In this interview, Ted explains how to start investing in real estate while reducing risks, minimizing costs, and eliminating headaches.
You may watch the video above, or if you prefer, read the transcript below.
The topics to be covered in “How to Start Investing in Real Estate” are:
- Become a Real Estate Investor and Build Wealth
- The Best Way to Get Started in Real Estate
- Begin Real Estate Investing With Tax Liens and Tax Deeds
Learn how to invest in bargain real estate and earn profits beyond your wildest dreams. Would you like to buy mortgage-free homes for pennies on the dollar? Or earn double-digit interest rates secured by real estate? Start now by taking advantage of this FREE Gift.
Become a Real Estate Investor and Build Wealth
A lot of people are confused about how to start investing in real estate. Real estate investing is a great way to build wealth over time, but it’s important to understand the different types of investments available and the risks involved.
There are many areas of the real estate business to choose from with some being more competitive than others, costlier than others, or riskier than others. For example, buying and selling houses in the traditional market is highly competitive, commercial real estate can be expensive, and rental properties can be challenging.
Issues like debt, negative cash flow, and ups and downs in the market are potential risks. However, there is a way to get started in real estate that greatly reduces the risks, the costs, and the headaches.
The Best Way to Get Started in Real Estate
A little-known type of real estate investment is tax delinquent property investing.
Tax lien certificates and tax defaulted property are subsets of traditional real estate investment, but they can be purchased at auction for pennies on the dollar. Let’s talk about the difference between tax liens and tax deeds.
Tax Lien Investing
Tax liens are a legal claim against a property for unpaid property taxes. When a property owner fails to pay property taxes, the county will place a lien on the property.
As an investor, you can purchase the tax lien, which gives you the right to collect the unpaid taxes plus a high rate of interest. Depending on the state where you purchase the tax lien certificate, the interest rate could be 16%, 18%, 24% or even 36%.
If the property owner does not pay the taxes within a certain period of time, called the redemption period, you get the property, and you get it without a mortgage. For beginners, starting with tax liens can be a low-risk, low-cost way to get into the game.
Tax Deed Investing
Tax deed investing is similar to tax lien investing, but with a key difference. The tax deed investor is actually buying the property itself, rather than just purchasing a lien on the property.
The bidding on tax deed properties begins at the back taxes, which could be 10, 20, or 30 cents on the dollar, making it possible to pick up real estate at rock bottom prices at a tax deed auction.
Begin Real Estate Investing With Tax Liens and Tax Deeds
Tax defaulted property auctions can be a great way for beginners to get into the world of real estate investing. They offer the opportunity to buy properties at a huge discount.
One of the key advantages of tax lien and tax deed investing is that it can provide a relatively high rate of return on investment. However, it is important to note that there is still some level of risk involved. So be sure to do your due diligence, research the properties and understand the rules before investing.
If you want to learn more about investing in tax delinquent real estate, view more of Ted’s free videos.
Ted is the authority on the subject of tax lien and tax deed investing and has been teaching students how to buy and sell bargain real estate for over 25 years.
Read the Transcript:
How to Begin Investing in Real Estate
Randy: Welcome, and thank you for joining us. I’m here with Ted Thomas who, of course, knows everything about tax lien certificates, tax auctions, and tax deeds. How many years, Ted, have you been doing this as a business?
Ted: You can tell by all of this hair I don’t have anymore. You can tell that I’ve been doing it for more than 30 years. I’ve been doing tax liens and deeds for some time.
Randy: I can vouch for that because I’ve seen videos of Ted with black hair, and hair down in front of his eyes and everything. Anyways, it’s good to see you again, Ted.
Ted: Thank you.
Randy: I thought today, let’s talk a little bit about how to start investing in real estate. Are tax defaulted property auctions a safe way to get involved in the real estate business?
Ted: People have been asking me for years, what’s the easy way and what’s a safe way of how to start investing in real estate? There are all kinds of things to do. It could be commercial real estate or traditional real estate, buy and sell houses. You could be in land or farm real estate. There are all kinds of things.
