Mark Ferguson: Podcast 65 Investing in Tax Liens With Ted Thomas

Posted on Sep 14 2016 - 4:20pm by Lance Edwards

 

ferguson-new

Tax lien investing is one thing I have never done. I have kept busy with flips, rentals, and running a real estate team. However, After my interview with Ted Thomas on this weeks podcast, I am considering learning more about tax liens myself. Ted has been an expert on tax liens for decades and seen the industry change over the years. Ted has also been a very active investor for decades buying commercial, and residential rental properties. After decades of investing Ted loves to buy tax liens because of the incredible deals he can get on them. Ted discusses on the podcast how to earn great returns with tax liens (up to 24 percent interest) and how to buy properties at steep discounts (40 cents on the dollar).

 

 

Listen to Podcast 65:  How to Invest in Tax Liens Across the US with Ted Thomas

 

How did Ted Thomas get started investing in real estate?

ted-thomasTed was an airline pilot in early 1980’s, but knew he wanted more out of his life than working for someone else. He got the real estate bug and bought commercial office buildings in the the 1980’s. He did very well for himself until the real estate crash in 1986, when he virtually lost everything he had. Instead of start over in another field or try commercial real estate again, Ted decided to invest in real estate differently. He discovered tax lien investing where he could buy properties extremely cheap and sell them without being exposed to market ups and downs. Over the last 30 years, Ted has perfected his tax lien investing strategy and teaches others how to do it as well.

What are tax liens and how can you buy them?

Just about every property in the United States has property taxes that must be paid to the government. The taxes pay for schools, roads, and other local government. Some states have higher taxes than others, but the government makes sure they always get paid. When a homeowner stops paying taxes, the government will place a lien on the property that is in first position. First position means that lien supersedes any other lien on the property, even a mortgage. The reason banks escrow property taxes and insurance into your mortgage payment is because they want to protect their position in the property. They require insurance, because if the home burns down they want to make sure the homeowner can rebuild or pay off the mortgage. The bank makes sure the taxes are paid, because if they are not and the government sells the property at a tax lien sale, the banks mortgage gets wiped out.

Tax liens have been a very safe investment because the almost always get paid off with interest. In some states, properties can be bought very cheap at tax lien sales.

Where does Ted buy his tax liens?

Ted has bought tax liens in 25 different states. Every state has different guidelines for how tax liens are sold, what interest is charged, and how properties are auctioned off. In Baltimore you can receive as much as 24 percent interest on tax liens, in Florida you can get 18 percent, but in Colorado you may only make 9 to 12 percent. In some states they have absolute auctions for properties that go to the tax sale, but in other states you may have to buy multiple liens for years to ever get a home. Ted has figured out where the best states to buy properties and liens are.

How can Ted Thomas buy tax liens in 25 different states for 40 cents on the dollar?

One of the great things about the world we live in is technology. Thanks to the internet, many tax liens can be bought through online auctions. Ted had bought a tax lien in Michigan while he was in Florida right before we did this interview. Ted likes to sell his properties very quickly after buying them to other investors. He has to get amazing deals on his tax liens since he is buying from out of state and selling off market. He has learned the best markets to buy in with the most favorable tax lien laws.

How can you contact Ted?

Ted not only buys tax liens himself, he helps other investors buy them as well. He has many students across the country who he helps buy tax liens in their own state, or in other states like he does. His goal is to have everyone of his students making at least $100,000 from tax lien investing in their second year in the business. After learning what he does and how cheap he can buy properties, I am going to look into the business myself! You can find out more on Teds program and contact him here: Ted Thomas.

Reminder about my sale on InvestFourMore

My sale is running until Friday the 9th on all my products in the store and on my Amazon Kindle and Paperback books. You can get more information on the sale here.

 

[INTERVIEW TRANSCRIPT]

 

[00:00:58.7] MF: Hey everyone, it’s Mark Ferguson with Invest Four More and welcome to another episode of the Invest Four More Real Estate Podcast. Today, I am super excited to talk to Ted Thomas who is an expert on tax liens. I’m excited to hear about what Ted does because I do my flips, I have rental properties, I am a real estate agent but I don’t know a whole lot about tax liens and how to invest in them.

 

So Ted thank you so much for being on the show. How are you?

 

[00:01:23.6] TT: Well, thank you. I am doing fine and we can just roll with it as you like.

 

[00:01:28.1] MF: All right great. Well Ted, I always like to hear about how people got started in the business. Obviously, you’ve got a unique place with tax liens but how did you get started in real estate?

 

[00:01:37.4] TT: Well, first I started by my first career I was an airline pilot. So that was a good career but when I found out that you could get in business and make a lot more money than you could as an airline pilot, I said, “Whoa I can?” So I actually resigned from the airlines and I started a business of buying investment properties. By that I mean, larger private properties, 200 units, that kind of thing and also office buildings and I did that in the San Francisco Bay area.

 

So that was my start to it but all starts don’t work perfectly and that one did until 1986 then we went through a huge recession and when we did, the commercial properties dropped in value 60 to 70%. Very similar to what happened in 2008 in the residential market and it crashed and we lost all the money. So then I had to start over again, so that was not as much fun. That’s when I discovered tax liens certificates and tax defaulted property and I have been doing that ever since then.

 

[00:02:31.4] MF: So you have been in this business quite a while then and seen quite a few ups and downs I’m sure.

 

[00:02:36.3] TT: I’m the senior citizen guy of the business. You know, I have been around for a long time, I’ve got a lot of gray hair and a little tummy on the front.

 

[00:02:42.6] MF: Very cool. Well, my dad was an agent and in ’78 he started. So I grew up around the residential side so I’ve been around a lot too and I always thought, “I’m never going to do that when I grow up,” but here I am.

 

[00:02:55.8] TT: Yes, yeah. Well good for you. But you know what? When you think of careers, the beauty of it is, it’s never boring whereas a lot of people have jobs where they have to do the same thing all the time. So we’re lucky that we have all these ups and downs and think of the learning curve that we’ve been through over these past 30 years.

 

[00:03:11.9] MF: Oh for sure, I wouldn’t trade it for anything that’s for sure.

 

[00:03:14.2] TT: Yeah, right.

 

[00:03:15.2] MF: Cool Ted, well what attracted you to tax liens and how did you get started in that business?

 

[00:03:19.7] TT: Well what actually takes place is every property in the United States, it doesn’t matter whether it’s an office building or whether it’s an apartment house or a shopping center, whatever it might be, is taxable and that’s, of course, called property tax, which you know because you’re an agent. But a lot of people don’t really understand that they’re going to have to pay like a wealth tax of the property when they own it and so I found out that if people went in defaults, and I found out by accident.

 

I found out and I’d heard people talking about it but nobody really knew enough about it. They don’t teach it in real estate school and they teach it to attorneys, they teach it to bankers but they don’t teach it to the regular people that are doing commercial real estate or residential and I found out that you can go in places like Baltimore, Maryland and you could buy a certificate, a tax certificate and you could earn 24%. So first let’s explain what that certificate is.

 

Same thing takes place in Colorado and half of the other states, but basically what happens is if the property owner doesn’t pay their tax, what will happen is the local government will issue a certificate. Now the certificate is nothing more than a piece of paper that would come off your printer of your computer and it’s just a certificate that says, “This property hasn’t a tax of X,” $2,000 or $5,000, whatever it might be and you can actually pay someone else’s taxes.

 

And so across the country now, there’s millions of these certificates because there are millions of people that don’t pay their tax and so you can buy the certificate and pay someone else’s taxes and sooner or later, they’ll come in to pay. 98% of people will come and pay it because they don’t want to lose the house just for back taxes. When they come in to pay, Baltimore they paid 24%. Here in Florida, they pay 18%, places like Phoenix, Arizona they’re going to pay 16%.

 

So you could really earn a really generous rate of return on a tax certificate. So that’s what attracted me to it and it’s a very low-risk certificate because it’s the first priority lien on the property. Most people think it’s the mortgage or deed to trust is the first lien. Actually, the taxes is the first lien and you buy the tax lien from the local government. So that’s probably a little bit more than you want to know in the first big, deep breath, but that’s how the business works.

 

[00:05:26.0] MF: Yeah, that makes sense. The government always wants to get their money first before anybody else.

 

[00:05:30.2] TT: Right. Right, so if they don’t get it, they sell a tax certificate and you and I can buy as many as we want. They sell them in half of the counties in the United States.

 

[00:05:40.3] MF: Right, yep. I have heard of tax lien certificates being sold, I’ve just never really researched it too much or looked into it. I know I see these programs advertising how you could buy a house for $1,000 using tax liens and like you said, I think that’s pretty rare that whatever happens but it sounds like the investment is in the interest you earn.

 

[00:05:58.2] TT: We could do two sides of it. There are two businesses there. Half of the states will sell tax lien certificates and the other half of the states will sell the tax defaulted property. So let’s use two examples. Let’s choose Colorado for one. Colorado is a state where if they don’t pay the taxes, they issue a tax certificate and so you could buy that certificate and you could earn an interest rate. It’s a little low in Colorado but right now anywhere from nine to 12%. It just depends upon what the Fed fund rates are. But there’s other states that pay a lot more than that but that’s just a tax certificate.

 

But over in Kansas for example, right next door, if you don’t pay your taxes there, what the government will do is they won’t issue a certificate. They will actually confiscate the property and then sell it for the back taxes and so half of the states just confiscate the property and sell them for the back taxes and it’s an open-bid auction. Anybody can buy at those auctions. So if you think of the whole United States, this round number is a 100 million properties and about 3% of local owners default every year. So it’s going to be three million of those every year. It’s a big business, really big.

