Remember my comment:
“Choose your enemies carefully because you will become like them” ?
Well look at this:
Duplicity or a genuine change of heart? Dean Letfus replaces Phil Jones. (Click to view bigger.)
Property spruiker Dean Letfus has replaced his old boss (and nemesis?) Phil Jones in a ‘venture’ promoting US tax liens to NZ investors. (This after Letfus comprehensively criticized US tax liens as a suitable investment ‘vehicle’ publicly last year … in no uncertain terms. What can have changed?)
Extraordinary.
(With thanks to David Whitburn.)
Sweet.
Tax liens huh, the new snake oil.
Well, I can assure you that these are only for the seasoned investor. Every city in the US has its own little tight knit group property investors – they all know each other and they all have banks, politicians and contracting companies at their beck and call. The stuff they refuse to invest in is what is bundled up and sold to outsiders. Unless you are familiar with the average “American city” you do not want to have anything to do with this kind of investing. While there is such a thing as gentrification in the US, there are just some areas of many US cities in which this will never happen — either by private capital or by public capital. Not to say that it won’t happen – but you could be waiting a really long time, whereas, the amount of dollars you invested in US tax liens could have easily earned far more if kept in a regular savings account at your local bank.
Also, as David Whitburn indicated the tax implications to the investor can be huge. Not simply because you are taxed but more because you will need a tax advisor who specializes in US and NZ taxes to prepare income taxes for your “investment” this will be the case regardless of whether you claim a “loss” or “gain” in investment. Any New Zealander who treads in this market will need to be very very careful.
By the way, nice job David Whitburn!
Snake oil? Yes, apparently.
What’s strange (as David Whitburn highlights in his post) are these damning judgements from Dean Letfus on 9 March 2009 (affecting an international connection) on a discussion thread devoted to the subject of US tax liens:
and in the same place on the same day:
Killer quote: “Would you trust the words of these people?”
Err, no. Not at all. (Thanks for asking.) And now you’re one of them Dean Letfus?
Here are a couple of things people should know about these kinds of “debtor” investments.
Keep in mind that you don’t get a payout until the property is actually sold.
1. As time passes Property Taxes continue to be assessed – this makes the property more and more unattractive to a prospective buyer.
2. As time passes additional Property Tax Lien’s may be sold on the very same property. You may find yourself on the bottom rung of a very tall ladder.
3. When dealing with local governments you should know – they make the rules and therefore they can change the rules.
4. Property that has tax liens on it most probably has other liens on it as well. Therefore, again, you may find yourself at the bottom of a very long list. And again, these liens make the property more unattractive to prospective buyers. It could be many many years before you see a return on investment.
5. A lot of people overlook US Bankruptcy laws. These laws allow a disinterested third party (a bankruptcy Judge) to intervene between a debtor’s creditors. Normally, debts are not forgiven but creditors are paid out in pennies on the dollar (if you’re lucky). And again – you may find yourself in a very long line of creditors – and that’s only if the debtor has any capital that the Court can get its hands on.
6. Whether New Zealanders realize it or not, there is actually a very deep recession going on in the United States. Many local municipalities and Counties are currently in the process of closing schools and even shutting down their police stations, and also, laying off government employees to keep within their budgets. This is not the kind of environment to be buying other people’s debts.
7. As I said in my earlier post – the good stuff is already gone before it hits the Court House steps – and that’s a statement you can take to the bank!
For all the reasons you outline, these US tax liens seem like among the worst investment advice someone could offer a neophyte off-shore investor. Long on promise short on delivery.
Yet, the spruikers ply their persuasive trade at events: “tickets just $47 and bring a friend free, go into the draw for a colour television”… the flip-flop from Dean Letfus is striking stuff.
For a self-professed godly person, it seems just nonsense. It’s got to catch up on them some time.
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