ITS INVESTOR PORTFOLIO FLOW CHART BUSINESS PLAN CHECKS MEMORANDUM LEGAL DOCUMENTS PNL S FINANCIALS KEY NUMBERS BANK ERROR INVESTMENT BREAKDOWN ITS Internal Tax Service
FLOW CHART ITS FLOW CHART ITSInternal Tax Service
BUSINESS PLAN ITS FLOW CHART ITSInternal Tax Service
ITS Internal Tax Service M I S S I ON “To maximize returns for investors through strategic investment in the Georgia tax deed market.”Executive SummaryInternal Tax Service (the “Company”) is a U.S. based real estate investment ﬁrm that is primarily focused on theGeorgia tax deed market, providing investors with a high ROI from the repayment of taxes and penalties through taxdeed sales. Through the cooperation of local county governments, ITS’ property tax redemption process, andsubsequent ownership and resale of high valued homes at severely discounted prices, the company’s versatileapproach will enable an investor the beneﬁt of consistent returns and a steady stream of income backed by tangibleassets.When a property owner cannot pay property taxes, the state or county often places a lien on the property for thetaxes owed plus penalties and administrative fees. Investors may then purchase the liens or deeds and receivepayment for that amount plus interest. In the event a property owner still does not repay the back taxes andpenalties, the lien/deed holder may foreclose on the property and gain the title, thereby acquiring property at a costoften well below market value. Internal Tax Service, Inc. entered this market in 2009, purchasing valuable deeds onideal properties through its founder’s real estate expertise and vision for proﬁtable returns.ServicesInternal Tax Service focuses only on the opportunity available in the state of Georgia because of the favorable taxdeed laws there, as well as the state’s high number of delinquent properties. Georgia is unique in its “hybrid” modelfor handling delinquent properties where investors can invest in the deed via the bidding process and are allowed tocharge a government enforced penalty. Perhaps the most unique and compelling element to investing in ITS and taxdeeds in Georgia is that the county awards FIRST PRIORITY LIEN POSITION to the company or individual who buysthe deed at auction.That “POSITION” along with our company’s ICR (Inter-Company Redemption) process forces the bank, mortgagecompany or owner to pay us our statutory 20% penalty or lose the property 1 in an accelerated foreclosure process.The owner of the property has to take immediate action and the necessary steps to recover their property rightsback. This allows ITS to have complete leverage on the property and investment strategy.1 Smith, Elizabeth. NuWire Investor. “Georgia Tax Deeds.” April 2007. Obtained at: http://www.nuwireinvestor.com/articles/georgia-tax-deeds-51021.aspx.
Market Analysis SummaryTax deeds are a consistent way for any investor to make a steady return on their money but based on speciﬁc marketconditions in Georgia, the Company’s management believes the time has never been better to invest in this geographiclocation. The city of Atlanta in particular is attractive to focus on; not only based on the county’s internal proceduresbut ITS has also established favorable relationships within the local government and is able to exercise the highest levelof due diligence in the investment screening process.The city is the second fastest growing metropolitan area in the nation, and has experienced particularly explosivegrowth over the last decade, according to the Atlanta Regional Commission (ARC). 2 During the last eight years alonethe city has added 1.1 million people to its population. The following chart from ARC demonstrates the city’s rapidgrowth since 1990, and projects future growth through 2040. Growth is clearly expected to continue at rapid paceover the next 30 years. 32 Atlanta Regional Commission 2009. Obtained at: http://www.atlantaregional.com/info-center/arc-region.3 Atlanta Neighborhood Development Partner. Obtained at: http://www.andpi.org/.