 

[00:07:02.0] MF: Wow, now in those states do they just have to be one year behind? I’m sure it varies in each state, but is there a certain amount of time before most of them can take the property back?

 

[00:07:10.8] TT: Actually, that’s a really good question. Every state is different and every county could be different. So you could be in one county, and they do it one way and charge a different interest rate and so on. Like in Baltimore City they pay 24%, whereas the next county over they only pay 16%. But generally speaking, the legislature of the state makes the rules and it’s not a complicated business. When we first talk about it like now, it sounds like it is. It’s really super simple. It’s been around for 200 years. It was invented when people couldn’t read and write. That’s how simple it is. It’s really simple.

 

[00:07:44.0] MF: Right, very cool. Okay. So I know you have mentioned a little bit, but has it changed over the years how tax liens have progressed? Legislation, the government I’m sure they’re always trying to change things.

 

[00:07:54.6] TT: Yeah, what happens is that the local counties are desperate for money. So they’re going to do everything that they can to put those properties that aren’t paying taxes, they want to get them back on the tax rolls. So let’s take a place like Florida, Orlando where people would know Orlando is right in the middle of the state, they all have a tax defaulted auction every three weeks. I mean it’s that often, it’s just that people don’t know about it and they don’t know to go to the auction.

 

So there are a select few people that know about them and read about them and understand them. They’ll go to those auctions and they’ll buy properties for 20 cents, 30 cents. I went to an auction this morning even though I’m in Florida and went online in Kalamazoo, Michigan and there were probably selling for 30 and 35 cents on a dollar. So a $100,000 for $35, 000 with no mortgage on it, that’s a pretty reasonable price.

 

[00:08:42.4] MF: I think so.

 

[00:08:43.5] TT: Yeah, well in the old days when I started, which is 25 years ago, you really could get houses for a $1,000. So some people are still advertising that but that hasn’t happened for years because, over the years, we have trade people and whatever. Now, it’s more reasonable. You should expect to pay anywhere from 25 to 35% for a house. I buy a lot of residential lots. You’ll get maybe even those, you can get them for 10 cents of a dollar. That’s not unusual.

 

[00:09:11.2] MF: Wow. So when you are buying these tax lien certificate or you are buying a property online auction like this, do you have to worry about liens or other judgments or mortgages or do they have to pay you off if you buy it, how does that work?

 

[00:09:24.4] TT: Well what happens is the taxes are always first. So if the tax man should confiscate the property because there was no payment, then the tax man wipes out all of the liens. So when you start out, you start out with a property. The only lien on the property is the tax lien and that’s going to be the minimum bid, that’s where the bidding will start. So those properties won’t have any liens on them. Now the IRS always can have a lien on any and every property but they have to come forward if they want to take the property but generally speaking all the liens are off the property.

 

[00:09:56.5] MF: Okay, that makes sense. I know in most cases, if a bank has a mortgage on the property, they’re going to be paying the taxes themselves unless they’re really messed up. So I imagine that most of those don’t have mortgages on them if they get that far.

 

[00:10:08.9] TT: Actually what happens is because of the rules that we have and you understand due process. An attorney could explain it better than I could but this is, the due process rule says if there’s a conflict of anything, you have to give people notice. So what the treasurer will do is they will notice the bank and they’ll notice the individual and they’ll notice anybody that is on that title. For example, you would don’t know your real estate background is.

 

But some people have second mortgages on the house or a second deed of trust and so everybody that’s on the tile is notified with a registered letter. Not just one, they will notify them with five registered letters and they are noted by that someone is going to pay these taxes and so if no one pays, then the government will take. So if you are looking at a property with a lot of liens on it, you’re probably going to get a lot of people pay it because they don’t want to lose their money.

 

Because what will happen is, once it goes into default, the government takes the property to wipe out all liens, all duty liens are wiped out. Every single one, it doesn’t matter who they are. So it’s a good system for everybody. It works for everyone except for the people that don’t pay attention to their mail.

 

[00:11:14.3] MF: Right.

 

[00:11:15.0] TT: Okay, now you’re in a state that has unusual rules in that all the counties are authorized to have an auction. I believe they do that every October if I remember it. I have gone through it, three or four counties in the state of Colorado and the rules there are the ones that challenge people. So I always tell people that if you’re going to be in Colorado, really go and understand what the rules are.

 

Now there’s no sneaky Pete stuff here. All the rules are at the county records. Anybody can request them if they don’t get them there just call us and I have a whole database full of them. I have a resource center where you can get any county. We know all the rules, we know all the phone numbers, we know every — the e-mails, whatever. We have all of that because we have clients all around the world that we teach the same.

 

We teach our classes in Singapore and Bangkok, Australia, all the provinces of Canada, United Kingdom because those people can now buy online. Five years ago you could do that but that takes you back to the question you asked earlier, “Has it changed a lot?” Yeah, now we could do this online. I could teach you sitting in your office. You could have gone to the same auction I did this morning. We were looking at properties in Kalamazoo, Michigan. It’s over on the western side, near the lake in Michigan. So anybody could do that once you learn how to do it.

 

[00:12:28.6] MF: Wow that sure makes it a lot easier that’s for sure.

 

[00:12:32.7] TT: Right. Now the challenge is looking at the properties. People don’t know how to look at it and stuff like that but now we have satellite systems that can really help out. I mean not — Google is a low-level system where there are systems now that you can be looking from 30,000 feet and tell the license plate on your car. That’s how well you can look at these properties.

 

[00:12:53.7] MF: Really? I didn’t know that that was available.

 

[00:12:56.5] TT: Yeah, they call it a GIS system, Government Geodetic Survey. We take people to the auctions, we teach them how to do it and in a place like in Los Angeles, Los Angeles where they have — you know that’s one of the most wealthiest counties in the world. They all have at the Angel Auction anywhere from 1,500 to 2,000 properties at the auction and they’re all starting in back taxes.

 

[00:13:15.5] MF: Wow.

 

[00:13:17.2] TT: A big number, huh?

 

[00:13:17.7] MF: Yeah, how often are those satellites update?

 

[00:13:20.5] TT: It’s live.

 

[00:13:21.7] MF: Oh wow, okay.

 

[00:13:23.3] TT: It’s live. Yeah, it’s happening right now. The satellites are roaming around the world right now.

 

[00:13:28.6] MF: Right, okay.

 

[00:13:30.4] TT: So there’s all of there’s — all the county data, we have what you call it thumb drive. We have thumb drives. We can access every property in the United States from your office. Everyone, it doesn’t matter where it is. We just had it. It’s all part of the course materials, we teach people how to do it.

 

So I plug that in and then they see the property and they could see it right there on the computer and everything about it. It’s all listed, two bedroom, three bath, whatever it is. We the square footage is, what color of it is, what the mortgage is, what the — any other liens on it, they didn’t pay the dentist so the dentist has got a judgment against them, all that’s all listed. So you can see all of that from your computer.

 

[00:14:05.5] MF: Wow, that’s amazing. Well, I’m personally looking to buy rental properties in other markets because Colorado is so crazy here with our prices. It’s just insane.

 

[00:14:15.5] TT: Oh boy, yeah.

 

[00:14:16.0] MF: And I was actually looking down on Florida and some different markets, and like you said, it’s very tough to buy from a long distance unless you’ve got a ton of time to spend in the area but that sure would make things easier.

 

[00:14:27.5] TT: Yeah, well I don’t think that your realtor base of the MLS systems and stuff like that are on the same level as we were talking about here but you can certainly use those as a baseline of information to get started and then find areas that I think you probably have to look more for emerging markets and get ahead of the waves because Florida is still, go from Miami up to West Palm Beach, there are probably, in most places, in excess of the values they were without going under or to crash. But other parts of the state like the middle part of the state haven’t caught up.

 

[00:15:00.7] MF: Yeah.

 

[00:15:01.0] TT: Places like Jacksonville, not caught up. They’re a long way off.

 

[00:15:04.4] MF: Those are exactly, my thoughts as well because yeah, Southern Florida is going pretty crazy too but the farther north you go, outside the brutal major urban centers, I think there are some definite major possibilities there.

 

[00:15:15.6] TT: Definitely, yeah. We do a lot of it — I have one gal that buys at the tax auctions in Jacksonville and her first year, she never did a real estate deal in her life, she made $125,000 buying tax defaulted properties and reselling them.

 

[00:15:29.1] MF: Oh nice.

 

[00:15:29.4] TT: Yeah, $125,000 first year. That was amazing. But it works on all kinds of different things. You don’t have to do just plain houses. You can do residential lots. A lot of builders went broke, those builders, well don’t pay. They give it back to the bank. What’s the bank going to do with a residential lot? They give it back to the county. Those lots were some of the really nice real estate, those make a lot of sense. I try not to buy houses now. I got out of the house business about 10 years ago and I just buy residential lots.

 

I’ve got people that, your listeners will be amazed with this story, they won’t believe it but I can document it. You could document it on video even. I’ve got people in Canada. So I don’t know if you know the provinces all but the middle province that’s right about the Dakota’s is called Saskatchewan. That’s a huge province. It goes all the way up to the Arctic Circle. It’s where they grow a lot of wheat and they sell it to Russia and so on. He lives in the capital, which is Regina, and he buys in Southern California.

