I’m Ted Thomas, and I’ve been an entrepreneur and investor in real estate for the past 3 decades. My specialty is tax defaulted real estate which is a subset of the traditional real estate business.
Today I’m answering your question about how to invest in real estate for passive income, and the topics I’m going to cover are:
This just happens to be an arena that I and many of my successful students have done very well in.
Real Estate Investing in Tax Defaulted Property
Tax defaulted real estate is not glamorous. However, it is money generated for all concerned, and many of my students generate passive income to take care of themselves and their families.
Simultaneously, while generating a passive income to help ourselves, we helped dozens, actually hundreds of people who couldn’t otherwise buy a home.
Let’s start by asking why are you reading this?
Ask yourself, if you could buy some used and abused real estate for 10, 20 or 30 cents on the dollar and sell the property for 50 or 60 cents on the dollar, wouldn’t that work for you financially?
Purchasing Mortgage-Free Real Estate at a Discount
I’ll give you a little background that you’ll find valuable. 30-years ago, I discovered a little-known but highly lucrative business that’s administered and executed by local county governments nationwide.
When it comes to property taxes, all 3,000+ counties will size and confiscate tax-defaulted real estate. These are properties which for many different reasons are in default.
The county will then resell the property at a minimum bid of at least the back taxes, and they eliminate the deed of trust and any mortgage loans. Counties use this auction process to remove properties from the county records and transfer them back to the private property records.
The treasurer is authorized to discount significantly below tax assessed values. Discounts could be 60%, 70% or 80% off the tax assessed value. This all takes place at a public auction which anyone can attend
Strategy 1: Creating Cash Flow With Real Estate
These auctions have been going on publicly for over 200 years. If you know how or are willing to learn how, you can purchase pennies on the dollar and resell whatever you can in the public market.
My students buy these properties, and one of the successful processes is a strategy to buy low at the auction and resell at less than market value to other real estate investors, like flippers or fixer-upper people.
To summarize, we teach people to buy low and sell low.
Strategy 2: Creating Passive Income With Real Estate Seller Financing
Now let’s talk about how to invest in real estate for passive income. I call this how to become the banker. Sell your property once and get paid for 10 years.
We do that using a contract for sale. This is nothing more than a contract like purchasing a refrigerator from Home Depot or Lowes.
Generally speaking, these are small investors, however, they’re on a fast track to making big money in an arena that most people are not aware of. That arena is installment sales.
Using Installment Sales to Sell Real Estate
Investors should only look and make plans to buy properties they can afford to purchase. The following is an example:
- My student chooses a single-family home that’s slightly used and abused.
- The tax assessed value is $80,000
- My student is the highest bidder at $8,000
- The student understands “buy low and sell low” and advertises the property on Craigslist, eBay, the Multiple Listing Service (MLS), many signs on the front lawn, Trulia, and Zillow.
- The asking price is $50,000
- A new buyer offers a $5,000 down payment and requests installment payments.
- My student agreed to sell for $5,000 down and installment payments of $650 a month for 10 years.
- $650 a month X 12 months = $7,800 a year
- 10 years X $7,800 = $78,000
- Add back in the $5,000 deposit
- That’s $83,000 – 10 years of passive income
Americans love installment sales because they can own what they want and just make payments.
Why does this work? The county gets paid for the property. The person who purchases the property now has a home. They probably have bad credit and have been rejected by the bank, but the installment sale made them happy.
Finally, the student worked once and got paid monthly for 10 years. I have students who have done this as many as 60 times in 6 years.
We hope you enjoyed Ted’s lesson, “How to Invest in Real Estate for Passive Income”
You can generate quick cash flow and residual income with tax defaulted property investing. The large profit margins that come from purchasing mortgage-free properties for pennies on the dollar allow for quicker sales if you utilize Ted’s buy low and sell low strategy.
Earn cash quickly, buy selling fast or create a passive income by seller financing, and watch your bank account grow.
If you’d like to know more about tax-delinquent property investing, Ted Thomas hosts a one-day virtual workshop monthly! To get more information about the Retire Rich From Home Virtual Workshop click here: https://tedthomas.com/geh504