PIP Group / PIP East / PIP West
I mentioned in a separate post over a year ago that I had bought some tax liens through PIP East and was hopeful on the prospect of obtaining a property that way. My experience was an example of "be careful what you wish for". But I wanted to do a new post about working with this company. Bottom line was that they did provide the services they claimed they would do related to obtaining tax liens and, if not redeemed, going through the foreclosure process to obtain the deed. The entire process took longer than I expected. It took about 15 months from initial purchase to obtaining the deeds on two of the five liens I purchased. I also expected more help with selling the properties once I got the deeds. That's part of what they said they would do, but isn't the main focus of their business. I am most familiar with their work with liens in Illinois since that is what I purchased.
I am not sure of the current business model for PIP but at the time I started working with them in mid-2013 they had two sets of customers for the tax lien deals they put together. The first group were people who wanted to buy a lien and collect the proceeds from penalties and interest for the first 24 to 30 months (less the fees that PIP charges for obtaining the liens). The second group are people who want to buy those liens at about the 24 to 30 month mark in hopes of being able to foreclose once the property goes past the 36 month limit without being redeemed. I was part of the second group.
PIP provided a long list of properties that were ready to switch hands from group 1 to group 2. It was up to me to review all the properties and select what I wanted to purchase. They did provide photos and a few sentences about the condition of the property. There are entire books and courses devoted to doing due diligence on buying a tax lien for possible foreclosure. My own efforts were pretty much limited to google street view and some basic info on the local county or city property records. Because of the fees charged by PIP and the fact that group 2 is buying out group 1 you have to be sure that the remaining penalties will at least cover the cost of the lien. This favors higher priced liens to make the numbers work.
I wound up buying five liens on properties in Illinois. Three of these redeemed at 1, 3 and 6 months after purchase with returns of 24, 0 and -9%. In total those three returned 6%. Not bad considering the main plan was to at least break even on any that redeemed.
Two of the properties moved forward to foreclosure. What I didn't realize when I started down this path was that there would be at least one to two more years worth of taxes still to pay before all was said and done. For one property I had to come up with another $16k to pay the additional back taxes and foreclosure fees. That would have been the right time for me to bail, but since I had $8k into it already and the house (I thought) was worth about $100k I pushed ahead. I figured even if I sold at 50% I would still double my money. My main contact at PIP was looking at it the same way. So I was hearing what I wanted to hear. I don't think they were being dishonest. I think they just didn't have the full detail on every area or neighborhood given the volume of business they do. This is where some new google street view photos of not just this home but the surrounding area would have shown me the number of boarded up homes in the area and a bit more research would have shown the foreclosures being sold at $10k or so. The folks at PIP had a couple of potential outlets including selling to their investors and selling bundles of homes to larger firms. Every month or so I spoke with my contact there to find out if any leads were popping up that might be willing to pay enough to at least cover what I had in this deal. I had other projects going on closer to home so I let this ride for quite a while (i.e. almost a year) before I realized that I was going to have to take action myself to unload the property. Eventually I contacted local real estate agents who confirmed the $7 to $10k price points in the area. One of them sent the deal out to her investors but no bites. To not drag this out too far .. bottom line is that I sold this via a craigslist ad for $8000. By that point I felt fortunate to find anyone who wanted this property. So I lost about $18k on that deal.
On the other foreclosure things turned out a bit better but I still wound up doing more to coordinate the sale than I had expected. One thing I didn't realize about this home is that it was in a town of only about 4000 people. I took action a bit sooner on this one, also listing on craigslist. Amazingly there was someone trying to find out what was going on with that particular house who googled the address and found my ad. I wound up selling to her with owner financing (after reading up quite a bit on the Dodd-Frank implications of that). In order to make that happen I had to arrange to replace the furnace and all the plumbing. Fortunately I was able to connect with a good contractor who could take care of things at a reasonable cost. For both of these deals I had to find a lawyer in Illinois to work with on the contracts and, for this home, the financing agreement. On this deal I had a total of about $21k into it and sold it for $28k with seller financing at 8%. In a few years I plan to sell the note so the final tally won't be known til then. Between the two houses I'll lose some money but not enough to make a huge dent in my overall investing plan.
Would I do this again? Probably not, but mainly because I would prefer to focus on deals in my local area that I can go see. As you can tell from my post, most of what I wrote had to do with my own decisions and actions and not as much about what PIP did or didn't do. If you are interested in working with them just make sure you are clear about their fees, try to estimate the total cost from start to finish and plan on the whole process taking a year or so. Compare that to whatever else you could be doing with your money and do your due diligence.