How Tax Sale Investing Works: Buying Properties for Pennies on the Dollar with Dale Merkord

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Show Summary

In this conversation, Dale Merkord discusses the intricacies of investing in tax properties, particularly tax liens and deeds in Mississippi and Arkansas. He explains the appeal of this niche market, the process of preparing properties for resale, and the bidding process involved in acquiring these properties. Dale also shares insights on IRA transfers for investments and reflects on lessons learned throughout his career, emphasizing the importance of understanding the market and the complexities involved in real estate investment.

Resources and Links from this show:

• • • Investor Fuel Real Estate Mastermind
    • Investor Machine Real Estate Lead Generation
    • Mike on Facebook
    • Mike on Instagram
    • Mike on LinkedIn
    • Dale Merkord’s Website
    • Dale Merkord’s Phone No: (228) 669-0887 or (226) 222-1500

  Listen to the Audio Version of this Episode

  Investor Fuel Show Transcript:

  Dale Merkord (00:00)
  ⁓ It’s kind of a niche market and they can be extremely cheap because it’s based on taxes owed and typically a property, taxes owed on a property is typically 1 to 2 percent of value. So you can get a property for five or 10 cents on the dollar occasionally.

  Kristen Knapp (00:18)
  Yeah, absolutely. And how did you go about kind of learning this world?

  Dale Merkord (00:23)
  ⁓ Well, with the internet it really helps. There’s a lot of information out there. But the main thing I’ve learned is it’s hands-on, complicated business because there’s over 3,000 counties that hold tax sales in all 50 states. And every state’s different. They have different rules, rigs, and even different counties can have different ways they operate. So it’s definitely a niche market but complicated also.

  Kristen Knapp (02:20)
  Welcome back to the Real Estate Pros podcast. I’m Kristen and I’m here with Dale Merkord. He is the co-owner of Certainty Investment Group. We’re going to talk all about tax properties. We have a lot to get into. So thanks for being here, Dale.

  Dale Merkord (02:32)
  Appreciate it.

  Kristen Knapp (02:33)
  So you have a great business and you’ve been able to carve out this really interesting niche in the market. How did you get into this line of work?

  Dale Merkord (02:41)
  I was a realtor in two or three different states over the years right out of college. And then I started grasping into, or gradually going into more investing. ⁓ while I was chasing typical bank foreclosures, ran across tax sales and have been at it ever since pretty much.

  Kristen Knapp (03:03)
  What was so appealing about it you?

  Dale Merkord (03:06)
  ⁓ It’s kind of a niche market and they can be extremely cheap because it’s based on taxes owed and typically a property, taxes owed on a property is typically 1 to 2 percent of value. So you can get a property for five or 10 cents on the dollar occasionally.

  Kristen Knapp (03:24)
  Yeah, absolutely. And how did you go about kind of learning this world?

  Dale Merkord (03:29)
  ⁓ Well, with the internet it really helps. There’s a lot of information out there. But the main thing I’ve learned is it’s hands-on, complicated business because there’s over 3,000 counties that hold tax sales in all 50 states. And every state’s different. They have different rules, rigs, and even different counties can have different ways they operate. So it’s definitely a niche market but complicated also.

  Kristen Knapp (03:54)
  Yeah, I mean, and your business works in multiple states and you guys are expanding. How do you keep track of all of this? How do you keep track of all the different areas?

  Dale Merkord (04:03)
  Well, we’re focusing mainly in Mississippi and Arkansas right now, so that’s not that bad. Even though there’s between the two, there’s over 100 counties in both those states. So it’s a lot to keep up with.

  Kristen Knapp (04:13)
  Yeah, it’s a lot.

  Yeah, so you guys, really do the heavy lifting for investors.

  Dale Merkord (04:22)
  Oh yeah, we take all the work out of it basically. Our investors are passive investors. It’s kind of a set it and forget it for them. And they earn a pretty good rate of return, 15%. You don’t have to worry about doing repairs or finding the great deals or traveling. Because you have to look at every property before you buy one.

  Kristen Knapp (04:36)
  Yeah. What kind?

  Dale Merkord (04:46)
  counties don’t get very good information and the pictures they offer sometimes the house doesn’t even exist.

  Kristen Knapp (04:51)
  Yeah, talk more about that, how you go and visit so many properties. What does a typical day look like when you’re out there looking at stuff?

  Dale Merkord (05:46)
  We had typical auction like I just did one about five weeks ago. And I looked at I think 36 properties ⁓ scattered in three different counties. This was in Arkansas. And I think we ended up with one or two properties. So that’s a lot of properties to look at in just barely a couple days.

  Kristen Knapp (06:04)
  Yeah.

  Yeah,

  absolutely. And how big is your team?

  Dale Merkord (06:13)
  Mainly just two of us, but then we have realtors we deal with, contractors we deal with. it’s, So we sub out a lot of our work. Assistance, we have a couple of online assistance.