Ted (cont’d): I started in real estate more than 60 years ago, but I changed 30 years ago, and I made a dramatic change. I’ll tell all the audience why. I changed because I discovered tax defaulted property. When I discovered that, I discovered tax lien certificates and tax defaulted property.
Ted (cont’d): What was so great about that? It was nothing more than traditional real estate, except now I could buy it for 10, 20 and 30 cents on the dollar with no mortgage. They cut out the mortgage, and I can buy the property at auctions. So, I like tax defaulted real estate myself.
Randy: Well, it sounds pretty appealing when you put it that way, Ted. Let me ask you though, is the risk of doing tax defaulted property auctions less than other types of real estate investing?
Ted: All real estate has risk. In the real world, when you start borrowing money, you’re taking a risk. When you take on real estate, you have maintenance problems and things like that. So you take on risk. I like the tax lien and deed business because I pulled my risk way down. When I found out about it, I found out all the counties in the United States are selling tax defaulted property.
Ted (cont’d): There are 3,000 plus counties. When they sell a property, they’re selling it without a mortgage or deed of trust loan. It took all of that risk out of the deal. Now, all I had to do was look at the property. When you buy tax defaulted properties, they’re used and abused. They’re not brand new. Some are junk, and some are beautiful.
Ted (cont’d): But I can go and look at them. I can check it out, I’m not blindfolded. I can go and look at these properties. So I try to take the risk out because I want to get out of financial risk. Most people take on a lot of debt. I teach people to do this without a lot of debt.
Randy: It’s interesting because I know you talk about, I don’t want to give away your secrets, but it’s buy low and sell low, which is interesting. I don’t want to get off topic here, but I know you talk about tax deeds and tax liens. Would you recommend that a beginner, a newbie, start with tax liens first?
Ted: That’s an easy business. Tax liens are so easy. A local county will say to someone who didn’t pay their property tax, “Look, if you don’t pay the tax, we’ll put a notice of default on it. When you’re in default, then you can’t sell your property. You can’t mortgage it. You can’t do anything with it, and we’re going to sell your taxes to somebody else.
Ted (cont’d): I like to be the somebody else that buys that because if you pay someone else’s taxes, there’s no risk. If they don’t pay you, you get the property. Let me say that again. If you buy someone’s taxes and pay them, if they don’t pay you back, then you’re going to get the property. It’s the law in all the counties in the United States.
Ted (cont’d): So that’s a pretty low-risk investment. It’s a good place to begin for anyone wanting to know how to start investing in real estate. You can buy those things for $1,000 or $5,000. It’s a low-risk investment, not a lot of money involved. People buy a lot of them, and there are millions of tax certificates that people could buy.
Randy: Just to make sure the folks are clear, the difference between buying a tax deed and a lien, could you explain that really quickly? You were just talking about tax liens.
Ted: At an auction, you’ve got a number, a bidder’s card, you raise your hand up with the number in it. They’re going to call your number, and say, “Sold.” When you buy that certificate, you’re buying a piece of paper. That’s what it was. A piece of paper that simply says, “Ted Thomas paid the tax on this property, and you’re going to have to pay him back.” That property owner knows the certificate has been sold on the property.
Ted (cont’d): But when you go to an auction to buy a defaulted property, you raise your hand with the bidder card in it, and after the third time, they say, “Sold.” When they say that, you’re going to get an actual property. So you want to be smart. You want to have looked at the property. You don’t want to just go down and say, “Oh, I want that one.”
Ted (cont’d): You want to get boots on the ground. Walk over there. Look at the property. See what you’re buying. If it’s a falling down place, or it’s burned down, you don’t want that. But what if it’s a nice house? Well then, you want to buy that. You want to buy it at the lowest price you can. The starting bid is going to be the back taxes, so that’s going to be pretty low.
Randy: That’s not bad. It’s kind of a neat investment option that a lot of folks hadn’t heard about before, Ted, but then let’s stick with tax deeds and getting property. If I’m going to go to a tax deed auction, how much money do you need to start investing in real estate there?