 

And the first one he did on, really high, he’s never left Canada and the first one he bought was a residential lot at a value of $229,000. That was in River Side at $229 and he bought it for $35,000 at the auction. He sold it immediately for $55,000 so now he caught on so he went right back and the next one he bought, paid a lot more money for it, but he made $150,000. So he buys residential lots just online. He doesn’t do anything but online. He’s never been to any of these properties. He only buys them online and he always uses a realtor to sell them, everyone. Isn’t that amazing?

 

[00:16:58.4] MF: Yeah, that’s not a bad business to be in.

 

[00:17:01.4] TT: Yeah, exactly. So, people that like real estate and are willing to do some work, it’s a great business.

 

[00:17:07.0] MF: Right. Well, I have a question for you then, I know you’re in Florida and you were buying properties in Michigan this morning and how did you decide on Michigan? What drew you to that particular tax lien on?

 

[00:17:18.8] TT: Well we stand and look at the states what’s going on, now next month we’ll be doing New York state to give you an example. But we looked in Michigan and Michigan has a bad name because of Detroit and Detroit is the biggest city in the United States. Biggest, not in terms of population because many people left but they abandoned a lot of houses on it. So that causes a lot of news, the nightly news and so Michigan is a beautiful state.

 

You live in one too. Colorado has beautiful mountains and Michigan has a lot of rolling hills, a lot of green, a lot of timber. You have to be careful of deer because they’re in your backyard all the time, a lot of wildlife, a huge lake as you know and a huge agricultural and marketing hub for the world. So Michigan is old, it’s not new like the coast of Colorado would be and so we looked at the area and we find by going online, we’ll find out that the auction, we want to go to an auction that has at least 100 properties.

 

And so we found four counties in Western Michigan and they had 244 properties to sell in those four counties and then they’re going to do all of that today and tomorrow and so we then go check them out and then we go there to buy them and resell them and if we can buy them for 10 or 20 cents on the dollar and even our customers they might pay, because most of our customers want to buy houses. People just think of real estate as houses as you know but there’s a lot more to it. You can buy commercial, you can buy farms, you can buy ranch land, you can buy timber. When you go to Washington you buy timber. There are all kinds of things that come up at the tax auction and so we just search for those and we can do it online.

 

[00:18:52.7] MF: Wow and let’s say you win the bid on one of these properties, how do you pay them? How do they complete the sale?

 

[00:18:57.6] TT: Well, in the room or online?

 

[00:18:59.5] MF: Online.

 

[0:19:01.5] TT: Well this morning the auction was taking place in room at the same time it was online. So when you’re online, you have the companies call but they are all different ones, will say bid for assets. You can put your money and bid for assets before the auction starts and then you can just bid until you use up that money. It’s all transparent so they could see what you’re bidding in and whatever. The auctioneer can see it and they’ll just say, “You have to stop now.”

 

[0:19:23.4] MF: Okay.

 

[0:19:25.1] TT: It’s not complicated, it’s simple once you’ve done it but when you first start you say, “Oh my god, am I going to be able to do this?” We have three-day classes, we have home study courses, we have online courses, we have been teaching this for 25 years. So we’re like a boutique, not a big company. All of our coaches that, like today, that same auction I went to online, our coaches had just taken classes of six people through. We don’t’ do any big classes. Six people have gone through it today and they all go to four auctions, in six days which is unheard of, absolutely unheard of.

 

[0:19:59.8] MF: Obviously things have been changing and the way they do taxes are changing and like you said, people are promoting it. Are you seeing more competition for more people getting into the business?

 

[0:20:09.6] TT: There’s always going to be that. Actually, when I started, there was only two or three, but there are only about four real players in the business. There’s a whole bunch of people that are selling hundred dollar courses and quite frankly what they do is they go buy my stuff a copy and then they go out and tell people they’re an expert. It’s just like anything else in life, you get exactly what you pay for. If you buy $100 course, you get $100 course. You get someone that’s going to be a coach that, for example, all of our coaches, every one of them, I’ve had coaches that have done 75 deals in the past three years. Now you’re a realtor, you tell me what it takes to do 75 deals for years.

 

[0:20:43.0] MF: Right, that’s pretty…

 

[0:20:45.6] TT: I’ve got people that got 150 deals. The other ones are doing the teaching. I’ve been doing it for 25 years and I still teach online classes. It’s a cycle, we do it four times a year, it’s a 13-week class. We have all levels, we can start people out with for $500 bucks of educational material, but if they’re smart and they really want to do it, they’ll go through all of the materials and have a new profession.

 

It’s not unusual for people to start with us and then a year later — I’m actually known for showing people how to make $100,000 in the second year. Not the first year, we got to teach them how. So there’s nothing get rich quick about it. It’s work, it’s for someone who wants to pay attention but it won’t go away. And when you went through at real estate recession, we didn’t go through any recession, we didn’t lose any money, right?

 

[0:21:31.0] MF: Right, yeah.

 

[0:21:33.4] TT: We’re buying at such low prices.

 

[0:21:34.5] MF: Yes.

 

[0:21:37.1] TT: So it’s not something, you get one little book and 60 days from now you’re going to be rich. That’s the kind of stuff they do on television. Late night television. This is not that. If you do that, you’re okay because you’ll learn a little bit about it but don’t go out and start making deals because you’re not going to know enough about it. You want to get with professionals, but you know that you’re a professional, you know it.

 

You know if people don’t do it right, they’re going to get killed and they do. How many people you know bought a rental house that they never should have bought it. They thought they’re going to paint and clean it and it was going to be a gold mine then they ended up spending $22,000 to do a paint job or something like that. So it’s that kind of thing, you just need to learn how to do it.

 

[0:22:16.8] MF: Okay, that makes sense. When you go through your coaching and you do that program, are you teaching both?

 

[0:22:21.8] TT: We integrated because over 65% of our clients are women, women like this because there’s not fixer upper stuff. This will go against the grain for you but let me tell you how it ends anyway. We teach them buy it low and sell it low. Every other real estate course teaches buy it low and sell it high.

 

So we’re going to buy $100,000 property for $25,000. Okay, 25 cents on the dollar, we’re going to sell it for $45, get rid of it and there’s a huge market to get rid of it because all the fixer upper guys want to buy those to go put a roof on it, paint it and do all that stuff. So we just teach you to buy and then quickly sell them using eBay, using Craigslist and putting out signs and stuff like that. 65% are women that do it because they can do it with a computer, makes a difference.

 

[0:23:05.3] MF: What are the different options because I know in some states you said, they’re selling their properties and some they’re just selling the certificates. Are there better options for different people who want to be more involved in the investment?

 

[0:23:16.1] TT: Oh so the people that want to just, they want a predictable or a certain investment, they want to buy a tax certificate because what they do is they are going to invest for the government and they’re going to get a check back from the government. So there’s not a lot of risk there. The people that want to go for the gold, that would be you and people that are entrepreneurial types, they want to do, is they want to go ahead and do the certificates when they’re available but when the tax defaulted auction comes up, they want to have done the research, be there at the auction.

 

Now if they’re there and it’s a big crowded room, two, 300 people, there’s going to be a lot of bidding. So you might have to wait till the bidding slows down like if there are a hundred properties, it won’t slow down for two, three hours, because those people are running out of money then you have to know which ones you want to bid on, you don’t just bid on anything. You bid on the ones that you’re going to be able to — the idea isn’t to buy to build a portfolio, the idea is to buy and quickly resell. Just sell. Buy resealable property, that’s all, that’s what we teach you.

 

[0:24:13.2] MF: That makes sense. Do they give notices in the paper? Because I know when you look at the trustee sales and different foreclosure sales across the country, there might be a little notice in the paper and that’s how they tell people, or maybe they might have a list online but they aren’t easily advertise. Is that kind of similar to how this is?

 

[0:24:28.9] TT: Yeah, this is probably even a little bit more restricted than that even. The difference is, if you’re going to buy bank foreclosures, regular foreclosures, you’re going to buy probate sales or any of the traditional things, you’re going to pay 50 cents on the dollar to 65 cents on the dollar, that’s what you’re going to pay, that’s the market. If youyou’re going to be in this business, you want to buy the 20, 30 cents on the dollar. So you need to investigate the different counties.

 

So there’s going to be 3,000 different counties, we have all this in databases, and we have it directly so they can look it up. SoI can tell you I didn’t prepare for the call today, but I could tell you what every single sale in that state of Colorado that’s going to take place. That you could tap into that on your computer, knowing it was going to take place and then you could start adjusting your schedule to keep your regular job, don’t quit your job, you never have to quit your job with this thing.

 

Do whatever you’re doing and then take a day to go to the auction because your county is only going to have one or two auctions a year. They’re not going to have 50 of these. It’s not like foreclosure where you get massive people not paying their house payment. These are people that are actually going to have lost their house to the government. The government’s taking it so that they can resell it and put it back on the tax roll. So it’s going to be the same size. It’s a specialty. I always tell people, this is kind of a boutique business. You might be one of only two or three people in your county doing it.

 

[0:25:51.1] MF: Okay, nope. That makes sense, but it obviously makes a difference where you’re located and how your county works and the different type of tax sales they have.

 

[0:25:58.9] TT: Well it used to be, what you just said, that’s what we used to teach. But now with the web, you can do anywhere you want. Like this morning Kalamazoo, tomorrow we’ll be very close to Gran Rapids, Michigan online, now online. You’re not going to walk in first day and buy something online, I’m going to tell you that right now. Because that would not be prudent because, and you’d tell people, “How did you do your due diligence?” They’re going to say they didn’t, and you know you’ve got to do due diligence on real estate, you know that. I’m sure you teach that to all your people. So there’s a learning curve.

