All Forum Posts by: Davido Davido

@Roy Oliphant, -Good morning and thank you sincerely for your comment. Your post identifies what I myself view as a serious weakness in my plan.I will indeed have difficult recourse should another person attempt to do something similar on the same property or a “tenant” refuse to pay or vacate.  It is only with the greatest of trepidation that I can conceive ever pleading my perceived right to an abandoned property in a court of law.Judges are simply people with a mentality very much like those who post here on BP.  As you can see -most people, even those here who are most knowledgeable, view taking possession of Abandoned Property more as a crime than as a community service.  I would expect only trouble from attempting to plead my right to an abandoned property in a court of law.

As a matter of law, my claim to an abandoned property would only be better than another person’s by proving I had prior constructive possession.  As a practical matter, claims from others are of little concern to me.  To effect such a claim requires considerable knowledge.  As many have noted, for any intelligent investor there are much easier ways to make money.  There will rarely be competition for these.Lack of competition is especially true since most often other investors locate abandoned properties from a county’s property tax foreclosure list.  My plan involves identifying these properties before property tax foreclosure is initiated and then paying sufficient taxes to prevent the property from entering foreclosure.  The vast majority of the time no other investors will even know the property was abandoned.  Further, my pre-acquisition research invariably reveals lien holders who I talk to and who’s interest I acquire.  As a rule I seek to be the most important lien holder.  Competitor’s are not the big weakness.

A renter refusing to pay and refusing to vacate is a bigger problem precisely because it would be difficult to go to court.  If a “tenant” became a problem I would likely attempt to foreclose a lien.  Failing that, I would need a simple but very professional set of records which lay out my due diligence in establishing the legal owner’s implicit abandonment, my expenses on the property and the income from the property.  Before going to court I would have a business license current for that jurisdiction and at least one year’s federal tax return to show that I’m operating as a legitimate business.  Assuming the judge is decent, I should have a better chance as the constructive possessor, than the tenant has as the current squatter possessor.  It would need to be a very enticing property for me to attempt resolution through the court system. 

I agree that as a general rule ANY investigation and/or press regarding my company’s use of abandoned Real Estate is most likely to be unfavorable for me.  I fully understand that this plan is working real estate the hard way.No one is going to approve of my efforts. No one is going to loan money to me.  No one is likely to have specific experience or knowledge about the legality of my work.

I choose this plan because it can provide steady income in an ethical manner and position me to be of help to my neighbors as our nation and world move into an increasingly restrictive economy.  In the very long term this is one business model that will enable my descendants to live freely, morally and ethically in a time of ever increasing governmental corruption and control.  Should my grandchildren choose to continue such a business, it will be extremely difficult for an official to identify their assets or to shut them down.

Your comment suggests that what I propose leaves the door wide open to Tax Evasion rather than tax avoidance.  It is my intention to pay all the tax I owe.  Please tell me, when does rent collected on a property that you do not own, become income to you?  Such rents would be segregated according to a property’s owner of record.  As the person administering the funds I’d be inclined to loan them out at a reasonable interest rate.  As a matter of law, the loan only becomes income when/if the absent owner forgives it.  When/how does an absent owner forgive a debt?  So certainly, the door is open to income tax evasion in this, but so is it in everyone else’s businesses too.

Property tax foreclosure is only one of the methods that society has devised for returning abandoned property back to productive use.  Adverse possession is another, very legal method with a long history in common law.

@RichardD –Well Richard your comments are certainly in line with the majority.  And Texans are by history and culture a good bit more self-determined and self-reliant than the average city dwelling American.  I’ll take some comfort in knowing that Texas is a state I won’t be messing with.  More power to you and to all of Texas.  Still, please bear in mind that most properties I deal with are vacant lots, so most often the scenario of a returning “home” owner will not apply.