  Kristen Knapp (06:21)
  Yeah.

  and what kind of investors do you work with?

  Dale Merkord (06:30)
  to all kinds of investors. In fact, this is a good way for somebody to divert their IRA. You can self-direct your IRA into real estate. So they can take their real estate, their IRA, estate, yeah, and divert it into real estate and make a 15 % interest.

  Kristen Knapp (06:46)
  Wow. Yeah, and talk about kind of, I mean, I’m sure you’ve seen ups and downs in the market as you’ve been doing this. How does it kind of play into that? How does it play into the ups and downs of the market?

  Dale Merkord (06:57)
  I wouldn’t say it’s a recession proof business, pretty close. Tax sales have been going on for 200 years. They happen every month for whatever reason. People just neglect, they get in hard times, they just don’t like to their taxes. Properties get left in the states and the siblings don’t want it. They’ve moved away and don’t have interest in the property. like I said, tax sales happen all the time for all different reasons.

  Kristen Knapp (07:22)
  young.

  Yeah, absolutely. Well, it’s very interesting. mean, I’m sure a lot of people enjoy the passive aspect of it, especially investors that are, you know, have multiple segments of their business and are maybe more active than others.

  Dale Merkord (07:38)
  Yeah, they’re busy doing what they do to earn their money and so they can invest with us, make it much better than bank rates. And like I said, we do all the work for them. It’s kind of a set it and forget it scenario.

  Kristen Knapp (07:50)
  Yeah.

  And in terms of kind of the properties you choose to invest in, what do those deals look like? What is a good deal to you in these kind of properties?

  Dale Merkord (08:04)
  Typically we like single-family homes, we also do warehouses, commercial properties, and then tracks of land. We did 119 acres the other day, track, 119 acres. And then we recently bought a 6,000-square-foot, used to be a church or club, a 6,000-square-foot building, and we’ve got it for $11,000.

  Kristen Knapp (08:29)
  Wow. Wow. And then how do you get it ready for resale? What does that look like?

  Dale Merkord (08:30)
  pretty good deal.

  Yeah, just go out and most of them need some sort of clean out. First we do a trash out or clean out and then we do a just decide what we’re going to do to the property to make it sellable. You know, create a scope of work and like the building does need a not a whole roof, but it needs a roof patch pretty badly. Just whatever the problem needs to get it resellable. We don’t overdo it on a property just enough to get it good looking to sell.

  Kristen Knapp (08:55)
  Yeah.

  Right. And I’m sure a lot of

  that is more cosmetic things like lighting and paint. Can you talk more about that?

  Dale Merkord (09:07)
  Yeah,

  yeah, we call it light cosmetic where you just go in and paint, put in new flooring, put in to replace the light fixtures, clean up the yard. But occasionally it gets more into, you know, sometimes you have to replace the AC centrally during the heating and the roof occasionally. And that’s a little bit, a little bit more than minor cosmetic.

  Kristen Knapp (09:58)
  Right.

  Yeah, do you you know going into purchasing these properties? Is that something you kind of look at maybe if there’s more More maintenance work to be done on the house or the property. Maybe it’s not the best investment for you, or how do you kind yeah?

  Dale Merkord (10:19)
  Yeah,

  we turned down properties all the time because like I said at that last sale I went to recently out of 34 properties we only had maybe seven or eight targets and we ended up with two because you know the others got bid up higher than we wanted to pay.

  Kristen Knapp (10:34)
  Yeah, what does the bidding process look like? If you can just kind of walk us through that.

  Dale Merkord (10:39)
  Some of it’s online and some of it’s live auctions, like Arkansas is all live auctions. ⁓ Mississippi is a bit, Mississippi is a lien state, but we have a way to, tonight have to wait three years to get a property. Mississippi, they sell a lien at the tax sale and the people don’t pay back in three years, you get the property.

  Kristen Knapp (11:07)
  right?

  Dale Merkord (11:07)
  But we’ve got

  an expedited process that we don’t want to wait three years. So we get them much quicker than that.

  Kristen Knapp (11:14)
  Yeah, you have your whole system set up. It seems like a very good investment for people. I know you mentioned this before, I would love to get into kind of the mechanics of it. Somebody transferring their IRA to something like this, how does that work?

  Dale Merkord (11:30)
  Yeah, just tell them to contact us. We can walk them through the process. We deal with three or four different companies that are IRA custodians. IRAs go through a custodian, a separate company that handles that transaction. And we work with three or four of those.

  Kristen Knapp (11:45)
  So what is the process of it? do they like? How do you make that work?

  Dale Merkord (11:50)
  Well, depending on what they’re doing with their IRA now, they just transfer funds through their custodian. If they have an IRA, they have a custodian already. They just transfer the funds.

  Kristen Knapp (12:02)
  Yeah, I mean that’s a

  Dale Merkord (12:03)
  Either

  all or some of them. They don’t have to do all of it, just some of it.

