In this interview, Ted talks about wholesaling real estate, what it is, how it works, and how you can make it work even better.
You may watch the video above, or if you prefer, read the transcript below.
The topics to be covered in “Wholesaling Real Estate – What is It and How Does It Work?” are:
- What is Wholesale Real Estate Investing?
- Pros and Cons of Wholesaling Real Estate the Traditional Way
- How to Wholesale Auction Properties
- Generating Quick Cash Flow From Wholesale Investing
Want to 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? Then you don’t want to miss this FREE Gift.
What is Wholesale Real Estate Investing?
Wholesaling real estate can be a way to make a profit, but it’s important to understand how the process works and where to find the best opportunities.
How does wholesaling real estate work? In a nutshell, wholesaling real estate is about finding properties that can be bought at a lower price than their market value and then reselling them to another buyer at a higher price.
A traditional real estate wholesaler will search for a distressed property that’s undervalued, lock it into a contract, then hunt for a buyer who will purchase the contract in order to profit from the difference, essentially earning what amounts to a commission or finder’s fee.
Pros and Cons of Wholesaling Real Estate the Traditional Way
Wholesaling real estate in the traditional sense certainly has its pros and cons.
Pros are reduced risk because the wholesaler hasn’t invested any money, and there is a potential profit to be made.
Cons are dealing directly with distressed property owners who may be volatile, scrambling to find a buyer quickly, no guarantee that the work will pay off, and a lower profit margin even if the wholesaler does manage to sell the property.
How to Wholesale Auction Properties
There is a much more profitable way to earn money from bargain real estate, and it begins by knowing where to find the best bargains.
A little-known way to find these opportunities is through tax defaulted real estate sales. These are county auctions where properties that have been seized by the government due to unpaid property taxes are sold at bargain basement prices.
Tax defaulted properties are sold with the bidding opening at just the back taxes and can literally be bought for a fraction of their market value.
In the United States, over 3,000 counties sell tax defaulted real estate, which can be purchased for 10, 20, or 30 cents on the dollar of the tax assessed value.
Additionally, mortgage and deed of trust loans are extinguished by the county, so the winning bidder gets the property mortgage-free.
Generating Quick Cash Flow From Wholesale Real Estate Investing
Once the tax defaulted property is purchased, the investor will then market the property to potential buyers, usually through traditional methods such as the Multiple Listing Service (MLS), Craigslist, or online real estate platforms like Trulia or Zillow.
The goal is to sell the property quickly, usually within a few weeks or months, to generate cash flow fast, or the property could be sold via seller financing to create a residual income stream.
Ted’s strategy of “buy low, sell low, and move on to the next property” is a tried and true route to financial independence. The profit margins from tax delinquent real estate investing are massive, and $25,000, $50,000, even $100,000 or more can be made from one transaction.
Tax defaulted property auctions are excellent places to find wholesaling opportunities. With the right knowledge and strategies, anyone can become a successful wholesaler in real estate.
If you want to learn more about tax defaulted 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.
If you want to have a free auction list of tax defaulted properties that are currently for sale, go to TedThomas.com/freegift. See the great deals for yourself.
Read the Transcript:
Wholesaling in Real Estate
Randy: We’re back here with Ted Thomas, America’s Tax Lien and Deed Authority. Hey, Ted, as usual, we’re here talking about different subsets of real estate investing. Today, we’re going to talk about wholesaling real estate. Why don’t we start with what wholesaling real estate is, and exactly how does it work?
Ted: This is not a wholesale house like you find a warehouse you could go to, and they’re selling low price or a clothing outlet or something like that. People’s perception of wholesaling real estate is they’re going to be able to get a great deal on properties.
Ted (cont’d): Now, my perspective comes from 30 years of working in the tax defaulted property business, where we buy properties for 10, 20, or 30 cents on the dollar. So you could say if we’re going to sell those, we could sell them at those kinds of prices.
Ted (cont’d): We could buy at, let’s say, 20 cents on the dollar, then add 20 cents and sell them at 40 cents on the dollar. We’d actually be wholesaling real estate because we’d be way below the tax assessed value.