 

[0:26:31.1] MF: Okay, great. So it’s pretty basic process, it’s just kind of like a wholesaler where you’re buying cheap, selling cheap and just keeping your money moving.

 

[0:26:40.1] TT: Right, that’s where you make the money, it’s turning them. Buy it and get rid of it, buy it and get rid of it. Tell people not to hold onto them. I buy residential lots that way. I had a client that recently, he was attending the class and every time we took a break he said, “Where should I go?” I said, “Look, you’re on the west coast, why don’t you just go to the Los Angeles auction?” You’ve got to understand, this is a big auction. It’s big and in terms of — there will be a thousand people in the room, but they’re going to sell 2,000 properties.

 

All right, so he went to that auction and I tell him, “Just stay, watch the whole auction and then see what happens at the end of the action.” Well at the end of the auction they hadn’t sold all the property, so they had another auction the next day. So on the first day, the action price always is back taxes. On the second day, on that auction, they cut the taxes in half, he bought seven properties and he spent $85,000, remember that number and the tax collector said, the value of the properties was $1,100,000.

 

[0:27:36.0] MF: That’s pretty good.

 

[0:27:38.4] TT: Eight cents on the dollar. If I couldn’t document that, which we did on video, nobody would believe it. That was Los Angeles.

 

[0:27:45.4] MF: That definitely sounds like there’s some opportunity out there that’s for sure.

 

[0:27:48.5] TT: Yeah. So if you get a property for eight cents on the dollar, what would you do? You could hold onto it, you could decide to go to the bank and say, “Look, it’s assessed at this,” and maybe borrow against it or you could put it back on the market for 50 cents on the dollar. You’re getting the idea, right? So that’s it. Tax lien certificates are the easy ones, the more complicated ones are tax deeds. Yeah, it’s just a matter of learning how to do it. It’s not difficult.

 

[0:28:14.0] MF: Very cool. So I’m curious, with personal investing, you went from the houses to the land, why did you do that? Was it a simpler process?

 

[0:28:21.3] TT: It’s simpler, I don’t have to worry about anything. So for example, let’s say that I decide to buy in Phoenix Arizona and I’m sitting here in Florida. Okay, so let’s use, that’s Maricopa County, and it’s a home. So probably not much to worry about, they could have termite damage or they could have maybe deterioration in the roof because of the sun or whatever and so I have to be cautious what I’m doing there but look, if I could get it for 35 cents on the dollar, I probably made a good buy.

 

But with if there’s an empty lot right next door? Nobody else is even going to bid on that because everybody else — I jokingly say, I said, You were conceived in a house, you grew up in a house so you know all about houses. So you’re going to bid on houses.” What if I could get the lot next door and it’s worth say $2,000 and I could get it for $1,500? It’s worth $20,000 and I could get it for $1,500? So I’m going to buy it for less than 10 cents on the dollar, how can I get hurt and what maintenance do I have?

 

[0:29:15.1] MF: Right. Yeah you don’t have to worry about — and that’s one thing too I imagine, even though you’re buying these properties, are they vacant when they’re buying them or could the occupants still be in there? Does the government pick out to people?

 

[0:29:25.9] TT: Majority of them are empty because the government is already gone through all the foreclosure and told people to get out because they have the power of the sheriff to go get people out. But from time to time, there will be someone in there but that’s not a problem, you just say, “Look, we rented a house down the street for you, can you get out of here by Saturday?” They alway get out. We don’t have any — we teach no confrontational stuff. We don’t want people to get in trouble.

 

[0:29:47.7] MF: Right, for sure.

 

[0:29:51.7] TT: Make it easy. If it gets hard then you’re not going to do it. We’re just going to say, “Forget it.” Some people get really sophisticated and they get teams of people out there fixing them up and all that. I think it’s a perfect business for the person that wants to just, you do two or three deals a year, and make themselves six figures.

 

[0:30:07.9] MF: It’s not a bad deal.

 

[0:30:09.6] TT: I don’t think so. It’s worked for 25 years.

 

[0:30:13.4] MF: Right. Now when you see people getting into the business and maybe they don’t have the right training or haven’t learned from someone, what are some of the mistakes you see people make? What are some things people need to watch out for?

 

[0:30:24.6] TT: Well the first thing they do is that they weigh overbid because they get all involved in the bidding process and if you’re paying more than — I tell people if they’re paying any more than 20 cents on the dollar in your first year, you shouldn’t be doing it because you don’t know what you’re doing. You don’t want to buy 20 cents on the dollar to cover your assets so to speak because if you made a mistake, you still want to be able to get rid of it.

 

So people overbid, people want to buy big — they go out, and spend a lot of time looking at big fancy houses. In other words, they’re going to go look at $300, $500, million dollar homes. Those things rarely go to auction, they do once in a while, you’ll hear about it but just once in a while so why waste your time? You just need to look at bread and butter properties and then don’t buy them. Now, if it’s in your hometown, you might want to buy it to live in but don’t buy them to live in. Buy them because you’re going to resell them.

 

So that might mean like you and I live in a certain economic status, it’s easy to look in our neighborhood to buy one but there’s never any in our neighborhood. So they’re going to be in a neighborhood where people are having some trouble or whatever. So have to open up. So people, they way over bid for the properties. Then if they haven’t thought about selling, the most difficult thing for everyone in my 25 years of doing this is the selling part. We spend more time on selling anything else because people have a bad taste about selling things. They think they’re being bad if they call someone up and say, “Look I’ll make you a hell of a deal.” They’re afraid to do that, don’t ask me why but you’re closer to that part of the business than I am but you get my point.

 

[0:31:54.6] MF: Yes, I think people are more concerned with how much other people are making sometimes and how much they’re making, and they lose focus of what’s really important.

 

[0:32:03.4] TT: Right, exactly. People have a challenge with that. So, people that want to know a little bit more about it, they can just go to Tedthomas.com. There’s for free videos there, and they’ll see in the interview format, me talking to a reporter and then showing examples of all of what we’re talking about. It’s free, they can go there, they don’t have to buy anything.

 

They can learn about it, see a little bit more about the business, and then at the end of the four videos, if they want to get involved for a few hundred dollars, they can do that. If they want to get more involved in that, they could do that. We don’t push it, we just tell them about it. We’ve been doing the same thing for 25 years. So it works and it will continue to work because there will never be less of these auctions.

 

Every year it inches up just a little bit more. Every single year. Because we have more homes, it sounds crazy but to say there’s 3 million tax defaulted properties, that isn’t really a lot, it’s only 3% of the total houses. But that’s a big number, you get out at some states that are absolutely amazing. You go to a place like Miami, they sell tax certificates and at the annual sale, they’ll have 65,000 certificates available.

 

[0:33:13.0] MF: Wow, that’s crazy.

 

[0:33:14.8] TT: The state of Florida in 2016 had one million certificates available.

 

[0:33:20.7] MF: I bet there’s not a million of them selling either.

 

[0:33:24.5] TT: No, and you can buy the leftover ones, just walk in and buy them, you don’t even have to go to the auction, just walk in and buy them, they’ll sell them to you.

 

[0:33:31.7] MF: Okay, so there’s definitely opportunities still in the business?

 

[0:33:35.8] TT: Oh absolutely. But they’re not going to buy any houses for a thousand bucks, don’t forget that.

 

[0:33:39.0] MF: Right, yeah.

 

[0:33:40.1] TT: That was 30 years ago. We used to buy houses for a thousand bucks. They’re not going to do that. There’s too much knowledge available. It used to be there was no knowledge but now there’s going to be someone at the table that would buy it for that before they get a house from that. So you kind of get the idea.

 

[0:33:55.9] MF: Right. Okay, great. Well you beat me to my question, I was going to ask you how people can contact you but you got me there.

 

[0:34:03.1] TT: All right great. Yeah, just tedthomas.com and there’s a lot of free stuff there. They can mosey around that website and find out all kinds of things. I have probably the world’s biggest database of information and a resource center, which are when people become a client, they can go in there. If they started class in the resource center today, they could not finish. If they started one every day, all day between now and Christmas they couldn’t finish. That’s how much data is in there for people that want it.

 

Some people, they get into it, they want to know everything and the problem is they want to know everything in the first week. So we can’t teach it that fast so we put it in the database so they can go in. Then we just have customer service people, every day we have customer service, they’ll take them through that database and show them, they’re like guides. There’s a guide that takes you through the week so you can find things. Which is pretty amazing.

 

[0:34:50.6] MF: Awesome. You have me intrigued about learning more about this business as well.

 

[0:34:55.4] TT: Well then go. Just go to the website, you don’t have to spend any money go there and look at it and say, “Oh my god, oh my god.” And what you’ll see is you’ll see real people, you’re not going to see any movie stars or anything like that. You’re going to see an interview and then you’ll see, you won’t see internet kind of video, you’ll see HD video, which would show on your television. You’ll see real video of real people and not just people from the United States.

 

I teach outside of the United States because those people are a lot more interested than the people here. Everybody here is kind of spoiled but those people out there have no investments like this. The US is the only place you can find — you couldn’t find this if you go to Australia. People from Australia just  don’t believe it. They come all the way over here, “How did you do it?” Matter of fact, our class in Michigan has three people that came all the way from Australia.

