Are you wondering how to buy rehab property? This side of the real estate industry is definitely tough, so you have to know exactly what you’re doing!
Here are tips and tricks for making money on rehab properties from Ted Thomas, America’s Leading Authority on Tax Lien Certificates and Tax Deed Investing!
Today, I’m going to answer your question about how to buy a rehab property.
I’m Ted Thomas, and I’ve been involved in the tax lien and deed business for over 30 years. I started out as an investor. People asked me a lot of questions, and I told them what a great business it was.
How did I get in it? Well, I came from real estate, and then I found this business was not only very lucrative, but very few people knew about it. That’s how I got into this business, and I’ve been in it ever since.
These properties are profitable. A lot of people like to do fixer-uppers, so let’s talk a little bit about rehabbing properties.
This business works for everybody involved. It works for the county because they can sell tax liens and tax deeds, and it works for the individual that’s buying it.
If you buy a tax lien, then you get an interest rate return. However, if you buy a tax deed, you might find a rehab property that you’re going to do well with.
Tax liens and deeds have been around for about 200 years. I didn’t invent it. I’ve just been teaching about it.
If you’d like to learn how to earn lucrative profits in real estate easily, painlessly, and safely, you can get started today at no cost by taking advantage of my FREE Master Class.
WHERE TO FIND A REHAB PROPERTY
We’re talking about rehab property today. These properties come from tax defaulted auctions. They come from foreclosures. They’re found in all kinds of markets.
For example, there are parts of the market that are in the country club and parts in the regular subdivisions with good properties and bad properties, but there are a lot of tax defaulted properties and foreclosure properties.
REHAB PROPERTY AT BANK FORECLOSURE AUCTIONS
The foreclosures outnumber the tax defaulted properties by the hundreds of thousands.
Every county and every city will be having bank foreclosure auctions every single day of the year, and the sheriff will be selling those properties.
Some of them are out in the country club, and some are just in regular subdivisions, but believe me, there’s a lot of rehab property for sale.
The difficulty with foreclosures is that the starting bid at the auction is usually something very close to what the mortgage amount was.
It’s much different in the tax lien and tax deed business, and I’ll explain that soon.
THE REALITY OF REHAB PROPERTY
What is a rehab home, really? How much does it cost to rehab a house?
The fixer-upper TV shows are talking about this all the time. They start out with a mediocre property at best, and they make it into a mansion in about 29 minutes on television.
However, I wrinkle my nose up when I watch all of that. Why?
Because what I’m looking at is a pretty woman and her partner, maybe husband or business partner, and they’re rehabbing a property.
These guys have drills and hammers, and they’re knocking down walls. They’re hammering on the roofs, and there’s dust and dirt flying. Sometimes they’re fixing concrete, and sometimes they’re replacing beams in the ceiling.
They’re doing a lot of work!
They’ll start out with a property that’s not too pretty, and they’re going to try to make it into something good. They do all of that, but that’s a very expensive, time-consuming business.
THE BEST WAY TO BUY REHAB PROPERTY
I can tell you right now the best way to buy rehab property is absolutely as cheaply as possible.
People buy these properties with only a few thousand dollars potential profit, and they don’t make money because fixing property up is not very easy.
Every county in America, and there are 3,000 plus, will be having foreclosure auctions right now. That means there are going to be plenty of rehab properties out there.
I know what you want to do. It’s the dream like you see in the before and after pictures with a beautiful house on the left, and then it becomes even more beautiful on the right.
Is it worth rehabbing a home? Well, it’s an expensive process. If that’s what your business plan is, you’re in for a lot of surprises. This is not a business to be in if you can’t handle surprises and don’t have enough money.
REHAB PROPERTY FROM HUD
There are tons and tons of foreclosures.
HUD, Housing and Urban Development, has thousands of properties that people abandon or didn’t pay the mortgage on, and you can buy those properties.
In most cases you can get loans on those properties from the government, and in many cases, they’ll include money to do the rehabilitation. So, there are hundreds of thousands of those properties available.
Government foreclosures are not something that you’re going to be timid about. You’re going to have to be aggressive to get those properties sold. However, they do come with financing; that’s the best part of the whole thing.
FINANCING REHAB PROPERTY
Let’s talk a bit about how to finance a rehab property. Financing is always a challenge with real estate. If you don’t know how to develop money, you need to learn how.
