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US Tax Leins

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  • #31
    Originally posted by Goffo View Post
    I think we need to be careful not be condesending from our 'lofty positions' and just criticise this strategy outright especially on the basis of involvement of PJ & RM. They are involved with education in Property Investing and teach the basics well enough and I am sure most of you would agree that there is money to be made in PI.

    Good luck to those who are having a go!!
    In reply

    Tax liens are great for a local investor in the USA - with no exchange exposure and whom already pays local compliance costs. Further the issues are local to a USA investor - they can drive or fly down the road, and sort out the issues.

    Not so from NZ.
    Matthew Gilligan CA - E-mail Matt
    Chartered Accountant Specialising in Tax Structures, Property & Trusts
    Read my book: Tax Structures 101


    • #32
      Thanks Matt for being open and summarising the risks so well.

      Nice websites in your signature too. I like the domain names of the two new ones.


      • #33
        Thanks Whitt

        Wait till you see the new GRA site going up in 3 weeks ! Big focus on free stuff for investors.
        Last edited by Matt Gilligan; 13-03-2009, 01:16 AM.
        Matthew Gilligan CA - E-mail Matt
        Chartered Accountant Specialising in Tax Structures, Property & Trusts
        Read my book: Tax Structures 101


        • #34
          Thanks to Dean and Matt for bringing this to my attention.

          I have not attended any of the recent RM seminars, but have been aware of the US Tax Liens strategy in a general sense since the early ninties.

          My personal take is this:
          Is a medium - high risk strategy with high - very high returns, but there is a lot of spadework and potentially random outcomes you need to consider.

          1. You are essentially paying the bills (property tax) for someone else in the US who can't. In return you get a good (compared to bank rates) % return If and WHEN they pay. If the don't you possibly get their property all for the outlay of the taxes that you paid for them. So you have essentially lost contol of the timing of the situation. You DON'T get paid regularly every month, you might end up "capitalising" your interest and not receiveing it for months to years.

          2. The US is a highly litigious society. Even if you are "due" a cheap house, how long in terms of hiring gladiatorial lawyers / evicting squatters / fixing the place up do you wait unpaid before its a viable rental property.

          3. If you end up with a house, it will be a random house in a suburb you don't know with property rules and laws you don't know. There is no guarentee you will be able to sell the house, so you are setting yourself up to be an uneducated, intercontinental buy and hold landlord of a random portfolio of houses which the previous owners have not even been able to pay the property taxes on. Think about that.

          To Summarise : the investment is is a hybrid between a random uncontrolled high intererest loan from you to a US property tax payer and a potential method to pick up a random uncared for house for a random but potentially very cheap price.

          If I lived in the states and had more than $100K US (spare cash NOT a bank loan / line of credit) I would go hard into this stragety in my own or a neighboring state, after a good 2-3 months homework.

          As I'm a Kiwi living in Wellington with structures , processes, networks and education appropriate to Wellington I'm going to go hard out in the Wellinton market instead.

          I am interested to know that there was / is a Kiwi equivalent. With the current economic climate I'd expect Kiwi defaults on local rates to be on the increase. Anyone got any leads on how to investigate this is ideal locally?


          As Matt and other have suggested, there is a viable strategy in there somewhere, but the compliance, uncontrolled nature of the outcomes, cross border tax complexities and potential for complex and expensive arms length problem solving make it a viable option for few NZ based Kiwis in my opinion.


          • #35
            Was just about to register for RMs Tax Lien 2 Day event this weekend. Thought the speil was too good to be true so decided to do some research and ended up here - lucky Black Friday I did . Thanks for your honest advise Matt - it confirms my initial thoughts . Sure you might be able to make some money but the risks/time/frustrations involved are just not worth it - does remind me of the US Options trading courses -too ggod to be true.


            • #36
              Welcome to PropertyTalk Kevin.

              My Black Friday hasn't been so good - driving in to an underground carpark on my way to the dentist, and took the roofracks clean of my 4x4.