 

[0:35:43.2] MF: Wow. Well, I talk to people all the time from Canada, from Australia, from other countries, they don’t believe me on just investments I’m doing. It’s like, “No, that’s not possible, you can’t do that.”

 

[0:35:52.1] TT: Yeah, yeah exactly.

 

[0:35:53.1] MF: It’s a pretty special place for real estate compared to the rest of the world.

 

[0:35:57.4] TT: Oh absolutely and that’s why there’s so much [inaudible] here because they made those rules back in the 20’s and 30’s and everybody’s benefit from all that for a hundred of years now. It’s just a changed world where as other places, there’ve still got 300-year-old houses that are falling down, forget it. They’re renewing here all the time, which is huge, it’s a big deal.

 

[0:36:17.8] MF: Well Ted, anything else you want to add? I know you’ve given a lot of information here, I’ve learned a lot.

 

[0:36:23.1] TT: We probably overwhelmed everybody. I’d button it up by just saying there’s lots of free information at tedthomas.com. If they’re really interested in knowing about it, they can go there, they can watch the videos, no one’s going to force them to buy anything. If they do buy something there, they’ll get way more than their money’s worth and they’ll maybe get themselves started on another money making opportunity, that’s for sure.

 

[0:36:44.3] MF: Okay, great. Awesome. Well, Ted, thank you so much for being on the show, I appreciate it, I’ll have links to your site in the show notes so people can get that there too as well. Really appreciate your insight and knowledge and yeah, I may learn some of this myself here soon.

 

[0:36:58.9] TT: All right. Well, good luck to you and I appreciate the call and I hope you do well in your career.

 

[0:37:03.4] MF: All right, thank you, Ted, and continued success to you as well.

 

[0:37:07.3] TT: Thank you, talk to you soon.

 

[0:37:08.6] MF: All right, bye.

 

[END]

http://www.bmsaconfirm.com/wwr2markF

Transcript

[INTERVIEW]

 

[00:00:58.7] MF: Hey everyone, it’s Mark Ferguson with Invest Four More and welcome to another episode of the Invest Four More Real Estate Podcast. Today, I am super excited to talk to Ted Thomas who is an expert on tax liens. I’m excited to hear about what Ted does because I do my flips, I have rental properties, I am a real estate agent but I don’t know a whole lot about tax liens and how to invest in them.

 

So Ted thank you so much for being on the show. How are you?

 

[00:01:23.6] TT: Well, thank you. I am doing fine and we can just roll with it as you like.

 

[00:01:28.1] MF: All right great. Well Ted, I always like to hear about how people got started in the business. Obviously, you’ve got a unique place with tax liens but how did you get started in real estate?

 

[00:01:37.4] TT: Well, first I started by my first career I was an airline pilot. So that was a good career but when I found out that you could get in business and make a lot more money than you could as an airline pilot, I said, “Whoa I can?” So I actually resigned from the airlines and I started a business of buying investment properties. By that I mean, larger private properties, 200 units, that kind of thing and also office buildings and I did that in the San Francisco Bay area.

 

So that was my start to it but all starts don’t work perfectly and that one did until 1986 then we went through a huge recession and when we did, the commercial properties dropped in value 60 to 70%. Very similar to what happened in 2008 in the residential market and it crashed and we lost all the money. So then I had to start over again, so that was not as much fun. That’s when I discovered tax liens certificates and tax defaulted property and I have been doing that ever since then.

 

[00:02:31.4] MF: So you have been in this business quite a while then and seen quite a few ups and downs I’m sure.

 

[00:02:36.3] TT: I’m the senior citizen guy of the business. You know, I have been around for a long time, I’ve got a lot of gray hair and a little tummy on the front.

 

[00:02:42.6] MF: Very cool. Well, my dad was an agent and in ’78 he started. So I grew up around the residential side so I’ve been around a lot too and I always thought, “I’m never going to do that when I grow up,” but here I am.

 

[00:02:55.8] TT: Yes, yeah. Well good for you. But you know what? When you think of careers, the beauty of it is, it’s never boring whereas a lot of people have jobs where they have to do the same thing all the time. So we’re lucky that we have all these ups and downs and think of the learning curve that we’ve been through over these past 30 years.

 

[00:03:11.9] MF: Oh for sure, I wouldn’t trade it for anything that’s for sure.

 

[00:03:14.2] TT: Yeah, right.

 

[00:03:15.2] MF: Cool Ted, well what attracted you to tax liens and how did you get started in that business?

 

[00:03:19.7] TT: Well what actually takes place is every property in the United States, it doesn’t matter whether it’s an office building or whether it’s an apartment house or a shopping center, whatever it might be, is taxable and that’s, of course, called property tax, which you know because you’re an agent. But a lot of people don’t really understand that they’re going to have to pay like a wealth tax of the property when they own it and so I found out that if people went in defaults, and I found out by accident.

 

I found out and I’d heard people talking about it but nobody really knew enough about it. They don’t teach it in real estate school and they teach it to attorneys, they teach it to bankers but they don’t teach it to the regular people that are doing commercial real estate or residential and I found out that you can go in places like Baltimore, Maryland and you could buy a certificate, a tax certificate and you could earn 24%. So first let’s explain what that certificate is.

 

Same thing takes place in Colorado and half of the other states, but basically what happens is if the property owner doesn’t pay their tax, what will happen is the local government will issue a certificate. Now the certificate is nothing more than a piece of paper that would come off your printer of your computer and it’s just a certificate that says, “This property hasn’t a tax of X,” $2,000 or $5,000, whatever it might be and you can actually pay someone else’s taxes.

 

And so across the country now, there’s millions of these certificates because there are millions of people that don’t pay their tax and so you can buy the certificate and pay someone else’s taxes and sooner or later, they’ll come in to pay. 98% of people will come and pay it because they don’t want to lose the house just for back taxes. When they come in to pay, Baltimore they paid 24%. Here in Florida, they pay 18%, places like Phoenix, Arizona they’re going to pay 16%.

 

So you could really earn a really generous rate of return on a tax certificate. So that’s what attracted me to it and it’s a very low-risk certificate because it’s the first priority lien on the property. Most people think it’s the mortgage or deed to trust is the first lien. Actually, the taxes is the first lien and you buy the tax lien from the local government. So that’s probably a little bit more than you want to know in the first big, deep breath, but that’s how the business works.

 

[00:05:26.0] MF: Yeah, that makes sense. The government always wants to get their money first before anybody else.

 

[00:05:30.2] TT: Right. Right, so if they don’t get it, they sell a tax certificate and you and I can buy as many as we want. They sell them in half of the counties in the United States.

 

[00:05:40.3] MF: Right, yep. I have heard of tax lien certificates being sold, I’ve just never really researched it too much or looked into it. I know I see these programs advertising how you could buy a house for $1,000 using tax liens and like you said, I think that’s pretty rare that whatever happens but it sounds like the investment is in the interest you earn.

 

[00:05:58.2] TT: We could do two sides of it. There are two businesses there. Half of the states will sell tax lien certificates and the other half of the states will sell the tax defaulted property. So let’s use two examples. Let’s choose Colorado for one. Colorado is a state where if they don’t pay the taxes, they issue a tax certificate and so you could buy that certificate and you could earn an interest rate. It’s a little low in Colorado but right now anywhere from nine to 12%. It just depends upon what the Fed fund rates are. But there’s other states that pay a lot more than that but that’s just a tax certificate.

 

But over in Kansas for example, right next door, if you don’t pay your taxes there, what the government will do is they won’t issue a certificate. They will actually confiscate the property and then sell it for the back taxes and so half of the states just confiscate the property and sell them for the back taxes and it’s an open-bid auction. Anybody can buy at those auctions. So if you think of the whole United States, this round number is a 100 million properties and about 3% of local owners default every year. So it’s going to be three million of those every year. It’s a big business, really big.

 

[00:07:02.0] MF: Wow, now in those states do they just have to be one year behind? I’m sure it varies in each state, but is there a certain amount of time before most of them can take the property back?

 

[00:07:10.8] TT: Actually, that’s a really good question. Every state is different and every county could be different. So you could be in one county, and they do it one way and charge a different interest rate and so on. Like in Baltimore City they pay 24%, whereas the next county over they only pay 16%. But generally speaking, the legislature of the state makes the rules and it’s not a complicated business. When we first talk about it like now, it sounds like it is. It’s really super simple. It’s been around for 200 years. It was invented when people couldn’t read and write. That’s how simple it is. It’s really simple.

 

[00:07:44.0] MF: Right, very cool. Okay. So I know you have mentioned a little bit, but has it changed over the years how tax liens have progressed? Legislation, the government I’m sure they’re always trying to change things.

 

[00:07:54.6] TT: Yeah, what happens is that the local counties are desperate for money. So they’re going to do everything that they can to put those properties that aren’t paying taxes, they want to get them back on the tax rolls. So let’s take a place like Florida, Orlando where people would know Orlando is right in the middle of the state, they all have a tax defaulted auction every three weeks. I mean it’s that often, it’s just that people don’t know about it and they don’t know to go to the auction.

 

So there are a select few people that know about them and read about them and understand them. They’ll go to those auctions and they’ll buy properties for 20 cents, 30 cents. I went to an auction this morning even though I’m in Florida and went online in Kalamazoo, Michigan and there were probably selling for 30 and 35 cents on a dollar. So a $100,000 for $35, 000 with no mortgage on it, that’s a pretty reasonable price.

