PODCAST

How Turnkey Real Estate Investing Works in Texas Tax Sales

Mitch Stephen|By December 1, 2016

Episode 29:

Before becoming a Texas real estate investor in 1991, Arnie Abramson had successful careers as a financial planner and Vice-President of Marketing for a national real estate management company that marketed public Real Estate Limited Partnerships. He began buying houses at Texas Sheriff Sales in 1992 and has been an investor, landlord, mentor, educator, speaker and property manager for over twenty years.

Arnie is a national speaker on Texas tax deed sales and is the Texas provider for tax deed purchases for several of the national tax lien gurus seen on the Internet. He is past president of the Texas Real Estate Investors Association (TxREIA), on the Advisory Board of several REIAs and was a co-founder of the REI EXPO. He was also quoted in US NEWS AND WORLD REPORT this year and acknowledged as the expert in Texas tax sales by the Tax Lien Lady in her book on tax liens.

His company, Texas Tax Sales Resource Group LLC, HAS THE ONLY COMPLETELY TURNKEY REAL ESTATE INVESTING PROGRAM THAT COVERS THE ENTIRE STATE OF TEXAS. This includes the research, due diligence, previewing, bidding, inspecting, rehabbing, renting and management of the properties purchased at the Texas tax sales. This program, along with the Lien to Deed program that converts tax liens to deeds in other states, is available to the PRIORITY MEMBERS.

Priority Membership information is available by contacting Arnie through
1000houses.com/taxdeeds (tell him Mitch sent you)

In addition, the very popular Learn and Earn Program does not require Priority Membership.

What you’ll learn about in this episode:

Arnie’s tax deed expertise
The difference between tax liens and tax deeds
What one right the person losing their house has
What makes Texas particularly great for buying tax deeds
How Arnie built up his business amidst the foreclosure boom
The research that needs to be done before buying a tax deed
What you need to know about options when it comes to evicting
The differences between a tax deed and a judgement
Why you have to pay attention to who is doing the suing
The best deal Arnie ever made — or didn’t make in his case
How turnkey real estate investing works, particularly in Texas
How you can make money by maintaining, preserving, and safekeeping a house where the the deed is redeemed
How to learn more from Arnie about tax deeds in his various speaking engagements and programs
Arnie’s “Learn and Earn Program” opportunity for you
Different ways other people make money in this niche — but why Arnie prefers it the way he does it
Why you should do your research and not assume someone can’t make the payments and stay in their house
Why you shouldn’t buy a tax deed hoping that it will be redeemed
The priority membership Arnie is offering

Resources:

1000houses.com/taxdeeds (codeword: Mitch)
1000houses.com/101
1000houses.com/grow
1000houses.com/NoteServicing

Transcripts:

Mitch: This is Mitch and today we’re gonna get you some Arnie Abramson. This man is specialist in tax lien business, specifically the Texas tax lien business and it is a wonderful niche and it is something that you should know about, you’ll never know when you’ll gonna come across issues that you should be able to profit but you just don’t know what you don’t know. So, today we’ll gonna get you educated about Texas tax liens, with the wonderful Arnie Abramson. Hey, Arnie how are you doing today?

Arnie: Well, thank you. Am doing fine. How are you?

Mitch: Am doing good and am so glad that you are here on the Real Estate Investor Summit Podcast, because I’ve heard your name for years and years around this part of the world and now, I get to talk to you, so it is an honor for me, thank you.

Arnie: Well, thank you. It is my honor. By the way, Mitch. Let me just set the [INAUDIBLE] if I could. I don’t want everyone to be misled. Texas is not really what they call a tax lien state. Texas is a deed state. Let me explain the difference, okay? That would be a good place for us to start.

Mitch: Okay. Good.

Arnie: That would be okay?

Mitch: See, am learning something already. [LAUGHTER]

Arnie: There you go. I think you did that on purpose, something in the hope that I passed the test.

Mitch: [LAUGHTER]

Arnie: Okay. A tax lien is amount of taxes someone owes to the county, to the city, and all the taxing entities. And it is a lien that is for taxes. And taxes for example, that lien goes into effect automatically, January 1st, every year. And it is not right, until 13 months later, you have to pay that taxes some times, but in January 31st of the following year it’s when–after that day it becomes a delinquent, but the tax liens are not for sale.

In Texas, some states that are called Tax Lien States, when you default on a tax lien, that’s what they sell at the option. They sell that lien. Let’s say you have a property, worth a $100,000 and $8,000 in taxes. In the tax lien state, they would out that $8,000. And that’s what you bid for, they might say, “Okay, the interest rate on this is 12%”. And then the bidder would say, “I’ll take it for 11%”. Somebody else for 10%. Whoever the lowest rate is, gets that lien. It is not how it works in Texas. Same scenario, $100,000 property, $8,000 in taxes, the bidding starts with the $8,000 and it goes up from there. I may pay 10, they will pay 15, somebody else’s will pay 20, whoever wins the highest bid on that, the $8,000– they will also pay the taxes and the rest goes to someone else, okay, if it goes to the country or the state or part of it could be claimed by the ex-owner. But, you get the property, immediately. It’s the deed you get, not the lien, in Texas.

Mitch: The deed of property in your name, if you win the bid.