              Then I was charged $60 for 5 mins with the dentist, and told I had $415 to get my mouth up to scratch.

              Can't get much worse, can it?

              Anyway, enough about me.

              Have a good read - this site is the best thing since sliced bread.



              • #37
                Originally posted by Kevin Ross View Post
                Was just about to register for RMs Tax Lien 2 Day event this weekend. Thought the speil was too good to be true so decided to do some research and ended up here - lucky Black Friday I did . Thanks for your honest advise Matt - it confirms my initial thoughts . Sure you might be able to make some money but the risks/time/frustrations involved are just not worth it - does remind me of the US Options trading courses -too good to be true.

                My pleasure. You are about the 20th person to tell me this today, so I am glad its doing some good.
                Last edited by Matt Gilligan; 13-03-2009, 01:35 PM.
                Matthew Gilligan CA - E-mail Matt
                Chartered Accountant Specialising in Tax Structures, Property & Trusts
                Read my book: Tax Structures 101


                • #38
                  Originally Posted by whitt
                  In light of the following info come to hand in last week or two

                  Should PT members use caution when dealing with RM at present? The current stability is unknown currently.
                  Ensure you do your due diligence and be careful handing over amounts of money for items, seminars, deals etc until you can guarantee the funds are secure should things go wrong.

                  They still have some good services to offer , just do your homework first.

                  I would venture to say that the RM Franchisees in the regions are good people doing their best and providing good service to their clients in core property education services.

                  GRA support them and note that we will continue our association with core Richmastery Franchisees around the NZ as long as they stick to their core principles.

                  Our issues are with the Auckland office where the problems seem to emerge from. Tax Liens are not promoted in the regions and it is our understanding that the franchisees of RM don't support tax liens.

                  Jones has forced it through the database and upset them all by doing so.

                  I think the better observation is don't judge the franchisees, judge the franchisor ( Jones). Instead of supporting his franchisees with good solid products and principled advice in a turning market, - he is slamming their database with snake oil and exploiting their local client relationship with a product that is outside of the Richmastery umbrella.

                  And he is sending them broke doing it.

                  So its a Jones thing, not a franchisee thing. Hope that makes sense.
                  Last edited by Matt Gilligan; 13-03-2009, 02:50 PM.
                  Matthew Gilligan CA - E-mail Matt
                  Chartered Accountant Specialising in Tax Structures, Property & Trusts
                  Read my book: Tax Structures 101


                  • #39
                    I've had a string of happy cancellees too Matt. Good timing!!


                    • #40
                      Tax Leins

                      I have recently come to this site and would like to place a view for those interested in entering the US property Market.
                      Firstly about myself and experience, I resided in the US for 10 years (born Kiwi) my business partner was a US Attorney and we had some 5000 apartments in portfolio , purchased from the last great property crash the Savings & Loan scandal.

                      And so , firstly I believe that Mr Jones & Co are indeed snake oil salesman at the best and has moved his operation to the shore of the US.
                      Many of the issues raised by "Hey Bigcat" are very true and correct, setting up costs etc.

                      Personally the only place I would invest in the US market (where I have the most experience ) is Texas.
                      Tax DEED sales rather than Tax Lien sales are in fact the best way to go here. Texas is a trust deed state , which is a better state to operate in the property market , as in acquiring the asset and taking it back it you on sold it using paper.ie on the first Tuesday of the month after having giving the mortgagee 21 days notice....unlike California etc , you have to sue for foreclosure , which can take years.

                      Tax Deed Sales in Texas are held on the first Tuesday of the month , are all cash auctions, you do your research on the property (which you can do from NZ, accessing the county records) and bid accordingly at the auction. At that time you are given a court house title as it is known.

