This week’s Misfit Entrepreneur is Ted Thomas. Ted is a real estate expert, especially in the tax lien and tax deed areas. In fact, Ted’s organization is the single largest “SOURCE” of Tax Lien & Tax Deed Information Products in the world. He’s written over 30 books and helped over 75,000 clients learn to invest in tax liens.
On top of that, Ted is an internationally sought after speaker and has created sales systems and selling processes that many of the of top gurus pay Ted to teach them. He’s shared the stage with everyone from Donald Trump to Tony Robbins. I am really excited to have Ted on to talk about his experience in real estate and get his wisdom on business in general.
Ted’s first career was as an airline pilot. He traveled the world. After a while, he decided to move on and get into business. He moved to California and started into real estate. He did very well and hit things at the right time and right place and amassed it to over $200 million in property in 6 years. But, then the 80’s savings and loan crises hit and he lost everything.
He then had to start over again and decided he didn’t want to put himself in situation with as much risk. This led him to the business he is in today.
As Ted says, “Crisis are good, because you learn a lot more on the way down than you do on the way up.”
What did you learn through your business crashing?
- You need to get advisers around you that are other than the business early on.
- You have to build a good foundation of finance, marketing, sales, operations, etc. processes that will ensure you can consistently succeed.
- Think ahead. When you “need money” the bank is probably not going to give it to you, but when you have money and are doing well they will. The best time to get money is when you don’t need it.
- Troubled times in real estate can be almost permanent, so planning and having a plan B, C, etc. for when things go wrong is vital.
- Beware of growing too fast in any business. If you don’t have the right things in place, you can collapse yourself. You need good systems, processes, staff that can keep up, etc.
Explain tax liens and how you invest in them…
- Every property in a state is going to have property tax.
- There will always be people that have some difficulty and don’t pay their property taxes and get behind.
- The local government needs the tax money to pay for schools, fire, police, etc.
- The state has rules. They can either take the property or file a tax lien.
- Taking the house is a “tax deed auction.” But, the government doesn’t want to own houses, so they auction it off.
- The other thing that the state can do is file a tax lien certificate. People can then come in and pay those tax and assume the lien certificate.
- These certificates have interest payments due on them.
- When you buy one, you wait – and when the homeowner comes in to pay their taxes and pay the interest penalty, you as the invest get paid back and get the interest.
- 90% of people will come in and pay the tax. If they don’t pay, you can get the property without a mortgage.
- It’s different in every state, some states have higher interest rates, some lower.
What are the risks of investing in tax liens?
- The risk is that you don’t know what you bought when you buy it.
- You need to learn how to do the research to look at the property and understand what you have invested in because if the owner doesn’t end up paying, you will own the property.
- The other side of things is “tax defaulted property” where you get the property at an extremely low price, but it needs a lot of work to fix up and either rent or sell.
- You want to buy low and sell low. Don’t spend the time or capital to fix places up. Get the house incredibly cheap and turn around and sell it for $20k or so more.
How is it possible to create a 6-figure income in less than a year doing this?
Ted starts with an example of doing something different…
- Every auction will have 15-20% residential lots that people planned to build on.
- Many times they don’t build and when the auction happens, they don’t get bid up as much.
- You need to check the value online to see what it is worth.
- You can pick up lots cheap ($1500-2000) and turn around and sell them for a good markup.
- You can sell them on Craig’s list and use an ad like “Lot value $30,000. Must sell. $15,000.”
- You have to learn a little bit about marketing to set yourself apart.
Anything else we should know about tax liens and deeds?
- Spend the time to learn it.
- The laws will be different by each area.
- Become a student of the business.
- If you are not willing to learn about marketing and finance, then you might lose your “assets”
What are the principles you teach on how to sell?
- Take the word sell and put a big X through it. You don’t want to sell. You want to solve people problems. Show them how you can help them solve their problems.
- Focus on the benefit to the client. What is the special thing? Or things?
- When people don’t sell well, it’s because they don’t get the audience participation. You must engage and help your audience become engaged. You can do this by asking simple questions and bringing people into the presentation.
- Ask questions, “Can this work for you? How would it help your family? How can it help your business? Do you see how this can make a different for you?”
Is there a format or steps that should be followed to present well?
- People need to stay in their natural style.
- If people try to force things in a way that is not them, it will not work.
- Use your natural style and then improve it.
- Focus on educating and solving problems.
- Use story, but the key is when you finish the story, you need to make sure you make the point and trial close on the point. Get some agreement in a gentle way.
- Also remember, each medium/platform is different. There is an art to each one. Live events are different than being on stage, or 1:1, and so on.
- At the end of the day, you have to be genuine and people have to know you, like you, and trust you.
What is your best advice to succeed as an entrepreneur and what would you tell a new entrepreneur starting out today?
- New entrepreneurs need to focus on the business, but thinking ahead about how they will have the capital ready they will need to really grow. Plan.
- There is no such thing as a 40 hour week for the entrepreneur.
- If you are not willing to learn about marketing, then don’t become an entrepreneur.
Where do you see thing going in real estate? What is the trend and are we getting close to another downturn?
Ted talks about Schiller and his book on the history of real estate as well as the Case-Schiller index.
- When it comes to real estate, you have to create value. Buy the real estate where it has value upside such as the example before with buying a residential lot.
- Good marketing is an upside. It is how you create value.
- Real estate is not complicated. It has averaged 1% a year growth historically.
- You have to focus on being the right kind of buyer and making sure you have a good margin to the upside on any property.
Best Quote: Crisis are good, because you learn a lot more on the way down than you do on the ways up.
Ted's Misfit 3:
- Get off your butt and do something.
- Don’t be afraid to seek out and ask for advice from advisers around you.
- Learn about finance and learn about marketing and be prepared for when the market shifts because it will.