 

[00:08:42.4] MF: I think so.

 

[00:08:43.5] TT: Yeah, well in the old days when I started, which is 25 years ago, you really could get houses for a $1,000. So some people are still advertising that but that hasn’t happened for years because, over the years, we have trade people and whatever. Now, it’s more reasonable. You should expect to pay anywhere from 25 to 35% for a house. I buy a lot of residential lots. You’ll get maybe even those, you can get them for 10 cents of a dollar. That’s not unusual.

 

[00:09:11.2] MF: Wow. So when you are buying these tax lien certificate or you are buying a property online auction like this, do you have to worry about liens or other judgments or mortgages or do they have to pay you off if you buy it, how does that work?

 

[00:09:24.4] TT: Well what happens is the taxes are always first. So if the tax man should confiscate the property because there was no payment, then the tax man wipes out all of the liens. So when you start out, you start out with a property. The only lien on the property is the tax lien and that’s going to be the minimum bid, that’s where the bidding will start. So those properties won’t have any liens on them. Now the IRS always can have a lien on any and every property but they have to come forward if they want to take the property but generally speaking all the liens are off the property.

 

[00:09:56.5] MF: Okay, that makes sense. I know in most cases, if a bank has a mortgage on the property, they’re going to be paying the taxes themselves unless they’re really messed up. So I imagine that most of those don’t have mortgages on them if they get that far.

 

[00:10:08.9] TT: Actually what happens is because of the rules that we have and you understand due process. An attorney could explain it better than I could but this is, the due process rule says if there’s a conflict of anything, you have to give people notice. So what the treasurer will do is they will notice the bank and they’ll notice the individual and they’ll notice anybody that is on that title. For example, you would don’t know your real estate background is.

 

But some people have second mortgages on the house or a second deed of trust and so everybody that’s on the tile is notified with a registered letter. Not just one, they will notify them with five registered letters and they are noted by that someone is going to pay these taxes and so if no one pays, then the government will take. So if you are looking at a property with a lot of liens on it, you’re probably going to get a lot of people pay it because they don’t want to lose their money.

 

Because what will happen is, once it goes into default, the government takes the property to wipe out all liens, all duty liens are wiped out. Every single one, it doesn’t matter who they are. So it’s a good system for everybody. It works for everyone except for the people that don’t pay attention to their mail.

 

[00:11:14.3] MF: Right.

 

[00:11:15.0] TT: Okay, now you’re in a state that has unusual rules in that all the counties are authorized to have an auction. I believe they do that every October if I remember it. I have gone through it, three or four counties in the state of Colorado and the rules there are the ones that challenge people. So I always tell people that if you’re going to be in Colorado, really go and understand what the rules are.

 

Now there’s no sneaky Pete stuff here. All the rules are at the county records. Anybody can request them if they don’t get them there just call us and I have a whole database full of them. I have a resource center where you can get any county. We know all the rules, we know all the phone numbers, we know every — the e-mails, whatever. We have all of that because we have clients all around the world that we teach the same.

 

We teach our classes in Singapore and Bangkok, Australia, all the provinces of Canada, United Kingdom because those people can now buy online. Five years ago you could do that but that takes you back to the question you asked earlier, “Has it changed a lot?” Yeah, now we could do this online. I could teach you sitting in your office. You could have gone to the same auction I did this morning. We were looking at properties in Kalamazoo, Michigan. It’s over on the western side, near the lake in Michigan. So anybody could do that once you learn how to do it.

 

[00:12:28.6] MF: Wow that sure makes it a lot easier that’s for sure.

 

[00:12:32.7] TT: Right. Now the challenge is looking at the properties. People don’t know how to look at it and stuff like that but now we have satellite systems that can really help out. I mean not — Google is a low-level system where there are systems now that you can be looking from 30,000 feet and tell the license plate on your car. That’s how well you can look at these properties.

 

[00:12:53.7] MF: Really? I didn’t know that that was available.

 

[00:12:56.5] TT: Yeah, they call it a GIS system, Government Geodetic Survey. We take people to the auctions, we teach them how to do it and in a place like in Los Angeles, Los Angeles where they have — you know that’s one of the most wealthiest counties in the world. They all have at the Angel Auction anywhere from 1,500 to 2,000 properties at the auction and they’re all starting in back taxes.

 

[00:13:15.5] MF: Wow.

 

[00:13:17.2] TT: A big number, huh?

 

[00:13:17.7] MF: Yeah, how often are those satellites update?

 

[00:13:20.5] TT: It’s live.

 

[00:13:21.7] MF: Oh wow, okay.

 

[00:13:23.3] TT: It’s live. Yeah, it’s happening right now. The satellites are roaming around the world right now.

 

[00:13:28.6] MF: Right, okay.

 

[00:13:30.4] TT: So there’s all of there’s — all the county data, we have what you call it thumb drive. We have thumb drives. We can access every property in the United States from your office. Everyone, it doesn’t matter where it is. We just had it. It’s all part of the course materials, we teach people how to do it.

 

So I plug that in and then they see the property and they could see it right there on the computer and everything about it. It’s all listed, two bedroom, three bath, whatever it is. We the square footage is, what color of it is, what the mortgage is, what the — any other liens on it, they didn’t pay the dentist so the dentist has got a judgment against them, all that’s all listed. So you can see all of that from your computer.

 

[00:14:05.5] MF: Wow, that’s amazing. Well, I’m personally looking to buy rental properties in other markets because Colorado is so crazy here with our prices. It’s just insane.

 

[00:14:15.5] TT: Oh boy, yeah.

 

[00:14:16.0] MF: And I was actually looking down on Florida and some different markets, and like you said, it’s very tough to buy from a long distance unless you’ve got a ton of time to spend in the area but that sure would make things easier.

 

[00:14:27.5] TT: Yeah, well I don’t think that your realtor base of the MLS systems and stuff like that are on the same level as we were talking about here but you can certainly use those as a baseline of information to get started and then find areas that I think you probably have to look more for emerging markets and get ahead of the waves because Florida is still, go from Miami up to West Palm Beach, there are probably, in most places, in excess of the values they were without going under or to crash. But other parts of the state like the middle part of the state haven’t caught up.

 

[00:15:00.7] MF: Yeah.

 

[00:15:01.0] TT: Places like Jacksonville, not caught up. They’re a long way off.

 

[00:15:04.4] MF: Those are exactly, my thoughts as well because yeah, Southern Florida is going pretty crazy too but the farther north you go, outside the brutal major urban centers, I think there are some definite major possibilities there.

 

[00:15:15.6] TT: Definitely, yeah. We do a lot of it — I have one gal that buys at the tax auctions in Jacksonville and her first year, she never did a real estate deal in her life, she made $125,000 buying tax defaulted properties and reselling them.

 

[00:15:29.1] MF: Oh nice.

 

[00:15:29.4] TT: Yeah, $125,000 first year. That was amazing. But it works on all kinds of different things. You don’t have to do just plain houses. You can do residential lots. A lot of builders went broke, those builders, well don’t pay. They give it back to the bank. What’s the bank going to do with a residential lot? They give it back to the county. Those lots were some of the really nice real estate, those make a lot of sense. I try not to buy houses now. I got out of the house business about 10 years ago and I just buy residential lots.

 

I’ve got people that, your listeners will be amazed with this story, they won’t believe it but I can document it. You could document it on video even. I’ve got people in Canada. So I don’t know if you know the provinces all but the middle province that’s right about the Dakota’s is called Saskatchewan. That’s a huge province. It goes all the way up to the Arctic Circle. It’s where they grow a lot of wheat and they sell it to Russia and so on. He lives in the capital, which is Regina, and he buys in Southern California.

 

And the first one he did on, really high, he’s never left Canada and the first one he bought was a residential lot at a value of $229,000. That was in River Side at $229 and he bought it for $35,000 at the auction. He sold it immediately for $55,000 so now he caught on so he went right back and the next one he bought, paid a lot more money for it, but he made $150,000. So he buys residential lots just online. He doesn’t do anything but online. He’s never been to any of these properties. He only buys them online and he always uses a realtor to sell them, everyone. Isn’t that amazing?

 

[00:16:58.4] MF: Yeah, that’s not a bad business to be in.

 

[00:17:01.4] TT: Yeah, exactly. So, people that like real estate and are willing to do some work, it’s a great business.

 

[00:17:07.0] MF: Right. Well, I have a question for you then, I know you’re in Florida and you were buying properties in Michigan this morning and how did you decide on Michigan? What drew you to that particular tax lien on?

 

[00:17:18.8] TT: Well we stand and look at the states what’s going on, now next month we’ll be doing New York state to give you an example. But we looked in Michigan and Michigan has a bad name because of Detroit and Detroit is the biggest city in the United States. Biggest, not in terms of population because many people left but they abandoned a lot of houses on it. So that causes a lot of news, the nightly news and so Michigan is a beautiful state.

 

You live in one too. Colorado has beautiful mountains and Michigan has a lot of rolling hills, a lot of green, a lot of timber. You have to be careful of deer because they’re in your backyard all the time, a lot of wildlife, a huge lake as you know and a huge agricultural and marketing hub for the world. So Michigan is old, it’s not new like the coast of Colorado would be and so we looked at the area and we find by going online, we’ll find out that the auction, we want to go to an auction that has at least 100 properties.