Strategy and Implementation SummaryInternal Tax Service will perform thorough due diligence on each potential investment, through tax lien research(www.GSCCCA.com) accurate assessments (CMA’s) and any potential legal ramiﬁcations (title searches) therebymitigating investment risks. The Company will place particular emphasis on properties with a mortgage, though willconsider some without. Internal Tax Service will focus on properties that can be sold immediately after purchase.Internal Tax Service has assessed its current competition and can ensure an even greater ROI if provided with anappropriate infusion of capital. The Company realizes that there are several organizations and local investors who willcompete for choice properties and try to ﬁnd hidden “gems” throughout the counties involved. Most of thesecompanies and people have limited resources in both their ﬁnances and research efforts. If Internal Tax Service is putin a position of ﬁnancial strength at each auction, it will be able to frequently outbid its competition, maintaining alarger property portfolio and providing larger returns to investors. Also, by employing more realtors and a largerresearch staff, the Company can ﬁnd, locate, and verify the select properties that will provide large proﬁt margins forminimal cost. By selecting choice properties it will not only allow for greater redemptions but ensure solidinvestments.Investor Distribution and BreakdownITS will offer investors a 10 -12% rate of return on their principal paid out quarterly. We will pay an additional 8-10%on the portion of the principal that result in a foreclosure and sale. The principal will be vested with the company for arequired 18 month period before any attempt at redemption. Your principal will be guaranteed against the propertieswe purchase with those particular funds and agreed upon by both parties in a formal contract (deed to secured debt)before investing. Any and all companies that ITS is associated with in order to make these transactions and returnspossible will be held to the same agreement aforementioned.ConclusionThe Company purchases tax deeds that amount to well below the market value of the property in question, therebyensuring a large return on investment regardless of the means through which the lien/deed is satisﬁed. ITS will eitherearn 20% on their investment collecting penalties and interest within 1 to 12 months or sell the properties acquiredthrough quiet title and foreclosure via the Company’s real estate brokerage division. This steady ﬂow of revenueassures investors we will be able to pay their guaranteed interest and all agreements and principal are backed bycompany assets and tax deed ownership.Management SummaryTodd Lipton, Director of OperationsMr. Lipton has an extensive background in ﬁnance, sales and management. Todd was previously an equities trader withT3Capital, a commodities trader on the ﬂoor in New York in the mid 90’s and following those positions was anAccount Manager in Sales at TEKsystems. He managed an IT sales delivery team and was responsible for building abase of clients in the ﬁnance and communications industries. He now pursues the endeavors of ITS full time.Daniel Lipton, Chief Executive OfﬁcerCurrently, Mr. Lipton trades commodities as well as owns and operates a nightclub that encompasses 40,000 squarefeet and employs more than 120 individuals. Daniel holds ﬁnancial series 5, 7, and 63 licenses. Prior to this venture,Mr. Lipton owned and operated a ﬂoor trading operation at the New York Board of Trade for 20 years where heoversaw 30 professional traders. He also owns and oversees businesses involving social media, technology and ﬁnance.
