EP 602 – Houston TX, Tax Lien Investing Paradise With Mike Wolf

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This is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property for pennies on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now, here's your host CEO of We Close Notes, Scott Carson. Hey, no nation, thanks again for listening to this new episode. Honored to have Michael Wolfe from Michael Wolfe Mastery join us. So many times we get requests and questions about tax lien investments and actually if you listen back to one of our earlier episodes on tax liens and tax overages, it's our most downloaded and watched video on YouTube. So we went out and found another tax lien expert and my buddy Mike Wolfe, who will actually be speaking at Note Camp here or speaking on it, depending on when you're listening. And Mike Wolf is an expert in tax liens, primarily here in Texas, the Lone Star State. He likes Harris county because he's built some systems, but he does a great job talking about that, sharing some of the ups and downs that we need to look out for. As always, if you'd like to learn more, you can always go over to the Note Camp podcast and listen to his full session from Note Camp 2020 once it's available. So stay tuned. Z grab a pen and paper, take some notes and we'll see you soon. Good morning, good afternoon, good evening, everybody. Welcome to this episode of the Note Closure Show. As always, Scott Carson. Excited to be here with you. I'm excited to have a special guest on here. Kind of a preview to what we've got going on in our upcoming not camp 2020 mid year conference coming on. Got a great, great guy, great investor and a great speaker here who's sharing his love of real estate, but also he's focused on a niche. And what is that? We haven't covered a lot here in the note investing side. Now, we have talked about tax deeds and tax overages as our number one downloaded and viewed video on YouTube. So I wanted to make sure and bring somebody on who's a tax lien expert to talk a little bit because I get a lot of questions about tax liens and how they work and what's the function behind them and how do we make money, which is what everybody's always looking for, right? Oh, not that. So I hit the wrong button there. My sound. So you got to hit the money sign. There we go. So we are excited to have our special guest today. He's been investing in real estate for over 30 years. Over that time, him and his teams have completed thousands of transactions, not only in the usa, but Canada as well. He's also the international speaker, trainer and philanthropist. These days, he's most known for his tax lien, indeed trainings where he teaches students how to buy real estate for pennies on the dock. So we're honored to have the one, the only, Mr. Mike Wolfe join us today.

Hey, Scott, thanks for having me. I like your sound effects, especially that. I like that cash one better, though.

You've been doing a great job. 30 years experience with the market being where it's at. Do you think tax liens are gonna be a little bit more desirable investment strategy here with the market being crazy? It is here in the United States.

I think it's going to be insane. Of course, all the auctions have been shut down and nobody's allowed to foreclose on anybody, which is good. I'm glad. But of course, when you have something like that and then you open the floodgates again, there's going to be a lot of supply. And anybody who's ready to take advantage of that, there's going to be a massive transfer of wealth, not just in this, but also in notes. And there's going to be a lot of things booming when things open up again.

Yeah, you know, I've been looking at stats and things like that, and Inman News came out and said that roughly about 9.6, 9.7% of all mortgages in the United States have filed forbearance agreements, which is great. But the last 12 months, the numbers still have shown, hey, roughly 10% of Americans are already a month or two behind in their mortgage. Now with this added stress of being laid off or things being shut down and no money coming in, and let's just face it, the government's never good about issuing stimulus checks in a timely fashion. Or the. The debacle with a PPP and the emergency loan. There's a lot of people that a, they're going to make a decision between either making their mortgage payment or putting food on the board. And if their, their taxes are rolled in escrow or they got to pay their taxes every quarterly because right now we're in the second quarter of the year here. A lot of people aren't paying their taxes. And that leads to opportunity and ways to help people in a variety ways. Would you dive a little bit in some of the ways you're able to help people with what you're doing? Tax lien, investing Mike?

