Unlocking the World of Tax Liens and Deeds with Brian Seidensticker

(0:09) All right, what is up and welcome back to how to invest in commercial real estate. (0:13) Super excited. (0:13) We have two guests on today.(0:15) Jackson, what's up, man? (0:17) Doing well. (0:18) Happy to be in Tulsa. (0:19) Yeah.(0:19) I'm from the Fort Worth office. (0:20) We're going to do the Christmas party tomorrow. (0:23) Tear it up.(0:24) Woo. (0:24) It's going to be fun. (0:25) Yeah.(0:26) So some market updates. (0:28) Let's see. (0:29) Bitcoin crossed 100,000 yesterday.(0:32) You can tell you've got a horse in the race. (0:34) I got a little horse, a little baby horse in that race. (0:37) It's been waiting a little while.(0:38) So we'll see. (0:38) Who knows, you know, how long the bull run is going to go, but I do think it's gaining (0:42) a lot of attention kind of across markets. (0:45) So it'll just be interesting to see where it goes.(0:48) But we're not going to let that take the focus off of what we do, which is commercial real (0:51) estate. (0:52) And we've got a couple of updates. (0:55) Grand Rapids property that we launched a week or so ago, it's almost full.(0:59) If you guys want to get into a deal before the end of the year, there might be a little (1:03) bit of space by the time this episode airs for you guys to get in. (1:08) I don't know if we're going to close it before the end of the year. (1:10) I think it's going to be pushed to January.(1:12) The Grand Rapids deal. (1:14) But yeah, I think 100,000 left in the deal. (1:17) Great cash flowing shopping center, right across from a newer construction, Whole Foods.(1:23) Yeah, super excited about that one. (1:24) And then the shopping center, we were about to launch in Oklahoma City, again, getting (1:29) delayed. (1:29) Thought it was going to close this year, most likely pushing into Q1 of next year.(1:32) And then sales, the Henderson Petromax is under contract, still on schedule to close (1:39) before year end, big win. (1:41) We may be getting an offer on the Dawson Petromax, and then the Perfect Auto in Vegas (1:47) is under contract, and that'll be closing before the end of the year. (1:49) So super excited about all those, get some cash back in everyone's pockets, and then (1:53) we can suck it back up and some new deals in Q1.(1:56) It should be perfect timing. (1:57) But without further ado, we are going to introduce our main guest here today, Brian Seidensticker (2:04) with Tax Sale Resources. (2:07) We got it.(2:10) Anyway, Brian, thanks for making the time and coming on today. (2:13) We love having guests and hearing about people and how they get started in investing in real (2:19) estate and how they invest in commercial real estate. (2:22) There's so many different varieties and facets and ways to get involved.(2:25) I think you said that earlier, and yours is interesting. (2:28) It caught our attention. (2:29) So give us a little bit backstory on you and what you do.(2:34) Yeah. (2:34) Well, thanks. (2:35) Thanks for having me.(2:35) I'm glad to be here. (2:38) Yeah. (2:38) Well, I come from, they say, getting the niches, right? (2:42) Well, the tax industry is definitely a niche within a niche within a niche.(2:47) And originally, I got into it really on the wrong side. (2:52) I was doing what many people do. (2:53) I was flipping houses in 2007, 2008.(2:57) I'm actually an aerospace engineer by trade. (3:00) That was what I went to school for. (3:02) Realized about my junior year, that is not what I wanted to do and had, I called my early (3:07) 20s crisis, ended up still going into the industry for a few years, but I'd started (3:12) flipping houses, you know, for at least for a path to get out of the engineering space.(3:18) And unfortunately, you got a couple, you got a couple of engineering graduates here. (3:24) All right. (3:24) All right.(3:25) Yeah. (3:25) Seems to be fairly common, right? (3:27) You either love it or you find any way you can to get out of it. (3:30) Yeah.(3:31) But yeah, I was definitely on the, on the end of feeling like I was slamming my head (3:35) against the wall on a daily basis, making no progress in the engineering world. (3:39) And I love the idea of real estate, seeing progress on a daily basis, seeing the product (3:45) of what you're working on on a regular basis. (3:47) So anyway, I was flipping houses, 2007, 2008.(3:50) I think many people have the same story, you know, got upside down. (3:54) Luckily, it was only in a couple of houses. (3:56) It wasn't like it was a catastrophic bankruptcy type situation.