                      In Texas , the person whom lost the property at auction has 6 months right of redemption, i.e they can get the property back, however they must pay you the amount payed at auction, plus 25% (50% annualized) of the amount payed at auction.
                      During the 6 months you cannot mortgage or re-sell the property,but you can (if you can get it) rent the property or receive rents if tenanted .(providing there are no squatters , or the owner wont budge and move out)
                      After the 6 months and the owner has not redeemed, then you will get a Judicial title , and then you are good to go, as in mortgage funding , re-sell etc. (the only exemption here is if the property is Homesteaded , in which the redemption period is a lot longer)

                      So I say to anyone , if you are contemplating entering the US market , enter with eyes wide open, know the rules of the game , (as in setting your structures correctly -more so for protection rather than taxation) , and be prepared to spend more than you think , but with that said substantial results can be achieved .....just be careful of the snake oil salesmen that want to clip the ticket for information you can get for free

                      I hope this insight helps
                      Last edited by BusyLizzy; 14-03-2009, 11:43 AM. Reason: Removed long quote which was Post 2 in it's entirety


                      • #41
                        buying in the united states

                        I have spent a great deal of time in the United States. It is important that you do your own due dilligence when purchasing over there. There are different rules in nearly every state. Even if you secure a property in Texas you also have an annual tax of 3% on the value of the property. Personally I do not buy in the bottom of the market, they are normally in slums.

                        My advice is to travel to America and see and feel the market for yourself. Be careful there are many people promoting the United States. however few seem to know what they are doing.


                        • #42
                          More spin from Dr Spin/ Phil Jones

                          Phil Jones wrote: 1/ Danetlc.com Members Area

                          Note: This week I have paid for Anthony Lipscombe from GRA to have direct access to both Larry Loftis and Barry Entous to approve and finalise the NZ and USA structure for NZ Tax liens students. Providing this advice this week to GRA has personally cost me over $1000 USD. I was therefore extremely disappointed yesterday to receive an email from Matthew Gilligan at GRA advising he refused to share his recommended NZ / USA structure with me because GRA wanted to individually charge each client for that advice (advice my USA advisors gave Matthew in the first place). As a result of Mr Gilligans attempted knowledge blockade I engaged NZ International Accounting Experts BDO Spicers to work with my USA advisors and sign off on the structure. This is the same structure that Barry Entous reach agreement with Anthony Lipscombe from GRA on earlier in the week.

                          ( Reply on the thread )

                          This is incorrect. Matthew Gilligan / GRA is giving this information for free to investors, and he has a better structure than the above. He critiques this structure and then gives better advice.

                          (Sent to me from a forum member before it is removed by Dr Spin in this highly monitored/censured site)
                          Matthew Gilligan CA - E-mail Matt
                          Chartered Accountant Specialising in Tax Structures, Property & Trusts
                          Read my book: Tax Structures 101


                          • #43
                            Remember, your integrity is always tested in pressure.
                            Pot calling kettle......
                            Defensive comments, personal attacks and legal threats. The RM thread has seen it all in the previous few years.


                            • #44
                              3 weeks ago I watched the RM free video on Tax Lien's, which is an actual recording of the $20 Seminar.

                              Sounded to good to be true.

                              Just wanted to say thanx to everyone for posting their thoughts on this topic.

                              Kind regards,



                              • #45
                                Gra’s view of tax liens

                                GRA’S VIEW OF TAX LIENS

                                Recently there has been some media coverage of investment in US based tax liens. In short the investments involve buying debts off US City Authorities that arise when property owners fall into arrears in paying their property taxes. Although laws vary State by State in general these unpaid taxes end up as priority secured debts against the property and often the City Authorities auction them in order to obtain funding. Some investors in the US are attracted by the relatively high rates of interest paid by these tax liens. Recently I have been asked by a number of clients to comment on my view of the commerciality of such investments for NZ investors.

                                In summary I do not see a US tax lien as an attractive investment proposition for a New Zealand resident investor. Although the returns can appear attractively high, exposure to foreign exchange risk and the disproportionately high compliance costs mean that I think that our clients are better off looking closer to home.

