The Profit Potential of Tax Lien and Tax Deed Investing
How can you make money on tax lien and tax deed investing, and which one has the greater profit potential? Today you will learn the answer to both of those questions.
Investing in tax delinquent properties can seem intimidating at first glance. You may not have the necessary knowledge to make the right investment opportunities come to life. We can help!
You may watch the video above, or if you prefer, read the transcript below.
The Difference Between Tax Deed and Tax Lien Investing
Although tax liens and tax deeds do differentiate, they are innovative and fantastic investment opportunities that you should not pass up!
Tax Lien Investing
Tax liens provide a relatively cheap investment for investors looking for a guaranteed return. Tax lien certificates are wealth without risk, meaning you invest directly with the county. It’s the county that ensures the return of capital and payment of high interest rates.
These certificates are a high-yielding passive investment that will put more money into your pocket. When you invest in tax liens, you are limited by the interest rate.
For example, Florida pays a maximum annualized return of 18%, and Texas pays up to 25%. You will not receive more than the maximum rate that the state pays.
Tax Deed Investing
Tax deeds usually have no limit on how much money you can make. When purchasing a tax deed, you are bidding on the deed to the property. The bidding begins at the back taxes, and the highest bidder wins.
The profit potential of tax deed investing is enormous. All the profit margin between the purchase price and the value of the property is yours, and you can purchase tax deed properties for 10, 20 or 30 cents on the dollar at a tax deed auction.
Tax Liens vs Tax Deeds: Which One Is The Better Investment?
There is no true answer about which option is better for you. It all depends on your investment opportunities and how long you are willing to hold out on waiting for a return on investment.
The difference with a tax deed is that you’re going through foreclosure to get the property at a lower price than its market value. The profit potential of tax deed investing is considerable, but the risk is greater as well.
You will spend more money on tax deed investing since you are purchasing the property, and you must know how to sell the property to collect your profit.
With a tax lien, interest and penalties are due when the property passes the grace period for late payment. 98% of the time the tax lien is redeemed, and you receive your profit. If that does not happen, then you will receive the property.
Tax liens are a low-risk, high-yield passive investment that are secured by real estate. The government guarantees that you will either receive your money back plus the high rate of return or get the property.
Learn More About Tax Liens And Tax Deeds
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Read the Video Transcript of How Can You Make Money on Tax Lien and Tax Deed Investing?
Randy: Hey, you’re thinking about doing some investing in real estate, and I’m sitting here with Ted Thomas right now. We’re talking tax liens and tax deeds. Ted is pretty much the authority on tax lien certificates and tax auctions and such. So Ted, what do you think? In terms of an investment and the kind of money you can make off these, can you make more money doing tax deed investing or tax lien investing?
Ted: Tax lien investing is for me. Well, and now I’ve got to explain it some. It’s wealth without risk. I mean, what you’re going to do with tax liens is you’re going to look one up. You can check the property out online, or go and visit it but you’re not going to invest with me. You’re going to invest directly with the county. Then the county is going to hold your certificate that you bought, or you can take it home with you.
Ted (cont’d): And if you take it home, you just sit it on your desk then sit on your rusty dusty. There’s nothing to do. It’s a passive investment. Now, when the people come in to pay, 98% of them come in, they have to give you back all your money. Let me say that again. They have to give you back all your money. You like that. You got a return of your capital and a high interest rate. That’s a no brainer.
Ted (cont’d): All right, now there’s the other side of the investment in half of the other states and half of the other counties. What they’re going to do is those counties did not get paid. Well, they’re not benevolent. They’re going to confiscate the property. They’re going to take the property away from the people and they’re going to auction it at a public auction. And whoever’s the highest bidder is going to get it. All right?
Ted (cont’d): So let’s say it’s a $100,000 property. And let’s say they started out at just the back taxes, maybe 5%, but people bid it up but you and I both bid against each other and I get it for 30 cents on the dollar. So if it was worth a hundred and I got it for 30 cents on the dollar, all of that margin goes to me.
Ted (cont’d): Now what I’m going to do is I’m not going to try to even get that margin. I’m just going to put it on the market for 50 cents on the dollar and grab that piece of margin and run. Why? Because all the fixer upper guys are out there. Everybody that knows about real estate they say, go paint it, put a white picket fence around it. You’re going to make a fortune.
Ted (cont’d): I don’t want to do all that work. So I’m going to buy it at 30 cents. I’m going to sell it 50 cents. That’s called buy it low, sell it low. Do I have a lot more risk? Absolutely. Because I had to spend more money to buy it, and then I have to make sure that I know how to sell it. Well, that’s what we do. We teach people how to do it. So we’ll put it on eBay, we’ll put it on Craigslist. I’ll go through that in another video later but you’re getting the idea.
Randy: So do you think, you know the risk aside and obviously there’s risk, do you tend to make more money with buying a deed versus the lien? And I guess that has to do with how quickly you make it or how quickly you can make it. What have you found in your experience?
Ted: Well, your question is perfect because with tax liens you’re limited. You’re limited in Florida. The most you can make on a tax lien is 18% annualized. Okay?
Ted: In Texas, the most you can make is 25%. You’re getting the idea. So you’re limited. Whereas if I buy a property for 30 cents on the dollar and I could sell it for 80 cents on the dollar. Woo!
Randy: Yeah, right.
Ted: Talking about making huge amounts of money. We actually teach people to make $25,000 and $50,000 on one deal. Now we’re a little early in our talk about this but that’s what we teach people. We say here let’s not even do this deal unless we’re going to make 25 grand or 50 grand. I don’t teach people to make nickels and dimes. I teach them how to make real money. They want to do that three or four times a year. There’s going to be no less than 5,000 options this year.
Randy: Wow. So, hey, there’s so much to learn about this and Ted’s got some great videos waiting at his website. Ted, where do they go to watch your great information?
Ted: Well, I’m glad you said videos. I didn’t mean to walk on your talk. There are videos of… we actually take people to auctions. So go to tedthomas.com, we show you the whole deal. We show it to you.
Randy: Very neat. I’m going to check it out myself. So, thanks for watching.
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