Realty411 Magazine The Future of Real Estate is Here | Page 18

Safety in
Numbers
Discover how Chris Gleason and
MMG Capital lower the risk on
what’s already one of the most
secure investments in the industry.
By Robb Magley | Photograph by Sam Green
Every day, all across the country,
real estate taxes go unpaid.
It’s no secret that real estate taxes
generally represent the majority of a
county’s revenue; and they need that
revenue to provide services like firefighters,
police officers, roads and bridges. In more
than half of the U.S., counties are required
by law to collect unpaid taxes through the
sale of tax liens to investors — counties sell
a certificate that grants the right to collect
those taxes, plus interest and penalties, to
investors for the amount of the outstanding
tax alone. This allows the county to balance
their budget and operate without a revenue
deficit — it’s great for the county, and
investors like the opportunity, too.
But while the sale of real estate tax liens
to investors is a process that dates back
to the early 1900s, it’s not the unexplored
territory it used to be, according to Chris
Gleason, managing director at MMG
Capital.
“The tax lien industry isn’t a secret
any more,” said Gleason. “Anyone can
register, walk into an auction, and bid.
There are thousands and thousands of tax
lien investors across the country, and that
makes the market competitive.”
It’s become so popular because it’s
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an exceptionally low-risk investment in
general, according to Gleason, who noted
the overwhelming majority of tax liens
investments eventually get paid back to the
investor — plus interest and fees.
“That’s because no one’s interested
in losing their house over a tax lien that
represents 1-3% of the property’s value,”
said Gleason. “Over 95% of property
owners redeem their unpaid taxes within
their state’s statutory period. For the ones
that don’t, the certificate holder has the
opportunity to do what’s called ‘filing for
deed’ — the equivalent of foreclosing for
a tax lien.”
Filing for deed starts the process, and the
property owner is forced to “redeem” (e.g.,
pay up), or the property will go up for sale.
“At that point, if you’ve done your due
diligence and you have a piece of property
that has value, someone’s going to come
along at that foreclosure sale and pay for
the property,” said Gleason. “And that
essentially gets you redeemed, too. Over
99% of the time you get your money back,
plus interest and fees.”
And that’s the goal. Gleason points out
the biggest misunderstanding about the tax
lien industry is that people think everyone’s
in it to acquire real property. “No one
PAGE 18 • 2014

should be going into it because they want
to buy property for $500,” said Gleason.
“Realistically, you’re not going to acquire
property this way — unless you’re buying
tax liens on worthless property nobody
wants. Then you might end up with it —
and you’re going to be mad that you did.”
While the concept of investing in
tax liens is very attractive, and in many
ways very simple, the reality of doing it
in a competitive market is complicated
once you’re on the ground, according
to Gleason; between the ins-and-outs
of varying state laws, timing, and bid
structures, to say nothing of traveling to
auctions and servicing the liens once you
buy them, the real rate of return for a small
investor shrinks quickly. Gleason and
MMG Capital structure the purchase of tax
liens as a pooled fund opportunity — at
once spreading out an investor’s risk and
increasing yield.
“The rates that you can achieve by
yourself, with not a lot of money, are not
very high,” said Gleason. “First of all,
you’re competing with people like us; we
come into these auctions with millions of
dollars. Second, if there’s a larger parcel
out there, say an apartment building, that’s
Continued on pg. 86

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