David Whitburn

As a property investor, it is very important that you select the right strategy or strategies for your needs.  Most commonly the long-term buy and hold strategy creates the most wealth.  I acknowledge that often property investors diverge into property trading (buying with the intent to resell at a profit – eg. renovations and on-selling straight away), and some succeed at this when they time the market correctly and remember to pay GST and income tax on the properties that they trade.  However the vast majority I have mentored have truly excelled at the long-term buy and hold investment strategy.

With internet and social marketing coming to the fore, all too often we see property promoters drafting a large menu with so many choices, and telling us about how great our lives will be with another strategy.   Many property investors using the success from their long-term buy and hold strategy let their own greed kick in and they feed the greed of the property promoter of the day, and spend a small fortune on education on a different strategy to the one that has served them so well.  This is a distraction, and distractions cost you money.

My own mistakes and resolving them

Firstly I must admit that I’m not perfect here, having been distracted buying a Blue Peak property finding licence, but I soon realised the loss of focus in what I have truly excelled in, which is long-term residential property investment.  So I stopped and removed myself from the situation, settling out of court to allow me to focus on being a Dad for the first time and on my own business interests.

I would now note that the Blue Peak property finding system devised by Phil Jones, Sean Levy and Sean Wood has been proven not to work, and as is often the case with Phil Jones, he lost another good relationship he once had and litigation commenced amongst the other 2 promoters.

Phil then passed Blue Peak onto Steve Goodey’s Venture Property.  Some affected licence holders (including me) who felt that they had been ripped off, stood up to the promoters about the unethical and incompetently run Blue Peak scheme.  So I learned two things from this – (1) not to lose focus and go down distraction lane, and (2) not to conduct any business with Phil Jones.

Distraction Lane

On networking at the breaks during Dean Letfus & Shaun Stenning’s NZ Property Guru’s [sic] Auckland seminar earlier this month, and hearing from investors that have paid to go to courses with the next best thing to do in New Zealand, I have found that people over the past 2 years have been taught about:

• Lease Options
• Rent by the Room
• NLP Training
• Presidential Inner Circle
• Tax Liens & Tax Deeds
• then insert any other random sidetrack you had like internet marketing, sports betting software, FX trading, buying apartments in Australia, buying property in Guyana etc

These are all simply distractions and whilst some of them can make you good money (I have seen many people make good money from lease options and renting houses by the room), strategies like tax deeds and liens, US property and internet marketing seem to predominantly only make money for their unethical promoters like Shaun Stenning and Dean Letfus).  Think about the Hybrid Real Estate Board Game – there is a distraction lane that you go down, and as a seasoned player of the game since working with Kieran Trass in Hybrid in 2003, I knew going down it meant a significant retardation to the accumulation of my wealth in terms of both growing my equity, and my passive cashflow.

Seriously – what is wrong with sticking with one strategy, perhaps even making a few mistakes, then fine tuning it over time and mastering it.  This has worked well with property investment for at least 5 generations in my family, and I see little reason why it can’t for the next 5 (barring being on the losing side of a World War!).

Major Distraction – US Tax Liens/Deeds?

How it works is that some states of the USA are tax deed states, others are tax lien states.  States are divided up into counties for administrative reasons and each county levies property taxes for things like roads, streetlights, schools, internal governance and administration and community services.  If you don’t or can’t pay your property taxes a lien may by statute be put on your property in favour of the county which takes priority over a lender’s mortgage.  These liens get sold (usually by auction) from time to time by counties to investors to help with revenue collection.  Whether the state is a lien or deed state is irrelevant, as what was portrayed for sale was returns of 15% to 50% (in Texas).

