How to Earn a 13%-18% Average Annual Return in 2026 (Tax Lien Investing 101) | Ep. 1002

Episode Summary

Stephen Morel, founder of JurisDeed, breaks down the mechanics and misconceptions of tax lien investing, an asset class traditionally marketed as a passive shortcut to cheap real estate. In reality, tax lien investing is a high-complexity yield play where less than 1% of liens result in foreclosure, while 88% to 90% redeem through delinquent property owners paying back debts with accrued interest. The discussion highlights the shift toward a more standardized asset class following recent U.S. Supreme Court rulings that eliminated equity windfalls by affirming that investors are entitled only to their debt, costs, and interest—not excess property equity.

The episode details the structural barriers that have historically allowed institutional capital to acquire approximately 80% of delinquent tax liens. Morel outlines two critical phases of due diligence: pre-acquisition street-level property evaluation and post-acquisition legal/title notification compliance. He cautions investors against common operational pitfalls, such as bankruptcy stays, statute of limitations risks, and expensive legal representation. Finally, the conversation explores how modern legal-tech platforms are digitizing legal notices, title clearing, and post-auction liquidity to lower entry barriers, enabling individual real estate investors and business owners to earn average annual returns of 13% to 18%.

Key Takeaways

• Tax lien investing functions primarily as a fixed-income yield play yielding 13% to 18% annually rather than a property acquisition strategy, given that 88% to 90% of liens redeem and only 1% foreclose.
• U.S. Supreme Court rulings have established that tax lien holders are legally entitled only to the repayment of debt, interest, and costs, eliminating windfalls of surplus property equity.
• Effective due diligence requires a two-phase approach: pre-sale physical property and location analysis, followed by rigorous post-sale title research and legal notice compliance.
• Failure to complete required legal notifications on time can destroy portfolio yields, make liens legally unenforceable, or expose investors to statutory limits.
• Technology platforms are disrupting institutional dominance by automating legal workflows, normalizing state-by-state variations, and streamline title clearing for post-auction liquidity.

Key Topics Covered

• Tax lien investing mechanics vs. mortgage debt
• Redemption rates, interest returns, and foreclosure realities
• Impact of Supreme Court decisions on property equity and tax deeds
• Institutional market dominance and structural barriers to entry
• Pre-acquisition physical due diligence vs. post-acquisition legal due diligence
• State auction bidding structures (bidding up principal vs. bidding down interest)
• Bankruptcy delays, human factors, and workouts in tax lien foreclosures
• Legal-tech automation for title clearing, legal noticing, and investor liquidity

Episode Chapters

00:00 Intro
Kevin Bupp introduces the guest, Stephen Morel, and sets up the conversation around tax lien investing mechanics and myths.

00:47 How Tax Lien Investing Works
Stephen Morel explains how local governments sell delinquent property tax debts to private investors as real estate-backed liens.

08:32 How You Make Money
A breakdown of tax lien yield plays, nationwide redemption rates (88%-90%), and why tax liens rarely result in acquiring physical real estate.

12:36 Competing with Institutional Investors
An exploration of why institutional capital controls 80% of the tax lien market and the complex barriers that keep smaller investors out.

17:37 Making Double-Digit Returns
A discussion on realistic average annual returns (13%-18%) and recent Supreme Court rulings that eliminated equity grabs.

19:31 The 2 Phases of Due Diligence
The distinction between pre-acquisition property intelligence and post-acquisition legal/title notification compliance.

28:28 Tax Lien Case Study
A real-world case study detailing foreclosure delays, bankruptcy filings, title complications, and cash-for-keys resolutions.

34:24 The Tax Auction Process
An explanation of state-by-state auction mechanics, including overbidding principal, bidding down interest rates, and historical offline tactics.

39:28 What Is JurisDeed?
Stephen shares his post-Katrina story and how fixing title insurance issues on adjudicated properties led to founding JurisDeed.

46:29 How JurisDeed Works
Overview of how JurisDeed uses technology and a legal network to normalize nationwide tax lien workflows and post-auction liquidity.

49:48 Connect with Stephen!
Where to learn more about Stephen Morel, JurisDeed, and additional resources for tax lien education.

Full Transcript

[Transcript begins]

Stephen Morel: Does the mortgage industry want foreclosures?

Kevin Bupp: Absolutely not.

Stephen Morel: This is the worst case. They don’t want that. They want to be getting your interest payments every month. And as soon as it goes to foreclosure, they’re like, how can I get my money back? I don’t care if I take a loss. I’ll be getting this back in the hands of a borrower that can take interest again. And that’s the way the tax lien system was designed to work.

Kevin Bupp: Tax liens are often marketed as a passive way to earn double-digit returns backed by real estate. The late night infomercials obviously left out a lot of the details. My guest today describes them quite differently.

Stephen Morel: The most non-passive real estate investment.

Kevin Bupp: Stephen Morel has spent roughly 20 years inside that complexity as a real estate investor, an attorney, a title professional, and now the founder of a technology startup focused on the tax lien industry. Stephen, welcome to the show, my friend. It’s a pleasure to have you here with us today.

Stephen Morel: I’m excited to be here. Thanks for having me.

Kevin Bupp: Would love to maybe start off for someone who’s, again, they’ve heard the term, you know, tax lien investing, but they don’t really understand it. Don’t understand the mechanics of it, what it is. So maybe walk us through, if you would, from a high level, the whole process and how it works.

Stephen Morel: I’ve been doing this for about 20 years, so I have somehow found myself down this rabbit hole and have never turned back. So I’m happy to give you the high level. Property taxes is one of the number one ways that counties and local government collects revenue to operate, basic annual operating capital. And just the reality of life is not everyone pays their bills on time. But this particular bill is kind of problematic if it’s not paid on time because it’s part of the budget of operating capital. The county. A long, long time ago, the government realized that this was probably one of the most important things to prioritize in the collection world. And so they made it in the ability for local government to attract private investment to pay for anyone that was severely late on the real estate tax to take over the lien that is a tax. A real estate tax becomes a lien on property. The government holds it. And when you pay it, it goes away until the next year. But when you don’t pay it, it’s an unpaid bill and they need that money that year. So they offer these liens, these unpaid tax bills up to private investment so that they can get the cash immediately and just assign their right to collect that debt to a private investor.

