How Smart Real Estate Investors Use Due Diligence to Avoid Bad Deals and Protect Their Portfolios

Stephen Morel (00:00)
If you’re not leveraging ⁓ clean, reliable, dynamic data to fuel your business, you’re gonna lose. And ⁓ artificial intelligence is the same way. The technology and the data is not your enemy. It’s your opponent who’s using it and you’re not.

Scott Bursey (01:57)
Welcome back to the Real Estate Pros Podcast, dedicated to giving you the edge in property investment. Today we’re cutting through the legal complexities of real estate with an expert who knows how to protect your assets, Stephen Morel from Jurisdeed. Stephen is here to share his insights on property titles, mastering due diligence and ensuring your next transaction is rock solid. Get ready to sharpen your legal foundation and scale your business with confidence.

Let’s welcome Stephen Morel.

Stephen Morel (02:30)
Hey Scott, thanks for having me. I appreciate you having me on.

Scott Bursey (02:30)
Stephen Morel

It is just wonderful having you here. And before we dive into the details, can you walk us through the journey that led you to founding Jurisdeed?

Stephen Morel (02:45)
Yeah, sure. Well, ⁓ Jurisdeed, our mission is making delinquent property tax-lean investing, ⁓ which is one of the most secure high-yield assets on the planet, or making that as easy as managing your 401k. And that sounds crazy because it has been anything but that easy for a century. So that is our mission. My story and how I got there, ⁓ I am an attorney from Louisiana. I don’t currently practice. I started a tech startup company instead. ⁓

But ⁓ in 2005, you may have heard of Hurricane Katrina came through the Gulf South and did some damage there. ⁓ it was, 80 % of the city was under water. My house was damaged severely. ⁓ it was then I was just a couple of years into practicing law. I was just a random associate at a firm downtown doing meaningless work. I couldn’t stand it.

And it was when the hurricane happened, it was just sort of a crossroads for me. ⁓ I had to come back and try to fix up my house. ⁓ I’m a veteran, so I had insurance that was there ready to go. And I started getting my hands dirty with real estate. I had never done that before. ⁓ I had to fix up the house ⁓ and beat realtors and builders and mortgage brokers and lenders, et cetera. And I just fell in love with the process of seeing the tangible results of taking something that was

destroyed and making it good again. And it was my personal home. I got in fast because I had quick insurance proceeds. But when I was done, I looked around and my city was still in red shambles. And I, and that’s where I’m born and raised there. And I, and I was, you know, that’s, I was like, I gotta do something about this. So I started working on products that could help get some, we had thousands and thousands, thousands of properties that were just abandoned and blighted before the storm. And

We had, I mean, over 1,500 people died in the storm. I mean, there were tons of people that were missing. You can’t move property unless you know where all the owners are. You can’t just go take it. And then you also need property taxes because that’s what funds the recovery and the infrastructure of the city. And you’re not getting property taxes paid if people aren’t living in the house or they’re deceased or they’re moved away. And so it was just a terrible connection of circumstances.

I eventually built a product that helped ensure title insurance on these abandoned blighted properties, which was told to me by the industry to be a fool’s errand. ⁓ And apparently I keep hearing that and I keep charging head first into these things, but it was successful. And since then, over 10,000 of those properties have been returned to commerce into productive use and are back on the tax rolls, producing hundreds of millions of dollars of tax revenue compounded over years.

that were previously thought to be at just done. so this is the title insurance industry that won’t touch it with a 10 foot pole unless it’s perfect, right? And that’s it almost has no risk. And it was wonderful. So I was able to roll that out through a software company that I had was brought in. It wasn’t my company, but I was brought in to bring this product to market. And once that had kind of run its course and it was on autopilot, I decided to start a new venture.

called Jurisdeed. At the time, that was in 2020, and also kind of an odd time to start a company, but it was actually, you know, kind of a good opportunity because everyone was working from home with COVID, et cetera. And I really started exploring where to go with that. And it took me a few years to figure it, figure out that this is not, you know, real estate tax is so vital to the common thread that we all share, which is just society.

It pays for basic public services in every county and city in America. And I know that this has been some topics recently about paying, you know, about whether we should keep property taxes. Florida was trying to do away with it and that didn’t go well. But it’s essential. I mean, it really keeps our communities together. And so, you know, that in itself means that if enough taxes are not paid, which on average,

20 % of every county’s tax roll is delinquent at some point during the year, they gotta have a system for bringing an investment in to cover that shortfall so that they can make budget to pay for all those police and fire and teachers and roads. And so there comes tax lien investing. It’s the county brings in private investments to take over the position of the creditor. And when delinquents payments haven’t come in yet,

the private investors hold that paper until and with rights, legal rights to foreclose, just like a bank and a mortgage foreclosure in the event they never get paid back. the idea is to get it, to bridge the gap between when the county needs the money and when the money can actually come in. that’s the, and that’s that spread is the investment. And there’s a very attractive interest rate. Every state has a different way to go about this.

