http://tedthomas.com Ted explains the terms “Tax Lien Certificates” and “Tax Deeds” and how you can make money investing in them.
– Summary of the video –
Ted: Hi, everyone. I’m Ted Thomas and if we haven’t met before, well, hello and actually we’re in my office right now and we’re going to talk about tax lien certificates and tax deeds. And we get tons of questions on this and you can go to the question line if you want we’ll answer them there. But I want to do just a short video and show you guys exactly what’s taking place.
So, the tax lien business has been going up, up, up over this past couple of years because we have so much foreclosure and such a bad economy. So, if you’re suffering from a bad economy take a real close look at what we’re going to do now because this will be a place where you could make yourself some money. So, keep some notes along this isn’t a fancy production but let’s look at the graph I’ve made here and we’ll kind of follow this along and we’re not going to take 10 minutes we’re just going to take a few minutes, okay?
So, this is just representing the average home and then what we’re representing here is the tax certificate. So if the person does not or the property owner does not pay their taxes what the county will do is they will issue a tax certificate. Now, that has a big advantage for you because you can actually buy those certificates and I’ll come back to that, okay? All right. Now, in half of the state so let’s just think of the United States and kind of divide it in half and I’m just going to be back to you for a second here and do this. Okay, so, that’s tax lien side of the business. Then we have another side and that’s the tax deed side. Now, a lot of real professional investors love the tax deed side because that’s where you’re going to get a property but same situation takes place.
If a property owner doesn’t pay the taxes here the local government issues the tax lien certificate. Now the tax lien certificate is not more than a piece of paper like this. That’s all it is and it represents a debt on that property. Now the brilliance of that whole thing is if you want one of these you can make a lot of money and I’ll come back to that in a second. Okay, now. Over here we have the same situation taking place while we have a property only it hasn’t paid the taxes. In about half the states the state and the county will actually repossess, they’ll take the property. They seize the property and then they sell it at an auction.
Okay, now, when they sell it at an auction you’re actually going to receive a tax deed to the property or a treasury’s deed or a county deed of some kind. The point is in both cases there’s a way to make money. Now the first case is here with tax certificates. So let me cover a little bit more about that. That’s relatively easy, okay. So if you were to buy a tax lien certificate these are the various rates.. Now, the lowest rate I’ve ever seen was 8% but generally speaking they’re 12%, 14%, 18%, all the way up to 36% and it depends upon the state. I don’t, the local people don’t decide, it’s the state decides what this rate is.
So if you buy a tax certificate , remember, it’s just that piece of paper they represented a data on that property. If you buy that this is the rate of return that you would earn on that certificate. Now that’s a good solid rate of return because the county pays those so you don’t have to worry about that. You’re going to invest with the government and you’re going to get a check back with the government. So that’s a real important thing for you to be thinking about. All right, down here we’re going to talk about the tax deeds again for just a minute. Now that’s the same situation people haven’t paid the taxes. Now that could include everything from any kind of real estate. In other words a shopping center it could be a local strip shop, shopping center, it could even be a home, it could be whatever. Farms, mansions, all those things, if they don’t pay the taxes what’s going to happen is the people are going to lose the property.