And it’s very similar. I’m going to say this right now because it’ll help understand a lot of what tax liens are throughout the course of our discussion today. The analogy, the best way to analogize it is to mortgages. So most people are more familiar with mortgages, right? And you own the property, but you borrow and you secure the repayment of that debt by a legal paper against the property that the lender, if you don’t pay them, you know, they can foreclose on the house eventually, right? So tax liens are very similar, except that it starts out as a lien that’s in good standing, just like a mortgage. And if you don’t pay it by the deadline, kind of like paying up on your mortgage, then it becomes late, starts accruing additional interest and penalties and fees. And eventually the, what we would call the mortgage holder in this analogy is the local government, they’re like, hey, I can’t keep this any longer. I need the cash. Otherwise, I got to raise taxes on everybody else who is paying their taxes, or I got to cut our budget. You know, one of the two, and those are bad results. So I’m going to go ahead and sell this to a different investor, a private investor. So think about it, how when you first get a mortgage, you probably have that mortgage gets transferred to a different mortgage company, right? Like it’s certainly they service it over here. So that’s very similar.

So the government transfers it at something called a tax lien auction. So it’s a public auction. Typically, they’re selling just the debt, whatever’s owed plus interest that’s accrued. And so investors show up to pay what the tax debtor hasn’t yet paid, right? The late payment. And in exchange for that, they get the rights of the debt, of the creditor, which used to be the local government. Now it’s the private investor. Now, that comes with a bunch that then it gets into the rest of the investment, right? So now that happens every year, by the way, because every year there’s a new round of tax bills. So every year operates on its own cycle. So you can have the same property go into tax sale again next year and the year after or maybe one year and not the next two years, but then the next year, right? So every year works on its own cycle. What happens after you buy that tax lien from a high level, the state has laws. And so every state has its own laws that govern this. And typically across the board, there’s a waiting period. You can’t just go foreclose the next day. Okay. There’s a period of time to give the homeowner time to pay that back without any severe consequences like foreclosure. But during that time, it’s accruing interest. So it’s not a, it is still a, that’s part of what makes it an intractable investment for some is that it’s usually a very strong interest rate.

And now, again, all that varies state by state. The waiting period, how long that is. For example, Louisiana is three years. Mississippi is two years. Missouri is one year. It’s all over the board, right? But typically between one and three years is your average. And during that time, you’re mostly sitting back waiting. Redemptions is what’s called when the tax debtor pays it back after a tax sale. You got to send notifications out to everybody, and then they will pay it off. It’s just like paying your late payment, right? And then once that happens, the tax thing goes away. Usually the government is the one who is handling that process of redeeming, collecting from the tax debtor, and then paying the investor their money, right? So the principal they paid at the auction plus what’s accrued since then. So that’s how they realize the liquidity, liquidation of that investment. And it gets hairy is what happens if after that protected waiting period where the homeowner has the absolute right to repay, is what if they don’t? And that’s when it gets into where the investor has to use the legal system to then foreclose on their lien. That kind of follows, again, similar processes of mortgage foreclosures to seize and sell the property. Not to take the property necessarily, but to liquidate it to pay the lien off.

Kevin Bupp: Yeah, and not to go down a rabbit hole, but my guess would be that the average homeowner across the US probably doesn’t even realize that if they don’t pay their property taxes, that they actually have the risk of losing their home to foreclosure. I would think that there’s a large percentage that don’t even realize that’s the thing. But we don’t have to go down that rabbit hole. I’d be curious to know, Steve, and I’d be curious to know, obviously, once they get into trouble, they’re going to get notifications. They’re going to realize the severity of the issue and the situation that they’re in and understand that they do have – they’re at risk now. At some point in time, if they don’t get caught up, they will be at the risk of potentially losing their home to foreclosure. I’d be curious to know, what is the percentage that actually redeem, that get caught up and get back straight and narrow?

Stephen Morel: Yeah. The vast majority. So in fact, nationwide is somewhere between 88 to 90 percent. Regardless of the duration of the redemption period that that state employs, whether it’s one, two, three years, people end up taking the amount of time that they’re given. Right. So it’s typically between 88 to 90 percent across the board.

Kevin Bupp: You had mentioned, you referenced New Orleans where you’re at, that it’s a three-year span before you can pursue additional legal action if they haven’t yet caught up or redeemed, right? Is that your choice to pursue it at that point, or could you let it ride out for another year or two and keep letting things accrue?

Stephen Morel: You could. Now, most states also have a statute of limitations on the enforceability of that lien. So think about it. The government doesn’t want to allow to let things linger because a lot of times what happens if it’s never paid back is somebody is maybe dead or abandoned it. And then now you have a property that could fall out of commerce, get blighted or abandoned. And it could have a lot of other impacts that are negative on the community, just like originally the lack of the payment was negative. Now it’s like this abandoned property. And they want the investor to understand that when you get into this investment, for the most sake, you’re going to get paid back, right? But if it doesn’t, you’ve got to understand that you have somewhat of a responsibility or a consequence if you don’t take action. You might lose out on your enforceability, and then you just have a piece of paper in your hand.

Kevin Bupp: Got it. That makes sense. So can I make the generalized assumption that you’re really hoping just to get repaid along with all the interest that’s owed to you rather than that of maybe owning the property? Is that with your investor hat on, is that your preference?

Stephen Morel: This whole investment industry has evolved significantly. And really, a lot of it has evolved over the last, I would say, three, four years, even. A couple of big Supreme Court cases have shaped that. For a long, long time, this was seen as a way to grab property for cheap by late night infomercials, gurus and books and that kind of stuff. It’s like, buy cheap, pay the tax and own the property. In reality, it’s one of the worst ways to own property, to become the owner, even before these big Supreme Court cases I’m talking about. What the Supreme Court decisions, without getting into a bunch of legal jargon, effectively did is said, this is not a property grab. This is a debt that is secured by property, and you’re entitled to get what you’re owed back and nothing more. And you’re entitled to be made whole with your interest and costs and all that kind of stuff, but you can’t just seize the property. And what if it has $100,000 of equity in it? Is that just a windfall for you? And a lot of times it used to be before these cases came out. It was just like, woohoo. I got away with this one. And it’s like, wait a minute, that’s somebody’s equity that they lost because they didn’t pay a $1,000 tax bill.