Yeah, absolutely. So tax liens and deeds are one piece of what I do, but I like to help people before they get to that point and hopefully save them from losing their home to either tax deed auction or foreclosure auction. One of the things I also focus on is pre foreclosures. And I love to come up with solutions for people that either help them stay in their home. Anytime I meet with a client, my goal is to leave them better off than when I met them. And so one of the things that I teach my students is I don't even like the term real estate investor. I really like the term problem solver. And the more problems we know how to solve and the more people we can help, the more we get paid. And so it's a great win win. But always make sure that the people you're dealing with are in a better situation than how you found them. So I always start off with pre foreclosure, try to get a hold of them before they lose a home. But unfortunately, once they lose it and it does go to auction, that's another problem we solved. The counties need that money to keep their police department going and their schools open. And so the solution is they need investors to buy these properties and give them that tax dollar that they need. And then of course you mentioned it as well after you can't help them pre foreclosure. And during the foreclosure or tax deed process, then we have overages. And that's a whole other issue where people are owed money and the government is not going to make a whole lot of attempt to get that money that's owed to them. And so I like to help them recover that money as well. So I like to go under all.

Different angles, problems everywhere, and everybody needs help solving those problems is so correct there. Let's dive in a little bit because when we were talking previously before Heaven and you were talking about some of the different states out there, what are your kind of your. Let's dive into the tax liens. What's your favorite couple states to invest in tax liens here in the United States?

Yeah. So basically I'm much more bigger fan of the tax deeds and so I'm a really big fan of Texas. I particularly like Harris county, which is Houston, but Texas in general reason for that you would know this because you're living there. Property taxes are high. You guys pay like what, 2.6 to 3% property taxes. And so it's pretty easy for people to get behind when the property taxes Are that expensive. And once you get a couple years behind, it's pretty hard to get caught up. I just find that the auctions there, they take place on the first Tuesday of every month, so they're monthly. Other parts of the country, they're once a year, maybe twice a year. So I love that they're every single month. And I also love that one of the things that's a little bit different in Texas. Everything's different in Texas. Right. One thing that's different is you guys have a six month redemption period, Meaning if I go buy a property at the auction, the previous owner has six months in which they can come back and buy it from me. But if they do that, they've got to pay a 25% premium to get it back. Not just on what I paid for the property, but any necessary repairs that I did. So if I had to replace a roof or carpeting or whatever to make it livable, all that you make 25% on if they come back. And the fact that it's a little more complicated with that redemption period, it keeps a lot of the institutional investors away. They just want it simple. They just want to either get the property, get the note, get the lien, and move on. They don't want to wait that six months. And if you're willing to do a little bit of extra work and a little bit more due diligence and it gets rid of a lot of the competition. So that's why I love Texas.

Yeah, no, I agree to that totally. First Tuesday of the month is always interesting, watching what's going on. It has been made last couple of months, but still very much so. Very interesting. You're going to have all cash at the event is a great place to show up and find some private investors as well, too, for people.

Absolutely it is. Yeah.

What's another favorite state for you? Is Florida one of your top five or ten as well, too? Because a lot of listeners in Florida.

To be honest, I find Texas gives me enough opportunity that I don't even have to go anywhere else, to be honest with you. One of the things that I love to teach my students is that you don't have to invest close to home just because it's convenient. One of the things I know about Florida is it's very competitive and it does attract a lot of institutional investors. Whenever you go somewhere where people like to travel on vacation, they'll sometimes use like Vegas, for example. I used to do a lot of work in Vegas. Mostly foreclosures, not so much the taxis, but the actual bank trustee auctions. But whenever you have a lot of people flying there anyway for another reason or if they need an excuse to go gambling and hang out in the desert, they go to these auctions. So I just find it a lot more competitive in places where people love to travel to. So if you're in Orlando, people like to go to Disney, all the beaches in Florida. It makes it very competitive, I find. So one of the things you want to do, if you're serious about this strategy, or any strategy for that matter, is not just investing close to home. Invest where it's most profitable, most advantageous, then build a team around it so you don't necessarily have to keep flying there and actually move there. And that's one of the things that I've done is I built a team in Houston, Texas and they go to the auction on my behalf, on my students behalf. And I don't live there, but I can still do business there.

