Melanie Finnegan is the founder of Tax Lien Wealth Solutions with 10 years of tax lien investing. She helps people with wealth management by teaching others to be able to manage their own money or can have her company do it for you. Melanie gives some explanation on what Tax Liens are and how you can go about investing with them.
Melanie Finnegan Real Estate Background:
- Founder of Tax Lien Wealth Solutions
- 10+ years of tax lien investing
- Based in Provo, UT
- Say hi to her at: https://taxlienwealthsolutions.com
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Best Ever Tweet:
“It’s all about due diligence” – Melanie Finnegan
Joe Fairless: Best Ever listeners, how you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever; we don’t get into any of that fluffy stuff. With us today, Melanie Finnegan. How are you doing, Melanie?
Melanie Finnegan: Hey, how are you? Great, thank you.
Joe Fairless: Well, I’m glad to hear that, and I’m doing well. A little bit about Melanie -she’s the founder of Tax Lien Wealth Solutions, she’s got 10+years of tax lien investing, based in Provo, Utah. So with that being said, do you want to give the Best Ever listeners a little bit more about your background and your current focus?
Melanie Finnegan: Yes. So a lot of people don’t really understand what tax liens are. So it’s just a facet of real estate. I got into it– it’s been about 12 years now. I just accidentally got into it here in Utah. Our business, we do all of our investing in Florida. But what it is, is we’re yielding between 14% to 18% by having investors and creating investors’ portfolios in tax liens. We purchase them on the secondary market. I started my company Tax Lien Wealth Solutions about three years ago, and we’ve just been growing ever since. So we love it.
Joe Fairless: So what is your business exactly?
Melanie Finnegan: So we do wealth management. So we manage– people just send us funds, we have a minimum amount of investing and we manage. But we actually also have what we call the learning portal investor. They go in and get a certification through my learning portal. And then there are do-it-yourselfers which they can have any amount they want. They can start with 500 bucks, 1,000 bucks, all the way up. We have inventory on hand of certificates that actually we are able to distribute and assign them to client portfolios and transact them in their names, and so we’re just money management and advisors.
Joe Fairless: Got it. So you have a done-for-you solution or a do-it-yourself option.
Melanie Finnegan: Yep.
Joe Fairless: And you teach people how to do it themselves through your learning portal, and then they can go do it.
Melanie Finnegan: Yes. And then I just launched a little subsidiary. It’s called Detroit Wealth Solutions, and what we’re doing is we’re actually rebuilding Detroit. So we’re actually getting tangible properties and then creating a fund. We’re just in the process of setting up the fund right now. But they’ll be making a quarterly return, and then have an option if they want to purchase the property at the end of the rehab or at the end of the year, just do it again. So we just barely launched that two weeks ago.
Joe Fairless: Oh, well, congratulations.
Melanie Finnegan: Thank you.
Joe Fairless: So that has been launched, you said?
Melanie Finnegan: The business itself has been launched. It got incorporated and everything. And then the website, detroitwealthsolutions.com is launched, and the fund is almost launched. We’re just waiting for paperwork to come back and sign.
Joe Fairless: Okay. So why switch gears from tax lien and Florida to building up– investing in Detroit?
Melanie Finnegan: Listening to my clients. So I’m definitely not switching gears, because I actually have someone that’s directing it and overseeing it, because tax liens are my baby, and that’s where my passion lies. I love investing clients in tax liens, and that’s where my knowledge is the most superior. So I’ve delegated somebody to come in, who has real estate background with tangible actual properties and things like that. He’s overseeing everything and he’s doing it on, heading it up. So I haven’t switched gears; I just added to us. We’ve just diversified our clients. They say, “We want property. We want property,” or “We want to invest. We want to do a fund.” So we’re listening to that and hearing that. And then I made a trip to Detroit with our partner that we’re doing this with and he just– we solidified the deal. Just after that trip to Detroit, I saw there was a need for it.
Joe Fairless: Okay, cool. So we’ll go back to the tax lien part since that’s what your primary focus is.
Melanie Finnegan: Yeah, that’s where my personal– yeah.
Joe Fairless: So the learning portal for people to learn how to do it theirselves… What are the steps in that process for learning, from step one through whatever step it is?
Melanie Finnegan: Obviously, it would take longer than that. So I’ll narrow it down. What happened is, I was a portfolio manager for another company, and the reason for the learning portal is I was thrown to the wolves with it. I wasn’t a good educator 12 years ago because I was brand new. So all these clients would call us and say– they’d say they had the knowledge, but they didn’t have the knowledge and things would happen with their liens, or they wouldn’t progress it, or they wouldn’t know exactly how to do it. So I created the learning portal that just educates briefly on due diligence and how to do simple things and how to access our resources for the counties we’re purchasing from, and things like that. It’s just a step by step guide of making the process go, but it has a certification in there. So I can go, “Oh okay, that person has their certification. There’s an accountability there on both sides.”