Kevin Bupp: Yeah, and you had to sell their house to get your $1,000 back. And that’s a consequence in and of itself. You’ve been made whole, you’ve made interest, all this kind of stuff, but you don’t just also get their equity in the house.

Stephen Morel: And if you stop and think about it, what a great investment that would be, right? If you could have a case of those grand slams. But then you stop and think about it as like, that’s not really fair. And when that went up to the Supreme Court, it was a 9-0 decision. It was like the perfect fact scenario. Little old lady in a house, you know, lost her 100,000 of equity for $1,000 tax bills.

Kevin Bupp: Exactly what I’m saying.

Stephen Morel: And they’re like, how does this never come up before? And they’re like, oh, yeah, we’re going to go ahead and put an end to that. So what that did, though, was really force the states that were employing different mechanisms to sell tax liens. Some actually sell what they call tax deeds, and that’s probably caused a lot of confusion among investors, too. It’s like, wait, what’s the difference between a tax deed and a tax lien? And the tax deed is in a state that employs a system of keeping the delinquent taxes on their books longer and collecting it and trying to collect it themselves. And then after doing all the due diligence themselves, rather than passing it on to an investor, like sending out notifications, waiting out that three years, they do it themselves and then sell the property after having done all that stuff. Are they selling the deed to the property by operation of law? So they’re skipping over the whole lien process altogether. And then that’s a whole set of difficulties because you’re getting a quit claim of something without insurance, without any warranties, all that stuff.

The way the industry is shaped because of just time and these cases and everything – it’s a money. It’s a yield play, right? This is a margin. This is, I’m going to buy this. There’s a percentage. There’s a 90% chance you’ll get redeemed. Here’s the interest rate on your principal. It’s economy to scale. You buy it. You deploy this much into the marketplace, and you’re going to get this much yielded. And that’s the play. If you happen to end up not getting paid back, here are these legal mechanisms, just like the mortgage industry has, to like, does the mortgage industry want foreclosures? Absolutely not. This is the worst case. Like, they don’t want that. They want to be getting your interest payments every month, right? And as soon as it goes to foreclosure, they’re like, how can I get my money back? I don’t care if I’ve taken a loss. I’m better off doing that than waiting out three years in court and paying legal fees. I’ll be getting this back in the hands of a borrower that can pay the interest again. Right. And that’s the way the tax lien system was designed to work. And it wasn’t until very recently that these cases kind of help push all the states into a more of a homogenous asset class, which is a yield play.

Kevin Bupp: Got it. No, that makes a ton of sense. I’d be curious to know about some of the other aspects of the industry that have changed over, you’ll call it, the last decade. My perception is that maybe 10 years ago, a lot of investors that were in the tax lien investing game were just individual investors like you and I. But what I’ve gathered from recent headlines over probably the last five, six years is that there’s quite a bit of institutional capital also finding its way into the space. So how has that changed the industry, if at all?

Stephen Morel: Well, it’s actually been that way for a long time, as far as, longer before, way before I got into it. So I would say that data shows that about 80% of all delinquent tax liens are acquired by institutional investors.

Kevin Bupp: Wow.

Stephen Morel: Yeah, so it’s a very, very top-heavy. And that’s really where, like, where, you know, one of the problems that I was always trying to solve was that the ordinary investor guy, right, is trying to be like, hey, it’s a pretty good investment. Yeah, where do we get the edge? I can’t compete against Bear Stearns. I can’t like Wells Fargo. Come on, that’s not fair. And it’s because they have built these extravagant systems with very well-funded companies to deal with the extreme amount of complexity, complication, legal jargon, the differences between different states laws and their changing and all the different things. You got different vendors in every state. They got different times a year of the taxes. It’s so complicated. It’s like, I don’t even want to worry about it, right?

Or you end up going to one tax sale in your local county and buy a couple of tax liens and wondering why you didn’t make the money that was promised by you by the late night guru guy, right? It’s like, you’re gonna have to put probably, you know, at least six figures, maybe seven figures into the marketplace to achieve the kind of returns that that the banks are making, right? And they have the teams to deploy. They have an attorney in every state. They have a team of people that are ready to go. They understand the complexities they’ve been doing for years. So all of these things, these complexities, have created a moat pushing everyone else that doesn’t have those resources or that know-how out of the industry. Artificially, though, there’s nothing legally preventing you or I or anyone else from buying every tax lien there is in America. But it’s very, very difficult. And that’s one of the things I kept doing in private practice was… like, okay, one person has a tax lien. Let me help you, right? Get, like, navigate the way through this thing. And I’m like, wait a minute. This is, like, a systematic problem, you know? And so it became kind of a bigger plight or a mission for me personally.

Kevin Bupp: Yeah, so then what is the secret sauce and how does an individual like myself or the similar folks that are tuning in here, they want to get in and how can they even start to be competitive and get into this game if all the big hedge funds are out there and they’re dominating the industry?

Stephen Morel: It’s not that the industry, that the institutions are all just going to fold up and stop making 15%, 18% year over year with this secret sauce they have, right? And so – but what they didn’t expect is – and I think they’re still kind of coming to grips with – is – technology has been an amazing tool to help break down artificial barriers of industries. So the best analogy I have is Robinhood. So how difficult, how gated was stock investing in crypto and that kind of thing before Robinhood came along? Where do you go? Where does the average guy go? How does it even work? And then you have this app where you just press a button and you’re in. And it’s like, oh, wow, that’s pretty easy. Well, it’s actually pretty complicated, but they figured out all the complicated part to make it easy for you. And so that’s exactly what I sought out to do eventually with my company was to bring that same level of simplicity to the marketplace to allow more access to the investment and to kind of balance the scales a little bit.

