Niche markets in real estate can have widely differing rates of returns depending on the state or county you are investing in. For real estate investor, international speaker, trainer and philanthropist, Mike Wolf, Harris County, Texas is the best place to do tax lien investing, owing to a beautiful combination of high property taxes and a unique auction process that favors bold investors who are willing to do more due diligence. Mike has been investing in real estate for over three decades, completing thousands of transactions with his teams in both the US and Canada. In all these years, he has learned the things that really matter in what he does: a good team, a good grasp of the property and the willingness to do due diligence. He is an expert in finding the most profitable deals in auctions – a skill which he now shares with his students in his Tax Lien and Deed trainings. He now joins Scott Carson to talk about investing in Texas tax liens, specifically in Harris County.
Listen to the podcast here:
Houston TX, Tax Lien Investing Paradise With Mike Wolf
I am honored to have Mike Wolf of Mike Wolf Mastery joining us. Many times, we get requests and questions about tax lien investments. If you would go back to one of our earlier episodes on tax liens or tax overages, it’s our most downloaded and watched video on YouTube. We went out and found another tax lien expert, my friend Mike Wolf. He will be speaking at Note CAMP. He is an expert in tax liens, primarily here in Texas, the Lone Star State. He likes Harris County because he’s built some systems, but he does a great job talking about it. He will be sharing some of the ups and downs that we need to look out for. If you’d like to learn more, you can always go over and check his full session from Note CAMP 2020.
I’m excited to have our special guest here. It is a preview to what we’ve got going on in our Note CAMP 2020 conference. I’ve got a great guy, great investor, and a great speaker here who shares his love of real estate, but also he’s focused on a niche that we haven’t covered a lot here in the note investing side. We have talked about tax deeds and tax overages. It’s our number one downloaded or viewed episode on YouTube. I wanted to make sure to bring somebody on who is a tax lien expert to talk a little bit because they get a lot of questions about tax liens and how they work. What’s the function behind them? How we make money, which is what everybody’s always looking for?
We’re excited to have our special guest. He’s been investing in real estate for many years. Over that time, he and his teams completed thousands of transactions, not only in the USA but Canada as well. He’s also an international speaker, trainer and philanthropist. He’s most known for his tax lien and deed training, where he teaches students how to buy real estate for pennies on the dollar. We’re honored to have the only, Mr. Mike Wolf join us.
Thanks for having me.
We’re honored to have you here. You’ve been doing a great job, years of experience with the market being where it’s at. Do you think tax liens are a little bit more desirable investment strategy here with the market being crazy in the United States?
It’s going to be insane. All the auctions have been shut down and nobody’s allowed to foreclose on anybody, which is good and I’m glad. When you have something like that and then you open the floodgates again, there’s going to be a lot of supply. Anybody ready to take advantage of that, there’s going to be a massive transfer of wealth, not just in deeds, but also in notes. There are going to be a lot of things booming when things open up again.
I’ve been looking at stats and things like that. The news came out and said that roughly about 9.6%, 9.7% of all mortgages in the United States have filed forbearance agreements, which is great, but the numbers still have shown roughly 10% of Americans are already in a month or two behind on their mortgage. With this added stress of being laid off, things being shut down, and no money coming in and let’s face it, the government is never good about issuing stimulus checks in a timely fashion or the debacle of the PPP and the emergency loan. There are a lot of people that are going to decide between making a mortgage payment or putting the food on the board. If their taxes are rolled in escrow or they’ve got to pay their taxes every quarterly because we’re in the second quarter of 2020. A lot of people aren’t paying their taxes and that leads to opportunities and ways to help people in a lot of ways. Would you dive a little bit in some of the ways you’re able to help people with what you’re doing in tax lien investing?
Taxes and deeds are one piece of what I do, but I like to help people before they get to that point and hopefully, save them from losing their home to either tax deed auction or foreclosure auction. I also focus on pre-foreclosures and I love to come up with solutions for people that either helps them stay in their home. Anytime I meet with a client, my goal is to leave them better off than when I met them. One of the things that I teach my students is I don’t even like the term real estate investor. I like the term problem solver. The more problems you know how to solve and the more people we can help, the more we get paid. It’s a great win-win, but always make sure that the people you’re dealing with are in a better situation than how you found them.