Arnie: Exactly. You get a share of this deed and parentheses-is with no warranties but, that’s because it got some built in things, which are really good. But, it is a deed, and in other states–

Mitch: I understand that, the person who is losing the house has some kind of right of redemption. Tell us something about that.

Arnie: Exactly. Well, they have [INAUDIBLE], that’s the way. If they lose the house in the auction, it is the only right they retain, is the right to redeem it. They no longer have the right of possession. They no longer have the right to collect [INAUDIBLE]. They have no right except the right to redeem it. And the right of redemption is statutory, means it is part of the state law and they have 6 months in which they can redeem it, unless it’s a homestead, has agricultural exemption or it is separated mineral, it has been separated from the property. Those 3 exceptions mean that they have that right for 2 years, if it’s not one of those things, it is 6 months, to be more accurate, it’s a 180 days. And if they claim, “Okay, I want to redeem”. They must pay us back, if we bought this [INAUDIBLE], they must pay us back what we paid for it plus 25%. If it is anytime in the first 12 months, and if it is in the second 12 months, it is 50%. And it is not pro-rated, which means if they buy it today and they redeemed it 2 weeks from now, you get the full 25%. In some of the other states, it is pro-rated, so this is very good for investors in Texas. In fact, that 25% rate in the country is the highest also.

Texas is very unique and has really the best structure of all.

Mitch: Okay, so you’ve been teaching this for a while now. How long have you been teaching this to people who are interested?

Arnie: Well, I started doing in the early 90’s. And, in that time, there was no–if there was an internet, there was none of this information in the internet, so it was very limited with what you could do, you have to go to one county and withstand around the circle around the share and I’ll bid, and then after a while, in the mid 90’s, some competition started coming in, that–bidding the properties up where I was, which was in Dallas county. So, we kind of add off from that a little bit. And so, I was doing forclosures with Hood and V.A and other things, but when 2008 recession debacle started, you know, we recognized them, they were a lot of foreclosures and I need to re-immersed myself into this. I spent about a year doing just that. Boning up on other law changes and everything and going to a lot of different options and finding that on the internet, there were so much information available now. So, I started teaching, because I thought, you know people need to know about this. This is–nowhere to go, they learn about it. I mean, you can sit there and read the Texas property tax code, which [INAUDIBLE]. If you ever happened to have insomnia, I recommend it, it’s great. It will put you right to sleep.

Mitch: [LAUGHTER] some of that stuff got too fun. It is fun if you can be in control of that information and own it in your heart, because the fun part would be knowing what you are doing exactly and going out there and making 25% to 50% of your money, bang bang bang, you know.

Arnie: Oh, you are exactly right. And when I read the first, in the early 90’s. It was–I kind of glazed over, but later after more years of experience, I started to relax and say,”Hey, I understand this. This is fun”. So, anyway I did that and then, I started teaching people. And Mitch, I had to tell you, this is a side commentary, but it’s all true, everybody was very interested and nobody–almost nobody was willing to do all the work involved, you know, because, there is a lot of work. That’s why a lot of people don’t do it. And so, I guess they wanted the silver bullet. So, finally I decided, “Okay, look. I do all the work and you can pay me if you are successful”. All of a sudden, it exploded. That’s what everybody wanted. And so, from that 2009, that’s what happened with that. I think it is a long answer.

Mitch: No. No. That’s great. So, what kind of work do you do? You say that is a lot of work, and you describe the process a little bit. I don’t want you to go all the way the details, but can you tell us some of the work is, that people were so happy for you to do for them?

Arnie: Yes, of course. I used to joking like, “Oh, a twelve step asset recovery program”.

Mitch: [LAUGHTER]

Arnie: And my initials are A.A. so, it’s perfect, right? I have a little humor somewhere.

Mitch: Yes.

Arnie: The first is, early in the month, some of the counties were gonna have– how many states there? 254 counties in Texas. And if any of them are gonna have a tax auction, or tax sale, it has to be on the first Tuesday of the month. Now, it will never be 254 auctions, because, some of the counties that are out there have probably less people better on this call, you know. So, they’re not gonna have houses available every month. But, in any given month, anywhere from 40% of the counties, will have a sale. So, the first thing, you know–we do, is we start looking at list of properties in all of the counties, to see which ones that fit criteria we may have. And of course, that will lead to another question, so just write it down, I’ll get back to it. Primarily, after that, we have to start doing research on those properties, to find out what we can about them, and there’s no one place to go, you have to go to several places. And then, you have to look– okay, on the sale, who’s doing all the sewing? Because, if it’s the county, if it doesn’t have the magic words, “ET AL. E-T-A-L, which means and others”, after it. It could be that the minimum bid which is the taxes could be just for the county and not for the city, not for the school district and everything else. If it has et al, it’s gonna include them all. If it does not, it may or may not. So, that’s some more research we have to do. The second thing they have to look at is, when was the suit filed, the lawsuit, and when was the judgment. Let’s say, the judgment was 2014, and it took 2 years to get to the auction, and it could happen very easily, I tell you why in a second. That means, that minimum bid of $8,000 only goes through 2013, the judgment was in 2014. And it was the taxes that owed up to that point. So, now who’s paying for the taxes since then? No one. So, if you buy it at the sale, it’s gonna pay that judgment off. But, then afterwards, after the sale, you have inherited the taxes since then called post judgment taxes, 2014, 2015, and this year 2016. So, you have to look and see, all these hidden factors, because you need to know what is total out of your pockets gonna be, you wanna found out what the value of the house is to you, right? So, that’s just the beginning. [LAUGHTER]

Mitch: Absolutely. That’s enough to let you know that you need some coaching before you go into this, as you could make some mistakes that could cost you a lot more than you think.