Commercial Alert on Tax Liens and Tax Deeds for New Zealand Property Investors

From talking with dissatisfied purchasers in my network and reading PropertyTalk.com forum posts, and taking the time to understand the offering, I personally take issue with promoters who don’t tell the full story about significant aspects of their product.  During Steve Goodey’s presentation at NZ Property Gurus:

1. There was no mention of US accountancy fees, nor state and federal tax compliance – which all will cost the Kiwi investor money;
2. There was no mention of the NZ tax consequences (including the accrual regime) on the US tax liens;
3. There was no mention of US initial structure (company/trust formation) costs – although this may have been in the US$5,995 pack and with a bit of ‘googling’ I could see LLC formation for as little as US$199;
4. There was no mention of the minimum US$1,000 balance in the US bank account that apparently has to be opened by Kiwi Tax Lien/Deed investors;
5. There was no mention of exchange rate risks (although I note that at $1NZD : US$0.69 this is less of a concern than it once was, however what is stopping the US Dollar devaluing to above $1NZD : US$0.80 or worse?);
6. Legal costs to foreclose on a lien (a friend working as a lawyer in the US noted that it often costs over US$6,000 in legal fees to foreclose a lien owner, and it is not unheard of to be over US$20,000);
7. Risks of buying a lemon property – you could purchase a piece of swampland, a landlocked property, a road, a tiny section with a tree on it, a footpath etc if you don’t do your due diligence properly;
8. There is mention of being able to buy tax liens for as cheap as US$1 on a webinar, yet there is not a single deal done for remotely close to that price for a tax lien course subscriber of nearly 1 year;
9. Risks of not buying anything at all and blowing US$5,995 – investors at Property Gurus that had purchased the Tax Liens course run by Steve Goodey in NZ, and by Phil Jones & Dan Ekelman (DANE Wealth Academy) in the USA have said that they have been trying to buy tax liens & deeds for months on eBay and following the techniques taught by the Millionaire Mastery/DANE training.  8 months later of genuine trying and they told me still no tax liens.  Other investors trying every couple of days for 3 months have not been able to secure any deals either;
10. If it were so good why can’t more of the 305 million Americans purchase tax liens, rather than getting 4.3 million New Zealanders to purchase them;
11. Why would an investor want to become a debt collector for US counties – many counties collect the easy debts themselves, and pass the hard ones onto investors;
12. If you were a lender owed US$250,000, would you rather pay out a US$1,200 tax lien to protect your security in the event legal foreclosure notice is served by the lien holder?;
13. Dean Letfus published on 9 March 2009, on the public PropertyTalk Forums that they are “they are snake oil, complete with white shoes and wagons” (source: published already on the internet at http://www.propertytalk.com/forum/showpost.php?p=168276&postcount=5).  Dean Letfus then expanded on this to say how dodgy they really are (source: Published on the internet already at http://www.propertytalk.com/forum/showpost.php?p=168389&postcount=8);
14. There is a 100% satisfaction guarantee on www.cashflowliens.com that appears not be honoured – in fact I am informed that the promoters try to shirk it.
    

    We guarantee to teach exactly how to earn between 16% and 25% returns on your money and give you the exact step by step processes for buying real estate up to 90% BELOW MARKET Value in the USA AND we will show you precisely how you can do this from the comfort of your home where ever you live in the World without ever having to leave your own Country!

So for me, tax liens and tax deeds are a no go zone.  They may work if you are in the US and can commit time and knowledge to becoming a tax lien/deed expert.  It is my honest opinion that they will make the majority of NZ investors poorer than if they hadn’t invested in them at all.  So my advice is to read this great article by Rob Stock, who is one of New Zealand’s finest and most respected finance journalists, in the widely circulated Sunday Star Times on tax liens and tax deeds: http://www.stuff.co.nz/business/personal-finance/1762855/Beware-of-lien-returns.  Stop the promoters like Dean Letfus, Steve Goodey and Shaun Stenning from getting rich at your expense and don’t invest in them.

That’s all from me – stay focused and don’t go down distraction lane.  Stick to your knitting and enjoy the rest of your week.

Kind regards

David Whitburn

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