Now, are the institutional guys shaking in their boots because I came around and said, oh, I’m going to let Joe and Kevin come along? No, they’re not. But they also haven’t – it hasn’t really sunk in yet. And did all the big – did Fidelity and all the chase, I think, did they stop – you know, because Robinhood came around. It’s like, oh, it didn’t. But it’s a huge market, right? And so it just allows for a more accessible avenue into it. So, but like, to answer your question, there really isn’t a great answer. And that became an opportunity for a business such as ours. But, you know, it became an opportunity for, this is an unmet problem, right? There is no good way. There is no good way. You can go do it, but you’re not going to get those results. And if you do, it’s not a passive investment. It is the most non-passive passive investment in the passive investments.

Kevin Bupp: I’m excited to break that piece down because I think up until this point, most probably think it really is just a passive investment. So we definitely want to dive into those mechanics of it. But maybe let’s start with the returns. I think that’s probably something that I’m wondering, but also a lot of folks listening here are probably wondering just – and I know it varies from state to state, probably even county to county. But what kind of returns are realistically available today? Give me the range, if you would.

Stephen Morel: Yeah, the average is between 13% and 18% year over year. Now, that is really oversimplified, right? But that’s what you asked for. So that’s what you get. But it is state by state. So states set their own interest rates. And obviously, you’re going to have anomalies where you buy, like I was saying, you buy two. And you’re not going to necessarily get the averages that you get when you buy 200. There’s other factors that influence those returns. But if you look at all tax liens that are bought, of course, most of them are by institutional investors. That’s the sort of year over year. Now, it’s also in flux right now because that windfall used to be in play. And that wasn’t that many years ago. So some of the – where you might end up owning the property and getting – So 10 percent of them, they would own the property and have a big equity windfall. Not necessarily 10 percent. So think about this. The initial question was on the redemption. Like how many will redeem during that redemption period?

Kevin Bupp: Yeah.

Stephen Morel: The second part of that is, let me give you the end answer first. About 1% will end up foreclosing. 1%. So what happens the other nine is workouts. What happens when somebody is in foreclosure and they’re walking to the court to go file the paperwork? Last minute saves, right? Or it just, that the investor just walks away from. You know, like what if something happens where it doesn’t actually go all the way through? And about 1%, is will actually be gavel dropped foreclosed on.

Kevin Bupp: Got it. No, that makes sense. Let’s talk to me about the due diligence process. I mean, what are you looking into to determine, I guess, whether or not it’s, you know, you even have an interest in bidding on this particular tax lien. Again, God forbid, you know, you’re the 1% you end up with this property. Do we need to do due diligence on the underlying piece of real estate that’s liens attached to? Help me, help walk me through, you know, that process and what you look for.

Stephen Morel: Yeah, so there’s two phases of due diligence. There’s the pre-acquisition and post-acquisition. They’re very different sets of due diligence. And so I don’t want to get them – a lot of people conflate them and think they got – they did their drive-bys, and then they’re good, right? And then they’re like, wait a minute, what’s legal noticing? What is that? I got to do that? And then there’s the other way around. The first part is more traditional due diligence that most real estate investors probably have already encountered or done in other vehicles where you got to scout the property. You’re going to scout this thing. And to bring it back into the tax lien context, even though there’s a very slim chance that you’re going to put the property, the physical conditions of the property have a big impact on which ones pay back. And now we have a lot more data today and access to that data and understanding around it to make that story much more credible and much more reliable. But it used to be where you just followed the trends, you could see that the higher the tax bill, the more likely it is going to redeem. That makes sense, right? It’s more to stand to lose more. Maybe it’s a nicer property. More people might, more likelihood that someone’s going to try to save it, right?

Then there’s the lower end ones, you know, that are like, maybe this burned down. Maybe it was bulldozed by the county. Maybe, you know, just not a great area. There’s probably a great chance that you’re going to end up with that property because nobody wants to save it. So you’ve got to look at certain things like that. Plus, if it’s in an up-and-coming area or if it’s in a diminishing area. So a lot of these things that you would learn from good street-level due diligence are going to impact tax lien investing. And where you’re not just taking what the auction gives you and hope it works out, you can actually structure your portfolio with intention. I want the mid-range. I want the cheapest ones. I don’t want the most expensive ones. I want the mid range. Right. And, or I’ll only want them in the vacant land. I only want the ones in urban areas. Like you can really devise a strategy behind this, but it all surrounds around due diligence and getting that property intelligence early.

And now, you know, are you scouting every property out there? No. Of course, now you’ve got to, what’s for sale this year? And it’s county by county. So who has the county list? And so conducting due diligence could also involve getting what’s for sale. This is not too dissimilar from like getting the foreclosure list, right? And going to the, or doing pre-foreclosure, that kind of stuff. So, and there’s plenty of companies out there that do this. And there’s places to get it. You don’t have to go county to county anymore. But once you’ve done that, and you basically are like, you’re preparing to go to the auction, right? You’re saying, this is what’s for sale at Johnson County, whatever. And, you know, as of now, as they pay, as late payments get collected, some might just drop off the list, right? But you go to the auction, you’re like, okay, and I’m going to compete with other people. I’m going to try to win these. That pre-sale due diligence helps you get an intentional plan together of what you want to buy and what you ultimately can buy.

And secondly, is once you own it, then now you’re in that second half of due diligence, which is more, that’s where I come out of, which is the legal due diligence. So legal and title, typically you don’t think about that when you are just, if you’re investing in something that you don’t have to necessarily be the one to satisfy the legal compliance component. Somebody else is doing that, right? Well, here, most of the times, or a lot of times, you are the one, the investor has to take that responsibility on. Or it’s the government, whoever does it is going to make or break whether you have a valid lien. So do you want to rest on the fact that you’re hoping that Sheriff Williams is going to send out the right notices? Or are you going to do it yourself? So a lot of times some people do it just because it is the better – it’s a protection, right, for your investment. But most states do put some imposition on the investor to take certain efforts. What does that look like? Title research, identifying who has an interest in the property, sending them required legal notices by a certain day, preserving the evidence that you sent it. What happened? Did it get delivered and all this stuff? Notification is huge because you’re talking about eventually maybe taking someone’s property, which pops into due process, constitutional stuff. So you have to show that all this stuff was done correctly to have to be able to exercise a valid lien if you do, down the road, right?

