Table of Contents - Profiting from Unpaid Property Taxes with Ted Thomas
Dave Debeau [00:00:08] Well, hey there, Don, this is Dave Debeau with this week's episode of the Property Profits Real Estate podcast. As you can see, I'm in different digs this week. I'm actually as we're filming this, I'm in Toronto and it's the day after the Raptors winning the NBA championship. So, yeah, we're pretty stoked. The town's pretty stoked up about that. And with me on today's call, I have a real estate living legend and a very sharp gentleman, Mr. Ted Thomas. How are you doing today, my friend?
Ted Thomas [00:00:42] Just great. Just great. Good to hear from you.
Dave Debeau [00:00:44] Likewise. And if you're not familiar with Ted, Ted has been doing real estate for quite some time. And he is, in my humble opinion, the world's leading authority when it comes to investing in tax defaulted property. So that's what we're going to be touching on today in the conversation. And Ted wants to get us started by just kind of giving us a brief overview of your background when it comes to investing.
Ted Thomas [00:01:08] OK, well, first of all, I started out as a pilot and I flew for the airlines for a while for Aloha Airlines and Honolulu. But when I found out how much money I could make in real estate, that got my attention. So I actually left the islands and I started in California raising money and buying apartment property, smallest one ever, what was 50 units. And then we went to three hundred units, two hundred fifty and so on. And that business was great until about nineteen eighty six and that we had a huge recession in the states and markets crashed and I went from having a private jet and living in the country club. So I lived right across from the clubhouse in the country club and went for the clubhouse to the outhouse in one year. And so I learned a lot about foreclosure, real estate and how tough it really could be. So that was my that was my start. And then from there, I became an expert in distressed property, not the good way, but by losing two hundred million dollars with the property going all the way to the bottom. But I learned all the mistakes some attorneys made, whatever. And that created a whole new career for me so that I went on from there to actually writing a book that became a bestseller. I invented the way to buy real estate with direct mail and that kind of thing. And so I've been at it ever since. And so here we are today.
Dave Debeau [00:02:22] Ted, thank you very much. Now, your main focus these days is on tax defaulted properties, tax liens, tax deeds for folks who aren't familiar with those. Can you just give us the big thirty thousand for perspective on what's a tax lien and what's a tax deed?
Ted Thomas [00:02:40] OK, good. It's first of all, it's a very profitable business, mostly because ninety nine percent of all of North America doesn't understand whether the provinces or whether in Singapore they don't get it. So you'll get it after one minute. Right now, every property in the United States has a tax, OK? It's original wealth tax that came from England like all the rest of the stuff that we have. All right. So the original wealth tax became a property tax, OK? Lots of people don't pay the property tax, which about three million homes or properties in the United States will go to tax default every year. I said three million. All right. So that's about three percent of all the property. So a property tax is what they'll do is they'll issue a piece of paper, think of a piece of paper that came out of your computer, out of that printer. All right. That's a tax certificate. Those tax certificates in the United States, if you buy one and pay someone tax, you could earn eighteen, twenty four or thirty six percent on that. So it's an investment. All right. Now, the other half of it is half of the states actually sell a tax defaulted property. That's called the tax deed. Those properties are probably as people didn't pay the tax and the local government went out and confiscated the property. They just took the property away from it. And then they auction it. They get rid of it because they don't want any more property. The government's got no property and they start those properties starting to use these 10 to 20 cents on the dollar. So if you're a conservative investor, you want to buy tax liens, attacks, tax certificates, OK, if you're entrepreneurial, you want to buy those tax defaulter properties. And I created materials and how to teach people how to do that about 30 years ago. And I've now become pretty much known around the world. I teach this in the U.K., I teach it in Australia, I teach in Bangkok, wherever it might be, almost all the provinces of Canada. I mean, I've spent a lot of time in British Columbia, Alberta and Ontario teaching the same subject.