Every county will have grant programs. Every county will have some kind of financing for people who can’t afford it. The point is you need to start investigating those.
So, the government has a lot of properties, and a lot of programs. I should say that will help you out, but I don’t want you to be under the impression that it’s going to be a piece of cake.
I said earlier finding a rehab property will not be a problem because every county will be having at least a sheriff’s sale or a trustee sale this week because there are thousands and thousands of these foreclosures.
You’re not going to have the ability to redo some of these properties. Some just have to be bulldozed. So, don’t think just putting a little paint on the house and patching it up is going to work.
This is a tough business. It’s not an easy one. It looks easy when you see it on television, but it takes a lot of money.
CHOOSE REHAB PROPERTY CAREFULLY
Recently the markets have opened up, and a lot of this is done online now.
If you don’t have boots on the ground, and you haven’t seen that property, I’m going to tell you that you’d better be very, very cautious. This is the kind of business that you have to take a microscope to look at it.
In this case, I’ve got a magnifying glass showing you, but you’ve got to really look at these properties and be very, very careful. You don’t want to jump into doing foreclosures or rehab properties unless you know what you’re doing.
Can you find them? Yes, there will be plenty of foreclosures from the banks and plenty from the government. There are always going to be foreclosures.
The HUD properties are the easiest ones to find major lists on; they’re in every county.
REHAB PROPERTY AT TAX DEFAULTED PROPERTY AUCTIONS
What are you going to do with a tax defaulted property? This is a whole different ballgame.
There are going to be about 5,000 tax defaulted property auctions this year, but in comparison to the mortgage foreclosures going on every single day and with every sheriff doing it, this is altogether different.
At a tax defaulted property auction, we’re going to get properties not for the mortgage amount. We’re going to get them for just the back taxes. So, this is a whole different ballgame.
I’m sort of switching gears on you here because if you’re going to get rehab property, this is the place to get it.
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REHAB PROPERTY AT BARGAIN PRICES
Tax liens on properties and tax defaulted properties are sold at auctions, however the starting bid is considerably lower. When I say considerably lower, these properties are being sold for the back taxes without a mortgage.
Let me say that again. At back taxes without a mortgage.
I’ll give you an example.
FORECLOSURE VS TAX DEFAULTED AUCTION PRICES
Let’s take a $150,000 property that comes up in a bank foreclosure. It might have a $100,000 loan on it. If it has a $100,000 loan, that’s where the bidding is going to start.
So, if it’s worth $150,000, and you have to start at $100,000, you’ve got $50,000 in margin there. I think that’s a little bit too tight if you’re going to do a lot of fixer-upper work.
Now, let’s look at that from an altogether different perspective.
The table above on the left shows a bank foreclosure at a $150,000 value. The mortgage is $100,000, and the starting bid is $100,000. That doesn’t leave you much room
Now let’s look at a tax defaulted situation where the property value is the same, except now you’re going to get a starting bid of $10,000. That’s going to make a lot of difference!
I don’t know that you’re going to get the property for $10,000, but it’s sure starting out a lot lower. So you’ve got a lot more room to work.
Let’s say you went to a tax defaulted property auction, and you could buy it for 25 cents on the dollar. Well, it’s going to be pretty easy to figure out that that’s $37,500.
GET A BIGGER PROFIT MARGIN ON REHAB PROPERTY
The point is you’re getting it for a lot less money than you would if you paid $100,000, and now you have some room to work and a lot of room to be able to sell that property.
I wouldn’t try to sell it for $150,000. I’m just going to sell it for $75,000, and I’m still going to be able to make money. The point is to look at the math. I’m just giving you an example.
Is every deal like that? Now look, I’m not a CPA; I’m not an attorney. I’m just giving you examples so that you get the idea.
I believe in buying them low and selling them low.
If I got a property that had a value of $150,000, I would try to sell it at much lower than that to sell it quickly and not have to hang around. I’m going to try to get it at a low price, and then I’m going to resell it at a low price.
At HUD auctions, there are going to be ton of them. At regular foreclosure auctions, there are also going to be a ton of them.
HOW TO SELL REHAB PROPERTY QUICKLY
So what is our question that’s on the table today?
The question I’m answering today is about buying rehab property.