                                To expand further, my primary concerns with tax liens investments are:

                                § The investment, which requires you to buy a debt that is denominated in US dollars, means that you are exposed to foreign exchange risks. The kiwi dollar recently hit a six year low against the US dollar so I don’t think this is an opportune time to be buying US dollar assets. If the US dollar weakens relative to the kiwi dollar (i.e. the kiwi dollar is worth more) after acquiring the tax lien investment, your asset (money invested in the US) immediately devalues. Although you might consider hedging a solution, we find the cost of hedging significantly erodes the return.

                                § Once you are dealing with two tax jurisdictions you are immediately exposed to higher compliance costs. This is amplified in the case of tax liens by the fact that American tax can be complex and that there are different State and Federal Laws. Further, the nature of the investment itself, which would be classed as a financial arrangement for tax purposes in New Zealand, mean that the work involved is not straight forward. For example, the cost of compliance in the US could be circa US$500-$800 and in New Zealand circa NZ$500 meaning total costs of circa NZ$1,500. Once again for a large scale investor this would be a proportionate cost that would be acceptable. However, it ends up being disproportionately high for lower scale investors. In particular, compliance with the accrual rules in New Zealand is costly for the smaller investor.

                                § As buying a debt is a “financial arrangement” under New Zealand tax law you need to account for exchange movements in NZ tax returns. This means if the NZ dollar weakens and you end up with an exchange gain at balance date, you will have tax to pay even though you haven’t crystallised the gain (ie you have tax to pay with no cash profit to help you pay it). There are de minimis rules whereby foreign exchange gains do not need to be brought to account until realisation but these only apply to individuals in certain circumstances.

                                § The risk of using the wrong structure across two different tax jurisdictions is high and the consequences are severe in that you end up with double taxation and losses being locked up.

                                § As the laws in relation to tax liens vary State by State, the risk of ending up with a worthless investment is too high to stomach. For example, there can be conditions that need to be fulfilled to protect your rights under the lien and if they are not fulfilled the lien can be worthless. Similarly according to commentary by the likes of Wikipedia, if the delinquent taxpayer is declared bankrupt, a bankruptcy court may lower the interest rate to be paid or discharge part or all of the lien again leaving the lien worthless.

                                § Often the opportunity to acquire the property at a severely discounted price is touted as one of the opportunities available. However, to ensure that you do not end up with a worthless piece of swamp land covered on toxic waste, research needs to be carried out which is going to be difficult for any NZ investor. Furthermore, you need to be careful of the various types of Deeds that apply to properties. For example, there are so called quitclaim deeds which are not insurable titles. You can also end up inheriting a property’s shortfall, for example, environmental issues which then have to be remedied at the investor’s cost.

                                We accept that there are potentially good returns in tax deed deals, but you need to take due diligence seriously and understand fully:

                                i. The area you are investing in (ie job security, population growth etc).

                                ii. The nature of the asset (with the complexities of American law across the top e.g. uninsurable ‘quitclaim’ titles).

                                iii. You may end up with expensive litigation and travel costs defending your investment, if problem arises.

                                In my view the risks involved for a NZ based investor outweigh the returns for the smaller investor. For this reason I am encouraging my clients to keep their money closer to home where they can keep a better eye on it. With so much cash flow positive property back in the market and no exchange risks, – we ask is it worth the risk to look so far offshore?

                                Yours faithfully
                                For Gilligan Rowe & Associates Ltd

                                Matthew Gilligan
                                Matthew Gilligan CA
                                Gilligan Rowe & Associates Ltd
                                [email protected] , WWW.GRA.CO.NZ , WWW.FAMILYTRUSTS.CO.NZ , WWW.LAQC.CO.NZ
                                Matthew Gilligan CA - E-mail Matt
                                Chartered Accountant Specialising in Tax Structures, Property & Trusts
                                Read my book: Tax Structures 101