Dave Debeau [00:04:32] So when it comes to taxes, tax deeds, thank you very much for the big picture overview. Maybe just kind of flesh out a little bit more about why the tax leans makes sense for conservative investors and why the tax deeds are more entrepreneurial.
Ted Thomas [00:04:48] Good question. OK, so I do business with a lot of seniors. You probably can tell a little gray here, here. And so seniors are attracted to me because I can show them. Well, let's just use Florida as the example in Florida in twenty eighteen and twenty nineteen each year they had at least one. Million property owners defaulted on their taxes, one million,
Dave Debeau [00:05:10] so that means two or three million in the states are all in Florida.
Ted Thomas [00:05:13] Yeah, well, no tax certificates now, about three million defaulted properties. OK, so one million tax certificates were issued. So you can buy a certificate and all you do to buy one to say I want to buy that and you pay the tax and tax. That average house in Florida is about fifteen hundred dollars a year, sometimes less. OK, so you buy that certificate, they give you the certificate, you take it home that you can't invest with me. You can't buy this from me. You invest with the government. You get a check back from the government and the property is the security. So when you buy the certificate, the government guarantees the rate in Florida, its all the way up to 18 percent. Now, the banks I don't know whether you want to use TD Bank, you want to use Bank of Montreal or whatever, those banks are paid like one percent and less on a Florida certificate. You can earn up to 18 percent. If you went to Iowa, you could earn twenty four percent. Go into Texas. Twenty five. So you'd want to buy that certificate because you get a nice rate of return. That's guaranteed rate of return. Now, listen to this. If the property owner does not pay you on that certificate, you get the property without a mortgage. Well, you get the property without a mortgage, so that's a tax certificate now, a tax defaulter property, which they'll be about three million every year. Those people don't pay their tax. So the government actually the local government. Now, this is a county government. We have counties as against municipalities. So we have a county government. The county government does not get paid. They confiscate the property, but they don't want it. So they put it back in the market and they'll sell it, starting bid the back taxes.
Dave Debeau [00:06:50] So in other words, in those cases, if somebody goes, let's say, probably a year or two or three of back taxes, the local county confiscates the property, puts it up for sale, and and the starting bid is whatever the back taxes were. Is that right? Right.
Ted Thomas [00:07:07] And there's quite a few I mean, there's many like you in Ontario right now. Well, all through the state of New York, they're having auctions right now, June, July and August. They'll be places within one hundred miles of New York City with two hundred and fifty of these properties to sell within one hundred miles of New York City. That's amazing. And all all of the states will have those will have property tax auctions every single year.
Dave Debeau [00:07:28] So why isn't everybody buying these all day long?
Ted Thomas [00:07:32] The challenge is this. Because we work under the antiquated system, the county will only I'm going to walk towards you, but I'm just going to walk towards you to get a brochure. I have a desk in front of me, so I'm just walking towards you to pick up a brochure. This brochure, which I'm going to hold up and you'll be able to read that brochure is for a county that's only an hour and a half from New York City. And you can't see the top of it that there's two hundred and thirty five properties they're auctioning right now. And every one of those properties is listed in this brochure. Every one of you can see the picture of it and everything, starting with the back taxes. Every single county in the United States will have those kind of auctions. And there's three thousand counties. There's another seventeen hundred and fifty municipalities. Here's the problem. This county I'm going to show you the brochure again. You can see what county it is. It's Dutchess County. This is an auction company down here. But this county only advertises in that county. So you could be living in New York City with his eight or 10 million people and you wouldn't even know this auction was taking place. If you were in the county immediately adjacent, you wouldn't know it was taking place. I'm the only one that has I have a database with every one of these counties that I've got on a thumb drive, believe it or not.
Dave Debeau [00:08:46] But it is basically because it's very fractured, it's very scattered. Nobody knows when all the different auctions are happening. But that makes sense now, Ted. A lot of our listeners are Canadian, so they're probably going, well, why don't I just do this or can I do this in Canada? Can I can I go buy tax liens, tax deeds in Canada?