Joe Fairless: Okay.
Melanie Finnegan: So that’s why it’s there, because I want to be held to a standard and I want the client, if they want to be a do-it-yourselfer, I can’t just throw them to the wolves. They have to have everything at their disposal. If they go through my learning portal, they’re also assigned a portfolio manager. So they have meetings with their portfolio manager; they advise and go through everything and onboard them and things like that. It’s pretty cool.
Joe Fairless: So let’s talk about the last, either group of tax liens that you purchased or the last major transaction you’ve done from a tax lien standpoint. Can you talk about it?
Melanie Finnegan: Are you asking in dollars?
Joe Fairless: However you want to define that.
Melanie Finnegan: Yeah. No, I appreciate that. Sorry. I just wanted to see that– So last purchase I did. I’m a member of the National Tax Lien Association who oversees the investment, and I also have what’s called my Certified Tax Lien Professional. So I’m a certified CTLP. I used to be the only woman in the US that did this. With that certification, I can buy from the secondary market that I access through the National Tax Lien Association. So I purchased– the last thing I did was at an event in March 6th. It was my last travel that I did; it was a business trip to Florida, and I purchased about $1.2 million.
Joe Fairless: Okay, $1.2 million in tax liens. And educate me; is that all-cash transaction?
Melanie Finnegan: Yeah, exactly.
Joe Fairless: So there’s no leverage or anything like that?
Melanie Finnegan: No, I was gonna say that. So some of that is client funds. Well, say I want $200,000 of taxes. If that’s when I’m managing them, they won’t access my inventory. I’ll go purchase on behalf of them. So I’ll make them wait and say, “Hey, let’s wait,” because I buy in bulk and I get a slight discount. So I say, “Hey, let’s wait. Next month is when I’m going to do my next purchase, and then we’ll lump it all together.” So some of it is business funds that we’re just reinvesting, because we sell them as quick as we get them. We sell out of them so quickly. I never have inventory just overflowing. We have tons of investors that are waiting for liens.
Joe Fairless: What’s the average time that you hold, since it seems like it’s pretty quick?
Melanie Finnegan: It just depends on which podcast it came out, what source of marketing I’m using and things like that. But I buy a few times a year, like six, seven. Sometimes I only buy $50,000 at a time. Sometimes I buy a million and a half.
Joe Fairless: No, I’m saying the hold period, not the amount. So you said you buy them as quickly as you sell them, right?
Melanie Finnegan: Oh, yes, it could maybe take us a month to get them going. But are you talking about the return to the investor, how quickly that process goes?
Joe Fairless: I thought you said you’re buying them and turning them around quickly?
Melanie Finnegan: What that means isn’t just assigning them to clients. No, I’m sorry, I didn’t explain well. So it’s under a taxpayer ID. So I purchase them, transfer them in my name, and then have to transfer them into the client’s name, or excuse me, taxpayer ID.
Joe Fairless: So let’s take a giant step back. Will you just talk about your business model with buying tax liens? And perhaps we should have started out with that.
Melanie Finnegan: So a tax lien certificate– just real quick, just so I can define it for your listeners. Sometimes people are like, “What is that?” When you don’t pay your property taxes, the following year at the annual sale, your property tax, that bill will go up for auction, because the counties have to do that, to put it up for auction. They have to incentivize investors with a mandated stated rate. So in Florida, it’s 18% is how much they get. But that investor comes in and pays that tax bill and the property owner is the only one that is penalized at all. The county just facilitates it. But the county needs that money for their police officers, their fire department. They have to meet their budget. So this tax lien investment has to benefit the investor so much, because they need us to keep coming back. There’s $14 billion delinquencies in our nation. So they’ve had to create a process that recovers funds on an annual basis, and that has been around since the 1800s. Just not a lot of us know about it. I had no clue about it when I fell into it.
Joe Fairless: Okay. So you buy in Florida, my guess is, because of that 18% compared to other states which could be lower. Is that correct?
Melanie Finnegan: Yeah. Each state has its nuances. So Florida, they really, really cater to the investor. So they have incentives. I created a strategy in the state of Florida, that actually I’ve been recognized for, that compounds money, turns money and things like that… And it’s just the best state for tax lien investing.
Joe Fairless: And what is that strategy?
Melanie Finnegan: That’s the secret; can’t share my secrets. It’s just turning the certificates as quickly as possible. So what I mean by that is we shake [unintelligible [00:12:30].09] by filing foreclosure, scaring the property owner to pay.
Joe Fairless: So when you buy a tax lien, your goal is to get them to either start paying or to file foreclosure, correct?
Melanie Finnegan: My goal is that we get in there and we file foreclosure and get that money back as quickly as possible, so that we use that interest that we’ve accrued for that period of time, and we’re making money. So I like to turn money twice a year. That way, I’m getting interest really, and they’re working for us. So we go in there… We’re buying season certificates. So the second that certificate is transferred into the client’s entity or name, we go ahead and initialize the foreclosures process and start the foreclosure process, because they’re maximized at that point, and it’s moving along, if you will.