Arnie: Absolutely. And Mitch, the next step is. Let’s go and visit the house, let’s take a picture, because, you know, sure you can go on Google and look into at them. You have a 50-50 chance it will be the correct address, but you also don’t know how long ago that picture was taken necessarily. It might be a year, it might be 6 months, might be last week but they could have come and the map [INAUDIBLE] since then, you wanna know and I think it is important to know, whether it is occupied or vacant.

Mitch: They’ll be interested in that, because that’s gonna be another set of problem.

Arnie: Well, it is. You know, if it is occupied, then you are pretty sure that most of the major systems are working, pretty sure. We’ve actually bought a house right now, I was camping out inside, and nothing worked. But, that’s the exception [INAUDIBLE]. And if it is vacant, you know, it is possible, you have no copper, no wiring, no plumbing and if you can get in, it’s kind of a guess.

Mitch: That will be a gamble, we correct the gambling, wouldn’t we?

Arnie: Yes, we would. [LAUGHTER]

Mitch: Yeah.

Arnie: I think we do–better off in Vegas.

Mitch: [LAUGHTER] Yeah. Okay, yeah so, man good stuff. What happens if you buy a house and someone’s in it?

Arnie: Well, the first thing you do, is go and knock on the door and give them some proof that you bought the house. And it doesn’t matter to me when that happens, whether it is the renter or the owner, because whomever it is, it is not our house. And they can pay us the rent now, if they wanna stay. And if you don’t want them to stay, you go through the normal eviction process. You’re getting your 3 day notice and you go from there. Now, there is one statutory thing you can do sometimes speed it up, after 20 days, if you back to the original court that issued that judgment. They will give you a writ of execution after 20 days and you can bypass all the other stuff, it will be a little fast for you that way.

Mitch: Oh, wow. Great stuff.

Arnie: You can go to the original judge that rendered that judgment.

Mitch: Are those guys easy to get hold of most of the time or is it that difficult?

Arnie: Well, I tell you the truth, we don’t use it once in the last 10 years. And that was in some remote Country and they were, it was good old deal, and the sheriff wouldn’t help us with the normal eviction at all. They kept stalling saying, “No”. You can’t put another [INAUDIBLE] you have to put the name down” And stuff like that. So, we just went around and went to the judge, that wasn’t too bad because it was a small town.

Mitch: Yeah. So, most of the time you just go to the regular eviction?

Arnie: Yes. And you can evict the owner of the renter or whatever. If it’s the owner of the house, what I usually do say to them is, “Look, you can stay or pay us rent or you can move out, or you can redeem it”. And they’re not usually exclusive, you can do anything 2 of the 3 also.

Mitch: Well, it’s just like everything else, Arnie. Having a great education in the niche that you are trying to be successful at is not optional. You have to know everything. And to know everything faster and to know everything in such a manner that you don’t have to spend years or the hours upon hours, digging this stuff up, and reading all these legalities, you know, you got to get yourself the right mentor. So, you have a course that teaches it. Can you talk to us little about that? And am gonna [INAUDIBLE] go to the link, 1000houses.com/taxdeeds, that’s 1000houses.com/taxdeeds and you’ll get to revisit all the numbers and get in touch with Arnie Abramson and learn his about his course there too, but can you tell us your course right here, what you offer.

Arnie: Well, actually Mitch, we didn’t have a course. Every now and then, or 2 to 3 times a year, I’ll have a boot camp. And it’s a full day deal, and we just teach everything. We also have a program Learn and Earn, and I’ll talk about that in another context but, what we really have found that works the best is, that we have a turnkey program, where we do all the work. In other words, we go out and we buy the property first, the investors that we work with are called out priority members and there’s a one-time fee to become a priority member, but it is not an annual thing. It is– so that we’ll know who they are and they’ll know who we are, but the priority members are called the Texas- 2 Step. It is a very simple concept, giving our–if priority members wanna rehab it themselves, they can. We’ll just it sell it to them, we’ll rehab it, we’ll rent it up, and then we’ll offer it to our priority members, already rented and cash flowing and they know exactly what they are getting anything they want. That’s the biggest thing that we have that we do.

Mitch: Well, it is way more of a relationship thing than just educational thing as well. That’s perfect, I love that.

Arnie: We are happy to teach and help people them, of course, our priority members they have like I said, a 21 hour access to us, because 2 of my associates are managing things. They have up to 2 am, Monday to Fridays. We have 21 hours, and we are ready.

Mitch: [LAUGHTER] 21 hours, that’s pretty good. Not everyone offers that. So, go to 1000houses.com/taxdeeds, that’s D-E-E-D-S, okay? All lower case. And be sure to get more information. What else do we need to know about tax deeds? And what would you like to say before we sign out?