Ted (cont’d): But there’s no big warehouse you go to, or no big websites where they’re just specializing in this kind of real estate because the people that get involved in this business are getting involved in tax defaulted real estate. They’re buying it at the right level, and then they use the traditional way to sell real estate, whether it’s Trulia and Zillow, some Multiple Listing Service or Craigslist, and they sell properties quickly.
Ted (cont’d): If you can buy a property right that would be buying it wholesale. It’s very difficult in a good market to buy properties right, because the regular market, it explodes. What happens is when everybody says, “Oh, there are great deals in real estate,” the real estate is going up.
Ted (cont’d): What they haven’t done is inspected and looked in depth at the market I’ve been involved in for 30 years, and that’s tax defaulted property, which has been around for 200 years. You can buy properties wholesale and sell them and call that wholesaling real estate. There aren’t a lot of people just selling wholesale real estate. That’s not really happening, but there are a lot of people that learn our business.
Randy: Just to be really clear, could you give us one concrete wholesaling real estate example?
Ted: Oh, sure. In essence, the public’s impression is that they’re going to go to the wholesaler, they’re going to go to Costco or BJ’s or something like that and get something at a low price. That’s the public’s view of this whole thing. There’s not a big company out there that does that. If you want to be a wholesaler, you’re going to have to find some method of buying properties at a low price. I’ll give you one right now.
Ted (cont’d): In 3,000 counties across the United States, properties are sold for just the back taxes, starting bid. Why are they sold? They defaulted on the property tax. These are used and abused properties. Sometimes they’re junk, sometimes they’re really nice, but they’re properties that the government is selling for 10 cents, 20 cents, or 30 cents on the dollar.
Ted (cont’d): Sometimes it will go higher than that. So they’re selling those properties. If you could buy a property for 10 or 20 cents on the dollar, let’s say it was tax assessed at $100,000, but you could buy it for $30,000. Well, you bought it wholesale. So now you could be wholesaling real estate.
Ted (cont’d): We don’t actually call it wholesaling real estate because we just go out and sell it in the retail market. By that I mean, we’re going to use the Multiple Listing Service or Craigslist, or we’re going to sell it on Trulia or Zillow. Or we’re just going to put big signs on the lawn and say, “For Sale. We’ll give you a great deal, sold cheap.”
Ted (cont’d): That would be a wholesaler. There’s no place like the wholesale mart when you’re buying clothes, you’re buying cars, or anything like that, that I know of. People are looking for wholesale real estate. What they really need to be looking for is tax defaulted real estate.
Randy: I know you know a thing or two about tax defaulted real estate because you’ve been doing it for like, 30, 40 years, Ted.
Ted: Right. This is my 30th year of tax liens and tax defaulted property. This thing is going to go on forever, folks. Tax liens and tax deeds have been around for 200 years. Anybody can do it. Once you learn how to do it, for just the back taxes, with the mortgage cleared and the deed of trust; they’re both cleared from the property before the government sells it. How about that? No mortgage, no deed of trust. I would say that was pretty close to wholesale.
Randy: I think that’s pretty nice. Ted, is there a tax lien or tax deed investing course that you offer so people can learn how to do this?
Ted: Yes, the people that want to learn how to do it can go to TedThomas.com/freegift. That’s a good place to start. We offer everything from 3-day workshops to 1-day, all-day workshops that are virtual. You can sit at home and watch, or you can actually go out and go to events. We offer a little bit of everything. The best bet for someone now is go to TedThomas.com and pick the one that you like.
Ted (cont’d): Most people start out by going to a virtual workshop. That means you can sit on your rusty dusty at home and watch a 6-hour workshop that tells you all about tax lien certificates and tax defaulted property. You can learn both of those in a virtual workshop. It costs $47. We’re not internet marketers; we’re business people. We actually teach you how to do it. So six hours for 47 bucks.
Randy: Sounds like a great deal. It’s a great chance for you to understand what Ted’s talking about and get into the feel of the whole thing. So check it out right now. What’s that web address, Ted?
Ted: They can just go to TedThomas.com/freegift
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.