Yeah, I don't want to travel to Houston either. I only live two hours away too.

I don't blame you. Austin's a much nicer place. No offense to anybody from Houston, but it is.

Houston is actually our number one market for listeners for the most part. So no offense or I love you guys.

If you're listening. You live in the best place to do real estate, in my opinion. One of the best places in the entire country. But Austin, I haven't really done any real estate there. I know you guys have a lot of universities and colleges, so I know there's a lot of opportunity around that. I just haven't delved into that yet. But I do love visiting Austin, but I haven't done the real estate there yet.

I haven't done the real estate thing in Austin in 10 years. It's been too overpriced and I've been other places that made more sense. You said something, you find something don't have to be in your backyard. It can be across the country, but there's teams everywhere. Would you say are probably a couple critical members of your team in that space, in that niche of tax liens?

Yeah. So if you're going to be doing what I do, the most important person, of course, is the person who actually goes to the auction for you because they're. You're sending them a large chunk of money and you have to obviously be able to trust them and that they're not going to skip town. So that's the most important person. And that's not something that shows up on people's resumes. That's not a typical job. So a lot of these things I had to kind of create. I didn't go find some already ready made team, I had to kind of create it. And so I've got somebody who goes to the auction on my behalf. I've got a bunch of rehabbers because the properties almost always are going to need some sort of repairs sometimes a lot of repairs. I've got people that drive around and photograph and videotape the property in the streetscape. I've got people that pull title and make sure it's safe to buy the properties. Because one of the. There's a couple of misconceptions. When I was trying to figure this out many, many years ago, I took a whole bunch of different courses and read every book I could find on the topic and I got more and more confused because everything contradicted each other. One of the things that it said was some people say you don't need to pull title. Yeah, you don't need to do anything if you don't mind losing your money. It's very, very dangerous. A lot of things that could happen normally when you go, the great thing about tax deed auctions, I've had students pick up single family homes, like 7,200 bucks. I mean that's amazing. But if you buy a property, normally all the liens disappear off it, the mortgages get wiped out. But not always. There's exceptions to that. And if you don't know what you're doing and you haven't pulled title, you might inherit a really nice juicy mortgage that you weren't anticipating. And that takes that from being a really good deal to a really bad deal. The other thing that other courses said, oh, you don't need to go view the properties, just look on Google, look on Zillow, look at the pictures there. Yeah. Once again, one of the things I do during my training is we actually drive around the city looking at properties and we've had some that looked amazing on paper. And then you get there and there's a bunch of smoldering ashes where our house used to be. Had you looked at the picture, that's what you would be buying. One of the challenges when you go to these sort of auctions is you're buying as is where is. You don't have any recourse. You can't say, oh, I didn't know or they don't take any responsibility. What you see is what you get after you bought it. So there's a Lot of things, a lot of misconceptions. And so having the right team will save you a lot of headaches and a lot of hassle down the road.

Yeah, I would totally agree. You got to have somebody put their eyes on it. Yes, you can look online and take a little bit of a look, but you always, always, always need to put eyes on the property, make sure it's the right address, street address, because you never know. It could be a beautiful house, a smoldering ash, or just be a flat slab in some cases too.

I don't know if you saw it. Actually, it made the news. I think it was over the summer in Fort Lauderdale. Somebody thought they were buying this really nice villa and I think I forget what. They paid maybe 12,000 bucks for it. And it turned out they bought this hundred strip of land that was separating two villas and that's what they got. And of course you can't do anything with it. And they wanted to sue the county and of course they can't because it clearly states what you see it it's up to you to do your due diligence. And it was something very, very avoidable. But once again, people don't know what they don't know. And that's why it's really important to make sure you know what you're doing. You don't just show up at the auction and start bidding or you will lose a lot of money. So don't do that.

Yeah, I was at an auction one time in Missouri and there were a couple students of mine and they had an auction and for 29,000 and somebody bid 29,100 and everybody was kind of hush hush. And the guy walked up, you hear him saying, oh my God. I listened to the tapes, I watched the video, it can't be this easy. And I said, what was so special about that? Because the guy, oh, that's a second mortgage. There's $160,000 first mortgage in place that the guy didn't know about.