However, under your wonderfully descriptive scenario, even such a home in Washington State wouldn’t hit my radar for another year.There are too many tax delinquent properties from any given county to sort thru, so I focus only on the most delinquent (at least two years) that have not yet had a foreclosure action filed against them.  But assuming the hunting was good and the owner stayed in Africa for over two years, I might notice such a property. If a drive by indicated that the home was also unoccupied and unmaintained, such a property would peak my interest further and I’d consult with everyone in the neighborhood. In your scenario, one of the neighbors would likely regale me with tales of your hunt and that would end my interest.  But, assuming there are no neighbors, or as sometimes happens, the neighbors know nothing, I’d then do an extensive skip trace search and not only find that the owner was in Africa, but I’d find a good number of his relatives too and that would end it.

-Still, if the owner were unattached and had no relatives and I could not find him or anyone who knew him because he/she went quietly to Africa without leaving a trace, I still wouldn’t intrude upon their home unless it was also open.  As stated in my post, I do not break into a home even if it appears to be an abandoned home.

However, I could have a problem, if the home is two years tax delinquent, open, unoccupied, unmaintained, and an extensive computer records search, and letters to all of the owner's addresses of record, and neighborhood inquiries and police inquiries (yes I often contact law enforcement regarding missing persons with abandoned property in their jurisdiction) all turn up no indication of where the owner is or when he/she’ll return.  In such a situation, I’d have no problem at all recording all my efforts to locate the owner, showing the authorities that the house has been left open (typically used repeatedly by passersby, homeless, vagrants and assorted criminals) and I would indeed most probably move my crew in to clean it up such a home, to lock it up, to do minimal but necessary maintenance, and then to put a tenant in it. Then I’d pay the property taxes as needed to keep the county from filing a foreclosure action against the absent owner.  And when/if he/she did show up, their home would be in surprisingly good shape despite the tremendous neglect they’d shown it, and instead of having to fight a foreclosure that would otherwise have already been an accomplished fact, they’d be entitled to the bulk of the rent I’d collected.

Can you see why the typical owner (if he’s not a Texan) wouldn’t feel a need to shoot anyone?  Now no doubt such an owner or for that matter literally anyone, could sue me. But given the above scenario, I like my chances.  I’d even represent myself and since, I'm ever the optimist, I actually believe I’ll win. You haven’t yet told me under what theory of law the home owner has been wronged. However, even if a presumptive case can be made that I owe damages to the home owner, a smart attorney is usually going to check on my available assets before wasting his time on an uncollectable civil suit. Since, I value my privacy and make it my business model not to own any assets there will be none to be found. Can you see why most people will never sue me –even if they think they’re entitled?

As for the possibility of a criminal charge being filed?  All things are possible.  But unless you can show a Texas statute that says otherwise, my research shows that given a record of due diligence to find the legal owner, preventing the waste of an implicitly abandoned property is not a crime in any state.

Richard.D, I very much enjoyed your post.  Doubtless your right about the danger in my plan.  Not sure I’m worried enough to forego it, but you did get me thinking. Thank you for your comments -just what I need. God Bless your family and God Bless Texas!

@JayHinrichs,Hello Jay, I too love timber.  Have you posted about any of your timber deals?  I’d like to read anything you've done with timber.

@Rick Harmon, - Yes, my post is not clear.Don’t know how the photo ended up in the middle of a paragraph.  Not being able to edit a post does nothing for improving clarity. But, congratulations to you!If writing an unexpected check for $400,000 was not devastating to you, then you are operating in a world that I have yet to even see. I’m quite envious.

Rick, thanks for the Adverse Possession research tip.Excellent! The practice of putting research into book form would surely benefit my understanding of the subject, enhance organization skills, and constitute effective practice for eventually publishing something of more general interest.

There was a time when Adverse Possession particularly excited my interest.Even now it will likely be the ultimate exit plan for some parcels, so I must know and understand each of the multiple element required to constitute an effective adverse possession. However, I have come to understand that adverse possession litigation is likely to remain but a small fraction of what I do.The real keys are perfecting skills in locating owners and lien holders and to be able to clearly establish express, effective or implied abandonment.

Your comment about the potential for adverse publicity (especially in the field of Adverse Possession) is taken to heart.  Even amongst this Bigger Pockets group of seasoned investors, the initial consensus toward the idea of an investor taking possession of an abandoned property is that doing so must be illegal.  It will be all the worse amongst the general public  if even one jaded article appears in the local press about my activities.