So that’s a whole different level of due diligence. And that gets very complicated because those people aren’t necessarily come out of the gate knowing how to do that. And then they end up turning to typically an attorney, right? And attorneys are very expensive. And so, look, I’m the most anti-attorney attorney.

Kevin Bupp: I was going to say, I’m watching my profits go out the door really quickly, right?

Stephen Morel: You have to gauge attorney after the fact and… it was in when I got like, I don’t practice anymore, but I believe in what I did, it was the toughest sell to go tell, like, come on, you really need to do this. Trust me. If you have to do it, I was like, yeah, but it’s going to cost me a thousand bucks. I know, but you just got to do it. Like, yeah, I’m a pass. Thank you. I’m like, it was, that was always a tough sell until we, you know, we were able to have a better way to offer the product, right. Which is more software based rather than, than, than Steven’s time. Now we can do a lot more, you know, at a scalable price. But yeah, no, it’s a real thing. And that’s what most of the courses and the gurus are pushing. That’s where they leave you off. They tell you all the stuff about how to do it, about the investment, about the nice returns, about the different states and all this kind of stuff. And you’re like, okay, what happens once I own the lien? Like, go talk to an intern, right? You just go talk to an intern. That’s what you do.

Kevin Bupp: Curious, curious on the bidding process. Is it simply the highest bidder? Is that how that works?

Stephen Morel: Sort of, kind of. So another, I keep coming up with all these nuances, but it’s real. And again, it kind of goes back to that, that like body of complicated, of complexity, right? Which is what has gated so many people from being access to the investment. Yeah. High bidder. So it depends upon how, what system that state employs to reconcile competing bids. What does that mean? Well, the most common, there’s only a handful of options. The most common way is you can bid up the price. So let’s say it’s $1,000 delinquency. And you say, who wants to pay $1,000 for this? And all the hands go up, right? Who will pay $1,001 for this $1,000 delinquency? Now, you’re only going to get back $1,000 as a principal, but you’re going to pay $1 more to get that, to buy the debt, right? So you can see where that goes. That’s one system.

The other one is, okay, we have 12% interest per annum on our tax things here in Louisiana. Who will take 11%? I’ll take 10. I’ll take nine. Right. And that’s another system is bidding down the rate of return, the interest that you’ll get. And then another nuance is on the overbid when you’re bidding up the price is, well, what happens if that redeems who gets the overbid back? Right. Because if you get it back and you have you have access to those resources, that’s a pretty that’s a pretty safe play. But if you don’t get it back, that’s like, whoa, hang on. Maybe I should think twice about bidding up now, right? And there are literally different states, only a handful, that keep the overbid and just tell the investors to screw off. I mean, you know, like it’s just different. It’s 50 states, and they all have the right to do it however they want, and that’s part of the complexity.

Kevin Bupp: Is commercial real estate handled the same way as residential and as one more desirable? Is there one that’s more desirable for you or does it not make a difference from an investment standpoint?

Stephen Morel: If you have the capital, right? If you have deeper pockets, commercial is a great focus. Now, there are far fewer tax liens on commercial property just because there are far fewer commercial properties than residential. But if you think about it, again, it’s an interest play, right? The investment itself and the interest rate is fixed, whether it’s by law or because that’s your winning bid, then the only variable is how much principal you invested, right? So if you buy a more expensive lien, you’re going to make more money, right? And there’s less competition because fewer people can afford, so you’re more likely to get it if you can afford it. So it’s a pretty good strategy to play. I know some of our clients that have those deeper pockets, they’ll target those right away just to kind of get them up, sweep them up. And then the rest of it’s just play money, right? Just the residential stuff, which is where more people can bid is going to be more competitive. And so it’s going to be hard to win those.

Kevin Bupp: Gotcha. No, that makes sense. You know, Steve, I love real-world case studies. And so I would love if you wouldn’t mind, I’m sure you’ve got a number of stories that come to mind, but you know, a deal that looked great on paper, but ultimately came much harder than expected, right? Had a lot of unanticipated complexities after the fact. Maybe share, you know, a little bit of the details of that particular deal and what were the additional unknown complexities that came to the table and what was the final outcome?