You can buy all you want at foreclosure auctions, regular auctions, HUD auctions, and VA auctions. I can go on and on about all the different kinds of auctions. However, I prefer to look at tax defaulted auctions, and here’s why.
Because I can get such a low starting bid that I don’t have to worry about selling. I’m more concerned about selling than I am about buying.
If I know I can sell it, then I know what I can buy it for. It’s a different way to look at the market, but that’s why we stay in business and don’t go broke.
It’s very hard to fix up properties and stay in business for more than a couple of years.
AN EXAMPLE OF A GREAT DEAL ON REHAB PROPERTY
I’ll give you another student example and show you exactly what happens if you can buy the property right.
I’m not forecasting. I’m not speculating, and I’m not expecting you to do any of those things either.
We’re going to have a look at what Doug did. Doug paid $61,000 at an auction for this property.
Was it the greatest property in the whole world? No, but the market value was $168,000. So, does he have some margin? Yes, he certainly has some margin.
Is that the cheapest and the best deal in the market? I don’t know, but he got it at auction for a very nice price.
He’s got some margin, so if he sells the property, he makes $25,000 or $50,000. I’m sure he would be happy, and so would you.
There are going to be some people who are going to hold out for top dollar. I get that, but that’s not me. When I teach my students, I say buy it low, and sell it low.
He didn’t get it for 10 cents on the dollar, but he did get it for around 30 cents on the dollar.
If it’s making sense to you, then you’re starting to see that there are a lot of ways to buy a rehab property, and this is just one of them.
REHAB PROPERTIES AT TAX DEFAULTED AUCTIONS IN CALIFORNIA
California has a lot of counties. Each one of those counties is going to be having a tax defaulted auction every year.
Sometimes there will be a thousand properties at one auction. Other times, in the counties with low populations, there will only be a few properties.
The point is these are tax defaulted properties. When we start at the back taxes, it’s a very different deal than buying at a HUD auction or a real estate foreclosure auction. It’s just a different ballgame.
CONCLUSION
We hope you learned a lot from Ted’s lesson, “How to Buy a Rehab Property for 10, 20, or 30 Cents on the Dollar.”
If you’re in the market for a rehab property, while there are many venues to purchase one, not all are equal.
Sure, you could pick up a rehab property at a foreclosure auction, regular auction, HUD auction, or VA auction, but nothing beats the bargains found at a tax defaulted property auction, also called a “tax deed auction.”
At a tax defaulted property auction, you could buy a rehab property for pennies on the dollar. On the tax delinquent properties sold at these auctions, the bidding begins around the amount of the back taxes owed, and the mortgage is wiped out.
For example, at a bank foreclosure auction, the bidding would start at the amount owed on the mortgage, which is generally much, much higher.
Conversely, back taxes tend to only be a small percentage of the value of the property, leaving you with a much larger profit margin on a rehab property purchased at a tax defaulted property auction, and you get the property without a mortgage!
Also, you can pick up a rehab property so inexpensively at a tax defaulted property auction, that you may not even need to acquire financing to purchase it.
Tax defaulted property offers a lucrative profit potential, and the high profit margins make it easy to discount your purchases to sell them quickly.
Fixing up a rehab property is hard work. It can be expensive and take a lot of time. This is why Ted Thomas prefers to buy it low, sell it low, and move on to the next property without spending a lot of time and resources on fixing it up.
Why spend months fixing up one property when you could buy and sell a few properties in the same amount of time, and do it without even breaking a sweat, using Ted’s buy low, sell low method?
Why pour money into rehabbing properties when you could be creating massive cash flow from buying low and selling low for a quick sale?
If you’d like to learn how to vet and buy rehab properties at the lowest possible prices and sell them fast with the least amount of headaches, Ted Thomas can show you how.
For over 25 years, Ted’s been teaching students how to do this successfully. Ted Thomas offers full support and a complete training with home study courses, Q&A sessions, live tutorials, workshops & web classes, and personal one-on-one coaching.
Ted is so confident in the system that’s made him and so many of his students wealthy that he wants to give you the opportunity to see it for yourself today for FREE!
Learn the secrets of making money in real estate previously only known to the one-percenters with Ted’s FREE Master Class. It costs you nothing and only takes about an hour of your time. You can change your life today, so why wait?
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