Arnie: Well, Mitch, one of the things that I would like to– there’s still more work, and you are absolutely, 100% right on track about know what you are doing before you get out there. Because, you know, at–the sheriff of the [INAUDIBLE] is doing the auction, where they’re selling this. And sometimes, most of the times, they are also selling judgments. And not just tax sales, and I have seen people coming in, new people who are not educated yet, and they are buying a judgment, and think they are buying a tax deed. Yeah, here’s a quick way to determine whether it is a tax deed that you are buying or a judgment. Listen to whom–listen to whom they say is doing the suing. Who’s the plaintiff, if it’s not the city, the county, the school district, junior college or something that has a tax immunity, if it’s not one of those, it’s not a tax sale. If it’s a HOA, an individual, corporation, an LLC– it is not a tax sale.

Mitch: So, you can actually get a judgement on someone and then go get paid to auction?

Arnie: Sometimes, they put judgment there. Now, that’s a whole different ball game, I don’t even get into it, but I do know this, that sometimes you can buy that judgment and if the judgment is ahead of you, they can wipe you out.

Mitch: Yeah. Yeah.

Arnie: I get the example of– some attorneys did they go there and gun on these judgments and they do a lot, one of the examples I give to people, who are truly afraid of doing it, as they should be, if they don’t know what they are doing. Is that, you come to my house and my dog bites you, and you sue me and you got a $600 judgment, you wanna go bet on that judgment?

Mitch: No.

Arnie: I mean, that maybe bet the people ahead of, you know, if there are lot more other things, too. And Mitch, let me say this if I may, right now, all of you who are investing in Texas now. Things are booming in Texas real estate, which is great news, if you are a seller. But, it is really tough if you are a buyer now, because, the prices have gone up, the

rents have gone up, the fundamentals are here, you know I was reading the other day, there are eleven hundred new people coming into Texas everyday and that’s just in 4 major areas, you know, San Antonio, Austin, Dallas Fort worth, and Houston, eleven hundred people a day, new.

Mitch: Well, they all gonna need help, aren’t they? [LAUGHTER]

Arnie: They do. They do. Let me tell you what I finding, I am finding this that some of the smaller towns, secondary and tertiary towns around the big cities are booming and no one’s really coming a lot of attention to that because the 2 major groups that are moving to these places. Number one, the baby boomers, as they count– they wanna stay within an hour and an hour and a half of this big city but, you know, let’s acquire their lifestyle. And then the younger, the millennials as an example, as they get– they’ve been in the city, they’re gonna be playing, working and doing everything in one area, and now they are getting married and they wanna raise a family, they wanna get out of that urban sprawl. And there’s a lot of demand out there. And the cost, the reason why i’m talking about this, I talk about how much demand there is here in the Texas real estate market. The prices have gone up, it is very tough right now. And options in Texas, in Dallas Fort worth, San Antonio, Houston, where you could do very well if they auction, it’s difficult, because we are competing against hedge funds coming in, REITs coming in, just investors anywhere, because everything is doing so well in Texas. And so, the bidding prices are up, I talked to some representatives, or some of the hedge funds before the sale a few months ago. They can bid up to 90-95% of the price value, now we can’t compete with that, because we can’t [INAUDIBLE] and get into cash flow. We are concentrating now, look, if most of the competition is in the big cities, then we’ll look in the smaller cities. If most of the competition is in the higher priced houses, which is where it is, then we could look into the lower priced houses, and we’ll not gonna give up on the others, but we’re gonna spread our opportunities out. Like, we are looking into your area, San Antonio, we at Atascosa County as well.Yeah. And around Dallas County and Grayson County and you know, Alice County and we are doing well in those areas now. And they rent up quickly.

Now, if we talk about redemption earlier and there is something that I really need to let you know about. There is nothing to do with redemption. There is another law on the books that says, “If someone who has an interest in the house who is not properly notified up to sale, they can contest the sale for up to 2 years”. Now, it used to be 3 years, it’s now 2 years. Here’s the significance of that, number one, it almost never happens. That almost never happens because they have built in some safe guards which you can’t previously say, “Oh, I can’t– I wasn’t notified”. Because, the first thing they’ll say is, “okay, put up the money that you would have paid if you have been notified”. And that gets a lot of [INAUDIBLE], here’s the significance, even though it never happens, the title companies will hang their head on that. And generally, you cannot get a title policy for 2 years, even if there is a 6 month redemption.

Mitch: Hmm, interesting. So, I just want people to understand that it doesn’t mean you can’t owner financed the house still, it is more likely to rent it because, you can’t get a title policy for 2 years. So, the obvious thing is to rent it, but you can, and if you can’t get the policy you can’t sell the house, but that is not true. You just have to disclose the fact that the reasons why you can’t get a policy, and disclose that there is a potential protest out there. Then, if the person still wants to buy the house under those odds and that disclaimer, then you can sell it. Just don’t go around and sell the properties to people and not tell them the truth about what the risk is.

Arnie: Absolutely. Mitch, I was gonna say that. We sell properties all the time, you must disclose it of course, it really comes to play, if you are trying to retail it to someone’s who’s going to a mortgage company, because they are not gonna be able to get a mortgage without a title policy from a normal mortgage company. But, you hit the nail on the head, I hear this guy in San Antonio, who does a lot of owner financing, is that right?