Stephen Morel: So when I first really got into servicing the industry, it was a college buddy of mine who had, he and his dad had sold their company. He had a boatload of money and was what wanted to do investing. And I was like, hey, that sounds great. Let’s do it. I’ll be your attorney. You be the investor, right? You’ve seen that story play out. And so we buy a bunch of secondary market tax liens. That’s a whole different story. It’s a whole different topic. But like basically, it’s kind of like these assignments of mortgages, right? It’s something that’s far, far down the road and people are the institutional guys are just unloading the stuff, the free of capital. Yeah. So he buys this portfolio of unredeemed but post-redemptive period, so it’s in that foreclosure-eligible period, liens. And one of them, to get to the story part, he had basically – when you buy at that stage – your game is to foreclose, right? That’s why you got, you do that getting into it, right? That was the liquidation strategy, period. But when you do that, obviously you have to serve people, notify them, you got to shake the trees, you can’t do it under the darkness of night. So we do good work, we track somebody down. And it was the daughter of this older woman who had passed away. They don’t, you know, as a poor family, they didn’t open up probate. So they didn’t have anything of record saying that this happened. Right. So it was like, and the person living there was the legal heir. So the deceased mother living in the house that, that now legally is hers, but they never did it. They never did all the paperwork. So never bought the property, never qualified for the financially owning a property. It just happened to be there, right. Legally. And, but what happens is the tax bill shows up. They’re like, I can’t pay that. You know, it’s like, then one day, my client shows up and says, we’re foreclosing on your house. Congratulations. Like, and it’s like, wow, okay. You don’t stop to think about the stories behind how this got to that point when you’re just getting into the, when you’re reading a book, right? And you’re getting into the investment and you’re seeing the numbers on a pro forma. You’re just thinking about numbers. But this is like humans. This is people, right? And there’s a human side of this. And so that’s a larger issue. But the second thing is the specific thing of here, this lady also had other financial problems and midway through foreclosure filed for bankruptcy. That stops everything, as you probably think, even taxes. Now, it didn’t wipe it out, but it stopped it. And it was one of those bankruptcies where it was like, somebody told her, just go file bankruptcy because it’ll give you more time, right? Not because you’re not going to see this thing through. And then you could do that a couple of times before they’d kick you out and said you can’t play anymore. And so that happened. And now all this time, and this happened to be, I don’t know why, but it was a bigger lien. The taxes, probably because it was multiple years had built up. They sold it all together. The tax sale. So he had a lot of money invested in this thing. And he was paying me too. I’m not just his friend. He’s of his lawyers. He’s paying me too. He’s got this basis built up on this one house. And this is now dragging on for years. This is supposed to be, you know, a nine to 18 month, you know, maturation to liquidity, right? So he’s thinking like, that’s the average. We’re going on like three years here and like, you know, failed bankruptcies and everything. He’s like, where does this end? And then this lady starts calling him, like got his number somehow, started calling him saying like, you’re taking my family’s home. And like, and it was like, I didn’t like get into the investment thinking all this, right? Like, like, he didn’t tell me all this was going to happen. I’m like, dude, I didn’t give him your phone number. Trust me. Like, I don’t know how that happened. And like, he’s like, get me out of this thing. Right. And so eventually we ended up working out a deal with her. We’re like, look, if it’s not, you could go into court and you could find, you know, hire an attorney. You’re probably, you may even be able to like tie it up for years to come and everything’s not stuff. But like, to what end? Guess every year a new tax bill is coming out. Like, this is three years of taxes put together, but three years have built up since we came along. So what’s the end of the story? And eventually we ended up like working out a deal with her to like a cash for keys kind of a thing where she actually voluntarily sold the house. The bankruptcy never held water. That was dismissed. But – my client and myself being, you know, just have a decent soul, I guess. Like, we’re like, okay, like, how about we find out what you can afford, we help get you over there. We can, we’ll pay your first month’s rent, your moving fees and everything. Get all that taken care of. There was so much equity, like, there was so much money. And this is when equity was still on the table, by the way. So the whole thing worked out, but it was a pretty traumatic experience to, like, to be… where a little bit of naivety, you know, like you get an investment thinking like, hey, I’m just going to play the numbers, right? And then all of a sudden you’re getting a call from a lady who says you’re ruining her life. What a drain on resources and emotions. There’s a lot there.

Kevin Bupp: Yeah. Wow. Okay. Well, it still sounds like it ended up on the up and up and everybody walked away with what they hopefully wanted. Maybe didn’t anticipate all the challenges that were going to come down the pike over a couple of years. Certain realities of life, right?

Stephen Morel: It’s the best case scenario for everybody, I think is what happened.

Kevin Bupp: Yeah, so I guess we’d love to learn a little bit more about Juris Deed. And so I guess maybe I’ll prompt it this way. For anyone that’s interested in this niche that would want to maybe explore a little deeper and potentially start investing in tax liens, where do they start? Where do they begin? And ultimately, how does your software, your company, how does that help them get rolling?

Stephen Morel: Yeah, thank you for that. So the first thing, it depends upon how much of it you already know, right? If you’re just getting started, you know, literally just heard this podcast or you heard, read some article about it, is to really dive into the education side of it to know, understand as much as you can about it. And a lot of the stuff is free, right? We put out tons of free content all the time. And there’s lots of others that do as well, but you can really learn a lot without spending a lot of money. Get a good feeling for what you’re getting into and what this is all about. If you’re going at it alone or maybe with one other person, understand that there are, this goes back to that thing I mentioned earlier about how non-passive this investment can be. And like, are you ready for that? Like, do you have a, is you going to be the one doing that work if you don’t have someone to dish it out to or you’re ready to pay someone to do it? So kind of understand like what the game is, right?

Then once you do that, then like another nuance that is fairly unique to tax sales are where do I, let’s say, hey, I got the concept, I’m good, right? I want to do it. Is, okay, am I going to my local county? Am I going to only my state? Can I invest in other states? Like, how do I do that? Is in which states better, you know? And so there’s a lot, another layer of education, if you will, to understand, like, how do and the ability to invest across state lines, of course, using the internet, et cetera, is way more possible today than it ever was before, where it really was a very much of a geographically local type of investment. Most investors at TaxSale lived within a 100-mile radius of that county, of that courthouse. And institutional investors would literally deploy physical teams during TaxSale season to certain areas, put them up in hotels. Yeah. And they would travel from county to county and go hit up sales. Some would even do it as a summer job to the local colleges would hire. So think about this as another funny tidbit is – how do you say who wins the auction when it’s offline auctions? It’s in-person auctions. You got the sheriff in Louisiana and several states, the sheriffs. The civil, they have a civil department. Sometimes it’s not tax collector, but they have their hell of these auctions in the courthouse, right? Like a bunch of people show up. You got these guys who are up there with like, you know, like they got better things to do, but they’re people who are, okay, who’s next lot, right? This one is $1,000, who wants it? And you have like all these hands up at once. And how arbitrary is that to say who won? Well, the institutional investors figured out that since most of these are men who are auctioning off, to go to the local colleges and get the prettiest looking girls to sit right in the front. And those who raised their hands, they’re all employed by the institutional guys. Like, they’re like, this looks like sorority row here. And they actually are working for institutional investors.

Kevin Bupp: No, that’s a, is that real? Come on.

Stephen Morel: Oh, honest to God. Honest to God. Like, it doesn’t happen anymore because most auctions are online. But I’m telling you that I worked for, I represented institutional investors that actually did that, not published in their playbooks, right? This is exactly what they did. And it was very effective.

Kevin Bupp: I bet. Yeah. I guess kudos to them. I feel like that’s… Very innovative, right?