MEMOMORANDUM ITS FLOW CHART ITSInternal Tax Service
MEMORANDUM RE: United Capital Financial of Atlanta, LLC v. American Inv. Associates, Inc., 302 Ga.App. 400, --- S.E.2d ----, 2010 WL 522690 (2010). ISSUE: What is the effect of the captioned case on tax deed investors? BACKGROUND OF CASEThe United Capital case was decided by the Georgia Court of Appeals on February 16, 2010. The issue before the courtwas which party had priority to claim the excess tax sale proceeds remaining after a tax sale.Georgia law states that the excess tax sale funds are ﬁrst paid out to any lienholders of the property sold for taxes, andthen to the delinquent taxpayer if there are any funds remaining.Generally, the ﬁrst lien ﬁled of record gets priority over all other liens ﬁled later in time. However, the law makes certainexceptions and gives some later in time liens priority over earlier liens. The most common example is a lien for realestate taxes. In certain situations, Georgia law gives a one paying off a tax deed (called a redemption) lien in the amountpaid to redeem a property that is superior to all other liens, which is commonly referred to as a super lien. STATEMENT OF FACTSAmerican Investment Associates claimed it held a ﬁrst priority lien on the property because it held a judgment lienagainst the delinquent taxpayer originally ﬁled in 1992.United Capital claimed it held a “super-priority” lien which was superior to American Investment Associates because itredeemed the tax deed from the original tax deed purchaser.United Capital redeemed the tax deed at issue after taking assignment of assignment of a debt for $71.00 from DynamicRecovery Services, a collection agency, on the day of the tax sale. United Capital did not redeem as a lienholder, and onlyas a creditor, which, until this case was decided, had signiﬁcance as to whether a redeeming party obtained a super lienor a standard lien.American Investment Associates challenged the super priority lien claimed by United Capital, and the Court had todecide whether or not United Capital in fact held a super priority lien.O.C.G.A. § 48-4-41 deals with redemptions by creditors without a lien. It states that in such a case, the creditor shallhave a claim against the property for the amount advanced by him to redeem the property “if, there is any sale of theproperty after the redemption under a judgment in favor of the creditor.” It is unknown whether a claim is the same asa lien.In the United Capital case, the creditor without a lien (United Capital) did redeem the property, but it never obtained ajudgment on the debt, and the property was not sold under such judgment. United Capital asserted in the suit that itshould be afforded the super priority lien anyway. The trial court rejected this claim on the grounds that the debt hadnot been reduced to judgment, nor had the property been sold under such judgment. On appeal, the Court of Appealsdecided in favor of the redeeming creditor without a lien in holding that even though it had no judgment on the debt,United Capital obtained a super lien when it redeemed the property as a creditor.The Court focused on the language of O.C.G.A. § 48-4-43 which says that a redemption made “by any creditor” gives it a“ﬁrst lien on the property” and in essence ignored the qualifying language of O.C.G.A. § 48-4-41 that requires creditorswithout liens to ﬁrst have obtained a judgment and also to have sold the property under that judgment. CONCLUSIONThe case gives any creditor who redeems a tax deed a super lien without ﬁrst having to satisfy the requirements to ﬁrstobtain a judgment and also sell the property under that judgment. The practical effect is two-fold. First, the super liengives the redeeming creditor the right to the excess tax sale funds, such that the only real money the redeeming party isout is the 20% redemption premium. Second, the redeeming creditor has a ﬁrst lien on the property, which it canforeclose by judicial foreclosure and wipe out any other liens on the property by banks or other lien holders.