Mitch: [LAUGHTER] at least one, as far as that bringing up that because a lot of my listeners like the idea of owner financing. So, I try to put everything tied up in that text when it’s the right opportunity and so, just because your property doesn’t have a [INAUDIBLE] the title’s a little bit coated, that doesn’t mean you cannot owner financed it. You just got to disclose it and let the person make a decision, do they wanna take that risk or not?

Arnie: That’s right, and you know, that’s where education comes in. Because, understand this, when you are buying a property at the tax sale in Texas, that tax lien they get–that had priority, what that means is that it wipes out the mortgages and any non-governmental liens.

Mitch: It wipes out the mortgage. So, if there’s a $50,000 mortgage on a house, and you get the tax deed, that lender’s just out of luck, that’s amazing.

Arnie: Now, the lender has the right to redeem it. And this typical transaction, $100,000 house, the guy living there got $20,000 the mortgage company got $80,000. He’s got lot more [INAUDIBLE], he is more likely to redeem it then the guy who is living in the house.

Mitch: Yeah. If they redeem it, they have to pay you the 25% or the 50% if it’s over a year old. So, you gonna win either way.

Arnie: Well–

Mitch: Am sure you rather have the house, you know in some of these cases, but you know, if you only get the 25% rate return for the first year or 50% rate of return on the second year. This probably if it makes it to the second year, it probably kills the will of the lender to come back and redeem, right?

Arnie: Generally speaking, if they gonna redeem it, they’ll gonna do it in the first few months, generally speaking. Back in the early 90’s, I’ll never forget one that we did, they guy redeemed it the day before the 2 years was up. Oh my god, we were so upset. Because, it was a house we bought for like $23,000 and it was a $70-80,000 house, and you know, we were just counting the money already. [LAUGHTER] Oh well, we made $20,000 it was the rent.

Mitch: Tell us about one of your best deals. One of your very best deals. You know, we all get lucky sometimes, we worked hard and long enough and prepare well enough, we’re gonna get lucky. Tell us about when you get lucky on.

Arnie: Well, the best deal that I ever had was one I decided not to do.

Mitch: [LAUGHTER] The best deal that you ever had was the one that you decided not to do?

Arnie: That’s right, because it was too good to be true. Actually, one of the very good deals, was during a couple of years ago, in a small county in Hunt County, the outer town of Combes, Texas. Combes is a county of about 8,000-9,000 people and 10,000 students at Texas A&M Commerce. And this house is right out of the town, about 5 miles. And it was on 35 acres, 5 bedrooms with a spa and 5 baths and all this relatively new house, as you drive by, there’s a pond– you can see the bass jumping out of the water. We were driving by this house, and they only owe $12,000 in taxes, and they have a value of about $300,000. My wife was with me and said, “You know what, this goes for sale and we buy it, they don’t redeem it, we’re moving”. You know, I mean [LAUGHTER], so we thought these people are not gonna let go of the sale for $12,000. Well, just in case I was on the sale, and my wife–we bought it for $80,000. And we are thinking, “OH my gosh, how could this happen”? We bought it with some of our investors, of course. We buy it on their [INAUDIBLE], and 52 days later it was redeemed for $130,000, including some of the rent that they collected. And it was redeemed by the mortgage company. Usually, the mortgage company, is not going to let it get that far, if people don’t make their payments, their escrows and their taxes, then they foreclose way before it goes to tax sale. Because, the tax sale takes so much longer because, they have to notify everyone, remember? And that, need I say, what the mortgage company was

Mitch: Well.

Arnie: And that, need I say, what the mortgage company was, Act One. And they also have a history of right hand on with the left hand now knowing what the left hand’s doing.

So, anyway it was a very quick one. That was one of the best one recently. And our investors were extremely happy.

Mitch: That’s a nice take, to put up $80,000 and get a 25% pay off, 25% more on a pay off in 52 days. That’s a tremendous deal that would make anybody happy.

Arnie: Right. Let me give you a few details, if we have more time.

Mitch: Sure. Sure.

Arnie: About the redemption because, you don’t only get your money back what you paid for it. You also get your money back for some other things, that I will tell you about now, plus the 25% on them as well. For example, the deal recording pay, that’s not a lot. But, any of those post judgement taxes you get to pay, you also get back that, plus the 25%. And then 3 magic words that in the code anything to maintain, preserve or safe keep the property. The first thing that came to my mind is, insurance. Any insurance payment that you make. That’s certainly is– maintain, preserve and safe keep the property. So, if you made any insurance payment, you’ll get back that plus 25%. And then the question always comes up, well, what about improvements, can I improve the house, can I do this? And that’s where those 3 words are important. Because, if you are not living on the house, it is now a rent house. If it’s a rent house, I wanna maintain, preserve and safe keep it as a rent house. So, that means, of course, if there’s a whole in the roof, I am gonna fix it. If the carpet has worn out, i’m gonna replace it. If it needs painting, am gonna repaint it. But, I cannot expect it to take those for my counter tops and turn them into granite and get that reimbursed because that an improvement, and upgrade. It is not maintain, preserve and safe keep the house. So, you must be really careful, if you are doing any kind of work on the house. Number one, take before and after pictures, and number 2, keep all receipts, because– besides, if they are going to redeem it, has the right to have you provide that information to justify it.