  Kristen Knapp (12:07)
  Yeah, I feel like that’s a really good option for people, especially if you’re already, you know, leveraged in the stock industry or the stock market. ⁓ Yeah, it would be great to diversify like this. This is a really good thing to diversify into. Do you see that ⁓ maybe there’s misconceptions that people have about your line of work?

  Dale Merkord (12:23)
  Yeah.

  Well, there’s all kinds of tax, I call them tax sale gurus where they get online and tell you all the good things about it and how to sell you courses and things like that. But like I said, it’s not for the light of heart and not a part-time job at all. So we, like I said, use our knowledge and time and effort to do all that for them and just the end product is a good rate of return.

  Kristen Knapp (12:53)
  Yeah, absolutely. I’m sure there’s a lot of people online who have a lot of different information out there. Is that kind of something you battle where people think things are easier or whatever from the internet?

  Dale Merkord (13:08)
  yeah, Not just in tax sales, but any phase of real estate. There’s a lot of information out there. Some of it good and some not so good.

  Kristen Knapp (13:13)
  Yeah, absolutely.

  Yeah. And how do you work with people? Do you do consultations where people can kind of ask the questions to you to kind of, you know, get a reputable source?

  Dale Merkord (13:25)
  yeah, people can call. Yeah,

  people can call or visit our website. Our website has a lot of information on it. It’s certaintyinvestmentgroup.com. Or they can call us.

  Kristen Knapp (13:35)
  Nice. Yeah,

  and would love for you to talk about, because you’re in the Mississippi and Arkansas ⁓ areas, expanding into Texas perhaps, what is very special about those markets? What do you like about them?

  Dale Merkord (13:51)
  Well, I’m from there. I grew up in Texas, and I’ve been in Mississippi for several years. So we know all those markets very well. And we just don’t, before we expand, the more money we get, more investors we get, we’ll expand to other states as well. But right now, that’s plenty to keep us busy as those three states.

  Kristen Knapp (14:05)
  Yeah.

  Yeah. And how does that work? Do you hire remote teams to do all of the vetting of the properties?

  Dale Merkord (14:59)
  yeah, we hire local realtors ⁓

  Kristen Knapp (15:02)
  Yeah.

  Dale Merkord (15:05)
  kind of inspectors on occasion, but we know properties pretty well.

  I was almost a home inspector, so I know pretty much about houses. We both know construction, so we basically know what a house needs.

  Kristen Knapp (15:13)
  Yeah.

  Yeah. Tell us more about that. You’re almost a home inspector.

  Dale Merkord (15:21)
  Yeah, was going to be, when I was a realtor, was going to also become a home inspector. took all the courses, but then I decided this is not for me. It’s too tedious and not enough money and too ⁓ much liability.

  Kristen Knapp (15:32)
  Yeah.

  Yeah, yeah, and you pick what kind of works for you because yeah, you found something that fits your skill set. ⁓

  Dale Merkord (15:43)
  And I like to travel,

  so this fits my personality well. I travel all over three states.

  Kristen Knapp (15:46)
  There you go. Yeah.

  Yeah, yeah, yeah. That’s awesome. Yeah, and so talk about maybe something you wish you learned earlier in your career that you could share with us today.

  Dale Merkord (15:57)
  I wish I would have learned more how to raise funds so we could do more and more instead of growing slowly and grow a little faster.

  Kristen Knapp (16:08)
  Yeah, but slow growth is good too. I feel like a lot of people scale a little too quickly and the bottom falls out. ⁓

  Dale Merkord (16:15)
  Yeah, we don’t want to overwhelm ourselves, we can handle much more right

  Kristen Knapp (16:21)
  Yeah, absolutely. ⁓ Well, this is awesome. mean, I think this is you have such a solid business that I think is a really good option for people to invest in. Talk about kind of the next steps. What are your goals for the next few years?

  Dale Merkord (16:36)
  ⁓ Mainly expanding into a few more states and like I said working with more investors and just building the business further. We’ve kind of a, I call it a boutique real estate investment company. Kind wanting to get a little bit more mainstream maybe.

  Kristen Knapp (16:51)
  Mm-hmm. Yeah.

  Amazing. Awesome. We’ll tell everyone where to find you and where to find Certainty Investment Group.

  Dale Merkord (17:01)
  Yeah, just go to certaintyinvestmentgroup.com or my phone number is 228-669-0887. 228-669-0887. Or another number is 228-222-1500.

  Kristen Knapp (17:18)
  Amazing. Well, thank you so much. I mean the numbers are very valuable everybody Definitely reach out if you have any questions about this, but thank you so much for being here Dale

  Dale Merkord (17:27)
  Yeah,

  I appreciate the invite.

  Kristen Knapp (17:29)
  Thank you everybody for listening. Hope you learned a lot about this area of the business and definitely reach out to Dale if you have questions or want to get involved. But otherwise we will see you back next time. Bye.

  Dale Merkord (17:40)
  Thank you.