(4:01) But Montana has a weird, had, it still kind of do, but at the time the statutes required (4:07) every tax lien buyer in Montana to send an individual letter, certified letter to the (4:13) property owner. (4:13) So I ended up getting these, you know, 50 plus certified letters in the mail, basically (4:19) stating, hey, you could lose your property due to a tax lien. (4:22) And I was kind of going, what the heck is this all about? (4:25) So good or bad, it basically led me down the path of researching this whole tax sale industry.(4:32) Ended up, ended up raising not a lot of money, but some family friend type funds and started (4:38) buying tax liens in a couple of states back in 2008, 2009. (4:45) So we need to describe what a tax lien is. (4:47) I am initially confused and I know a lot of people are hearing you saying it over and (4:51) over.But when you say tax lien, just describe what that is. (4:56) Yeah, so I think the easiest description is it's a micro loan, right? (5:00) So if you don't pay your taxes, your property taxes, right, the county or the (5:06) jurisdiction, some states by the city actually, will actually put a lien on your house, just (5:11) like you can have a lien on your house from a mortgage. (5:14) And then they sell that lien to a third party, right? (5:17) And that third party basically pays the county those taxes.(5:20) The county, you know, is made whole. (5:22) They can balance their budget like they need to. (5:25) And then the interest that is usually state statute driven of what that lien earns is then (5:31) assigned to the investor, right? (5:33) And so the investor gets to earn that interest.(5:35) And in many cases, that interest can be pretty appealing. (5:39) And that's the lien side, right? (5:42) And I'll use tax lien, you know, as a tax deed is very different, right? (5:48) Tax deed is you're buying the actual property. (5:50) You're not buying a lien on the property.(5:52) You don't have just interest. (5:53) You're buying the real estate. (5:55) And then there's kind of in between that we call redeemable deed, which is this weird, you buy a deed, but it has a redemption period.(6:03) Meaning the previous owner can still come forward and pay off the property. (6:07) It's definitely an industry with lots of interesting twists. (6:13) But that's, I guess, to answer your initial question, that's what a tax lien is all about.(6:17) Now, it's really interesting. (6:18) When I first got into real estate, it was back, I was listening to Kiyosaki and some others. (6:23) And the tax lien was a pretty hot topic back then.(6:26) And the pitch was on the tax lien, not the deed side, was you pay the taxes for the individual. (6:32) And then as long as they don't pay them, you are earning the state statute limit on the interest. (6:38) And it was like maybe 15, 16 percent or even, you know, some states less, some states more.(6:44) And then, I guess, you may not get paid that interest until they catch up the taxes or the property sells. (6:50) Is that right? (6:53) Yeah, I think in general, that's on par, right? (6:55) I think the devil's in the details, right? (6:58) So where states like Illinois, right, you can earn up to 18 percent, but it's a bid down method. (7:05) So the quantity of liens that are actually earning 18 percent is a very small fraction.(7:10) And then, you know, there were some states historically where that lien, right, if it doesn't get redeemed or nobody ends up paying the taxes, you know, you could end up owning that real estate, right, with a fee associated with it. (7:24) And there were probably eight or 10 states that did that. (7:27) But that model is going the way of the dinosaur with the recent Supreme Court case last year.(7:32) So the industry itself has shifted massively over the last probably 24 months, more than probably the previous 50 years combined due to that. (7:43) Well, OK, so let me ask a question. (7:47) I think we got the basis kind of of what you're talking about.(7:49) So how do how do you make money and what kind of money can you earn in buying these either tax liens or tax deeds? (7:56) Yeah, I think on the lien side, it's really shifted to an institutional industry. (8:01) Right. And what I mean by that is, you know, getting the big wins, right, or getting, you know, huge interest rates is is becoming more difficult.(8:10) Right. So the institutional level, the guys, you know, placing 20 million to 500 million dollars a year in the space. (8:17) Right.They're OK earning, you know, seven to nine percent. (8:21) Right. And that's kind of the kind of the average return that you might get.(8:25) And so, you know, their their game is is, you know, you maybe borrow money at five, you place it at eight, you do a large enough volume, you know, you can make a pretty good, pretty good living doing that at volume. (8:38) But for the small guys with, you know, three hundred thousand dollars, it's really hard to make any big wins on the lien side. (8:44) Right.On the deed side, it's very different. (8:47) Right. You're buying that real estate and typically you're buying it in a very distressed state.