 

And so we found four counties in Western Michigan and they had 244 properties to sell in those four counties and then they’re going to do all of that today and tomorrow and so we then go check them out and then we go there to buy them and resell them and if we can buy them for 10 or 20 cents on the dollar and even our customers they might pay, because most of our customers want to buy houses. People just think of real estate as houses as you know but there’s a lot more to it. You can buy commercial, you can buy farms, you can buy ranch land, you can buy timber. When you go to Washington you buy timber. There are all kinds of things that come up at the tax auction and so we just search for those and we can do it online.

 

[00:18:52.7] MF: Wow and let’s say you win the bid on one of these properties, how do you pay them? How do they complete the sale?

 

[00:18:57.6] TT: Well, in the room or online?

 

[00:18:59.5] MF: Online.

 

[0:19:01.5] TT: Well this morning the auction was taking place in room at the same time it was online. So when you’re online, you have the companies call but they are all different ones, will say bid for assets. You can put your money and bid for assets before the auction starts and then you can just bid until you use up that money. It’s all transparent so they could see what you’re bidding in and whatever. The auctioneer can see it and they’ll just say, “You have to stop now.”

 

[0:19:23.4] MF: Okay.

 

[0:19:25.1] TT: It’s not complicated, it’s simple once you’ve done it but when you first start you say, “Oh my god, am I going to be able to do this?” We have three-day classes, we have home study courses, we have online courses, we have been teaching this for 25 years. So we’re like a boutique, not a big company. All of our coaches that, like today, that same auction I went to online, our coaches had just taken classes of six people through. We don’t’ do any big classes. Six people have gone through it today and they all go to four auctions, in six days which is unheard of, absolutely unheard of.

 

[0:19:59.8] MF: Obviously things have been changing and the way they do taxes are changing and like you said, people are promoting it. Are you seeing more competition for more people getting into the business?

 

[0:20:09.6] TT: There’s always going to be that. Actually, when I started, there was only two or three, but there are only about four real players in the business. There’s a whole bunch of people that are selling hundred dollar courses and quite frankly what they do is they go buy my stuff a copy and then they go out and tell people they’re an expert. It’s just like anything else in life, you get exactly what you pay for. If you buy $100 course, you get $100 course. You get someone that’s going to be a coach that, for example, all of our coaches, every one of them, I’ve had coaches that have done 75 deals in the past three years. Now you’re a realtor, you tell me what it takes to do 75 deals for years.

 

[0:20:43.0] MF: Right, that’s pretty…

 

[0:20:45.6] TT: I’ve got people that got 150 deals. The other ones are doing the teaching. I’ve been doing it for 25 years and I still teach online classes. It’s a cycle, we do it four times a year, it’s a 13-week class. We have all levels, we can start people out with for $500 bucks of educational material, but if they’re smart and they really want to do it, they’ll go through all of the materials and have a new profession.

 

It’s not unusual for people to start with us and then a year later — I’m actually known for showing people how to make $100,000 in the second year. Not the first year, we got to teach them how. So there’s nothing get rich quick about it. It’s work, it’s for someone who wants to pay attention but it won’t go away. And when you went through at real estate recession, we didn’t go through any recession, we didn’t lose any money, right?

 

[0:21:31.0] MF: Right, yeah.

 

[0:21:33.4] TT: We’re buying at such low prices.

 

[0:21:34.5] MF: Yes.

 

[0:21:37.1] TT: So it’s not something, you get one little book and 60 days from now you’re going to be rich. That’s the kind of stuff they do on television. Late night television. This is not that. If you do that, you’re okay because you’ll learn a little bit about it but don’t go out and start making deals because you’re not going to know enough about it. You want to get with professionals, but you know that you’re a professional, you know it.

 

You know if people don’t do it right, they’re going to get killed and they do. How many people you know bought a rental house that they never should have bought it. They thought they’re going to paint and clean it and it was going to be a gold mine then they ended up spending $22,000 to do a paint job or something like that. So it’s that kind of thing, you just need to learn how to do it.

 

[0:22:16.8] MF: Okay, that makes sense. When you go through your coaching and you do that program, are you teaching both?

 

[0:22:21.8] TT: We integrated because over 65% of our clients are women, women like this because there’s not fixer upper stuff. This will go against the grain for you but let me tell you how it ends anyway. We teach them buy it low and sell it low. Every other real estate course teaches buy it low and sell it high.

 

So we’re going to buy $100,000 property for $25,000. Okay, 25 cents on the dollar, we’re going to sell it for $45, get rid of it and there’s a huge market to get rid of it because all the fixer upper guys want to buy those to go put a roof on it, paint it and do all that stuff. So we just teach you to buy and then quickly sell them using eBay, using Craigslist and putting out signs and stuff like that. 65% are women that do it because they can do it with a computer, makes a difference.

 

[0:23:05.3] MF: What are the different options because I know in some states you said, they’re selling their properties and some they’re just selling the certificates. Are there better options for different people who want to be more involved in the investment?

 

[0:23:16.1] TT: Oh so the people that want to just, they want a predictable or a certain investment, they want to buy a tax certificate because what they do is they are going to invest for the government and they’re going to get a check back from the government. So there’s not a lot of risk there. The people that want to go for the gold, that would be you and people that are entrepreneurial types, they want to do, is they want to go ahead and do the certificates when they’re available but when the tax defaulted auction comes up, they want to have done the research, be there at the auction.

 

Now if they’re there and it’s a big crowded room, two, 300 people, there’s going to be a lot of bidding. So you might have to wait till the bidding slows down like if there are a hundred properties, it won’t slow down for two, three hours, because those people are running out of money then you have to know which ones you want to bid on, you don’t just bid on anything. You bid on the ones that you’re going to be able to — the idea isn’t to buy to build a portfolio, the idea is to buy and quickly resell. Just sell. Buy resealable property, that’s all, that’s what we teach you.

 

[0:24:13.2] MF: That makes sense. Do they give notices in the paper? Because I know when you look at the trustee sales and different foreclosure sales across the country, there might be a little notice in the paper and that’s how they tell people, or maybe they might have a list online but they aren’t easily advertise. Is that kind of similar to how this is?

 

[0:24:28.9] TT: Yeah, this is probably even a little bit more restricted than that even. The difference is, if you’re going to buy bank foreclosures, regular foreclosures, you’re going to buy probate sales or any of the traditional things, you’re going to pay 50 cents on the dollar to 65 cents on the dollar, that’s what you’re going to pay, that’s the market. If youyou’re going to be in this business, you want to buy the 20, 30 cents on the dollar. So you need to investigate the different counties.

 

So there’s going to be 3,000 different counties, we have all this in databases, and we have it directly so they can look it up. SoI can tell you I didn’t prepare for the call today, but I could tell you what every single sale in that state of Colorado that’s going to take place. That you could tap into that on your computer, knowing it was going to take place and then you could start adjusting your schedule to keep your regular job, don’t quit your job, you never have to quit your job with this thing.

 

Do whatever you’re doing and then take a day to go to the auction because your county is only going to have one or two auctions a year. They’re not going to have 50 of these. It’s not like foreclosure where you get massive people not paying their house payment. These are people that are actually going to have lost their house to the government. The government’s taking it so that they can resell it and put it back on the tax roll. So it’s going to be the same size. It’s a specialty. I always tell people, this is kind of a boutique business. You might be one of only two or three people in your county doing it.

 

[0:25:51.1] MF: Okay, nope. That makes sense, but it obviously makes a difference where you’re located and how your county works and the different type of tax sales they have.

 

[0:25:58.9] TT: Well it used to be, what you just said, that’s what we used to teach. But now with the web, you can do anywhere you want. Like this morning Kalamazoo, tomorrow we’ll be very close to Gran Rapids, Michigan online, now online. You’re not going to walk in first day and buy something online, I’m going to tell you that right now. Because that would not be prudent because, and you’d tell people, “How did you do your due diligence?” They’re going to say they didn’t, and you know you’ve got to do due diligence on real estate, you know that. I’m sure you teach that to all your people. So there’s a learning curve.

 

[0:26:31.1] MF: Okay, great. So it’s pretty basic process, it’s just kind of like a wholesaler where you’re buying cheap, selling cheap and just keeping your money moving.

 

[0:26:40.1] TT: Right, that’s where you make the money, it’s turning them. Buy it and get rid of it, buy it and get rid of it. Tell people not to hold onto them. I buy residential lots that way. I had a client that recently, he was attending the class and every time we took a break he said, “Where should I go?” I said, “Look, you’re on the west coast, why don’t you just go to the Los Angeles auction?” You’ve got to understand, this is a big auction. It’s big and in terms of — there will be a thousand people in the room, but they’re going to sell 2,000 properties.

 

All right, so he went to that auction and I tell him, “Just stay, watch the whole auction and then see what happens at the end of the action.” Well at the end of the auction they hadn’t sold all the property, so they had another auction the next day. So on the first day, the action price always is back taxes. On the second day, on that auction, they cut the taxes in half, he bought seven properties and he spent $85,000, remember that number and the tax collector said, the value of the properties was $1,100,000.

 

[0:27:36.0] MF: That’s pretty good.

 

[0:27:38.4] TT: Eight cents on the dollar. If I couldn’t document that, which we did on video, nobody would believe it. That was Los Angeles.

 

[0:27:45.4] MF: That definitely sounds like there’s some opportunity out there that’s for sure.

 

[0:27:48.5] TT: Yeah. So if you get a property for eight cents on the dollar, what would you do? You could hold onto it, you could decide to go to the bank and say, “Look, it’s assessed at this,” and maybe borrow against it or you could put it back on the market for 50 cents on the dollar. You’re getting the idea, right? So that’s it. Tax lien certificates are the easy ones, the more complicated ones are tax deeds. Yeah, it’s just a matter of learning how to do it. It’s not difficult.