I always start off with pre-foreclosure, try to get ahold of them before they lose a home. Unfortunately, once they lose it and it does go to auction, that’s another problem that needs to be solved. The counties need that money to keep their police department going and their schools open. The solution is they need investors to buy these properties and given that tax dollar that they need. As you mentioned, if you can help them with pre-foreclosure, during the foreclosure, or tax deed process, and we have overages, that’s a whole other issue. People owed money and the government is not going to make a whole lot of attempts to get that money that’s owed to them. I like to help them recover that money as well. I like to go to different angles.
There are problems everywhere, and everybody needs help in solving those problems. We were talking about some of the different states out there. Let’s dive into the tax liens. What’s your favorite couple of states to invest in tax liens here in the United States?
I’m much more a bigger fan of the tax deeds. I’m a big fan of Texas, particularly Harris County, which is in Houston. The reason for that is property taxes are high and you pay 2.6% to 3% property taxes. It’s easy for people to get behind when the property taxes are that expensive. Once you get a couple of years behind, it’s hard to get caught up. I find that the auctions there take place on the first Tuesday of every month. Other parts of the country are once or maybe twice a year. I love that there is an auction every single month. Everything is different in Texas. One of the things that are different is you have a six month redemption period.
If I go buy a property at the auction, the previous order has six months in which they can come back and buy it from me. If they do that, they’ve got to pay a 25% premium to get it back. Not just on what I paid for the property, but any necessary repairs that I did. If I had to replace a roof or carpeting or whatever to make it livable. All that you’ve made 25% on if they come back. The fact that it’s a little more complicated with that redemption period, it keeps a lot of the institutional investors away. They want it simple. They want to either get the property, get the note or lien, and move on. They don’t want to wait that six months. If you’re willing to do a little bit of extra work and a little bit more due diligence, it gets rid of a lot of the competition. That’s why I love Texas.
I agree with that totally. The first Tuesday of the month is always interesting watching what’s going on. It has been. They haven’t made for a number of months, but still interesting. You’ve got to have all cash at the event. It’s a great place to show up and find some private investors as well too for people. What’s another favorite state for you? Is Florida one of your top 5 or 10 as well too, because we’ve got a lot of readers in Florida?
To be honest, I find Texas gives me enough opportunity that I don’t even have to go anywhere else. One of the things that I love to teach my students is that you don’t have to invest close to home because it’s convenient. One of the things I know about Florida is it’s competitive. It does attract a lot of institutional investors. Whenever you go somewhere where people like to travel on vacation, they’ll sometimes use Vegas, for example. I used to do a lot of work there, mostly foreclosures, not so much to tax deeds, but the actual bank trustee, trustee auctions. Whenever you have a lot of people flying there for another reason or if they need an excuse to go gambling and hang out in the desert, they go to these auctions.
I find it a lot more competitive in places where people love to travel to. If you’re in Orlando, people like to go to Disney and all the beaches in Florida. One of the things you want to do if you’re serious about this strategy or any strategy for that matter is not just invest in close to home. Invest where it’s most profitable, most advantageous then build a team around it. You don’t necessarily have to keep flying there and necessarily move there. That’s one of the things that I’ve done is I built a team in Houston, Texas. They go to the auction on my behalf or my student’s behalf. I don’t live there, but I can still do business there.
I don’t want to travel to Houston either. I live two hours away. Houston is not our number one market for audience, for the most part, no offense.
If you are reading, Houston is one of the best places to do real estate. One of the best places in the entire country. Austin, I haven’t done any real estate there. I know you have a lot of universities and colleges. I know there’s a lot of opportunity around that but I haven’t delved into that yet. I do love visiting Austin.
I have another real estate thing in Austin in many years. It’s been too overpriced and I’m in other places anymore. You said something that if you find something, it doesn’t have to be in your backyard. It can be across the country, but there are teams everywhere. Who would you say are probably a couple of critical members of your team in that space and that niche of tax liens?
If you’re going to be doing what I do, the most important person is the person who goes to the auction for you because they’re sitting them a large chunk of money and you have to be able to trust them that they’re not going to skip town. That’s the most important person. That’s not something that shows up on people’s résumés. That’s not a typical job. A lot of these things I had to create. I didn’t find some already ready-made team. I’ve got somebody who goes to the auction on my behalf. I’ve got a bunch of rehabbers because the properties almost always are going to need some sort of repairs. Sometimes a lot of repairs. I’ve got people that drive around, photograph, and videotape the property and the streetscape.
