The Anatomy Of Investing In Tax Liens With Melanie Finnegan

Welcome to the Next Level Income show, where it's our goal to take your income, investments and your life to the next level. I'm your host, Chris Larson. You can get your free copy of our book@nextlevelincome.com book or just click click on the book link. Today's show is sponsored by Money Insights and their investment optimizer strategy. In my book, I share how I use this strategy to invest my money in two places at one time. This strategy has been used by the wealthy for generations for estate planning, minimizing taxes, preserving wealth, and increasing stability for their investments. Money Insights can help you develop a plan to build an emergency fund, pay for college, fund a business, or optimize your investments. For more information, check out nextlevelincome.com banking on today's show, we have Melanie Finnegan. Melanie is the founder of Tax Lien Wealth Solutions and started her career in tax liens in 2008. She ultimately perfected her tax lien strategy in 2013 and started Tax Lien Wealth Solutions in 2017. She's the first female to become a certified tax lien professional by the National Tax Lien association, the governing organization over the tax lien industry. Melanie, welcome to the show from Utah today.

Yes, thanks, Chris. It's good to see you again.

Good to see you again as well. We were just talking before the show about how great it is that things are starting to open up here again after everything and how wonderful it is to see people face to face in person. But this is going to have to do today.

Hey, man, Zoom is a gift, right?

Absolutely. So, Melanie, for those who haven't listened to you before, haven't seen Tax Lien Wealth Solutions, please share with the audience kind of how what your background is and how you ultimately got to where you are today.

Yeah. So just for anybody, if you guys don't know what a tax lien is or tax lien certificate investing, it is a governed by the government program. What it is, is the government is entirely in charge of this. It's our property taxes. We gotta pay them. We have 14 billion delinquent year as a nation. So if we don't get those property taxes paid by the property owners, then we have tax lien investors, myself, or of course, institutions like bank of America and that they go to these annual auctions and actually that way these government, these counties and things, we don't have them belly up or we don't have a national crisis on our hands because we've created this in the 1800s and it works so just a claim against the property for unpaid property taxes.

Excellent. So for the audience, Melanie, tell us, how did you learn about tax liens for the first time and then ultimately founding your company? And how did you move into that? How did you decide to do that?

Yeah. So this is kind of crazy. So everybody's like, what's a girl in Utah doing? Property tax living. Investing in Florida and on the east coast. But it was like that happy accident. Right? You just need to get this job. I was just looking for a job 12 years ago. Needed to put food on the table. Right. For my son. I was a single mom, 21 now. So hopefully he's doing that for himself. He is working for me. But I walked into a place and it was kind of similar to what I do. Not quite so similar. Changed my life, I guess forever. Right. Was the opportunity of a lifetime. I took it and ran. Fell in love with that part of me that was so eager to play with the numbers and create strategy. I learned how I was actually good at it. I Traveling and presenting. And I found my inner nerd. And I just focus on being the asset to the client. So I'm not a salesperson. I'm a human connection person. And I think that's why I thrived so well at the other company. Just you were meeting so many different walks of life, and then because of those relationships, you want to work your for them, make sure you're an asset to them.

Absolutely. So you got started with another company. Ultimately, you branched out on your own, Is that correct?

Yep. I just saw some things I didn't love and I left. I didn't. I actually went into the IT field. And then I thought, I'm crazy. I was the face of their company. I knew it inside out. And I thought, this is crazy. This is what I love. I definitely didn't love working with network engineers and load balancing lingo. And so I. Here I am, you know, and I. It was kind of just one day I said, I'm doing this, and I did it.

So that's awesome. So what were you doing before you entered into the tax lien industry?

I really wasn't doing much. So I was. But I was like, I was a single mom for pretty much all of Braden's life, and I was working not good jobs. So I didn't have that confidence that said, go out and go find career. I didn't go to college or anything yet. And I was like, I'll be a bartender or I'll be a waitress and made good Money, but it just wasn't conducive to a good lifestyle. I wasn't fulfilled. And so, you know, when you're just kind of a single mom, I was very, very much a stereotype. But I knew I was raised by the Rams, right? So I knew how to get out of it and I did think of.