(8:51) Right. So if you're used to any sort of value add model, then, you know, the tax deed arena can be a place to get properties that may be, you know, inventories dried up, you know, and others. (9:04) Right.The bank foreclosures are not what they were, you know, 10 years ago. (9:07) I think everybody knows that tax deed properties is a pretty, you know, pretty even Steven conveyor belt of properties coming through on an annual basis. (9:18) So finding those those gems and doing the fix and flip the model is pretty common in that space and doing very well at it.(9:28) So I'm wondering, because I don't understand it completely, but so tax lien or tax deed, how is it decided who gets to pay it or who wins that particular property and is able to pay the tax lien and get the interest? (9:44) Well, most of the states that had that, hey, first come, first serve is that model's gone away. (9:49) So almost all states now have an auction. (9:52) An auction process, right.(9:54) Whether or not it's a lien and you're bidding down the interest or most tax deed auctions is a standard auction. (9:59) You can imagine starting bids 20,000. (10:03) OK, I'll bid 21,000, whatever.(10:04) Right. And it's just a normal purchase process. (10:08) But yeah, so it's really become a lot more straightforward on who it's who wins.(10:14) Right. Whether you're bidding down and you're willing to go to the lowest interest for the lien or you're willing to build the highest for the deed. (10:21) Is the winner at the end of the day.(10:22) Are these some sort of online auctions or. (10:26) Yeah, well, I guess good or bad, COVID forced a lot of the country to go online. (10:31) Right.So it used to be hard. (10:32) Right. Or it was really only a couple of states that had online auctions.(10:35) Now, most states have online auctions, which allows folks to really, I'll say, invest from the comfort of the couch. (10:41) Now, reality is the best deals are still going to be those live auctions that are hard to get to. (10:47) Right.You're not going to have as much competition. (10:49) Right. But you can still find areas that have online auctions and win on occasion for sure.(10:57) Yeah. So I guess walk us through an average deal. (11:00) Where are you looking for these? (11:02) Where are you finding them? (11:03) What do you think your average strike price or perspective is? (11:07) I mean, walk us through why you love this asset class and how it's made you some wins (11:13) compared to other ways of investing in real estate.(11:18) Why do you love tax liens and how do you go about it, I guess? (11:23) Yeah, we're in the tax lien space, right? (11:26) We're not as active as purchasing, right? (11:29) We're basically a service provider, data software, that sort of thing. (11:34) On the tax deed space, we are involved because we run a fund that actually provides capital (11:39) to the tax investors themselves, right? (11:41) And through a profit share structure. (11:44) And so we've chosen to be much more involved in the tax deed space.(11:49) Why I got involved, I guess, have you ever got into something and you kind of thought it was (11:55) somewhat interesting and then by the time you realize what you got yourself into, (12:00) you maybe wished you never started, right? (12:02) I think that's probably my journey in getting into this space. (12:06) But at this point, it's served very well and it's always changing. (12:12) It's very interesting from that perspective.(12:17) And because of the complexity and the difficulty in really understanding all of the nuances, (12:27) from one state to the next, you can still find real estate at a pretty good discount, right? (12:32) I won't give away all the secret sauce, but typically where we provide investors capital, (12:37) they're buying it somewhere 50% to 60% of what we call as-is value, right? (12:42) If the property is worth 300,000 as repaired, it might be worth 150 in its current estate (12:49) and they're buying it for around 100K, right? (12:51) That's kind of the general economic. (12:54) So the upside is substantial if you know where to find them, which isn't everywhere, (12:59) but there's still a couple of billion dollars worth of real estate being sold in that (13:03) bucket on an annual basis. (13:06) So here's a question for you.