Joe Fairless: And will you elaborate on what season certificate means versus unseason certificate?
Melanie Finnegan: Yeah. So one thing that tax lien certificates have is, it’s called a redemption period. I call it the grace period, for the property owner. In Florida, that redemption period is two years. So as an investor, you just have to be idle. You can’t do anything with the property other than just accrue interest on paper. But two years and day one, you can go in and file what’s called tax deed application, which is step one in foreclosure, and you can go after the property. I buy outside of that grace period–
Joe Fairless: Got it.
Melanie Finnegan: –so that we couldn’t do that immediately. I don’t like paper interest; I like real money. So I like to move it along. It’s nice to see it on a computer screen and things like that… But I love to show the investment earns the trust of the investor by performing.
Joe Fairless: And my assumption is that you can buy them at a steeper discounted rate if you purchase before the grace period’s over, but then you’ve just got to wait. Is that a correct assumption?
Melanie Finnegan: Kind of. A lot of people, if they’re buying season certificates, they go in thinking, “Oh, I’ve been [unintelligible [00:14:23].00] to foreclose on this and get this property.” So sometimes, the outside of the redemption certificates have a premium to them, because you can initialize foreclosure right away.
Joe Fairless: Makes sense.
Melanie Finnegan: Yeah. So over the course of 12 years that I’ve been doing this, we’ve had about 145 properties come to deed, and that’s nothing compared to how much money I’ve invested in clients in over the course of 12 years.
Joe Fairless: When you say 145 properties come to deed, what do you mean by that?
Melanie Finnegan: That means that the money didn’t shake loose and they took over the deed to the property. So they didn’t get the redemption, which is their initial investment plus the accrued interest at the time they actually got the property.
Joe Fairless: What are some mistakes that you see investors make whenever they enter in the tax lien purchase business?
Melanie Finnegan: It’s all about due diligence. So I analyze data; that’s how I look at it. I look at numbers; I can look at a huge spreadsheet and I can see it in 30 seconds if it’s gonna perform or not. But people, they think every certificate is going to perform, and there’s just some that have no value to them. So if they’re going in blind, they could go in and foreclose on a property and get invested into this property that has absolutely no value. It could be a marshland, and I’ve seen that happen, where people have– I’ve had to rescue people and buy back liens that they bought from somebody else, because they don’t know what to do with this property, this slice of grass. But all you have to do is go to the tax collector site and start doing due diligence, and there’s a lot of data there that communicates to non verbally, of course, that “Yes, I’m going to perform” or “No, I’m not.” I vet and cherry-pick every single lien. That’s where I am an asset to the client is I know how to read the liens and what they’re going to do. It took me a long time to do that, but that’s where I’m an asset to the clients, for sure. But I teach them too, because I want them to know how to do it and how to look at a property so they know what they’re investing in and be excited about it.
Joe Fairless: When you’re looking at it in the 30 seconds that you mentioned, what are the first four things that you look at?
Melanie Finnegan: There’s a lot of nuts and bolts here, so I hope I don’t overshare. But when you go in to file foreclosure, you have to pay off any additional tax lien certificate holders. So the number one thing is I look at what’s the additional tax column, what is the assessed value column this year and last year, and what did I pay for it. So if I have 20% equity in a property, I look at that. If my exit strategy is I’m going to get the property and I want to wholesale it, so I want to look at the assessed value. As you notice, the size is a low value. I look at that as our exit strategy if we get property. I leave about 20% equity in there that you’ll never get the property if a client would be absolutely enthralled by it, because they’d have an instant 20% buffer at the very minimum. So I look at those columns. It’s called the horizon lien to value, and I want to know how much of my total investment is going to saturate your assessed value, and I want to maintain 80% or below.
Joe Fairless: Anything else that we haven’t talked about as it relates to tax liens that you think we should, within the context of this conversation? I know it could be a much longer detailed conversation, but anything else you want to say?
Melanie Finnegan: Yeah. One thing that I learned that is one of the most key components is… and especially right now. We’re going through a weird time in our economy and things like that, and we’re very recession-proof, but not only that. We are an approved alternative asset investment, which means you can take your 401k or an IRA and do what’s called a self-directed IRA, and use those funds to invest and capitalize on that retirement fund that you have and make 14% to 16% a year. My ten-year average is 24.7%. So that’s incredible.
Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?
Melanie Finnegan: Just go to our website, taxlienwealthsolutions.com. You can go over to our Facebook, same thing. We’re on LinkedIn, and check us out. And then just call us or submit an inquiry on our email.
Joe Fairless: Melanie, thanks for being on the show. I hope you have a best ever weekend. Talk to you again soon.
Melanie Finnegan: Thank you.
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