Ted Thomas [00:09:12] Well, first of all, you could actually buy taxes in parts of Canada. But the challenge is this, to my knowledge, unless they changed in the last year since I was teaching there, I'm going to tell you the highest rate I've ever seen in all of Canada is three percent. So why would you want to get involved with three percent when in Florida you couldn't make 18? I would make twenty four. In Chicago, Illinois, tax certificates pay three percent a month. That's thirty six percent a year. So my Canadian clients and I have hundreds of them all by in the States.
Dave Debeau [00:09:43] I don't know why anybody buys tax things are deed's in Canada that
Ted Thomas [00:09:46] nobody would notice. It doesn't make sense. That makes sense. All right.
Dave Debeau [00:09:49] So, Chad, a lot of you know, a lot of Canadians say, well, that sounds great, but I live in Kamloops, British Columbia. I don't want to be getting on a plane and flying to. Right. Who knows where New York City could be doing this. Is is it possible to. I know it is. But explain to us how to be different from. Are you from. Have you got clients actually in Singapore buying American taxpayers?
Ted Thomas [00:10:15] I have clients all over the English speaking world buying here here in Florida and all over the states. I teach my Canadian clients, just let us give you some exposure to it and we'll put you online to do this. People can say, oh, but I don't want to use a computer. We can show them how to use a computer and buy it. I guess all of our British Columbia, all over Alberta and all over Ontario already doing this. Now I'm talking about people that are making six figure incomes doing this business in the States.
Dave Debeau [00:10:44] OK, so basically just give us the gist of how they do it online.
Ted Thomas [00:10:48] All they have to do online is this particular auction. OK, once you know when the auction is, they will put this brochure. Now, this brochure that I'm showing you right now, I took it to a printer to print it. It came up online. I got this online and I just took it over and printed it so I could show it to someone like you. Because if I show you all this paper, it looks like a big mess, but it's a brochure. And so online it comes as a brochure and you can look up every property. You can sit at your desk right now and you can look at every property number in the United States, like you have a social number. Well, every property has the same thing that they can do that so they could look online and they can they can actually talk to the county treasurers online here in the states.
Dave Debeau [00:11:30] And then when the election comes up, there's some way to bid online if they want to as well.
Ted Thomas [00:11:34] They'll actually put a picture up there online. You'll see the picture and you'll hear the bidding in the room and you can bid in the room or you could just bid online, but you'll hear both and you'll see both going on. They'll say all those bids in the room. Do you have something online and you get online? You can go to a company called Bid for Assets. They'll give you a free classes just like we do bid for assets. All right.
Dave Debeau [00:11:56] Sounds good. So, Ted, if somebody is watching this table, sounds pretty interesting, but I'm into doing my main bread and butter is I'm buying OLDING properties locally or I'm doing Flip's locally or whatever, and I'm happy with that. How would this fit in with somebody current real estate investing business or how do you see this fitting in?
Ted Thomas [00:12:17] OK, this whatever you're doing and you're doing it already, keep doing it because you're already making money. So you don't want to change anything but slowly start learning how to do this. The beauty of this business and the reason I like it and the clients like it is this is a part time venture, this auction. I'm just reaching for that brochure. This auctions only happening once a year, but there's three thousand county to. So you can do this when you want to. For example, Los Angeles already had their auction. They won't have another one till September. So what are you going to do in between now and September? We're talking in June and so you've got months to prepare and get ready. So this is a part time venture tax certificates. When they put those up, if I show you how many they have a place like Tampa, Florida, we'll have forty thousand certificates. There's no way you could buy them forty thousand. So they're always there. So this doesn't go away. And it's not just one time of year. So it's a part time adventure.
Dave Debeau [00:13:15] So let's say somebody is into doing flips and they get excited about this idea. So they're probably thinking, well, why don't I just go by? If I can buy properties for ten cents on the dollar, why don't I just go buy a bunch of properties and and flip them? Is it is that and if so, why isn't everybody doing it? All right.
