Today I’m answering your question on how to find residual income.
I’m Ted Thomas, and I’ve been involved in real estate for more than 30 years. I specialize in a subset of traditional real estate that is an alternative to the traditional market, and it produces substantial residual income which I’ll cover.
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Residual Income Through Alternative Real Estate
My specialty is tax liens and tax deeds which are usually considered unwanted properties.
When I say unwanted, by definition I mean the owners of the real estate do not want the property and have failed to pay property taxes to the local county government.
When I discuss how to find residual income, I won’t define it like accountants or brokers do. I’ll define it like entrepreneurs and people in the business do.
I’m explaining it as a practitioner, in other words, as an investor. This is not a college class taught by a CPA or an attorney. The lesson is from a practical standpoint
Generating Cash Flow
In real estate, there’s always a place to make money for entrepreneurs. Think of residual income as cash flow after paying mortgages and property expenses. The key to success is always cash flow.
Many entrepreneurs and real estate people consider cash flow residual income, and I’m going to outline a process which you can use to create cash flow residual income for decades into the future.
Buying Real Estate for Pennies on the Dollar
As a practice, I follow and teach a system of buying unwanted property for pennies on the dollar and then reselling those properties for a higher price to make a profit.
To accelerate the sale, I will offer installment payments to the new buyer. The installment payments ultimately will create residual income.
Selling Property Quickly
Everyone is relatively good at buying. What I have noticed is that most investors suffer with the selling.
To sell a tax defaulted property, I discount below retail or comparable values, offering it below the competition to sell quickly and attract bargain hunters.
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You Make Your Money When You Buy
To answer the question about how to find residual income, my response is that I prefer to create residual income.
Entrepreneurs have the opportunity to make a bundle of money selling tax defaulted property because they actually made their money when they purchased. The process of selling merely allows them to collect the profits from the new buyer.
To keep this simple and easy to understand, this is a business that allows the investor to buy low then sell low and ultimately accelerate the sale to create residual income by collecting payments.
I call this developing/creating residual income.
Buy Low and Sell Low
For example, we buy property at auction with huge discounts from comparable prices. The county will discount 60%, 70%, or 80% or more below the tax assessed price.
And we, the entrepreneurs, sell at below competitor pricing to attract bargain hunters. Or simply said, we buy low and we sell low.
The documentation is all available from title companies. This is all perfectly legal and ethical, and the new buyer can live in the property almost immediately.
The property will be sold, and the buyer will enjoy ownership; however, they will not receive a deed or title until all payments are completed.
Investors using this program and strategy have a competitive advantage. They buy at below competitive prices and sell below competitive prices quickly.
Creating Residual Income Via Seller Financing
Banks have strict guidelines and credit standards and the lowest interest rates available. Because the rates are so low, the bank can restrict new borrowers and require them to qualify and stay within bank guidelines.
The objective for the entrepreneur is to create profits on the sale and also create additional profits on the financing. Those additional profits will be residual income for the seller.
Buying Tax Defaulted Property: An Example
Here’s an example:
- A property has a tax assessed value of $100,000.
- The county presents the property at a tax defaulted auction.
- Bidding at the auction starts at $5,000 which is the back taxes.
- The auction is open to the public, and the highest bidder gets the property.
- Highest bid is $20,000.
Seller Financing: An Example
Ted’s system is buy low and sell low.
The auction buyer, who is now the seller, announces the sale at $65,000 and advertises on Craigslist, Facebook Marketplace, eBay, the Multiple Listing Service, Zillow, and Trulia.
The seller hires a broker who aggressively attempts to sell.
A new buyer is attracted and offers a $5,000 down payment and requests installment payments.
The seller accepts the $5,000 down payment and proposes a contract installment sale of $800 a month for 10 years.
The buyer accepts.
Profit #1 – Sale Price
Let’s do the analysis:
- Selling price $65,000
- Purchase price at auction $20,000
- Profit $45,000
That was profit #1 from the sale price.
Profit #2 – Residual Income From Installment Payments
- First year payment at $800 x 12 months is $9,600 annually
- An installment contract of 10 years x $9,600 = $96,000
The residual income looks like this:
- Purchase price $65,000
- Total payments $96,000
- Residual income $31,000
The total profit is $96,000 plus the amount received for the down payment.
How to Find Residual Income: Conclusion
You can find residual income by creating it, and Ted has developed a proven system for generating residual income and quick cash flow with tax defaulted property investing.
At a tax delinquent property auction, you can purchase real estate for pennies on the dollar, then resell the property below market while still receiving a substantial profit. Combine that with seller financing, and you can profit even more.
If you’d like to know more about 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.
You can learn how to reap the huge rewards from tax lien and tax defaulted property investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!