Today I’m answering your questions about buying a house to rent out, and I’m going to tell you a lucrative way that investors are doing this.
The topics I’ll be covering are:
- The Best Way to Buy Real Estate
- Where to Find Investment Properties
- Cheap Investment Property for Sale at County Auctions
- Purchasing Real Estate at a Redeemable Deed Auction
- An Example of a Successful Investment Purchase
- Rent or Sell Using Owner Financing?
- Doing the Math on an Income-Producing Property
Want to learn how to purchase bargain real estate? Would you like to buy mortgage-free property for pennies on the dollar? Or earn double-digit interest rates secured by real estate? Then take advantage of this FREE Gift.
The Best Way to Buy Real Estate
I’m Ted Thomas, and I’ve been investing in a subset of the real estate business called Tax Defaulted real estate for the past 30 years.
Many of my student investors purchase tax defaulted property for pennies on the dollar with no mortgage or deed of trust loan, and then they rent to others. Sometimes they sell, and in many instances they sell using a contract for deed and collect monthly installment payments for 10 or 15 years.
Today, you’ll see an example of how small dollar investments can quickly grow to big dollars and learn how to get a dream deal when buying a house to rent out.
Where to Find Investment Properties
In over 3,000 counties, real estate is seized by the local treasurer due to unpaid property taxes and then auctioned to the highest bidder.
Counties with small populations will have dozens of tax defaulted properties for sale. While counties with large populations could have hundreds or even thousands.
The auctions will be announced in the newspaper and on the local county website.
Auctions are held at the county offices or on the courthouse steps and online. These are public auctions and anyone may attend. If you plan to bid you must have money to do so, and the county will have strict rules outlining exactly how that process must be handled.
Why is a tax delinquent property auction such a good place to find investment property if you’re buying a house to rent out? As I’m about to reveal, you can get incredible bargains at these county auctions.
Cheap Investment Property for Sale at County Auctions
Auction properties are sold mortgage-free because the treasurer will have canceled the mortgage or deed of trust loan. This is the law as directed and mandated by the treasurer and enforced by the board of supervisors or county commissioners.
The treasurer will start the bidding at a very low price, sometimes at only the past due, delinquent back taxes. They will sell property at these auctions for 10 cents or 20 cents on the dollar.
The tax assessed value will be available to bidders, and the auction sale price will be well known because the auctioneer will lower the gavel at the maximum price.
It’s not unusual for a property to sell at auction at 60%, 70%, or 80% below the assessed value. Many properties will be sold for only 10 or 15 cents on the dollar. That’s an excellent margin for an investor who’s buying a house to rent out.
Purchasing Real Estate at a Redeemable Deed Auction
Certain counties and states will auction redeemable tax deeds.
If you buy a redeemable deed at auction, the delinquent property owner may come forward and redeem the property within a specific timeframe. The delinquent property owner does so by paying the auction buyer a 100% return of the amount bid plus a penalty.
Redeemable means exactly that. The previous owner can come forward and pay the auction bidder 100% of purchase price plus a penalty to redeem the property. In Texas, the redeemable penalty is 25% of the purchase price.
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An Example of a Successful Investment Purchase
Let’s talk about buying a house to rent out. I’m about to reveal how an investor purchased a house for less than 10 cents on the dollar an ultimately gained $100,000
One of my students purchased a small residential home in rural Georgia at a redeemable tax auction. The opening bid was only $2,900 for a valuable property. My student investor said, “I’ll open at $2,900,” and no other bidder raised their hand.
My student purchased a redeemable deed, which meant he needed to wait a full year for the property owner to come forward and pay whatever he paid plus a penalty. In this case, it was in Georgia, so the penalty was 20%.
The property had been abandoned for two years. The neighborhood was average, safe, and the neighbors were friendly. My student secured the property, doors, windows, locks and began the long wait.
During the 1-year redemption period in Georgia, The property owner may come forward any day and pay the purchaser 100% of their investment plus a 20% penalty to redeem the property. The estimated value of the property by the tax assessor was $60,000, which my student had purchased mortgage-free for only $2,900.
The property owner disappeared and never redeemed the property.
Shortly after one year elapsed, my student hired an attorney to perform the foreclosure for a small fee of less than $1,000. He also rehabilitated the property for another $8,500.
Rent or Sell Using Owner Financing?
The property could be rented out in this instance for $1,000 a month or more, or it could be sold to a willing buyer using a contract for deed, which is an installment contract.
Selling via an installment contract, also known as seller financing, simply means that my student could become the banker, and the new buyer would pay him monthly.
The new buyer would be responsible for maintenance, property taxes and insurance, and my student would have income for 10 or more years.
I regularly teach my students to buy tax defaulted property at auction for low prices and sell to bargain hunters, fixers, or renovators, or they can rent the property out or sell it using a land contract with installment payments.
Doing the Math on an Income-Producing Property
Let’s take a look at the math:
- Purchase price is $2,900
- Renovation cost is $8,500
- Total $11,400
- Sales price is $65,000
- Down payment is $5,000
- Contract for Deed – $750 a month x 12 = $9,000
- Term 10 years – 10 x $9,000 = $90,000
- Total Revenue is $90,000 over 10 years.
- Total Investment was $11,400
We hope you enjoyed Ted’s lesson, “Buying a House to Rent Out? What the Smart Investors Are Doing.”
When you’re buying a house to rent out, you want to stay out of a negative cash flow situation. That’s why a tax defaulted property auction is such a good place to purchase rental property. At these auctions, real estate is sold mortgage-free for pennies on the dollar.
There are multiple ways you can profit from your auction purchase. You can sell it quickly at a discount, rent it out, or seller finance it to generate years of passive income.
If you’d like to learn how to reap huge rewards from tax delinquent property investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
Get started today by taking advantage of this Free Gift from Ted. Act now, it costs you nothing and will give you a big head start!
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.