That's awesome. So tell us how you founded Tax Lien Wealth Solutions and kind of what's your business model like? How do you, how do you find a tax lien? How do you make money off it? We've had some experience in non performing notes, so I'd love to hear about how it's kind of different than, you know, a note, whether it's a second or first mortgage.

The podcast I did earlier today, we talked about notes as well. So that's funny, I don't usually always talk about them, but yeah, they are kind. But the cool thing is, is. So what happened is so I branched out, but I wanted to. And I don't want to step on toes here, but there's seminars out there that overcharge for education. And so I see all these people going into these debts and things for education, and I was like, I don't want to just charge and put value on me. I want to put value on the real, on the investment. Because this is an institutionalized investment. And I wanted people like me to be able to get in this investment. I'm absolutely passionate about it. And so I just kind of racked my brain and put together, you know, I wanted to do for my clients. So I buy on the secondary market. That's from the large institutions. I have tax lien brokers. They go out and broker deals for me because of my affiliate and certification. And then I parcel them, I buy them in bulk, I parcel them off and we assign to clients and get making money.

Awesome. So you're buying in bulk about how many you're buying at a time?

Typically, Melanie, you know, I want to, I'm before about a million, probably a million. I bet every other month. So every. I mean, I would say like, you know, but. But sometimes I'll just, I'll be like, I need inventory and just need to grab 200,000 or something. And I buy it in bulk and I get a small discount there. I don't pass that on, of course. But then the client, we transferred into the client's entity, name or taxpayer, and we go from there.

Okay, so let's say I'm an individual. I say, all right, hey, Melanie, you know, I want to go out and buy, you know, buy a tax lien. Walk us through the anatomy of a deal. So like just, you know, one deal. For instance, if I'm, if I'm going out and looking to buy this, how would I do that?

So let's just tell the story. So I'm going to pretend you're actually, if you don't mind, I'm going to actually pretend you're the property owner and I'm the investor. Okay. So Chris Larson is the property owner, doesn't pay his taxes for the year of 2016.

I don't like this already.

No, I know, that's why I like you to be the bad guy.

But I'll play along.

Yeah, just play along. So this is a very serious. If we want to, everybody should pay attention to this because us property owners don't play root Russian roulette with your home. Don't.

I got my tax bill right here in front of me. So you have something. I sure would not like to pay it, but I don't like what's going on if I don't.

But yeah, so you jeopardize if you don't pay it. 2016, he doesn't pay it. Well, I decided to go to the 2017 annual auction. I'm the investor and I'm going to bid on that property and I'm going to get this or bid on the certificate attached to that property. It's a thousand dollar bill. Interest rate is 18% and I'm going to accrue the interest. I'll stay because there's a grace period. And so Chris Larson gets his taxes paid for free, basically because he's not paying it. He's accruing interest. Paper. The penalties are all on paper, but basically he has two years, a two year grace period before the property has any threat to it whatsoever. I call it the tax lien. Gamble. A lot of invest investors do this. They're going to sell the property or maybe developers for land. They actually hang on to it. They allow us to, you know, all of us investors pay the property tax deal and they just sit there and there's no threat. Well, Melanie comes in, buys it, sits for two years if I'm gonna be on the primary market and then I initialize foreclosure on two years and day one. If Kris wants to keep his property, what does he do? He has to pay his tax bill. So if Kris, it's the hammer is down. Once I filed that tax deed application, do the step one in foreclosure I'm a maximized investor. You're accruing interest as the owner, like so high. 18% a year is a lot. And I am reaping the rewards.

Credit card rates.

It's like bad credit card rates.

Yeah, absolutely. So then at that point I have the chance to pay the back taxes, pay you the interest rate, Is that right? And then keep my property.

Yeah. Nothing comes is facilitated through the investor and the property owner. It's facilitated through the county. So the county does this and everything goes through the county. It runs through the county. Much run through the county. The county is never out any money. They just facilitate the deal. But I always say, what is the one thing that the government is the best at getting paid? Right.

So, yeah, because they got forced to back them up. Right?