 

[0:28:14.0] MF: Very cool. So I’m curious, with personal investing, you went from the houses to the land, why did you do that? Was it a simpler process?

 

[0:28:21.3] TT: It’s simpler, I don’t have to worry about anything. So for example, let’s say that I decide to buy in Phoenix Arizona and I’m sitting here in Florida. Okay, so let’s use, that’s Maricopa County, and it’s a home. So probably not much to worry about, they could have termite damage or they could have maybe deterioration in the roof because of the sun or whatever and so I have to be cautious what I’m doing there but look, if I could get it for 35 cents on the dollar, I probably made a good buy.

 

But with if there’s an empty lot right next door? Nobody else is even going to bid on that because everybody else — I jokingly say, I said, You were conceived in a house, you grew up in a house so you know all about houses. So you’re going to bid on houses.” What if I could get the lot next door and it’s worth say $2,000 and I could get it for $1,500? It’s worth $20,000 and I could get it for $1,500? So I’m going to buy it for less than 10 cents on the dollar, how can I get hurt and what maintenance do I have?

 

[0:29:15.1] MF: Right. Yeah you don’t have to worry about — and that’s one thing too I imagine, even though you’re buying these properties, are they vacant when they’re buying them or could the occupants still be in there? Does the government pick out to people?

 

[0:29:25.9] TT: Majority of them are empty because the government is already gone through all the foreclosure and told people to get out because they have the power of the sheriff to go get people out. But from time to time, there will be someone in there but that’s not a problem, you just say, “Look, we rented a house down the street for you, can you get out of here by Saturday?” They alway get out. We don’t have any — we teach no confrontational stuff. We don’t want people to get in trouble.

 

[0:29:47.7] MF: Right, for sure.

 

[0:29:51.7] TT: Make it easy. If it gets hard then you’re not going to do it. We’re just going to say, “Forget it.” Some people get really sophisticated and they get teams of people out there fixing them up and all that. I think it’s a perfect business for the person that wants to just, you do two or three deals a year, and make themselves six figures.

 

[0:30:07.9] MF: It’s not a bad deal.

 

[0:30:09.6] TT: I don’t think so. It’s worked for 25 years.

 

[0:30:13.4] MF: Right. Now when you see people getting into the business and maybe they don’t have the right training or haven’t learned from someone, what are some of the mistakes you see people make? What are some things people need to watch out for?

 

[0:30:24.6] TT: Well the first thing they do is that they weigh overbid because they get all involved in the bidding process and if you’re paying more than — I tell people if they’re paying any more than 20 cents on the dollar in your first year, you shouldn’t be doing it because you don’t know what you’re doing. You don’t want to buy 20 cents on the dollar to cover your assets so to speak because if you made a mistake, you still want to be able to get rid of it.

 

So people overbid, people want to buy big — they go out, and spend a lot of time looking at big fancy houses. In other words, they’re going to go look at $300, $500, million dollar homes. Those things rarely go to auction, they do once in a while, you’ll hear about it but just once in a while so why waste your time? You just need to look at bread and butter properties and then don’t buy them. Now, if it’s in your hometown, you might want to buy it to live in but don’t buy them to live in. Buy them because you’re going to resell them.

 

So that might mean like you and I live in a certain economic status, it’s easy to look in our neighborhood to buy one but there’s never any in our neighborhood. So they’re going to be in a neighborhood where people are having some trouble or whatever. So have to open up. So people, they way over bid for the properties. Then if they haven’t thought about selling, the most difficult thing for everyone in my 25 years of doing this is the selling part. We spend more time on selling anything else because people have a bad taste about selling things. They think they’re being bad if they call someone up and say, “Look I’ll make you a hell of a deal.” They’re afraid to do that, don’t ask me why but you’re closer to that part of the business than I am but you get my point.

 

[0:31:54.6] MF: Yes, I think people are more concerned with how much other people are making sometimes and how much they’re making, and they lose focus of what’s really important.

 

[0:32:03.4] TT: Right, exactly. People have a challenge with that. So, people that want to know a little bit more about it, they can just go to Tedthomas.com. There’s for free videos there, and they’ll see in the interview format, me talking to a reporter and then showing examples of all of what we’re talking about. It’s free, they can go there, they don’t have to buy anything.

 

They can learn about it, see a little bit more about the business, and then at the end of the four videos, if they want to get involved for a few hundred dollars, they can do that. If they want to get more involved in that, they could do that. We don’t push it, we just tell them about it. We’ve been doing the same thing for 25 years. So it works and it will continue to work because there will never be less of these auctions.

 

Every year it inches up just a little bit more. Every single year. Because we have more homes, it sounds crazy but to say there’s 3 million tax defaulted properties, that isn’t really a lot, it’s only 3% of the total houses. But that’s a big number, you get out at some states that are absolutely amazing. You go to a place like Miami, they sell tax certificates and at the annual sale, they’ll have 65,000 certificates available.

 

[0:33:13.0] MF: Wow, that’s crazy.

 

[0:33:14.8] TT: The state of Florida in 2016 had one million certificates available.

 

[0:33:20.7] MF: I bet there’s not a million of them selling either.

 

[0:33:24.5] TT: No, and you can buy the leftover ones, just walk in and buy them, you don’t even have to go to the auction, just walk in and buy them, they’ll sell them to you.

 

[0:33:31.7] MF: Okay, so there’s definitely opportunities still in the business?

 

[0:33:35.8] TT: Oh absolutely. But they’re not going to buy any houses for a thousand bucks, don’t forget that.

 

[0:33:39.0] MF: Right, yeah.

 

[0:33:40.1] TT: That was 30 years ago. We used to buy houses for a thousand bucks. They’re not going to do that. There’s too much knowledge available. It used to be there was no knowledge but now there’s going to be someone at the table that would buy it for that before they get a house from that. So you kind of get the idea.

 

[0:33:55.9] MF: Right. Okay, great. Well you beat me to my question, I was going to ask you how people can contact you but you got me there.

 

[0:34:03.1] TT: All right great. Yeah, just tedthomas.com and there’s a lot of free stuff there. They can mosey around that website and find out all kinds of things. I have probably the world’s biggest database of information and a resource center, which are when people become a client, they can go in there. If they started class in the resource center today, they could not finish. If they started one every day, all day between now and Christmas they couldn’t finish. That’s how much data is in there for people that want it.

 

Some people, they get into it, they want to know everything and the problem is they want to know everything in the first week. So we can’t teach it that fast so we put it in the database so they can go in. Then we just have customer service people, every day we have customer service, they’ll take them through that database and show them, they’re like guides. There’s a guide that takes you through the week so you can find things. Which is pretty amazing.

 

[0:34:50.6] MF: Awesome. You have me intrigued about learning more about this business as well.

 

[0:34:55.4] TT: Well then go. Just go to the website, you don’t have to spend any money go there and look at it and say, “Oh my god, oh my god.” And what you’ll see is you’ll see real people, you’re not going to see any movie stars or anything like that. You’re going to see an interview and then you’ll see, you won’t see internet kind of video, you’ll see HD video, which would show on your television. You’ll see real video of real people and not just people from the United States.

 

I teach outside of the United States because those people are a lot more interested than the people here. Everybody here is kind of spoiled but those people out there have no investments like this. The US is the only place you can find — you couldn’t find this if you go to Australia. People from Australia just  don’t believe it. They come all the way over here, “How did you do it?” Matter of fact, our class in Michigan has three people that came all the way from Australia.

 

[0:35:43.2] MF: Wow. Well, I talk to people all the time from Canada, from Australia, from other countries, they don’t believe me on just investments I’m doing. It’s like, “No, that’s not possible, you can’t do that.”

 

[0:35:52.1] TT: Yeah, yeah exactly.

 

[0:35:53.1] MF: It’s a pretty special place for real estate compared to the rest of the world.

 

[0:35:57.4] TT: Oh absolutely and that’s why there’s so much [inaudible] here because they made those rules back in the 20’s and 30’s and everybody’s benefit from all that for a hundred of years now. It’s just a changed world where as other places, there’ve still got 300-year-old houses that are falling down, forget it. They’re renewing here all the time, which is huge, it’s a big deal.

 

[0:36:17.8] MF: Well Ted, anything else you want to add? I know you’ve given a lot of information here, I’ve learned a lot.

 

[0:36:23.1] TT: We probably overwhelmed everybody. I’d button it up by just saying there’s lots of free information at tedthomas.com. If they’re really interested in knowing about it, they can go there, they can watch the videos, no one’s going to force them to buy anything. If they do buy something there, they’ll get way more than their money’s worth and they’ll maybe get themselves started on another money making opportunity, that’s for sure.

 

[0:36:44.3] MF: Okay, great. Awesome. Well, Ted, thank you so much for being on the show, I appreciate it, I’ll have links to your site in the show notes so people can get that there too as well. Really appreciate your insight and knowledge and yeah, I may learn some of this myself here soon.

 

[0:36:58.9] TT: All right. Well, good luck to you and I appreciate the call and I hope you do well in your career.

 

[0:37:03.4] MF: All right, thank you, Ted, and continued success to you as well.

 

[0:37:07.3] TT: Thank you, talk to you soon.

 

[0:37:08.6] MF: All right, bye.

 

[END]