And over time, it has just become one of the most complicated, fragmented, difficult, challenging, paper-intensive manual processes of investing and being successful in tax lien investing. And anyone who tells you that it’s a passive investment has never done it before or is lying to you. It’s the least passive investment of real estate investing because it takes so much hands-on ⁓ attention.

And it could take three, five, seven years before you can liquidate and get your money back. So our goal was to, again, was to take that incredible opportunity to invest in something that’s secured by real estate, has a high rate of return, is super prioritized in the law, but is untouchable by most people and allow it to be accessible by virtually anybody.

like Robinhood has done for stocks and crypto, Jurisdeed is doing for tax-free investing.

Scott Bursey (09:40)
That’s an incredible evolution, Stephen. It’s clear that Jurisdeed was born out of ⁓ real market need for certainty and precision. Let’s dive in with this, Stephen. What’s the biggest title mistake investors make?

Stephen Morel (09:58)
⁓ You know, well, in the tax lien context or delinquent property tax context, I mean, or even sometimes even if it’s not intentionally in that context, it can be, you know, unpaid, liens and taxes, code enforcement violations, anything that can tie up the title

and also create extent, ⁓ you know, significant costs to clear it. ⁓ So having a clear picture of

⁓ which we’re talking about data and now nowadays it’s no longer paper, it’s data and in having a good idea of what that looks like before you get into a deal, before you are responsible for that property, ⁓ is the same, think about what a bank goes through before they will even lend somebody a more, ⁓ get grant a mortgage on a property. But beyond the credit worthiness of the borrower, think about what they do, they’re gonna order an appraisal, right? Why? Because, not because they want the property.

because they better know what that sucker’s worth if they have to take it back. And if you don’t pay, it’s like insurance, right? And so, but what else are they doing? They’re looking at, you know, is the title clear? Because the property might be worth a lot, but if there are three people in line ahead of the bank, then they maybe won’t get any of that money back, right? Because they’ll have to pay, the foreclosure will have to pay off people that rank up in front of them, right?

So understanding ⁓ the law and like how the title can be cleared and what may make it unclear is really, really ⁓ can trip up a lot of investors in rushing in because they drove by a property or they read a book or they watched a course and they’re like, I know how to do that. And they don’t get professional advice. They don’t get counsel or they don’t get the right data.

Scott Bursey (12:26)
outstanding insight. And our listeners would love to know what’s the core strength that Juris Deed brings to the table.

Stephen Morel (12:36)
What we’re bringing to the table is a novel way to approach an archaic investment class. So tax lien investing has been, again, as I mentioned in the opening, ⁓ has really been stuck in the dark ages along with a lot of real estate investing. ⁓ And it’s been, every state, there are 50 states, every state has its own rules. And so…

Is it, can you really invest in the asset class? Are you investing in a particular property in a particular state? And then you’re not really scaling your investment, right? Cause you’re really limited to what’s going on in that one location. What we’re doing is bringing artificial intelligence, modern technology, and a fresh look at normalizing the data that is required to be successful in tax lien investing, which goes all the way to the property level, to the county level.

Streamlining that into a single homogenous asset class, like as if you’re putting money in the stock market and where that all the complexities, all the complications, all the fragmentations that have always existed with taxing investing are no longer barriers to entry because we have that figured out. Now you can just be an investor in this incredible asset class and enjoy some of the returns that you’ve read about in those courses and books.

Scott Bursey (14:01)
Well said and point well taken. If you could walk us through, Stephen, what is the top legal threat you see in today’s market?

Stephen Morel (14:15)
⁓ so there right now, ⁓ in, you know, you have a lot of volatility with, with the economy first off. And so that can impact, you know, ⁓ in, in the broader sense, you know, you have, ⁓ this interesting, ⁓ sequence of events that have happened since, ⁓ since COVID, ⁓ where it during, if you remember in COVID, ⁓ 2021,

interest rates were historically low. And most people took advantage of that. I hope you did because you could probably get a mortgage at below 3%, you know, fixed for 30 years. ⁓ And what is happening now? It’s at least double that, right? So

are you planning to, if you have one of those low interest rate mortgages, are you planning on moving anytime soon? Probably not, right? Cause you’d have to double your interest rate to move. So you have a lot of people who are just staying put, which, which it’s crazy because so you don’t have a whole lot of sales.

But it’s kind of like, it’s not really a buyer’s market or a seller’s market. That’s just, it’s just sort of like a stalemate, you know? It’s an interesting way to look at it. But you also have is a lot of commercial debt that is that, you know, commercial property debt that was secured on short term mortgages, you know, like, like that are, that are coming to maturity right now. And it is a coming, it is a tsunami that is, that is coming and there’s no stopping it of defaults on commercial.

mortgages and I know I’m getting off of the tax lien, ⁓ you know, let’s talk for a second, but for the purposes of your show and your listeners, I figured that might be interesting. ⁓ it there there’s over $3 trillion of commercial debt. That is, that is coming due like ballooning in the next 18 months. ⁓ and that is going to be in delinquent status and it’s primarily held by

Scott Bursey (16:35)
Thanks.

