TAX SALE INVESTING
In Tax Sale Investing Made Easy, Ted goes into detail about the auctions themselves. Should you attend a large or a small auction? How much money would you need? What mistakes do you want to avoid? Ted Thomas, America’s authority on tax liens and tax deeds, answers your questions about tax sale investing.
Watch the video above or read the summary below:
Tax sale investing can be easy if you’re knowledgeable and utilize the right strategies.
I’ve been involved in the tax lien certificate and the tax defaulted business for a little over 25 years, and today I’m going to show you how tax sale investing can be easy.
I’ll cover a couple of other things too, so you’ll have some ideas. I’ll talk about tax liens and tax defaulted property and deeds. Also, I’ll show you some mistakes that you just don’t want to make.
So let’s get going. How can tax sale investing be made easy?
If you’re going to buy tax lien certificates, you can buy those certificates and earn 16%, 18%, 24%, all the way up to 36% interest.
However, if you’re reading this, I’m thinking you’re really after tax sales where they sell the property. The official name for that is tax defaulted property, and all the counties across America sell tax defaulted property.
TAX SALE INVESTING IN BACK TAXES
All private property is taxed. Why is it taxed? Well, that’s what keeps the government going.
Actually, every property is taxed, except for schools and churches. Otherwise, the property is taxed, and when it is, that’s the money that runs the government.
What happens is the legislature of the state creates a tax entity, and that tax entity is called the county.
The county has a treasurer who has the job of levying the taxes, collecting the taxes, and then finally, if you don’t pay the taxes, they confiscate your property, or they sell a tax lien certificate.
So all owners of property are required to pay tax. The money is collected by the government, and the money is usually in the 1% to 2% range. For a $100,000 property, you could estimate about $1,000, maybe $1,500, in taxes each and every year.
If the property owner doesn’t pay the property tax, one of two things is going to happen:
- They’re going to sell the tax lien certificate, or
- They’re going to sell a tax deed.
What happens before they sell the tax deed is the county comes along and says, you haven’t paid your taxes. They send you many notices, many notices. Some of them are even delivered by the sheriff.
If the tax isn’t paid, then they go out and they confiscate the property. They seize the property, and then what do they do with it?
They sell it at a public auction, and they use the revenue they made to pay those back taxes.
It’s not some local person selling this property. It’s the state telling the county, you must sell this property, collect the taxes, and pay it; make sure everybody pays taxes.
What happens to all that money that they collect? Well, that’s what pays the police, the fire department, some money for the hospital. That’s how all the schools get paid. I’m sure you’re getting the idea.
TAX SALE INVESTING IN TAX DEFAULTED PROPERTY
We have tax lien certificates, and we have tax defaulted property. Tax deed means tax defaulted property.
There’s nothing benevolent about collecting these taxes. They are going to collect the tax. So if you don’t pay your tax on a property, they will sell it.
How do you as a buyer doing tax sale investing make out?
Well, you make out very well because when the county seizes the property, they take the money out that they need to pay the bills. Then when they sell the property, they usually sell it at very close to the back taxes.
Let’s say it was a $100,000 property, it would probably be for sale for $5,000 or $10,000. That doesn’t mean you’re going to get it for that because there are going to be other people who show up at the auction.
Additionally, when they sell the property, it has no mortgage on it. Now you’ve got a $100,000 property with a starting bid of $10,000. You can see there’s a lot of margin in there. So that’s a beautiful thing.
A tax sale could be a tax lien certificate auction, but today we’re talking about a tax defaulted property auction where you would get a tax deed.
TAX SALE INVESTING AT AUCTIONS
There are 3,000 counties across America. That’s plenty of counties, let me tell you. All of those counties will have at least one tax defaulted property auction every year, and some of those counties will just do it every single month.
For example, I live in Florida, and I know that in Orlando, that’s Orange County, they have an auction about every 10 days, or every two weeks, for whatever properties they have confiscated.
In a place like Miami, they’ll wait until year end. At the end of the year, they might sell 150 or 200 properties. So that would be a big auction.
The little auctions are kind of easy because you can go there and watch, and it would be something you could take in yourself on a regular basis.
So, you’re going to have some small auctions. By that I mean, just a few properties where only a few bidders will show up, or a big auction where hundreds of bidders will show up.
For example, I’ve been in Los Angeles many times. They’ll have over a thousand people at the auction, but they might be selling 2,000 properties just in that county. I’m not talking about the state; I’m just talking about Los Angeles County.
What’s happening to all this money? Well, the county has to fix the roads. The county has to pay for the court system. The county has to pay the school teachers.
All this money that’s coming in is really the lubricant that keeps the government going. The wheel’s turning all the time. What keeps it turning is that money that’s coming in.
The state requires the treasurer to do that work: Levy the tax, collect the tax and confiscate the property. The money comes in when they sell the property, and that pays the county’s bills.