How am I with ambush journalists?  My understanding of the legalities and belief in the benefit to all of what I do, is strong, but realistically, fighting public opinion would be a battle I’m most likely to look bad in.  Any press could raise a sudden outcry against my efforts to possess abandoned property.  There are multiple reasons to remain "subterranean"

In regard to adverse public opinion, you may have heard of the case of Washington investor Joe Kaiser?  His company, Fiscal Dynamics, and his former partner became so effective at acquiring tax delinquent properties, many of which would have otherwise filled the coffers of county general funds, that various Washington counties pressured the State Attorney General to shut them down. The state sued Fiscal Dynamics under the consumer protection act for providing a means of escape for the very people that Washington Counties where attempting to foreclose. Joe was intercepting funds that often go unclaimed and revert to the county. Kaiser kept a fascinating blog about his long running battle with the State of Washington.http://www.pushedtoshove.com/ .The bottom line for me is that, like Joe, I won’t win any popularity awards if my activities make the press.

The story about the member of your legal team sounds educational. Do you care to tell it?

@Wayne Brooks -  Thanks.  I'll look into creating a "signature".   Yes, I actually did log property where the owner could not be found.  I paid the taxes on that one just one day before the property tax foreclosure sale.  

Turns out the owner needed heart surgery but the surgeons wouldn't do it unless he quit drinking.  In order to quit drinking the guy cut himself off completely from all his old friends, went into rehab.  Then he went into surgery and had a difficult recovery.  Only six weeks afterward the tax sale did he come back to check on his property. 

I wasn't worried at all about being arrested for theft of timber.  I could have easily shown that I had been sufficiently diligent to avoid theft charges.  I was however, concerned about civil liability.  Washington is a timber state and has triple damages for cutting someone else's timber.

The plain fact however, is that the legal owner would have lost the property to the tax foreclosure if I had not paid his past due taxes.  Unfortunately, in Washington State, once the county files its foreclosure action, only a secured party can pay the past due tax, so I had to buy out a junior lienholder's interest, and then had to pay the entire three year's past due taxes, interest and penalties in order to pull the property out of the foreclosure sale. My mistake in thinking the owner was dead, together with those extra acquisition expenses would have left my investment in jeopardy if the owner had some of you BP investors behind him.

@Wayne Brooks -

agent

n. a person who is authorized to act for another (the agent's principal) through employment, by contract or apparent authority.

What term would you use to describe someone who rents a property where the owner can not be found.  It would be fraud to call yourself the owner.  I understand that "agent" is generally used when authorized by the owner.  And I will indeed be looking for a more accurate term to use in future rentals.  However, in the instance when I applied the term agent, I did have an unrecorded "Quit Claim" deed from the owner and was thereby authorized to rent the property.   I doubt that I was in any legal jeopardy.

@Wayne Brooks,-Hi Wayne.Thanks for commenting!  Yes, you are right that the definition of “abandonment” that I quoted came from online. http://legal-dictionary.thefreedictionary.com/Abandonment The quote is not from any Washington State statute

.I have, however, read as many Washington State statutes on the subject as I could find, and I’ve read the relevant case law on those statutes as well.  I have a file full of those laws and the relvant cases.  Still, I make mistakes far more often than is prudent, so if anyone sees a legal obstacle, I'd love to know it.  Overall,  I’m convinced that my plan is within the law.

Wayne, for abandoned “Mansions” your proposed  strategy of acquiring a superior interest and using it against a mere squatter would indeed be effective, but do see my reply to Rick Harmon, just above about why the vast majority of these properties will never become the target of competing investors –low value, not worth your time, and not readily identifiable.

In any event, I greatly look forward to those times when another investor comes in and gives me a lesson the hard way. May I become a quick study. Thanks again Mr Brooks!.

By the way, how did you get your location and contact info to display below your post?Surely you don’t type it in each time you comment?

@RickHarmon –Rick, thank you so very much for your comments.I know it is true that Adverse Possession cases are extremely rare.  In my experience, finding an attorney knowledgeable on the subject is more difficult than its worth.I’d rather handle these cases myself “Pro Se”.Fortunately, I do have both the stomach, and aptitude for litigation  .I understand and enjoy both reading and researching the law.And I enjoy the argument of live court even more.  Nonetheless, I’m only inclined to pursue this course of action because I honestly believe that suits against me, though likely more frequent than in other real estate businesses, will actually still be rare events.