Stephen Morel (16:52)
the banks that are not considered too big to fail by the government, credit unions, local small banks, that’s who does these commercial, for the most part, not in so much high rises, et cetera, but it’s gonna be tough. And it’s like, who’s gonna want that? Because why are they defaulting? Because there’s not enough people paying rent. There’s not people occupying those spaces anymore. The whole go back to work thing didn’t work out so well. They’re not going back to the office. And so you don’t have people paying rent. So the only solution there,

You’re gonna have to change the use, the zoning, the use case of the property, because who’s gonna wanna buy that if the same problem that forced the first guy out is the same situation that the next guy has to get into, which is that it has to be office space, right? So you’re gonna have to be looking at repurposing property, which is gonna require rezoning. mean, it is a, we’re talking about big swaths of almost every major city in America. And I’m not exaggerating about this. This is that I’m just trumpeting what.

with other experts that are way smarter than I am have been writing about for years.

Scott Bursey (17:57)
Absolutely. And that is some excellent, excellent advice. And to take that to another level, I have to ask you for some more advice. Please give us an actionable, diligence tip. Stephen.

Stephen Morel (18:15)
So, you when you’re looking at real estate investments, ⁓ again, like one of the most important things is to, to, is you’re going to hear this a lot and I’m not going to, you’re going hear from me too, is your due diligence ahead of time. I mean, because you first, you’ve heard the old saying you make your money when you buy the property, not when you sell it, right? That’s kind of a cliche, but it’s true. ⁓ Because once you’re baked into the deal, you really, you can’t go back in time and undo that.

And so now you’re trying to scrape out whatever’s left of what you can, what the Delta is, what your, what your margins could be, but you’re already into it for X amount. So, you know, and maybe it, you wish you hadn’t gotten into it at all, you know, there’s no good way out. And all of those, all of that can be mitigated or at least improved by it, better investigative work, better preparation ahead of time. ⁓ and

you know, do you have the right resources in place to be successful in this? You might want to do it. It doesn’t mean that you should do it though, right? And real estate is a very proximity based investment. mean, where are you relative to the actual property? This isn’t something that you can be so disconnected from like around the world and be successful at unless you have boots on the ground. You’ve got to have some kind of local presence to be able to at least periodically to put your eyes on the physical asset.

on a regular basis, both before, during, and when you’re trying to get out, if you’re going to be successful in, mean, tax liens is no different, but almost any kind of real estate investing. So I think that’s, that’s where, I know it’s kind of high level, but, it’s so, it’s so, so many people get tripped up on that and, and, and, you know, just rush brush in because they have money or because they have the, the, the, the time or the willpower or the determination, whatever. And those are nice, but

that’s not gonna get you out of a bad deal.

Scott Bursey (20:15)
point well-taking there as well. Stephen, this has been incredibly insightful. Before we wrap, I have one final question to bring everything we discussed back to our core audience. For our listeners who are focused on scaling their real estate portfolios right now, what is the single most important legal shift they need to make to handle that growth safely?

Stephen Morel (20:44)
I think you need to be leveraging technology today.

you’re not leveraging ⁓ clean, reliable, dynamic data to fuel your business, you’re gonna lose. And ⁓ artificial intelligence is the same way. The technology and the data is not your enemy. It’s your opponent who’s using it and you’re not.

That is what you should be fearing. You should be dedicating most of your time, not some, most of your time on getting those tools and that know-how, that knowledge base in as a part of your assets, part of what you bring to the table, why you can be successful. It’s not an optional thing anymore. You better have it or else you’re gonna lose to someone who does.

Scott Bursey (21:42)
great advice and Stephen before we let you go how can our listeners connect with you and Jurisdeed to learn more about protecting their portfolios and getting that critical legal certainty.

Stephen Morel (21:58)
Jurisdeed.com is J-U-R-I-S-D-E-E-D. That’s our website. We’re also, we post frequently ⁓ valuable information and industry insights on LinkedIn. We also have our own podcast called the Innovative Investor Podcast, which we just launched about two months ago. ⁓ And we’re excited to be promoting that as well. ⁓ And we feature industry guests from around the country that are experts in their space.

⁓ And we’re on all the podcasts, channels, Spotify, Apple, et cetera. And frequently we’ll be ⁓ speaking at industry conferences. So, you know, check us out there and ⁓ connect with us on LinkedIn, which is one of the best ways. We’re actively engaged there and we’ll be able to help ⁓ schedule time if you need to, if you’re looking at getting into tax lien investing. Now’s the time and we are the way.

Scott Bursey (22:54)
Stephen, thank you. Your insights on legal certainty and scaling safely have given our listeners a tremendous amount of value today. It’s been a great honor having you on the show.

Stephen Morel (23:08)
God, it’s been my pleasure. Appreciate you having me.

Scott Bursey (23:11)
And thank you to all of our listeners for tuning in. If you found value in today’s episode, please make sure you’re subscribed. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.