Mitch: So, is there a limit that you can spend on a house preserving it, maintaining it?

Arnie: No. No limit.

Mitch: So, you would wanna make sure that you can that bill up a little bit. It seems to me, you wanna make sure that you get that stuff done pretty quickly before anyone’s redeemed it.

Arnie: Yes, you would. Because, and here’s the risk involved, of not knowing what I just said. Supposed, you are going in and spend much money, really make this house great. Well, let’s say they [INAUDIBLE] $40,000 on it and you made that house twice as where it was before. You don’t think they can find another investor that will come and loan them the money to redeem it and still buy the current value of it? So, you want to be very careful. And not put stuff in there that does not fall into those categories. And one thing–

Mitch: That’s an interesting topic. You can make the house looks so nice but if the bank wants to redeem it again, you know, instead of living it kind of dingy.

Arnie: Exactly. But, remember this. Now that it is a rent house, we have to bring it up to the standards of the state laws about smoke alarms, and carbon dioxide, and glass on the windows and people’s– one way dead bolts and all those things that you may now have in that house because it is a rent house, according to state law. Now, that’s all money that you can get back if they do redeem it, you know. So, that’s interesting.

Mitch: Arnie, the more you talk. The more interested I get. And you know, sometimes, it’s just fascinating to me how much is out there to do and to know and how many different issues there are in real estate and ways to make profit. And here’s to show one that I really never thought a lot about, but it seems, there’s a heck of opportunity there. How does someone go about, I don’t know, getting really educated about this. How much they just really go about it?

Arnie: Well, I do have a meetup every month. We have a meet up, Monday following the tax sale. Every month in the Dallas area. And occasionally, I get to Houston and in San Antonio and I’ve spoken in one of the clubs in your area in San Antonio and I can go– I am a speaker at the several of the expos that are around. So, that’s a good start. And then, they get in touch, we can tell them how to go, where to go to look. We have a program the, Learn and while you Earn program. It is very interesting because, it’s sort of beneficial, my first introduced– you will appreciate this. I was doing a presentation, now am getting to the point where my presentation, i’m gonna tell you how much it’s gonna cost you, to really learn about all this stuff, guess what, I am gonna pay you instead. Then, suddenly, I get their attention. And–

Mitch: You don’t pay, you get paid.

Arnie: Well, you can get paid. What we do is, we are covering the whole state, okay. And remember, all the auctions are on the same day. So, how can we all be in different places at once? Well, that’s why we developed this Learn and Earn program. We have people there that we’re going to teach the basics of some of what we do, like going out and visit the properties, taking the pictures, sometimes accessing the neighborhood, talking to the neighbors. We’ll gonna teach them how to do all this. And we also gonna teach them how to go to the auctions and do that kind of stuff. And sometimes, even how to do the research. And so, if they are working on anyone of these areas, and we happen to buy it, they will get a small percentage of what the person buys these. So, they get rewarded that way, but they gonna learn regardless. And these are things that will help them no matter what kind of real estate they are in, they don’t have to be tax sales, you know, if you’re gonna go along and look at house, we have this saying, “I can improve the house, I can improve the neighborhood”. So, you wanna see how the neighborhood looks like also in relation to that. So, this is our Learn and Earn program. It has no cost involved, we do have a training session. I just got back last night from having a Learn and Earn training session in Houston 2 days ago. So, and I had one in San Antonio, even about a year ago. So, we are happy to do that. Once they are interested, you know, they go to your website and they make contact us, and we can certainly tell them how to do that. And it is a lot of fun, it really is.

Mitch: So, if you interested in how to get involved in a Earn as you Learn program, you just go to 1000houses.com/taxdeeds, D-E-E-D-S, all lower case after the slash, okay? 1000houses.com/taxdeeds. We’ll get some people interested am sure. Maybe they’ll help you cover the rest of those counties out there. That’s 254 counties, that’s a lot of work.

Arnie: Right. Generally, we have a people about 12 of the counties every month, anyway. So, we’re looking for more people in, and here’s one the little future that we are looking ahead. Most people don’t know this. But, in 2015, a legislature in Texas, passed a law that said, “Tax sales can go on land”. Now, not one has done it yet. And very possibly, not in Harris County in Houston, we’ll be the first one to do it. Because, I need it the most, ’cause I–they just have a zoo there. But, it is inevitable. Eventually, they’ll all be on land. Now, that means, they’ll gonna be more investors coming to Texas from outside of the state, outside of the country, outside of the hemisphere. Because, they’ll gonna all come in and wanna be on land. Now, for that to happen, who’s gonna teach them about Texas tax sales? Who’s gonna take pictures for them? Who’s gonna tell them whether the house is occupied or not? No one’s doing it. We’re the only ones that has a turnkey program for all the whole state and I wanna build this team up of people that will already be in these areas so that we can do that when that happens. And everyone will share in the benefits of that, because we’ll charge for that, and it will filter down all the way, while we are learning. So, we have an exciting program down the road for that.