I’ve got people that pull title and make sure it’s safe to buy the properties because there are a couple of misconceptions. When I was trying to figure this out many years ago, I took a whole bunch of different courses and read every book I could find on the topic. I got more and more confused because everything contradicted each other. Some people say you don’t need to pull titles. You don’t need to do anything if you don’t mind losing your money. It is dangerous. There are a lot of things that could happen. The great thing about tax deed auctions, I’ve had students pick up single-family homes for $7,200 and that’s amazing. If you buy a property, normally, all the liens disappear off it, the mortgages get wiped out, but not always. There are exceptions to that.
If you don’t know what you’re doing and you haven’t pulled title, you might inherit a nice juicy mortgage that you weren’t anticipating. That takes that from being a good deal to a bad deal. The other thing that other courses said, “You don’t need to view the properties. Look on Google or Zillow. Look at the pictures there.” Once again, one of the things I do during my training is we drive around the city looking at properties. We’ve had some that looked amazing on paper and then you get there and there’s a bunch of smoldering ashes where the house used to be. If you hadn’t looked at the picture, that’s what you would be buying. One of the challenges when you go to these auctions, you’re buying as is, where is. You don’t have any recourse. You can’t say, “I didn’t know.” They don’t take any responsibility. What you see is what you get after you bought it. There are a lot of misconceptions and so having the right team will save you a lot of headaches and a lot of hassle down the road.
You can look online and take a little bit of a look, but you always need to put eyes on the property. Make sure it’s the right street address because you never know. It could be a beautiful house smoldered in the ash or just be a flat slab in some cases too.
I don’t know if you saw it. It made the news in Fort Lauderdale. Somebody thought they were buying this nice villa. I forget what they paid, maybe $12,000 for it. It turned out, they bought this 100-foot strip of land that was separating two villas and that’s what they got. They can’t do anything with it. They wanted to see the county, and they can’t because it clearly states once you see it, it’s up to you to do your due diligence. It was something avoidable, but people don’t know what they don’t know. That’s why it’s important to make sure you know what you’re doing. You don’t just show up at the auction, start bidding, or you will lose a lot of money. Don’t do that.
I was at an auction one time in Missouri and there were a couple of students of mine. They had an auction for $29,000 and somebody bid $29,100. Everybody was kind of hush-hush. The guy walked up and you hear him saying, “I listened to the tapes. I watched the video. It can’t be this easy.” I said, “What was special about that?” The guy goes, “That’s a second mortgage. There’s $160,000 first mortgage in place that the guy didn’t know about.”
We see a lot of that thing happening. Unfortunately, sometimes I’m witnessing it. I used to be helpful and try to help others when I would go to the auctions. I try to tell people I gave up on that because you can’t help everybody. Sometimes, the best way to learn is to lose some money and then to do it better the next time.
That’s an important thing as well too out there. The beautiful thing too is there are often these lists being published on a regular basis. It is easy to tap into to start getting your feet wet.
It’s extremely easy to get the lists, but the list is not the challenging part whatsoever. It’s the due diligence that goes with that. A lot of people call me up and want to pick my brain or they want to hit me for coffee. I teach a four-day course and there’s no fluff. We go all day long and talk about all the due diligence, steps that need to be done and the ways to protect yourself. I wish it was easy where I could say, “Do these three things and you’re good to go.” Unfortunately, it’s easy to get the list. It’s easy to get excited. Back in the old days, it used to be right in Downtown Houston, people would be randomly walking by on the streets because it was near a bunch of office buildings and lock courts and they say, “It looks like there’s a real estate auction.” They go in and they have no clue. They hadn’t done the slightest bit of research. They’re starting to bid on stuff that they have anyway. These days, it’s more in the middle of nowhere, so at least people have to do a little research to find out where they have to go and bid. Some of the stuff that I’ve witnessed at some of these auctions are crazy and mind-boggling.
With the auction mindset, people lose control if they don’t know what the heck they’re doing and what they’re looking at. The due diligence is the most important key on that. I always tell people don’t fall in love with the property, avoid that OTSC syndrome, “Oh That’s So Cute,” and look at the note.
My favorite properties are the ones that come with the biggest paychecks. I don’t have to like the way it looks. As a matter of fact, the most profitable deals you’ll ever find it on these auctions are the ones that other people don’t want to do. Everybody wants to do the pretty homes. I want to do ugly homes. Those always have the biggest reward and the least competition. Once again, ugly home, a pretty home, no matter what home, do your homework. It’s such a dangerous place for people that don’t know what they’re doing. I don’t want to make it sound like, “Get rich quick,” because it’s not. There’s work involved if you’re willing to do the work. If I lived in Houston, I’d be there every first Tuesday of the month. That’s guaranteed. Luckily, I have somebody else that does that for me.