Ted Thomas [00:13:34] All right. Again, they're not doing it because they don't know where all the auctions are. So people are provincial and they're going to think about if they happen to live in Vancouver, they want to know they want to buy in Vancouver. OK, I'm saying let's break you out of the model of it. How about buying a couple over in Seattle to go down to Yakima or something like that? All right. So people on the other side, what we in Ontario, we'll come on down here to Dutchess County. It's one down to Orange County in New York. And you can go everything you want to know because it's online. All right. So if you wanted to, you could get on the expressway and go down Mississauga. I got to just going down at Buffalo, New York. We'll have seven hundred properties this year. Buffalo, and that's four hours. Four hours. Yeah. OK, so you can do this anywhere you want. You just have to learn about it.
Dave Debeau [00:14:17] Just have to learn. That's all right. So what are some of the bigger mistakes you see people making when they get started in all tax lean taxed business
Ted Thomas [00:14:26] that 90 percent of them have at the same trouble? Everybody that's got great here is saved up a little bit. So they're OK. If they've got an RRSP, they've got a an account that they've saved up, they're OK. But the people that make the big mistakes, they think they're going to buy every property. Five cents on the dollar. Now, look, I'm buying in places like New York, I'm looking at a colonial house. You're a real estate guy. You know what a nice looking colonial. Four acres of land, one hundred year old oak trees. I'm not getting those for 10 cents on the dollar. These are five hundred thousand dollar house. I'm going to have to spend 30 cents on the dollar to get that property. OK, now we're talking about pretty good. OK. OK, yeah. Well, if I buy that and put 50 grand into it, am I coming out good for the year. I get it. All right. So it's not a business you could just buy for 10 cents. But let me give you the opposite of that. I just have a guy is a newspaper editor, skeptical guy. He bought a house in Georgia for three hundred and twenty six dollars and 16 cents. Three hundred and twenty six dollars, I said, a rentable livable house, he rents it out for six thousand bucks a year.
Dave Debeau [00:15:39] But that's the that's not the norm. That's the exception, correct?
Ted Thomas [00:15:43] Exactly. So don't think you're just going to get in for nothing down and all that crap. That's all B.S.. You need to get a little nest egg together. You need to get a couple of investors. I mean, do crowdfunding if you want. I don't care like you do. You teach people like get that bundle of money together and then you're ready to go. That's what kind of business it is. Now, what's
Dave Debeau [00:16:04] a good amount to have in mind to get started with this business? Realistically like to make it worthwhile.
Ted Thomas [00:16:09] If you've got 50 grand, you going to really kick some butt and buy something that you get for 30 grand. So you got a little left over to take care of it, you know, whatever, and try to do one that year, try to do one, then the next year, try to do another one. But don't just try to buy. I tell you, if the house is low price, don't buy it. Don't buy that stuff. If it's in your neighborhood, like this guy found one in his neighborhood, you know, that's OK. But it's not a junker business at all. It's not a jungle's.
Dave Debeau [00:16:35] Yeah. So, my friend, time flies when we're having fun. That means we kind of come back and do this again sometime. But in the meantime, if people are interested in finding out more, do you have any any resources, any freebies, any anywhere we can find people to place?
Ted Thomas [00:16:49] If they like video, just go to Thomas Dotcom and there'll be some free videos there. If they like to learn with their ears, then go to Ted Thomas podcast and I do a podcast like you do I. I do that once a week and I always have some new information and so. Great.
Dave Debeau [00:17:04] Yes, awesome. Ted, it's always a pleasure. Thank you very much, my friend. I really appreciate you sharing some of your wisdom with us.
Ted Thomas [00:17:12] Great. I'm glad to be here and I look forward to seeing you again.
Dave Debeau [00:17:15] All right, everybody, have a good week and we will talk to you next time on the next episode of the Property Profits Real Estate podcast. Take care regardless. Well, thanks very much for checking out the property profits podcast. We like what we're doing here. Please head on over to iTunes, subscribe read us and leave us to review it. Very, very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom Ticker.