Mitch: Arnie, sounds to me like a reader. Do you read a lot of books? Yes or No.

Arnie: Two times I read every day. When am on a car, I have a book on tape and first thing I do in the morning, I get on my combat bicycle and I read while am doing that. So, I read every day. But, I am working– am writing a book on tax sales in Texas.

Mitch: Well, that’s a little hard to do on the bicycle and in the car, and so. [LAUGHTER]

Arnie: Am reading that, and I think I have a subtitle is– gonna be, “There are no short answers”.

Mitch: No short answers. I love it.

Arnie: One of the things that I’d really like to alert everyone about, there are a lot of programs out there, where people are talking about, they have a program where you can share some of the old bridges with the people who have lost their houses on tax sale. What I mean by that, is go back to my example, a $100,000 house and $8,000 in taxes. Let’s suppose that property is sold at the auction for $50,000. Well, the first $10,000- $8,000 went to pay the taxes, so what about the other $42,000. Where did it go? Well, if no one claims it for 2 years, it goes to the taxing entities. The county, state, etc. But, for a 2 year period, the people who lost their house, or anyone who had interest in that house can claim it. But, they don’t know that, usually. By law, the share of a county or law firm, but in 31 days, after the sale they must send a letter to the people, the [INAUDIBLE] excess fund waiting for them to claim it. Now, if they don’t claim it, remember they get it. So, the letters usually go out in the 30th day.

Mitch: Where do they send the letter if the person was in the house or if the house is vacant, they just have to send it to the last known address? A lot of times, those letters won’t make it to the people, right?

Arnie: Bingo. [LAUGHTER] which is probably they took 30th day to send it. So, a lot of gurus out there are talking about tax sales, all over the place, almost every one of them are talking about tax liens and not talking about Texas. And this is true, in this arena also. They are talking about how you, as an investor and buy this course, and they’ll teach you how to call this people up, who lost their house and tell them how you can get up that money to them, and split with them 50-50. And that makes a lot of sense, except the law in Texas is, you can only charge 25% not to exceed a $1,000 and by the way, you must be an attorney.

Mitch: Oh, the attorney got that write up, didn’t they?

Arnie: They must have.

Mitch: [LAUGHTER]

Arnie: But, I just want your listeners to go pay somebody a $1,000, $1,500 or $2,000 for a program thinking they can do it in Texas, and they can’t.

Mitch: Okay. That’s great advice. Can you– there are people out there trying to help people redeem their houses for a profit?

Arnie: Yes. There are some attorneys who are actually now, lending people money to redeem their houses. So, now I guess their reasoning is this, “Okay, they couldn’t pay their taxes, so now if they redeem it they’ll gonna start all over and not pay their taxes, and they gotta pay me back, so the odds are they’ll probably default, end up with the property”.

Mitch: There are also people loaning people money to pay their taxes before it goes into auction, and they are betting on the same thing, I bet.

Arnie: Exactly. The last time I looked, there were 26 licensed tax lenders in the state of Texas. Most of them all belonging to the same main company, shall remain nameless, that does most of the mistake, they send out flyers and says, “Don’t lose your house, if you don’t do something you’ll gonna lose your house. Here we have a guarantee, devoting to you to pay your taxes, no payment for 90 days, low interest rate”. And on and on and on. And a lot of people go for it. And you are exactly correct. Their reasoning is, “Okay, they haven’t had to pay their taxes now, I loan them money, they can start paying their taxes and they can pay me back, and they probably will default again, and I’ll get the property”. The problem is, they have to wait a year to foreclose after they default.

Mitch: It seems like quite a strategy though, because even if the person–if the person is in the house, and they can’t pay the taxes, and they get a loan and get another few months in the house, I mean, you know what i’m saying.

Arnie: Yes.

Mitch: So, they are not paying, so I’ve got [INAUDIBLE] just take this loan whether they intend to pay or not. It’s gonna end up in the same result. They’ll just gonna lose their house a few months later or several months later, and so they get to hang out in the house for a little while longer.

Arnie: Exactly. And by the way, be very weary, if someone approaches you and say, “I can loan you the money so you can pay the taxes”. That does not make yet a tax lien in the sense that they’ll gonna jump ahead in other ways, you must be a licensed tax lien lender to have that privilege or if you do less [INAUDIBLE] of a year, you can do it but you still– it’s a judicial process. You still have to get a judge to render that judgement. So, it’s not–

Mitch: It’s not necessary a super lien right off the bat. You have to be licensed, and what else?

Arnie: It should be like–you should be licensed to do it and even if you are not, and if you do less than [INAUDIBLE] you don’t have to be licensed but, it is not a certifiable tax lien, if you don’t get a judge involved with it. So, if you just know somebody who is planning to do it, you can’t be taking your chances, your weight them down on the totem pole, a priority.

Mitch: Very interesting. So, when you are searching for these kind of leads, is there a ton of them right now? I would have imagine right now, that there are less than there’s gonna be when the next recession hit. So, recession gonna cost a lot more of volume of this, right?

Arnie: Well, a lot more foreclosures, which will result in defaulting liens as a result in a lot more properties on the tax sales, correct.

Mitch: Okay, so right now–it’s like the owner finance business, you know I did good on the good times, when I boom in the recession, and that’s kind of how this business works too, right?