(13:08) I know you can do this with houses. (13:10) Can you do this with commercial real estate of any kind? (13:14) Or do you see it? (13:15) Is there a marketplace for it? (13:16) Is it common? (13:18) Well, I'd say until the platform that we put together that allowed you to really search (13:22) nationwide, it was very, very difficult to take a commercial approach because you were (13:26) really looking at a county and then how often does a county or a couple of counties, when (13:31) you're having to look one by one, have a commercial real estate property come up for auction? (13:36) Rarely, right? (13:36) But I've done this demo several times of let's go look at how many bowling alleys are up (13:43) for sale nationwide. (13:44) There always seems to be one.(13:45) It's weird. (13:46) And there's certainly commercial real estate that ends up in this bucket. (13:50) Actually, one of the guys that we work with, he ended up buying a 53,000 square foot.(13:56) It was an old newspaper headquarters in Indiana and got a great deal on it. (14:03) You know, is that a common thing that you can just go today and buy that exact property? (14:10) You're going to have to do some digging. (14:12) But if you're willing to be pretty flexible on where you buy that type of asset, then (14:18) you can find them for sure.(14:21) Yeah. (14:23) And tax deeds, right? (14:24) It's every type of property, right? (14:27) Vacant land, commercial, single family. (14:29) It's definitely dominated by single family.(14:31) But you can also get yourself into pickles because counties typically don't peel out the (14:36) stuff that's worthless, right? (14:38) And we've seen people buy a mailbox. (14:40) We've seen people buy a sidewalk or the road, right? (14:44) These are all things that you really need to be aware of what you're buying when you (14:48) get in the space because there's nobody telling you don't buy that. (14:52) It's not worth anything.(14:53) That doesn't exist. (14:56) Okay. (14:57) Any other hurdles you would say without obviously giving away all your secrets? (15:01) But any other hurdles to this other than just buying a mailbox and stuff like that (15:04) that you know you should expect to see? (15:07) Yeah.(15:08) I think the biggest hurdle that I think some folks get into depending on the state is (15:13) really the title garbage, right? (15:16) And with most real estate, you don't deal with... (15:18) What I mean by that is like other interested parties in that property, liens that may be (15:23) stuck, municipal fines that don't get wiped out by the tax or foreclosure. (15:29) And so you're underwriting the asset from two angles, right? (15:32) The standard asset value that I think most real estate investors know what they're doing, (15:37) right? (15:37) And then you're looking at it from a title perspective of what is the garbage you're (15:40) going to have to fix and how do you discount it to account for that, right? (15:45) Which a lot of real estate guys aren't really used to that end of it. (15:49) Not that it's rocket science, it's just new and different.(15:52) And so I think that scares people away and it's really not that hard to learn it. (15:57) Once you do, then you just address it just like you address, hey, this needs a new rule (16:03) if it costs 10 grand, right? (16:05) It's the same thing. (16:05) This has a $5,000 lien, I can negotiate it on the $3,000, right? (16:09) It's the same.(16:09) Interesting, yeah. (16:11) That is very interesting and it's a really good point because we could buy a dozen pieces (16:16) of real estate all over the country, $50 million worth of real estate and there's never title (16:22) problems. (16:23) Like there's a lien that's being paid off by the seller.(16:26) Yeah, like there's never any issue. (16:29) It's kind of an inside joke around the office that title insurance is kind of like the biggest (16:32) scam ever. (16:33) Like I don't know anybody that's had a title insurance claim just so.(16:38) So I see the value from like people would be weary. (16:43) People would say, ah, this $5,000 lien, they may not know that you could just call and (16:48) that may have been there forever. (16:50) They may take nothing just to get it off and get something.(16:54) They probably mentally written it off. (16:56) So it's very interesting. (16:59) I've heard you mention this software and it sounds like maybe it's your proprietary software (17:04) where you're like aggregating some of this data of either sales or opportunities, whether (17:12) it's a marketplace.(17:13) Could you tell us more about that? (17:17) Yeah, I mean, not to put the shameless plug, but it was really a first of its kind where (17:22) you know, prior to us aggregating all that information, it's not a proprietary thing. (17:27) You can go subscribe to it. (17:28) Right.