Ted: This is not that low down real estate that you hear about. People get real estate that may not be as good as they like. They say, “I’ll sell it to you no down” because they just want to get rid of the headache. They want to get rid of the liability. If someone’s selling to you no down, they’re just getting rid of their liability, and giving it to you.
Ted (cont’d): I don’t want to buy any no down real estate. I want to go to the auction, and I want to get legally as cheap as I possibly can. What the government has done is they’ve simply said, “Look, this property owner didn’t pay the tax. That means the property owner forfeited their property.” Now the government’s got it. The government doesn’t want it either. What they do need is the property tax to pay the county employees.
Ted (cont’d): So you can start the bidding at $100 at a tax auction. Now, I didn’t say it was going to end there. It could go all the way up to $100,000 depending upon the property, but it could start at $100. I’m going to buy it as low as I can, and then I’m going to resell it. I buy it low, sell it low, and give the next guy the rest of the margin. Why not?
Randy: You make it sound pretty easy. I mean, theoretically it is. If I do have some dollars in my pocket, and I am thinking about buying a tax deed, as long as I have that money, would it be a good idea that I get myself somebody, a coach, to help me do this first?
Ted: Now you’re thinking. Someone must have prepped you on this. Because the successful people, well, everything in life is that way. Everything in life. You want to be a football player. Guess what, they’ve got coaches, right? They pay millions, but everybody wants to be good, you’re going to have to have someone teach you to be good.
Ted (cont’d): I’m a big advocate of coaching, but first of all, you need to start out with some basic foundational material. We have that. We teach people how to do that with basics. Then when you want to advance, what if you wanted to buy a $500,000 house? You never bought one that big, but what if you could buy it for 20 cents on the dollar? Whoa, $500,000 at 20 cents on the dollar. I’ll buy those all day long. I’ll go get my friends and gather up all the money I can. That’s a lot of margin, right?
Ted (cont’d): Well, you probably don’t want to do that on your first deal unless you have a coach looking over your shoulder saying, “Don’t do that. Do this.” A coach really makes a big difference. You couldn’t learn a language without a coach. How about when you learn the ABC’s. You had a school teacher. What’s the difference? It’s a coach, someone to help you. I’m a big advocate of coaching and education. It always seems that the educated guy at the auction does much better than the non educated.
Randy: Yes, I bet. Plus, we’ve talked before. Being at a live auction is pretty exciting. You can get caught up in that kind of thing. So it’s good to have somebody there who’s got a level head and has been there before. Ted, I know we have a video we can show where you can actually trail along and go to an auction, see what it’s like, and have a coach tell you what’s going on, right?
Ted: Each year we take dozens of people. Now, we can’t take dozens all at the same time. We’ll put five or six couples together, and they’ll go to the auction with the coach. They’ll go there two days ahead of time, so they can check out all the properties together. Then they can figure out what’s good and what’s bad.
Ted (cont’d): When they go to the auction, they can separate in different parts of the room and buy properties. That’s one of our most popular courses. People want to go to an auction and learn how to do it with someone that’s done it. It makes a big difference, big difference.
Randy: That’s really great. That’s like getting in a swimming pool for the first time and having somebody there to guide you through the laps and hold you up. We’ll see a video on that in just a minute. One more question for you, Ted, you can teach how to get into real estate investing; there can be a smart real estate coach to help me along. If I’m really serious about getting into this, what other professionals should I hire? A lawyer, a real estate agent?
Ted: I’ll tell you the first thing that you should absolutely do. If you’re watching this video, and if you’re just beginning and want to know how to start investing in real estate, the first thing a person should do is, every month I do a virtual seminar. The virtual seminar lasts all day on a Saturday. It starts at 11:00 and goes to 5:00. That’s the place for someone to start.
Ted (cont’d): It costs 47 bucks. That’s all it costs. They can watch all these other professionals and see how they did. That’s the easiest way to do it. I know you can afford $47, and that’s going to get a person started. Then they’re going to see, well, is this for them? Is this the kind of money that they want to make? That’s what I’d suggest. People that want to see coaches at an auction, we’ll show you that on one of the next videos that’s coming up.
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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.