We see a lot of that sort of thing happening and unfortunately, sometimes witnessing. I used to be really helpful and try to help other when I would go to the auctions, I try to tell people I just gave up on that because you can't help everybody. I think sometimes the best way to learn is to lose some money and then do it better the next time.

And that's an important thing as well too out there now. It's definitely important. But the beautiful thing too is often these lists are being published on a regular basis. Pretty Easy to tap into, to kind of start getting your feet wet, right, Mike?

It's extremely easy to get the lists. The list is not the challenging part whatsoever. It's the due diligence that goes with that. And it's kind of funny because a lot of people call me up, they want to pick my brain and they want to take me for coffee. And I actually teach a four day course. And in this course there's no fluff. We go all day long and talk about all the due diligence steps that need to be done and the ways protect yourself. So I wish it was easy where I could just say, hey, just do these 1, 2, 3 things and you're good to go. But unfortunately, it's very easy to get the list. It's very easy to get excited. It's very easy to take. Back in the old days, like three years ago, it used to be right in downtown Houston and people would be randomly walking by on the streets because it was near a bunch of office buildings and law courts, et cetera. So people would just randomly be walking by and they say, oh, looks like there's a real estate auction. They go in, they have no clue, hadn't done the slightest bit of research. They're starting to bid on the stuff that they have anyway. Now it's at least in a. It's not in the middle of. Well, now it's kind of more in the middle of nowhere. And so at least people have to do a little research to find out where they have to go and bid. But still, some of the stuff that I've witnessed at some of these auctions, it's just crazy. It's mind boggling to me.

Yeah, auction mindset. People just kind of lose control if they don't know what the heck they're doing and what they're looking at. And the due diligence is the most important key on that. I always tell people, don't fall in love with the property. Avoid that OTSC syndrome. Oh, that's so cute. And look at the numbers.

You know, my favorite property are the ones that come with the biggest paychecks. I don't have to like the way it looks. Matter of fact, the most profitable deals that you'll ever find at these auctions are the ones that other people don't want to do. Everybody wants to do the pretty homes. I want to do the ugly homes. Those always have the biggest reward and the least competition. But once again, ugly home, pretty home. No matter what home. Do your homework. And it's such A dangerous place for people that don't know what they're doing. And it's such a. I don't want to make it sound like get rich quick because it's not. There's work involved, but if you're willing to do the work. If I lived in Houston, I'd be there every first Tuesday of the month guaranteed. So luckily I have somebody else that does that for me.

Yeah. With stuff in Harris county, what would you say your average time frame from the time that you buy it there to the time you dispose of it? I know it's going to vary depending on what's going on with the property, stuff like that. But would you say in six months you paying to release redemption rights from any of the borrowers or anything like that too, or no?

Yeah. So there's a whole bunch of different ways you can do it. And it really depends also on your exit strategy is so people, if you want to turn into rental, literally the day after you buy it, assuming it's livable, you can put a tenant in there. Sometimes you inherit a tenant that you may or may not want. That's a whole other story. If you're looking to flip it, there's ways to speed it up. But in general the traditional way is you wait out that six month redemption period. There's also going to be some issues. You're not going to be able to get title insurance on it. So it also depends on if you want to do vendor financing, for example, that speeds things up. So it really just depends on what your strategy is. And it also depends on if that previous owner wants to buy it back because you may just make 25% doing nothing. So it's such a wide variety of potential outcomes that could happen. So I actually would reverse engineer it and determine what your strategy is, what you're trying to do. If you're looking for a rental, I'm going to bid a lot differently than if something I'm going to flip and then to throw a curveball into it. If it's a homestead, then it's not a six month redemption anymore. Then it's a two year redemption. And so if you're planning on holding it for a rental, well, a great way to do that is to buy one of those with the homeowner still in place. And by the way, if they decide they want to redeem it after a year, they've got to give you 50%. And a lot of these people, if they're still living in the home, attachment. Yeah, there you go. They have an attachment to that property. And so I'm going to work with them to help them get that back. But once again, you wouldn't want to flip. If you're doing a flip, you don't want to inherit one of those homes because the previous owner's probably still there and probably not gonna leave. Or you can make them leave, but it's more difficult, so why not go easy path. Like I said, we always wanna make a win win. I never wanna take a tenant, kick them out on the streets. I never wanna take a homeowner, kick them out. I always wanna work with them and figure out a solution that makes them happy. But also it makes me happy too.