Stephen Morel: So, anyway, it is… The point of that side story, as funny as it is, is like, where am I going? Where am I deploying this capital, right? So… Nowadays, there are places where you can invest across state lines. You can register to bid. Most states don’t have a restriction on where you are located as long as you register like an LLC in that state, right? So it’s not a big deal. That’s layer number two is, okay, now I know all about what I got to do. I know how much money I have to invest. I know where I want to invest. I know where I need to do it. I got to sign for the auction company and go ready to bid, right? And then you win. And then it’s like, okay, now what? And this is, again, where most of the current… educational resources or classes and courses kind of leave you hanging. It’s right about now, right about that stage of the life cycle of the asset, where like, go talk to an intern, right? It got you to that point where you own the lien, but then the real hard part starts there. Not for the ones, obviously, where you sit back and just get, and just collect a redemption check. You lucked out. But it only takes a one or two that you missed the noticing period on to derail your entire returns of your portfolio that year. Where Jurisdede came in, our story started post-Katrina, Hurricane Katrina, New Orleans. I’ve been here my whole life. And my house flooded. I was a young attorney and was just hated every day of practicing law. I couldn’t stand it. And I came back two weeks later to my house. I was in a, actually had to get to my house on a boat two weeks later.

Kevin Bupp: Oh my gosh. Wow.

Stephen Morel: And I had a little office in my, in my down, I had a little split level townhouse. So I like a moored my boat to the, this is nasty water, by the way. This is, this is early September in New Orleans with no electricity. It’s hot. It’s muggy. It’s stinky. It’s disgusting. If you’ve ever gone hunting, you go out, you have these waist, I had these like chest high wagers on. I had a gas mask on from the army. I had the whole thing. I looked like I was part of the scene from ET at the end of the hazmat suits. And so I’m walking through this place. nasty water in my downstairs. I had a little office in there and I had a bookcase that it looked like Jurassic Park. I mean, there were so many things growing on the walls and everything. I was like, how is this even possible? This is like a science lab. And all my books had fallen in the water because the wood got warped and it was just like falling in the water. It was my Black’s Law Dictionary, like the rite of passage when you get into law school. It’s like, here, son, here’s a Black’s Law Dictionary. Good luck to you. And it was like floating upside down with spine not facing saying Black’s Law Dictionary floating in this water. I’m like, yeah, that’s a sign. I’m done. I’m done. I was like, that’s the last time I’m there. Practice law.

Like, well, that’s not exactly true. But what I had to do after that was fix my house up. And so I was in the military. I had USAA, which was fantastic. Everybody’s fighting their insurance companies over, was it caused by wind or flood? And USAA was like, here’s a check, sir. And I’m like, sweet. And so I did, I’d never done housework before. Like I just did grew up. I just wasn’t what I did. And so I had to learn what was, you know, how to renovate a house. I fell in love with the process. I actually got to see the tangible evolution of this, what was awful to certain something that’s nice. And it was my, I watched it happen. I helped do it. And I met all these other people in the industry. So I just fell in love with real estate. I was like, by Christmas that year, I was back in my house. And that was super fast after that devastation.

And I remember driving out of my neighborhood right around that time. It’s daytime. And it just hit me that like 99% of the rest of the city still looked like the hurricane happened yesterday. It was still, I was like one of the few that got back. And I was like, oh my God, like I just hit me, just sunk in. I was like, I got, it was a calling. I was like, I got to do something. This is my hometown and I’m not planning on moving. And so I’m like, hey, I got this law degree. I love real estate. And it just, the rest is history. It kind of fell down that road. It wasn’t about a few years later that somebody walked in my, I was trying to start a title company. I was like, okay, I got to put food on the table. I got to start doing something. So I started doing a title company business and started flipping houses and all this stuff. I was like, I couldn’t get enough of real estate.

And this realtor walked in and was like, hey, dude, so-and-so told me you were the guy I come talk to. He was like, but I worked for this company out of town and they got all these tax deeds properties and they can’t move them. They’ve got hundreds of them. They can’t move them. They can’t get title insurance on them. Nobody wants to buy them. Can you help? Like my whole job is selling these properties. I can’t sell them. I’m like, yeah, sure. I know what tap sales are. I’m like, you know, like looking at the book, like, yeah. And that’s like, he had so much business. And I found a way to work with my underwriter to get him insured and all this kind of stuff. And eventually rolled out a program in 2015 for the city of New Orleans to sell all their old what they call tax sale, adjudicated property. So these are the ones, if you imagine like every county in America has a certain amount of tax, of delinquent tax liens for sale every year, right? That doesn’t mean that investors are actually going to want to buy all of them. Something that’s just going to pass.

Well, what happens to those? It’s uncollected debt still sitting with the collector, right? And so what happens is there’s laws that govern that too. The collector has to wait a few years, and then they can try to put the deed up for property, kind of like the tax deed auction I was saying before. So, but these are the bottom of the barrel. These are the worst, the worst. Even the investors passed up on these, right? Can’t give them away, right? No, and there’s never been a legal mechanism to make that a desirable investment for anybody. So decades have gone by and the swollen surpluses of these adjudicated properties and it’s statewide. And then what I found out was that every state has these, it has called different things. And you couldn’t touch up a 10-foot pole. The solution, my hypothesis was that if I can get clear title on these, just – I know you think it’s a fool’s errand. Just stop working with me here. If I can get title insurance on these, people will want to buy them. Because all of a sudden, the only reason, well, not the only reason, but for a lot of them, the only reason was I can’t do anything with it. Right? I can’t flip it. I can’t get a bank loan. You can’t get finances if you can’get title insurance. And no one wants to buy it from you. So once you fix that, all of a sudden you create a marketplace. It was a fear. And it freaking worked.

