Tax Lien Investing – Fix Your ‘Fixed’ Expenses
All businesses have the well-known “contingency” line item in their budgets. We all are familiar with the “unknown” items that may crop up from time to time in our daily course of business; things we don’t expect but know will happen … and along with that comes the necessity to budget for unforeseen expenses. Follows is a primer on how to fix your ‘fixed’ expenses.
We have found that Tax Lien Companies – those who purchase and service tax lien assets – often find themselves with larger than normal “contingency” budgets. Those who are familiar with the industry can readily understand why:
1. Unexpected, administrative and operational costs for liens that were sold or purchased in error
2. Unforeseen legal fees to remedy title issues or to process REOs/foreclosures that are “out of the norm”
3. Additional costs of collection for those hard core assets that don’t appear ready to redeem anytime soon….This list just goes on and on. As any seasoned tax lien investor will tell you, this can all add up very quickly and balloon into profit killing “contingency scenarios.”
Most seasoned tax lien investors out there have already identified these and other “hard costs” which become readily apparent to anyone who has been through a lien cycle or two. However, that is not what this article is all about. We wish to share with you all some of the other, unexpected “fixed expenses” that lien investors often encounter. These are unforeseen costs which are not so readily “seen” or “identified” but which can also have devastating impact upon profits, rates of return, and portfolio performance.
Our business is all about lien software technology and SYSTEMS. All lien companies are held to a high degree of accountability – they MUST record, track and process massive amounts of data and details in order to efficiently track, record, and collect their portfolios. Each tax lien parcel can have dozens of different attributes and characteristics which all need to be accounted for and accommodated in order to not only MAXIMIZE the rate of return, but to also PROTECT the investment from being derailed during the end stages of its life cycle.
Here is what we often see:
Most tax lien companies manage their tax lien portfolio data in SEVERAL, disparate (not connected) systems. These “systems” often take the form of Excel spreadsheets, Microsoft Mail Merges, Google Docs, and maybe even an Access database or two thrown in on the side.
When you have different, disconnected systems that do NOT talk to or interact with each other you end up storing the same data MULTIPLE times in multiple, different places. This means that you are entering the same information not once, not twice, but multiple times to keep your records current and “in sync.”
There is a Golden Rule in Software and Database Technology:
“He who enters data more than once shall make a mistake at least twice!”
That is just a poetic way of saying that the more times you enter the same piece of data into a “system” the more prone to error you are … which can have devastating effects.
For example, we all know that one small “slip up” of entering the wrong property address, or the wrong owner of record, or incorrectly flagging on account sold in error can easily cost you a 5-figure fee down the road … and that is only for a single tax lien parcel! Courts tend all too often to rule on the side of the property owner in such cases where there are “discrepancies” in the file or a failure to properly notify.
One company we recently spoke to admitted that one rather “mundate and simple clerical error” cost TENS OF THOUSANDS of dollars when it came time to foreclose.
We all know mistakes happen. It’s part of life. However, why would we all not seriously consider how we can mitigate such operational risks which are bubbling right under the surface of our daily operation? Why would we not want to know about hidden “holes” which are ready to appear within the mission critical core of our business and profits?
Looking the other way or simply saying “we don’t have that problem” is only putting off the inevitable. Murphy’s Law is alive and well when it comes to tax lien data. Just because it has not happened “yet” does not mean that it will not happen at all. Any tax lien portfolio is only as good as its dataand data integrity. Period.
Our research has found that most tax lien companies can easily incur additional costs anywhere between $20,000 and $50,000 ANNUALLY from such “mundane” and “simple” data misfires.
Here are a few summary points to keep in mind as you contemplate your own “systems” (or lack thereof) in managing portfolios that are worth millions and millions of dollars (your dollars):
1. Automate Data Entry. Unbeknownst to you, your staff is manually entering information and values that can be automatically imported. Not only does this cost man-hours, but potential loss of credibility and dollars through comman human errors.
2. Remove Redundancy. Nearly all investors track their funds using disparate spreadsheets used by different people in different ways. Consequently, transactions that can be entered once into a central system are wastefully repeated over and over, increasing the chance for error and loss.
3. Make Reporting Instant. Reports can and do come with a click! The old days of “running” a report are over, and systems can deliver immediate analytics to your tablet or smartphone in a touch.
Give us a shout. We’d love to show you how to streamline operations and reduce expenses. VisitLienApp.com or call us at 877.823.2700 today.