Arnie: Exactly. Exactly. Owner financing is a great way for this, because [LAUGHTER], they have no other choice.

Mitch: Yeah. It will be great, yeah. Do you [INAUDIBLE] that lost their house or is– to me, when someone loses their house, I really need to move them to move down the road and go start a new life someplace else. I don’t keep one of those houses, even– as much as they wanted to stay or whatever, because it’s just it didn’t work out, they can’t make their payments before, what makes me think they’ll gonna make their payments after. What’s your thoughts on it?

Arnie: Well, that’s were always my thoughts, too. In all my legal friends always said, never do that, because there’s always some question, some sort of retain equity and stuff like that. But, the legal advisers know the most about this that I trust. The exception here on a tax sale, there’s no problem because it’s a final deal. It is statutory. They lose their house, they lost all their rights forever, unless they redeem it. And that’s it. So, it’s pretty safe to do that, and I found this, Mitch. That they–most of the time, they’ll better take care of the house and they have more best of their interest and you know, very often the people who are in the house, the owners usually is something– some cork that caused them not to make their payments. Maybe they inherited it, and they have discredit– and their brother was supposed to make out their payments, and they didn’t know, something like that. And this is not always just because, they are just flat broke or something, you know.

Mitch: Now, so you are saying, to check the fact story and see if it makes sense to leave them there.

Arnie: Yes. Yes. But, don’t’ rule out without necessarily. One of our work, let’s change the subject for a second, on the subject of redemption that sounds so great. State live the average is only about 10% of them got redeemed, okay? So, don’t go buy property at tax sale with the idea that others can’t redeemed because it is not a very good idea. Our average is 20-25% not 10% because we generally don’t buy vacant lots and almost nobody redeems [INAUDIBLE] and bring the average down. But, even 1 in 5, you know, if that’s the major league, that is in $200 betting area, you’re not gonna make it in the majors. And guess what, this is the major league. So, that’s not a good reason to buy the house. You should buy the house for sound fundamentals, and if the fundamentals makes sense, then you just another exit strategy that, if it happens all well, I make 25% in 3 months, you know, that is not too bad.

Mitch: So, why you not buy lots?

Arnie: Because, if I may have to hold on for two years, I wanna have cash flow in, and not cash flow out. Now, that’s 90% of the people. There are people out there who buy lots, who understand what they are doing, and that is great. Some of the investors do, most of the investors that are coming to us and say, “Okay. You’ll not gonna be able to flip. You gotta hold on for 2 years. If you want for 2 years, let’s look into the cash flow, and see what the cash flow”.

Mitch: That’s not a bad tax strategy either, you know at least you get long term capital gains handling whenever you do sell it, right?

Arnie: Oh, absolutely. Yes, of course, and the beauty is you don’t have to decide now or if you’ll gonna sell them or owner financed them or retail them, wholesale them or keep them. You can wait 2 years and decide to see what the market’s like.

Mitch: But, your tenants–they like to see if they’re problem or no problem or if how you like it. Well, Arnie this has been a great conversation. Now, I really appreciate you being on, we’re here on for about 45 minutes, so I think we are good. I can’t tell you how much I appreciate you coming on, you guys out there listening go to 1000houses.com/taxdeeds all lower case, tax deeds. Check it Earn as you Learn, or you could use the help of these 254 counties in Texas and am sure you could use any help in one of those counties that you are sitting in. So, get off there and do yourself a little Earn as you Learn it, and get yourself some Arnie Abramson. Arnie, thank you so much.

Arnie: By the way, Mitch. I forget one thing out, too. If anyone does go to your thing and comes to us, and they would like to become a priority member, we can give them a special discount for having come from you, okay?

Mitch: Oh well, that’s perfect. Thank you. And that was unsolicited. And a gift to all of us out there. So, be sure to view that link

and or just tell Arnie that you said, hi. And get yourself a little discount on priority member, is that what we call it? Priority Membership?

Arnie: That is correct?

Mitch: All right. Tell us about the priority membership real quick, so we’ll know exactly what it is.

Arnie: That’s where we do most of our business web. We have the Texas 2 Step Program, where we buy properties on that, and then offer them to our investors who are already cash flowing. We have what we call the Quick Step, the Quick Step is where we– right now, we’re 10 days 9 days before the next sale, I’ll be sending out the next day or two, some of the properties that look good to us, if they can take a look and come back to us and say, “Okay, let’s look at this. Let’s see what we can do”. And in addition, some people might want Special County, “OH, I just want to look at their county”. Give me your parameters, and I’ll send them all the information if they are priority members, if that properties fit those priorities. And then, there’s something very special. We started about a year ago, and we’ve got so much competition here and I thought I would never do this. But, we are looking outside of Texas, we call it Lien to Deed, where we are buying some of those tax liens as they expire converting them into deeds, and then giving that a title and the whole process takes about a year. But, we are finding some fantastic deals. And most of them are available to our priority members also. That maybe the subject for another session one day.

Mitch: Well, that’s truly interesting, too. So, if you are interested in working with Arnie, then this is your chance, and we’re out of here. Have a great day you guys.

Love the show? Subscribe, rate, review, and share!