Like gangbusters. So I created this whole program, this underwriting program, the title insurance product, registered with the Department of Insurance, the whole thing. And it was just me in an office doing this. It’s just how my brain works. And I was like, I got no way to roll this out to anybody. But the whole thing existed on paper. And so I had friends of mine who owned a software company who post-Katrina actually built a software company to help the tax collector do the annual tax sale, the things we’ve been talking about already. But this is the annual sailing. They created an… They were the first online auction in the country. I was like, I know those guys. This is the properties that didn’t sell at their tax sale. That they did… Like, we should work together. We should do this. And like, sure enough, that was a perfect… It was a match made in heaven. And we rolled this whole thing out and it was a smashing success. I mean, we’ve… That was… That was 10 years ago, and the program still operates statewide. I mean, tens of thousands of properties have been reinsured through the program. Families living in them now that would have never been touched. I mean, over $100 million in revenue. It was fantastic. It put me on the map.

Kevin Bupp: Yeah, that’s great.

Stephen Morel: I was speaking at conferences on a national scene, stuff like that. Like, okay, now I wasn’t an owner of that company. I was like, okay, I’m glad it’s working. I want to go build my own thing now. So… That’s really where I started Jurisdeed, which was to bring this, the entire, this crazy complex system that is amazing. If you think about it, what it means to the county, what it means to the community, every individual property can really hurt or help that your neighborhood. And how incredible that investment is if you’re good at it. But nobody can touch it except for these handful of elite institutional investors. And I just set out on a path to, to break those barriers down and make it accessible to everybody.

Kevin Bupp: No, that’s amazing. What a great story. I mean, doing, you know, doing financially well by doing socially good. I love that. That’s a beautiful thing. And so as far as jurisdiction, I guess, you know, you kind of gave some action steps there. There was a lot to unpack with what you just shared, but for someone that wants to learn more, maybe go out, there’s a ton of free resources. There’s lots of podcasts. There’s lots of information. That they can just learn the basic high level understanding of tax lien investing. And then at that point in time, maybe come visit your site, learn a little bit more about your service, your tool, your software that you offer and how that might be able to benefit them and maybe systematize the process. Is that essentially what you’re doing with Jurisdeed is creating an efficient system for them to acquire these in practically any county or state across the country?

Stephen Morel: Yeah, the system is designed to be nationwide. We’re obviously starting in our home state just because of our inroads and familiarity here. But the system, it’s no different. The differences are part of the complexity. We have that behind the scenes. We’ve normalized the whole thing. So if you’re an investor, our target audience right now, now we are through and through a tech startup, right? So at this point, we are building software that’s merging with legal requirements that has intelligence and accuracy as cornerstones, which is why it’s so difficult to build this, even with AI. AI is not helping with understanding what the laws are and what you have to do to comply with it. It’s getting the whole thing together and making it where anybody can just do it and just put the money in and just watch the show and make the final calls, right? Say yes, no, high, low, give me, take, like.

And effectively, it’s what you do, what most people do with a 401k. Right? You can log into a Fidelity account. You see that the numbers are going this way or this way. You can say high, low. You can say stop, liquidate, whatever. But you don’t have to be a day trader or a stock trader to know how that has, for that to work. Somebody else has that done behind the scenes. And that’s kind of what we’re building. And the fact that the industry has shifted to more of a homogenous single asset class because of these recent cases and laws, it has made it more popular. It makes more sense to do it now, right? Whereas before it was like 50 different systems. Like what are you gonna do with 50 different software programs? You know, so now it’s like a nationwide homogenous, it’s tax notes. And yeah, there’s a few outliers. Yeah, not everybody’s gotten on board yet, but for the most part, it’s, this is the system. It’s a delinquency on property. County needs the money. You put the money up. You get the lien. You got to do stuff. We do that stuff for you. You got to get the money back. We help you get the money back.

If it gets that far, we have a legal network. So what we do is we have our own law, a separate law firm in Louisiana because we’re licensed to practice there. But for every other state, removing that part of the problem from you as well, unless you have your dead set on having your own attorney, we have all of it taken care of for you. Kind of like, you know, legal zoo, rocket lawyer, right? You show up with a problem, they match you with an attorney who’s qualified to do that work in that jurisdiction.

Kevin Bupp: Beautiful.

Stephen Morel: And so we have all of it, all the way to liquidity. So all the way to the reason why you got into this was to get that check back that was more than you put in.

Kevin Bupp: That’s right.

Stephen Morel: And nobody else is partnering with you nationwide to make that a reality except for what we’re building.

Kevin Bupp: No, that’s a beautiful thing. I love it, man. Great conversation, great intel. And we’ll be sure to put that in the show notes. So Steven, I really appreciate you coming on here, my friend, and just, you know, pulling back the curtain on an asset class that I think most investors, including myself, know, you know, very little about. And if you understand, I mean, you just shared even some recent case law that that’s, you know, where, where changes have happened in a big way over the last couple of years within the industry. So very insightful, I guess, for those that, that want to learn more about you and getting your work and, and you’ll connect with you after the fact, where’s the best place for them to do that? Is it juristeed.com?

Stephen Morel: It is. So one of several channels, our website, our, we’re on LinkedIn. We posting two, three times a week with a free, again, free content. We have a YouTube channel. We have our own podcast called the Innovative Investor Podcast, which we just started this year. And again, just bring on industry experts to help. Everything is about making this more sense to more people and making it feel more accessible. And so trying to be consistent with whatever we’re putting out kind of rides that same theme. So LinkedIn, YouTube, gresy.com. We have a contact page on there. We can send us a note. We have a team. We have ability to set you up wherever you are. And if we’re not servicing in the state that you want to operate in yet, just follow us. And we are. Like, we’re going to be adding states. This is a nationwide product. We just have to roll out, you know, one step at a time.

Kevin Bupp: Awesome. Good deal. Well, again, Stephen, appreciate it again. Guys, we’ll get that in the show notes. And my friend, thanks for coming on the show. It’s been a pleasure to have you.

Stephen Morel: I really appreciate it. It was a lot of fun. Thanks for having me.

Kevin Bupp: And to everyone listening, just thanks again for joining us on another episode of the Real Estate Investing for Cashflow podcast. If you found value in today’s conversation with Stephen, I’d greatly appreciate if you could subscribe, leave us a rating review on the show, and then do share the episode with somebody who might benefit from it. And so thanks again for tuning in, guys, and I look forward to seeing you on the next episode. Take care.

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