Yes indeed my plan is exactly to swoop in and have my company take possession, then to rent these properties (90+% are vacant land).My one rental agreement specified that the owner was “away” and I was acting as an agent.  So far 1/6th of my “possessions” have indeed gone sideways – from a lack of diligence in my research.  After considerable research and footwork, including talking to an owner’s previous attorney and all people who could be found at the owner’s last three addresses, I concluded the man had died.  I had located a “death certificate” for him in a nearby city that listed his exact name and age.  Who knew there was two of him?   The presumed dead owner only showed up after I had paid his taxes and logged 30 acres of his land.  We settled out court, -a quit claim deed for the approximate value of the timber.  I got to keep the property.

Rick, people with your skills would have no interest in most of the majority of properties I target because they are not worth your time.  Frankly, if I wasn’t determined to create a subterranean business, most wouldn’t be worth my time either.  There are much easier ways to make money.  I'm in it long term for the privacy and tax benefits this method affords. 

In any event, once I start paying taxes on a property it will never make the county’s property tax foreclosure list, it will be maintained, and the property will be constructively occupied –so how is a competing investor going to identify one the properties I’m managing as a likely target?   Further, to date I have been astute enough to at least understand who holds the important liens and to attempt to acquire them myself.  I do not always value nonperforming liens as highly as the lien holder, but I also do not put much money (usually just a half year's property tax payment) into a property unless I secure the interest of the owner, or of primary lien holder.  In one case I at least foresaw that rents would repay my tax payment in less than a year.  Thus, would be competitors would have to act fast for me to lose money.If they are that good, then I either want to partner, or become their student.

Unless you are talking about abandoned mansions, I cannot agree with your statement “It’s not like they’re waiting to be taken over and nobody cares”.  That statement is precisely what defines an abandoned property.  Such properties are my primary target.  And though improved properties are only 2 to 5 out of every hundred that are abandoned, there are still more useful low end abandoned properties than I can work in my tri-county rural area.  So yes, this plan may be worth the trying.  I’m still working for a paycheck.  My plan will require a long slow build up, but I do look forward to  eventually doing this fulltime. When things pick up, I will want to hire you to brainstorm on the problems that stump me.  Thanks for your input, and do feel free to comment further.

@Mike Hartzog Thank you Mike.Yes this plan creates a higher probability of lawsuits against me than most Real Estate business plans.And yes in finding these properties I will often acquire nonperforming notes.However, gaining legal ownership via tax sales is not generally in my plans. Not owning the property is precisely what interests me about this plan.Since I own nothing, nothing can be taken from my in a judgment.There are sufficient opportunities for this in Washington, and I’ve already done a few.

Further, I’m very confident that what I’m proposing is not unlawful, even though it is generally viewed as unlawful by the public.It could be unlawful if I failed to exorcise due diligence or if I break into another’s improved property, but that is not what I’m proposing.Indeed, I will clearly document the open nature of each property.The key is to document that sufficient diligence was used to establish that a reasonable person would believe the owner has abandoned the property.And really, what is the owner going to sue me for?His property back?The rents I’ve collected?I’ve already stated those are his if he shows up (less the taxes I’ve paid on his behalf and necessary costs).Lenders will not sue if they’ve suffered no loss (probably can not).

Abandonment

The surrender, relinquishment, disclaimer, or cession of property or of rights. Voluntary relinquishment of all right, title, claim, and possession, with the intention of not reclaiming it.

The giving up of a thing absolutely, without reference to any particular person or purpose. For example, vacating property with the intention of not returning, so that it may be appropriated by the next comer or finder. The voluntary relinquishment of possession of a thing by its owner with the intention of terminating ownership, but without vesting it in any other person. The relinquishing of all title, possession, or claim, or a virtual, intentional throwing away of property.

Term includes both the intention to abandon and the external act by which the intention is carried into effect. In determining whether someone has abandoned property or rights, the intention is the first and paramount object of inquiry, for there can be no abandonment without the intention to abandon.