(17:28) But it was, you know, if you wanted to go look at the tax sale properties, taxing your (17:33) tax deeds, you go to a website, right? (17:36) Even online ones, a website, you look at what's in there, right? (17:39) And if you want to look at the next county, you got to go to a whole different website (17:42) and look in there. (17:44) And what we did is we put all like the whole country in one platform. (17:47) And so if you're looking for a bowling alley, you put in, I want a bowling alley.(17:50) It tells you, hey, you have one in Oklahoma, you got one in California, you got one in (17:54) New York, which makes it very unique and underwriting on a large basis to find those (18:01) diamonds in the rough. (18:03) So you were just building that out of out of a need. (18:05) It's not like you had an initial business model of, hey, we're going to we're going (18:09) to do this because it's this massive space you were just using and probably annoyed with (18:14) going to a million websites yourself.(18:17) Exactly. (18:17) That's exactly right. (18:18) We built it as an internal tool initially.(18:21) Right. (18:21) And then had some guys say, hey, you should you should make this public. (18:25) You might make some money, you know, selling it to others.(18:28) And and and we did. (18:30) And so, you know, it's didn't really have that plan going in, but it worked out pretty (18:34) well. (18:35) Exactly.(18:36) That's pretty cool. (18:37) Yeah, it's super interesting. (18:38) You know, are you familiar with Napoleon Hill? (18:42) Think and grow rich.(18:43) And one of his big things was every adversity carries with it a seed of an equivalent benefit. (18:47) And it's just interesting because that's played out in my investing career. (18:51) And for you, it was like the deal that didn't work was the seed for a business that would (18:56) work for you.(18:57) And I think it's important for everybody listening like you're going to run into roadblocks (19:00) getting into real estate. (19:01) You don't even know what direction you're going to go. (19:03) But as long as you when you have your failures, you don't you don't get afraid and say, I'll (19:08) never do that again.(19:09) I'm going to quit. (19:10) Use that knowledge to turn it into something really positive for your future. (19:14) And it sounds like that's what you did with your experience.(19:16) So let's wrap it up because we're probably about time. (19:20) Our man didn't start the clock for us. (19:22) But tell us about how do people listening, if they're just interested in this side of (19:29) real estate, how do they hook up with your website or with your database and just look (19:34) into it for themselves? (19:36) Yeah.(19:37) Well, I mean, to find us, it's, you know, Google Tax Sale Resources, right? (19:41) Or TaxSaleResources.com if you want to go straight to the website. (19:45) The one thing we don't do is we're not really we're not an educator in the space. (19:50) And so if you're looking for somebody to teach, to teach you, there's many out there.(19:54) You can Google that or I guess the latest is YouTube. (19:57) YouTube or call it GPT or chat it or whatever, you know, but there's lots of educators out (20:04) there. (20:04) I would say do your homework on because there's good educators and not so good educators.(20:11) And so definitely do your homework on that front. (20:13) But if you just want to learn about what the industry is all about, we do I do a ton of (20:18) interviews with attorneys in the space. (20:21) So if you want like legit information on how a specific state works, you can find it on (20:26) there.(20:26) So if you want to if you're self-taught type person, go there. (20:29) Right. (20:29) If you want somebody to teach you, maybe go learn some routes and then come back to us (20:33) when you're ready to get going.(20:35) Awesome. (20:36) It's very cool. (20:37) So TaxSaleResources.com or Google it.(20:40) It's just another area, guys, for you to get involved in real estate. (20:44) And it could be if you're starting out and you're a house flipper, this could be a great (20:48) way to get into properties for less money than you otherwise would. (20:52) But just look out for the risks.(20:54) Like you said, I'm sure there's plenty of online content that'll help protect you. (20:58) You guys have anything else now? (21:00) Brian, I really appreciate it. (21:02) Wish you the best of success and hopefully some people on our podcast go and check out (21:08) your website.(21:08) Well, thank you, gentlemen. (21:09) Thanks for having me. (21:10) It was great.(21:11) It was great chatting. (21:12) All right. (21:12) Really appreciate it.(21:13) Yep. (21:13) Thanks. (21:14) All right.(21:14) Till next time, guys. (21:15) We'll talk to you later.