Yeah. And so they're like just so what they've done for us as investors, they're saying, thanks for taking the risk. We need these, we need these funds. Thanks for taking the risk. We're going to actually reward you with not only the 18% interest or whatever your state interest is, we're also going to allow you or enable you, you as a tax lien investor. A tax lien certificate usurps everything, mortgage, any liens on the property, anything, you trump them all. The only thing you don't, just federal tax, so just income tax that's attached to the property. So that's the only thing. Of course, the feds get that. They get that money too. So that's kind of how they make it in, I guess how they entice us and then they allow it. I mean, they, that property owner says, Chris Larson's like, I can't pay my tax bill. I don't know what to do. Well, yeah, that you either better beg, borrow and steal, because the moment that that property is scheduled for, it will get scheduled for deed auction. The investor will not get it immediately. It gets scheduled for deed auction minimum. The minimum bid is my. The investor's investment plus interest and penalties. And then you go, you get redeemed that way. Or if it's not bid on at the auction, you, the investor, Melanie, meet the investor. Melanie gets the property.

So there's a few things in there, Melanie, that I want to kind of unpack in that. So first off, do you just buy in Utah? Do you buy locally? Do you buy all over the country?

I buy on the east coast, but my main baby is Florida.

Okay, that sounds.

Florida is about 500 million a year delinquencies and they really, really, really make it work. For the investor, they have tips and tricks. Part of my strategy that I created and why I started my business was because of Florida.

Why is that?

They have secrets? No, they, so they, they allow you to change your estimate when you file. And the, they, they allow the yield and the interest yield to become higher or more increased. Once you file for foreclosure, there's an incentive that kicks in. So it's kind of, they're saying if you file foreclosure, I'll maximize your investment. But nobody does it. I am the only one in this space that does this. But nobody wants to do it like this. And I think it's crazy because I compound interest that way. So I get redeemed. I turn around and take the principal and the interest and throw it back out there. I no matter what, try to turn it twice, but I will usually get it at least once a year turned. So we're getting that interest at least working for you in that year. But as things go along and we create some cyclical investment, when you're in the investment longer, you're going to have a waterfall of funds where you're going to create cash flow if you want. And so that's kind of. We work the money really, really hard and then if we have a stopping point, five years, I want to replace my wife's income. Well, we meet that goal five years at the exact minute. Not all the time. I try my hardest. I'm not perfect, but dang close. Dang close to meeting those goals by utilizing the strategy.

Yeah. So if I heard you correctly, you come in so I don't pay my tax bill. The government says we need somebody to pay it. You come in as the investor and provide that bridge until my two years runs out. Is that accurate? Kind of an accurate way to look at it. Okay, gotcha. And then, you know, so when we were buying non performing notes, one of our goals was to keep the owner in the house to work out a plan.

Yeah.

And yeah. So a lot of times we said, hey, look, you owe this. But you know, let's say they owe $100. We bought the note for $20. We might take $40, save them a bunch of money off the original write off that the bank had, but still get, still multiply our money by 2, which was a really good return. How do you work with property owners to make sure that they can keep their property versus just because you said you do go to foreclosure sometimes. How does that work?

I asked this question. I don't want to be the bad guy. But I had to make a decision.

Or a bad girl. Right?

Yeah. Right. So I didn't want to. I had to make a decision because or my heart on my sleeve. And it's also completely something I didn't want to do is kick people out of their homes and do all this. And then as I pondered and reflected and I'm also a businesswoman and in. I have to be on my client's side. Right. I have to be in the best interest of my client regardless. And I'm like file foreclosure. I don't keep people in their properties because they have their property tax bill paid for at least two years. There could be multiple liens on there that I'm going to have to throw my money out on as the investor. So we file foreclosure the moment we can. But this is the key component to tax lien investing. And I don't know that what the success rates are on notes. So I would love for you to share with me. But on tax lien investing it's 99.9% of the time to get redeemed. And the definition of that is you're going to get your principal plus your interest. So that just shakes the money loose. They're waiting that sometimes those property.

I love that. Shakes the money loose.

I like it just like shakes it free, you know, like, like these property owners are waiting for you. So like they're going. Are they gonna. Because there's a statute of limitations on the certificate seven year life. Well, if it expires, then the property owner literally got their property tax bill just paid by me, the investor. You're welcome. But I don't let, we don't let them expire.