With the stuff in Harris County, what would you say your average timeframe for a deal from the time that you buy it there to the time you dispose it? I know it’s going to vary depending on what’s going on with the property, but what would you say you’re seeing? Is it in six months? Are you paying to release reduction rates from any of the borrowers or anything like that too or no?
There’s a whole bunch of different ways you can do it. It depends also on what your exit strategy is. If you want it to turn into a rental, literally the day after you buy it, assuming it’s livable, you can put a tenant in there. Sometimes you inherit a tenant that you may or may not want. That’s a whole other story. If you’re looking to flip it, there are ways to speed it up. In general, the traditional way is you wait out that six month redemption period. There are also going to be some issues with the title because you’re not getting the title insurance on it. It also depends on if you want to do vendor financing, for example. That speed things up.
It also depends on if that previous owner wants to buy it back because you may make 25% doing nothing. It’s such a wide variety of potential outcomes that could happen. I would reverse engineer and determine what you’re strategy is and what you’re trying to do. If you’re looking for a rental, I’m going to bid a lot differently than if something I’m going to flip. To throw a curveball into it, if it’s a homestead, then it’s not a six-month redemption any more, it’s a two-year redemption. If you’re planning on holding it for a rental, a great way to do that is to buy one of those with the homeowner still in place. If they decide they want to redeem it after a year, they’ve got to give you 50%.
A lot of these people, if they’re still living and have an emotional attachment to that property, I’m going to work with them to help them get that back but if you’re doing a flip, you don’t want to inherit one of those homes because the previous owners are probably still there and probably not going to leave. You can make them leave, but it’s more difficult so why not go easy path? We always want to make a win-win. I never want to take a tenant and kick them out on the streets. I never want to take a homeowner and kick them out. I always want to work with them and fair to the solution that makes them happy, but also it makes me happy too.
What would you say the ratios are from your deal flow where the borrower has come back and redeemed? Is it a small percentage?
It’s low because I target that. If I want to buy properties to hold, I’m a much bigger fan of Atlanta. I’ve got a turnkey operation there. The property taxes are a lot lower. The insurance is a lot lower, so I get to keep a lot more of the income. I don’t want to buy and hold in Houston, but I do like to flip that. If I’m going to flip, I don’t want to go for those ones where they’re going to redeem. I want the ones that are vacant or the homeowners are probably long gone. They don’t want to know what happened to their property. Those are maybe people that I might target for getting them some of the money that’s owed to them by the county for the overage. Those are not the people I want encouraged to buy the home back. I want to go and get in, fix it up, get back out, get my money, and go into the next one. If somebody specifically said, “I want to get that for 25% or the 50%,” there’s a different strategy for attracting those types of properties.
We see that same thing too. We’re buying in foreclose on the mortgage. Some different states have different redemption periods and you’ve got to work through those. It’s different if it’s a contract for deed that you’re foreclosing on or a true lien out around the state evaluates those. Whether it’s a, “No redemption period. You can evict on a contract for deed in Alabama versus being a one-year redemption if its owner-occupied in Alabama.” It varies across the state. That’s why it’s important to get educated.
That is the key. One of the big distinctions that we have is we do the stuff that we teach. There are many people there these days that are good marketers and they can get you excited. I don’t know if some of these people have ever done a real estate deal. They put those faces of people that are on TV shows. Anyway, I’m not going to go down that road. When you’re picking somebody to train you, make sure it’s somebody who’s doing it, who’s paid their dues and made all the mistakes because it’s not just teaching you the right things to do. It’s showing you where you can go wrong. Sometimes you’ve got to make those expensive mistakes and I’ve made plenty of them. Even though I thought I was doing all the due diligence, but every time I’ve screwed something up, it led to another due diligence. I know you’ve paid your dues in the notes industry and I want to learn some of the stuff you’re doing because I’ve never done a lot of that so we’ll be talking.
That’s why I want to have you on because it’s a similar due diligence aspect of things of making sure you know what you’re buying and you’re not buying some 100-foot long, 5-foot-wide strip in Florida. You’re truly buying a first lien versus a junior lien. You know what type of liens are on the property that doesn’t get wiped out or that do get wiped out. The beauty of it is that a lot of people like the whole flip this house mentality, they want to go out and buy a property to touch it, to rub it, to hump on it, buy the Peyton carpet. I don’t want that. Give me the numbers. Give me the check. I don’t care what the property looks like for the most part.
