Marlborough Property Investors' Association
"THEY ARE snake oil, complete with white shoes and wagons :-)"
That's what self-styled New Zealand property guru Dean Letfus wrote in March last year on Propertytalk.co.nz, when describing the US tax lien investments being promoted by rival Phil Jones.
Letfus also posted this note: "And if you troll (sic) the various USA web sites they all say only to do it if you are an expert in an area and you can view the property prior. Doing it long distance is specifically warned against again and again."
Fifteen months on, Letfus is spruiking the very same system.
Dan Eckelman, the US expert Jones brought over to teach Kiwis about US tax liens and sell them the system used to invest, is one of the gurus presenting later this month at a seminar offered by Letfus's company, NZ Property Gurus Ltd.
In advertising for the event, Eckelman promises that those who attend will "learn how to acquire real estate for only 25% of the value of the property", which Letfus admitted was a direct reference to investing in US tax liens.
Letfus told the Sunday Star-Times his position had changed on tax liens. "We looked at it at the time [in March last year] and we couldn't find anybody doing well out of it," he said.
His earlier opposition had, he said, been partly based on his personal antipathy for Jones, as well as other factors such as exchange rate risk and what he saw as excessive costs.
But Letfus said his new view was based on a changed exchange rate position, as well as the tax lien education being sold at the seminar being delivered by Steve Goodey in New Zealand rather than out of the US.
"Because Steve's involved and people are making good money out of it, and the world has a totally different look to it, it is a good opportunity for some people."
Tax lien certificates are a product of US local authorities. When a household fails to pay local property taxes (the equivalent of our rates), the local authority may recover the debt by auctioning it off to investors. In return for paying the debt, investors buy the right to recover the money and levy penalty interest, sometimes as high as 25%. The tax defaulters are often struggling families hit hard by America's housing and jobs market crashes. The debt is entered as a lien against their homes, and should they not pay, the certificate holder can force the sale of the property.
In his March 2009 attack on US tax liens, Letfus agreed with other doubters that they were "high risk, money could be tied up for years, no guarantee of profitability, etc" going on to voice his concerns over the potential for hidden costs and investors finding the profits they end up with are "paper only equity, which may equate to zero in real dollars".
Not all critics from last year have been won over, however.
David Whitburn, the president of the Auckland Property Investors Association, was concerned about the high risks and costs of the tax lien investment systems being sold to Kiwis for thousands of dollars.
He lists 14 concerns on his website, including the costs of US accountancy services, difficulties enforcing liens and complying with US and New Zealand tax law. He also notes just how hard it is to buy the liens, which are being sold as a quick way to get rich.
Whitburn said some investors had told him of their experiences.
"Eight months later of genuine trying and they told me still no tax liens. Other investors trying every couple of days for three months have not been able to secure any deals either."
The unwitting, he said, could find themselves accidentally buying a lemon.
"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."
Whitburn added: "If it [tax lien investments] 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?"