That's not a good. Yeah, that's not a good investment. So I'm, you know, I'm, I'm listening. I'm thinking. So first off, no, the percentages aren't that high in notes. Especially you know, we were looking in not just the primary space but also the secondary non performing, you know, notes like, like lines of credit. So I'm looking here, I'm thinking like 18%, 99.9 plus percent of the time you get paid off. This sounds, this sounds fantastic. So Melanie, your company helps people if they want to learn how to do that. Is that correct?

Yeah, like I said, I'm just, I have this fierce passion in getting tax liens need to be a part of our alternative investment portfolio. I love 401ks. No, I don't know. I Don't they tuck us in bed at night? They make us feel good for a while, but all they do is just tucking us in. They are not going to enable us live or sustain our lifestyle. We have to convert that 401k or self directed IRA or excuse me, IRA to a self directed IRA and learn about these alternative asset classes. If you don't do tax liens, do something because it's scary. I see people, I even have, like, I got started late in the game and so it's like I'm scrambling, right? Because now I know how important this is to I want to sustain my lifestyle. I mean, it's not, you know, lavish or anything like that, but I still, you know, when I'm, when I'm at 60 years old, I want to be able to get out there and play still. And you know, these, I see people, all that are just like either going back to work again and I don't want to do that and neither should any of us.

That's right.

Look at alternative asset classes for sure.

Agree 100%. And look, you said a couple of things in there, Melanie, that we, you know, we've had prior guests on the show, so we have American IRS that Sean McKay was on talking about how to set up a self directed IRA and how you can use your IRA funds to invest in things like this. Also invest in multifamily real estate like a lot of our investors do. Also Damian Lupo, who teaches how to set up what's called a qrp. Same thing where you can actually self direct your funds through there. So check out those previous shows if you want and figure that out. But it is impressive. So I think one of the reasons I wanted to have you on, Melanie is because next level income, the strategy is, number one, how to make more money. So you teach people how they can do that themselves, themselves. Number two, keep more money and then grow their money. So for people that either want to learn how to do this themselves or maybe they say, hey, that's great, but I'm a doctor or I'm a professional, I'm already doing really well. I'd like to do this passively. Is there a way that you help facilitate that?

So we have a couple of different programs. We have the hands on investor, we have the hands off investor. So the hands off investor is. The minimum is significantly higher. We have a minimum of $50,000. I manage it for 24 months and you know, work your, you know, you don't have anything to do with it. You don't do anything. That's the guy. And that the guys that they just call and say, I've got my ira, I'm busy, I am a doctor, I don't want to do this, but I don't want anyone to be passive on this investment. It's not. You want to be. You would be like, this isn't worth my time. If I'm going to be passive. You would want to be either handed over to me or be well educated enough, which I've got learning portal with all the resources in there. And we get you certified in there. Once you're certified, you can have a portfolio manager and your hands on with your investment. It's significantly, you can invest it a $500 investment if you want, so it's lower. You can let the investment earn your trust that way. You know, I always say, I always tell people, whoa, whoa, whoa, hold on. They'll say, I have X amount of dollars. I'll say, just let the investment earn your trust first, because otherwise you're going to be calling constantly. I had to let the investment earn my trust. I should treat my clients the same way. And so I really like that the learn portal part of it. But you just got to know you have access to our portfolio managers and all the resources inside of there.

That's awesome. And again, that's one of the big things we do is putting all that education out there so our investors can not only learn how to do it and learn the ins and outs, but they can also participate, you know, on the gains of the back end, even if they want to be passive. So.

Absolutely. And get educated, you know, it's just better.

Yeah, yeah, no, it's fantastic. So I love Utah. My, my uncle lived and still lives in Colorado, but I started going out there when I was 11 years old skiing. And then we did river trips out there and group of friends and I, back in 2018, we did a Grand Canyon. We did a raffle.

I did that this year. I told you. Didn't I tell you?

Yeah, I love it. I know. So I want to tell, I want you to tell the audience a little bit about some of your adventures outside. So this is one of the, you know, one of the great things. I mean, it's, you know, having money, having financial independence. It's not just about, you know, checking your bank account every day. It's about doing what you want to do and having experiences. So tell the audience a little bit about some of the, some of the cool stuff you've done this year.