That’s what it’s all about. I also would like to add, helping people. I don’t love to find people that are distressed, but I love to help them. When you’ve been in this industry for a long time, you know a lot of solutions that a typical person doesn’t know how to deal with lenders and how to deal with counties. We know a lot of stuff that isn’t common knowledge. When I find somebody in trouble, at the very least, I can help them give us some advice and help them get back on their feet or stay in their property longer or come up with a solution to get them back into homeownership. That’s one of the things that light me up because I can’t imagine what it would feel like to be in that position that a lot of people will be. They’re losing their jobs and in big trouble and having to reinvent themselves. It’s good to be a problem solver in times like that.
In times like that, history repeats itself. That’s the thing, the stories of helping people always are better, more memorable than, “I made $20,000 on this flip or $40,000 on this deal.” I kept somebody in their house and they lived in the house for 18 years or 3 years or whatever and help them out. We’ve all gone through financial hardships at some point.
The other thing I find is that when you help somebody with their finances, you’re helping them in a lot of ways. You don’t even know because tied to that is a relationship. Those things are never good when you’re depressed because of money. If you’re under a lot of stress, it’s never good for your health. When you help somebody, even in a small way, sometimes you don’t even know the ripples of that from helping those people out.
Big ripples, not only to their family but the neighborhood too, because in a foreclosure that affects the values of the entire neighborhood if they’re two blocks around too.
I’ve had people tell me, “I was thinking of killing myself. I was thinking of taking my life.” You can make a difference. When you’ve been doing this for a long time, the solutions for a lot of this stuff is autopilot. I don’t even really think about it. I just do it. For other people, this is an insurmountable hill that they don’t think they’re ever going to get over. That’s what keeps me doing what I do. I love doing that and I can’t even imagine how many people are going to be feeling the aftereffects. The virus itself is minor compared to what’s going to happen in the economy afterward.
We both agree that we’ve had a 90-day issue but turned into a year-long problem.
Maybe much longer.
Everything is looking like it’s going to be probably long before we start seeing everything coming back. They’re talking about 25% unemployment here in the United States and expecting 50% of small business owners to not recover. It’s a bad thing. Anytime we can solve solutions, we can work with homeowners to try to keep them on the property. Make it a win-win is one of the most viable things we can do. I think it’s one of the blessings of us as problem solvers. I liked that real estate investors rank above attorney for a lot of people, but problem-solvers rank a whole lot higher on that list.
The other thing is the one blessing that’s coming from this, if there is the silver lining is that people hunker down. It is the time to reinvent yourself. Instead of waiting to see if your job is still going to be there, if real estate investing or notes interests you, if this is what you want to do, whatever it is or any other venture for that matter. It is the time to get educated on whatever it is. Instead of letting circumstances dictate what your future looks like, it is the time to take the reins and figure out how you want to come out of this. A lot of the worst things that ever happened to me turned out to be blessings in disguise.
This could be a blessing in disguise for a lot of people if they use the time wisely. They watch Netflix and drink all day. Probably you’re going to have a much different outcome if you’re taking online courses, training, and reading. I’m not saying don’t watch any Netflix because I do too, but it takes some time to figure out what you want your future to look like. Start training on that and don’t rely on the government to be there for you because they will not be there. Rely on yourself, take the reins, and go with it.
Mike, we’re so excited to have you speaking here at Note CAMP. I am looking forward to it. What’s the best way to reach out to you, to connect, to find more about what you’re doing and in some different classes or training that you offer?
The best way is to send me an email at Info@MikeWolfMastery.com.
Mike, thanks so much for coming on the show. I look forward to it. Everybody, go out, send the message, and learn. This is the opportunity to reeducate, rebuild yourself, learn something new, and identify the opportunities, but also the pitfalls so you can avoid those and not being an idiot. Be an educated person who’s taking action and learn how to do something well. I guarantee, when you do that, you’ll be at the top.
- Mike Wolf Mastery
- Previous Episode – Tax Deeds and Tax Overages
About Mike Wolf
Mike Wolf has been investing in real estate for over 30 years. Over that time Mike and his teams have completed thousands of transactions in both the US and Canada.
Mike is also an international speaker, trainer, and philanthropist.
These days he’s most known for his Tax Lien and Deed trainings where he teaches students how to buy real estate for pennies on the dolla
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