LEGAL DOCUMENTS ITS FLOW CHART ITSInternal Tax Service
6854 DERBY LEGAL DATE EXPENSE PAYMENT DESCRIPTION BALANCE 5/28/10 $1,250.00 1ST FLAT FEE INSTALLMENT $1,250.00 5/28/10 $1,250.00 1ST FLAT FEE INSTALLMENT $0.00 7/16/10 $2,500.00 2ND FLAT FEE INSTALLMENT $2,500.00 7/22/10 $2,500.00 2ND FLAT FEE INSTALLMENT $0.00 7/23/10 $11.00 COURT FILING FEES $11.00 FEES FOR CONTESTED ISSUES INCLUDING Many conversations w/ Ayoub and Client; in ofﬁce meeting w/ client; research to locate underlying owners; drafting QCDs for underlying owner, forming new LLC and numerous conversations w/client re strategy for 7/29/10 $750.00 same. $761.00 8/13/10 $32.00 COURT FILING FEES $793.00 $4,543.00 DEED Purchased on County Steps - Taxes 11/3/09 $50,000.00 Saitsﬁed were $3,462.21 LIEN 5/27/10 $2,415.08 TCFC Cashiers check 9/2/10 $5,280.54 Conduit Law Firm Cashiers check TOTAL $62,238.62 COLLECTED 7/16/10 $42,003.05 Overage Collected ???? Sale of Home (pending) TOTAL $42,003.05TOTAL NET PROFIT -20235.57 Home valued at 95K…on market for 89K lowest offer will be 81K and well use that $81,000.00 assumption for our business model $2,430.00 3% commission $78,570.00 Expected NET PROFIT on home
WOLF CREEK LEGALDATE EXPENSE PAYMENT DESCRIPTION BALANCE 5/28/10 $1,250.00 1ST FLAT FEE INSTALLMENT $1,250.00 5/28/10 -$1,250.00 1ST FLAT FEE INSTALLMENT $0.00 6/22/10 $265.50 COURT FILING FEES $265.50 7/16/10 $2,500.00 2ND FLAT FEE INSTALLMENT $2,500.00 7/22/10 -$2,500.00 2ND FLAT FEE INSTALLMENT $0.00 7/22/10 $120.00 PUBLICATION COSTS $385.50 7/26/10 $865.00 SERVICE OF PROCESS FEES $1,250.50 8/24/10 $1,250.50 $0.00 $4,735.00 DEED Purchased on County Steps - Taxes 12/1/09 $40,000.00 satisﬁed were $ 2,452.84 LIEN 5/27/10 $1,736.43 TCFC Cashiers checkTOTAL $51,206.43 COLLECTED 5/4/10 7/16/10 36,197.66 Overage Collected 8/12/10 Invoice 55653.63 8/31/10 $53,719.58 Redemption Check From C link (1934.05 short )TOTAL $89,917.24 TOTAL NET PROFIT 38710.81
FINANCIALS ITS FLOW CHART ITSInternal Tax Service
First Fiscal Year In Business (September 2009 - September 2010) Facts $ $ $ Description We collect recycled $ through our ICR process. This money is received from the county, re-invested and accounts for the difference between capital vested and cash Cash Spent $700,000.00 spent Capital Vested Year 1 $586,000.00 3 Investors (DBL, MSL, DZC) Revenue $53,524.99 9 redemptions $38,710.81 1 Double Dip $58,334.43 1 SaleTotal Revenue $150,570.23 Expenses $25,000.00 Legal $18,000.00 Liens $10,000.00 Operations $13,000.00 Interest $8,000.00 Start up $3,500.00 Misc. $13,458.25 Losses $9,200.00 Taxes and HOA FeesTotal Expenses $100,158.25 Net Proﬁt 50411.98 Second Projected Fiscal Year In Business (October 2010 - October 2011) Facts $ $ $ Description We collect recycled $ through our ICR process. This money is received from the county, re-invested in ITS and accounts for the difference between capital vested and cash Cash Spent $680,000.00 spentTotal Spent 2 Years $1,380,000.00 Capital Vested Year 2 $500,000.00 5 Investors (DBL, MSL, DZC, MH, DB) Total Vested 2 Years $1,086,000.00 Projected Revenue $98,000.00 14 Redemptions $128,000.00 4 Double Dips $480,000.00 10 Sales Total Projected Revenue $706,000.00 Expenses $57,000.00 Legal $38,000.00 Liens $14,000.00 Operations $69,000.00 Interest $50,000.00 Salaries $5,000.00 Misc. $21,200.00 Taxes and HOA Fees Total Projected Expenses $254,200.00Net Proﬁt 451800
KEY NUMBERS ITS FLOW CHART ITSInternal Tax Service
KEY NUMBERS Total # of Deeds Purchased 38 Average Price of Deeds $26,031.77 Average Price of Deeds Since May $35,055.56 Total Cost of Deeds Purchased $859,048.41 Total Assessed Value of Property $3,300,900.00 Average Property Assessment $100,027.00If we can buy up to 6 properties a month or put at least 200K a month to work; the company will assure itself minimum revenue of at least 40K a month. ITS Internal Tax Service
BANK ERROR ITS FLOW CHART ITSInternal Tax Service
INVESTMENT BREAKDOWN ITS FLOW CHART ITS Internal Tax Service