Oh, my gosh you guys. So I'm an outdoor enthusiast, so I always say don't tell people how wonderful Utah really is, because it is. I'm covered. We're covered in mountains and we're speckled. So I went to Lake Powell three times this year, which I don't know if your listeners know about Lake Powell, but it's just so rad.

Yeah, we spent a week there camping.

Yep.

It was awesome.

I grew up. Yeah, that's what we do every. And I grew up, you know, on Wednesdays I took, had a half day of school and we would go snowboarding. It's just a lifestyle meant for me, if that makes sense. Like it just fits me. I live. My backyard is mountains, you know, and so golfing up in the mountains, we just, it's just. But now it's starting to get cold and yeah, we get the snow and stuff. So you have to have. In order to love Utah, you've got to be okay with the cold too. But yeah, we do a lot of fun stuff. We just went zip lining at Sundance. That was really fun. Just barely did that. And it was, it's the zip line in the nation. It went, it had five platforms.

Oh, that is awesome.

And just in the mountains, just like, it's just so cool. So, yeah, we have a life. We have a cabin up at Brighton Resort which is probably. Maybe you've skied there. We can go in there. We just go up there and ski in, ski out. That's a family cabin and we feel pretty lucky.

That is awesome. Now listen, if you're listening today, the big thing I always say is you can have it all. Like, you can have it all. If people say, yeah, you can't have it all. You can't have a career. You can't have a career in a family and have your own life and do all these things, you really can do it all. And that's what our mission is. I mean, Melanie, you're proof to there. But that being said, one question we ask everybody that's on the show is, is if you can go back to your 25 year old self and give yourself one piece of advice, what would it be?

Confidence. Trust yourself. Trust in yourself. Like zero confidence. Because I didn't go to college, I had my baby young and I thought I wasn't good enough to apply for those jobs that could take me to a next level. Settled for a lot of years and it was, you know, I find like every, every lesson is so awesome. Right. I'm really grateful for it, but I Would tell myself, you're good enough. You need to build your own confidence. Nobody can build your conf for you. It's all about you.

I love that. And, you know, as I talk about my book, you know, cycling, it really gave me the confidence to do a lot of things. I was kind of like a soft, you know, not super athletic kid. I was pretty intelligent. But, you know, until I found cycling and kind of found something that, that I was good at and had a network of people, it really helped propel me. I love that, Melanie. And it's, you know, first off, I think your story's an inspiration. Yeah, absolutely. We love what you're doing again at Next Level Income. We love other platforms that help teach education and also give opportunities. So if someone's listening today, they want to learn more about what you and Tax Lien Wealth Solutions does. Where can they find you?

Yes. So you guys. Okay, There's a couple of different places and I want to say that you're going to be my first podcast. I'm saying this on. We're starting. So we have like 30,000 followers on our Facebook page. And I don't, I don't even know how it happened. Right. Like, I don't engage and I feel so bad, but I'm like the last thing I want to do. So one of my employees, Howard, that you just heard me talking to you, that was great. Yeah. He actually is pushing me to a new level. He is an inspiration to me. He is pushing me to a new level where I'm putting myself out there because I sometimes get a little self conscious, a little like, I don't want to be in these videos. But we're starting a weekly video, five minute video on our Facebook page where we're going to do just one question at a time and we're going to start swinging there. So Facebook is one. Sorry about the long answer. And then my website is just taxlieanwealthsolutions.com tons of action buttons that ask for us if you want to contact us. You can see them right there. So you guys will be able to contact us right there. But that's the best place. But definitely go to the Facebook page if you want to just learn more and see us more.

Awesome. So, yeah, check out Melanie, check out Tax Lien Wealth Solutions. Check her out on Facebook. You can also check us out@nextlevelincome.com you can get a free copy of our book. You can also listen to some of those podcasts we talk about at our website. Just click on the podcast link. Melanie, I really enjoyed our conversation today. Love what you share with the audience, love your story and the inspiration and showing everybody that, you know you really can have it all. You can live in a beautiful place, you can have financial independence, and you can help other people achieve the same thing. Thank you so much for being on the show today.

You bet.

Absolutely.