What would you say the ratios are from your deal flow where the borrowers come back and redeem? Is it a small percentage?

It's very, very low. Because I actually, me personally, I target that if I want to buy properties to hold. I'm a much bigger fan of Atlanta. I've got an attorney operation there. The property taxes are a lot lower, the insurance is a lot lower. So I get to keep a lot more of the income. So I don't really want to buy and hold in Houston. But I do like to flip. And so if I'm going to flip, I don't want to go for those ones where I think they're going to redeem. I want the ones that are vacant or the homeowners are probably long gone. They don't want to know what happened to their property. Those are maybe people that I might target for getting them some of the money that's owed to them by the county for the overage. But those are not the people I want encouraged to go buy the home back. I want to go and get in, fix it up and get back out and get my money and go on to the next one. So I don't target those. I would say very, very, very few. But if somebody specifically said, hey, I want to get that 25% or the 50%, well, there's a different strategy for attracting those type of properties.

Yeah, that totally is. We see the same thing too. We're buying and foreclosing the mortgage. Some different states have different redemption periods and you've got to work through those. And it's different if it's a contract for deed that you're foreclosing on or a true lien or how the state evaluates those, you know, whether it's a, you know, hey, no redemption period, you can evict on a contractor deed in Alabama versus being a One year redemption if it's owner occupied in Alabama. So it varies across the state. That's why it's important to get educated, right, Mike?

Absolutely. That is the key. And that's why people like yourself and people like me that are big distinctions is we actually do the stuff that we teach. And there's so many people there these days that are really good marketers and they can get you really excited. But I don't know if some of these people have ever actually done a real estate deal and they put those faces of people that are on TV shows anyway. I'm not going to go down that road. But when you're picking somebody to train, you make sure it's somebody who's doing it, who's paid their dues, made all the mistakes. Because it's not just teaching you the right things to do, showing you where you can go wrong. Because like I said earlier, sometimes you got to make those expensive mistakes. And I made plenty of them, even though I thought I was doing all the due diligence. But every time I've screwed something up, it led to another due diligence step. And so I know you paid your dues in the notes industry and I actually want to learn some of the stuff you're doing. So I've never really done a lot of that. So we'll be talking.

We've definitely been talking. But that's why I want to have you on. Because it's a very similar due diligence aspect of things. Making sure you know what you're truly buying. And you're not buying some hundred foot long, five foot wide strip in Florida. You're really truly buying a first lien versus a junior lien or know what type of liens are on the property that don't get wiped out or that do get wiped out. That's the beauty of it is the a lot of people like the whole flip this house mentality. They want to go out and buy a property, to touch it, to rub it, to hump on it, you know, buy the paint and carpet. I don't want that. Give me the numbers and like I said, give me the check. I don't care what the property looks like for the most part.

Right. That's what it's all about. And for me, I also would add helping people. I love to find people that are. I don't love to find people that are distressed, but I love to help people that are distressed. Because when you've been in this industry a long time, you know, a lot of Solutions that the typical person doesn't know on how to deal with lenders, how to deal with counties. We know a lot of stuff that isn't common knowledge. And when I find somebody in trouble, at the very least I can help them, give them some advice and help them get back on their feet or stay in their property longer or come up with a solution to get them back into home ownership. So that's one of the things that really lights me up because I can't imagine what it would feel like to be in that position that a lot of people will be and losing their jobs and big trouble and having to reinvent themselves. So once again, it's good to be a problem solver in times like that.

