption value on this will be approx $11,800. This includes the original cert amount plus 18% interest for the year. (let's ignore the penalties and legal fees for now). When Tax Lien Vault buys a seasoned lien from ABC Fund, they might get it at a discount because ABC will be ok to discount from then interest. Now when Tax Vault sells this lien to Kristen for full face value they make the difference. The problem with this (even on SFHs) is 1- you will not be earning interests on the interest amount. That could effect the return by a few % points depending on  how much of them price is principal and how much is interest.  And 2- Douglas & Tom wrote you have to to pay all the subs (plus interest) in order to get final judgement.

Jerry K. · Answer

@Kristen Sinclair  That is a very tough group of certificates to make any money from buying at this point.  There are ways to make money from vacant parcels but like @Tom Yung advised, to start with liens/certificates it's better to go with SFR where an owner or mortgage holder has a reason to make sure the property is not given up for taxes.

I think it's best to start local.  You can drive by the properties, you know the local market, it's easier to get a professional's opinion on the value since you probably have more contacts locally.

Learn the Statutes first.  You need to know the laws, the rules for the auctions, all the nitty gritty details.  Look for a local investment group and ask questions of the local investors.  Biggerpockets has a ton of Texas investors online.

If you want a mentor in your area, then offer your services.  A mentor doesn't have a need for a person who only wants to "take" their knowledge, however, most will have time to share their knowledge with someone who will help them do the research on investments.  You help them make money, and they will have incentive to make sure you learn what it takes.

Guy Gimenez · Answer

@Kristen Sinclair

Never invest in something you don't thoroughly understand unless you're partnering with a trust advisor who understands the product. If Tax Lien Vault is providing your information to third parties without your permission, that should tell you the type of company they are.

You wanted to invest in SFR tax liens and they're trying to convince you that vacant lots are what you really need.  Sounds to me like what they're selling is what THEY need, not so much what you need.

Trust your gut...it's seldom wrong.

Josh Carr · Answer

@Kristin Sinclair - I am one of the founders of REI Holdings so let me just clarify a few things.

1. We are affiliated with Tax Lien Vault - Tax Lien Vault is the education side of the company and REI Holdings manages the "Real Estate Investment Holdings" sorry if that wasn't clear on the phone.

2. The business model is actually quite simple. After years of being in the Tax Lien industry we noticed many of our students on the education side of the business were having difficulty finding tax liens that fit their investment criteria.  Primarily because of institutional investors like banks and hedge funds that were buying the vast majority of inventory at public auctions.  Banks and hedge funds also have access to counties where individuals are not normally able to invest because the county sells all tax liens in bulk through an RFP (request for proposal) process.

3. We only buy "seasoned" tax liens because the vast majority of our students are interested in foreclosing on the properties they purchase and don't want to wait the 2 years plus redemption periods.  Because they have accrued interest for at least 2 years the institutional investor will sell them to us at a small discount.  So when you buy from us you pay the redemption value (the same price you would pay if you were to buy directly from the county) We make a couple points on the deal.

4. This is probably why you misunderstood what the account manager was referring to with redemptions and vacant land.  Because the cost of the lien on vacant land is so much lower it is easier for the owner to come up with the money (assuming they don't want to lose it to foreclosure). We also have SFR homes but the prices on those are obviously a little higher because the assessed value from the county is also higher.  I am assuming you were offered vacant land because you didn't have the budget for SFR.

5. Obviously as part of the education package you purchased from us we can teach you how to buy directly from the county.  Please feel free to reach out to us and we will help you with every step of the process.  We also have updated lists of tax liens that are available from counties across the county. It may save you some time to use those online resources for your research.

I hope that helps!

Thanks,

Josh

Roy Oliphant · Answer

@Kristen Sinclair

Before I would buy a tax lien on a vacant lot, I would want to know how will I get the value out of the lot.  There is not much money to be made in inner-city vegetable gardening but it might be the only way to get something out of the lot.

If you figure out how to turn them into cash, please let me know.  I am working on the same issue as I'm sure I'm just missing something.  Those lots had owners in the past and that implies value.  Figuring out how to turn them into future value will create a huge opportunity.

Tom Yung · Answer

@Kristen Sinclair

I have never heard of tax lien vault. But

I totally agreed with @Ned Carey & @Guy Gimenez recommendations & comments.

Especially liens on land lots; you really have to know the area & best use in order to get any gains.

I will recommend  purchasing liens with property on it when first try out, it is more secure than lots. Also a higher chance for redemption.

Good Luck

Douglas Snook · Answer

I signed up with them too. Have not done any deals with or through them but have had some long conversations and got a much better idea of how it works. I would stay away from the vacant lots unless it is a place you want to be and get into building a home and then selling it at some point. Also be prepared to spend more then just the back taxes, at least in Florida. There is a cost to foreclose on your lien and that may include paying addition back taxes. For example you buy the 2012 tax lien and then you have to foreclose but you would also have to pay the 2013 and 2014 taxes. One example I ran through with them in Florida the cost of the lien was about $1000 but we figured it would cost about another $8000 to go through the foreclosure and actually end up owning the property outright. This was for a condo that might be worth about $40-50,000.

Tim Macy · Answer

@Kristen Sinclair There are way too many great opportunities in our area to go throwing money at Utah!!!  Research the Texas tax lien laws and see what they're going for at local auctions.  Last time I was at the San Antonio auction it seemed like vacant lot tax liens were the only affordable thing left!  You may be able to find some great deals at some auctions in other counties outside san antonio.  I wouldn't throw my money at properties in another area from someone I don't know.

Tom Yung · Answer

@Douglas Snook

Quiet title action is required on most states on tax deed properties.

Cost around $3-5K in most cases.

Also pay special attention to the year that the year of tax sale. Like the example that you gave, Tax sale is for 2012. So after the sale; you will be responsible for 2013, 2014 tax.

Also check the HOA lien, in some states HOA liens stays, it does not wipe out . Same with city or municipal lien.

Budget all those in before you bid.

Anyone deal with Tax Lien Vault?

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