KNOWLEDGEABLE TAX SALE INVESTING
How do you make out? Well, tax sale investing is really easy if you show up at the sale and buy the right property.
Now, do I suggest you just walk in the door and start buying? No. I would suggest you get educated.
You want to know how much the property is worth. Research the records on the property. Make sure there are no other liens on it.
You want to make sure that it’s resalable, be sure of the condition, and so on. All of that’s going to take a little time for you to learn some of those things.
You can go to these auctions. They’re free. They don’t cost anything. You can show up there and watch and watch and watch. If you want to do it that way, you could do it that way. The average person could learn this on their own.
How long would that take? Probably a year and a half to two years to learn it. Or you can come to a class, and we can teach you a much easier way to do that. Tax sale investing can be made easy.
Is it better to start online or offline? I can go in the room and get a sense for it. At the small auctions, where they’re only selling 25 or 50 properties, you’d get to see a lot.
More than likely, the auction would be conducted by a county employee. Someone from the County would get up from their desk and come out and auction off properties. That happens all the time.
At the big auctions, and if it’s a live one, they’re going to have an auctioneer. They’re running that price up as high as they can get it, so they can get as much money. That one’s going to go so fast, you’ll have trouble keeping up with it.
It’s up to you, which one you like the best, but I’d definitely go and watch auctions online and offline.
HOW MUCH MONEY DO YOU NEED FOR TAX SALE INVESTING?
For tax sale investing, what’s the minimum amount you may need in a tax deed auction where you’re trying to get the property?
Well, certainly don’t go there with $5,000 and expect to get a million dollar property. That’s not going to happen. There are going to be other people at the auction, and they’re somewhat competitive.
The educated buyers are the ones that always make all the money at these auctions.
Here’s the point. You can go with a small amount of money. But if you only had $5,000, and if you could buy for 10 cents on the dollar, the biggest property you’re going to buy is something valued at $50,000.
What’s $50,000 in Modesto, California? It’s probably a driveway.
What’s $50,000 in the South side of Miami? Well, that’s probably a little two-in-one that was built 80 or a hundred years ago that’s got the roof sagging in. So it’s going to be different in every part of the country.
There are plenty of properties. One thing about this business is it’s a business of abundance. There are always too many.
TAX SALE INVESTING MISTAKES TO AVOID
There are two big mistakes that you need to learn to avoid.
Mistake number one is do not buy any property that you haven’t looked at. Now when I say looked at, that means looked with your eyes or had your boots on that property so that you know what you’re buying.
There are people that will buy and not know what they bought. More than likely, they’re going to be very disappointed when they get there.
Maybe there was a big wind storm or a hurricane that blew the property away or flooded the property. Or maybe there was a fire. Any one of those things could happen.
So don’t buy anything that you haven’t seen.
The second biggest mistake, and this happens all the time, is we have many people that are eager at the auction. They’re eager; they’re excited; they’re committed. They want to make money and make this thing work.
What they do is maybe someone else bought the first property and paid a little bit more than they could afford. So now they see a second one on the list, but they haven’t looked at it. They haven’t established an exit strategy.
Don’t buy a property if you don’t know what you can sell it for. If you paid too much money, how are you going to sell it? It happens every single day at auctions. People are buying things that they’ve never seen.
You’ll go to the auction and have someone in the row where you’re standing say, “Okay, Gladys, let’s go see what we bought.”
Well, that’s insanity. They don’t know what they got. What if they bought a sewer?
What if they bought a property next to a chicken farm? Or maybe a pig farm or something like that. How would you like that?
You don’t want to do that. You want to make sure that you’ve looked at it and have an exit strategy for that property.
Tax sale investing can be easy if you do your research and use the right strategies. Always have an exit strategy, and don’t buy any property you haven’t seen.
Your need to do your homework on the auction rules and the properties themselves before you even place a bid. The amount of money you have available for tax sale investing also plays a big role in your strategy.
Since you can attend an auction online, you can choose where you invest. So where do you go?
If you’ve got a lot of money to put into tax sale investing, the world is your oyster. But what if the amount you’ve set aside for tax sale investing is more limited? Then what do you do?
In that case, you’re better off choosing an auction in a state where the property values are lower. That way you can get more for your money.
Now, you could learn about tax sale investing on your own, attend auctions and observe, but it would take a lot of time. You’d need to attend several auctions, large and small, online and offline, to even begin to get a feel for it.
Sometimes the auctions move so fast, it’s hard to keep up, making it difficult to absorb it all.
I can teach you about tax sale investing much faster; it’s something I’ve been teaching for over 25 years.
Since I said I’d make it easy for you, what I’m going to do now is give you a gift. I have a home study course in tax sale investing that I think you’ll be delighted with.
The course teaches you the secrets of tax lien certificates and how to make big profits in tax foreclosures, also called tax deeds, like we’ve talked about. It’s valued at $197, but for you, it’s FREE.