Yeah, times like that. I mean, history repeats itself. And the stories of helping people always better, always are more memorable than, hey, I made 20 grand on this flip or 40 grand on this deal. Now I kept somebody in their house and they lived in the house for 18 years or three years or whatever and helped them out. We've all gone through financial hardships at some point. I don't care who you are. Right.

The other thing I find is that when you help somebody with their finances, you're helping them in a lot of ways you don't even know because tied to that is the relationships. Those things are never good. When you're depressed because of money, your health, if you're under a lot of stress, it's never good for your health. So when you help somebody, even in a small way, sometimes you don't even know the ripples that has after that from helping those people out.

Yeah, big ripples. Not only their family, but really the neighborhood too. Because in a foreclosure, that affects the values on the entire neighborhood there too. And blocks around too. Right, Mike?

Absolutely. But I've had people tell me, thinking of killing myself, I was thinking of taking my life. You know, you can make a difference. And for us it's so easy. Like, I won't say easy, but when you've been doing this a long, long time, the solutions are just like for me, a lot of this stuff is autopilot. I don't even really think about it. I just do it. But for other people, this is like insurmountable hill that they don't think they're ever going to get over. That's what really keeps me doing what I do. I love doing that. And I can't even imagine how many people are going to be feeling the after effects. I think the virus itself is minor. Compared to what's going to happen in the economy afterwards, unfortunately.

Yeah. I think you and I both agree that we've had a 90 day issue year long problem.

Maybe. Yeah, maybe much longer.

So, yeah, everything is looking like it's definitely going to be probably longer before we start seeing everything coming back there. Talking about 25% unemployment here in the United States and expecting 50% of small business owners to not recover. It's a bad thing. So anytime we can solve solutions, we can work with homeowners to try to keep them in the property. Make it a win. Win is one of the most viable things we can do. And I think it's one of the blessings of us as problem solvers. I like that real estate investors ranks right about attorney for a lot of people, but problem solvers ranks a whole lot higher on that list.

Right? Yeah. And I think the one blessing that's coming from this, if there is the silver lining, is that people are now hunkered down and now's the time to reinvent yourself instead of waiting to see if your job's still going to be there. Real estate investing interests you if it's notes, if it's what I do, whatever it is, or any other venture for that matter, now is the time to get educated on whatever it is. And instead of letting circumstances dictate what your future looks like, now's the time to take the reins and figure out how you want to come out of this. And this could actually a lot of the worst things that ever happened to me turned out to be blessings in disguise. And I think this could be a blessing in disguise for a lot of people if they use their time wisely. If you just watch Netflix and drink all day, probably you're going to have a much different outcome than if you're taking online courses and training and reading. And I'm not saying don't watch any Netflix, because I do too. But it takes some time to figure out what you want your future to look like and then just start training on that. And don't rely on the government to be there for you, because they will not. I don't know where they're getting all this money that they're printing. That's a whole other story. But rely on yourself and take the reins and just go with it.

Yeah, definitely. Mike, we're so excited to have you speaking here at Note Camp here in a couple weeks. Really looking forward to it. What's the best way for those listening here or watching this to reach out to you, to connect to find more about what you're doing and some different classes and trainings that you offer up. Mike?

Yeah, best bet is just to send me an email. Infoikewolfmastery.com Wolf Just like the animal infoich the wolf man.

Exactly.

That's right.

The wolf of tax liens. There we go.

There you go. Not to be confused with that wolf of Wall street guy I don't really want to be affiliated with.

Different thing, different story, different time. Well, Mike, thanks so much for coming on the no Closure show. Look forward to it. Like you said here, everybody that's listening, go out, take some extra learn. Now's the opportunity to re educate, rebuild yourself, to learn something new and identify the opportunities but also the pitfalls so you can avoid those and not be an idiot. Be an educated person who's taking action and learn how to do something well. And I guarantee you, you do that, you'll definitely be at the top. So once again, Mike, thanks for being on the Nut Closer show and we'll see you later, everybody.

Great to see you, Sam.