Ted Thomas | A Low-Risk Real Estate Business

Before his current success, Ted Thomas had some very tough times as an entrepreneur and investor. As in, he lost it all almost overnight. 

Ted says he wouldn’t trade it because it showed him the dangers of being over-leveraged and tamed his tolerance for high-risk investments. 

We talk about how he got into a real estate-focused business with very low-risk that has resulted in steady returns since 1989… who he says is to blame for any failures in your life… and why he says paying other people’s taxes can make you a lot of money.

We dig deep into those topics, as well as…

  • The importance of surrounding yourself with people who’ll tell you like it is
  • A unique real estate investment with “guaranteed” 18% returns – or more
  • Where to buy tax lien certificates… and places to avoid
  • Why you should buy low and sell low
  • What happens to your lien when a person defaults on their tax payments… and how to take advantage of it

Listen now…

Mentioned in this episode:

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Steve Gordon: Welcome to the Unstoppable CEO Podcast. I’m your host, Steve Gordon. And today, we got a really special and unique interview for you. Today I’m talking with Ted Thomas. Most people consider Ted America’s tax lien certificate and tax deed authority. And since 1989, he’s been teaching and guiding newcomers and really serious-minded investors how to make money and stay safe and secure with very predictable tax lien certificates.

He really is the goto guy. When it comes to this topic, there is no one else. And so I’m excited to talk to him and learn a little bit about a business that I don’t really know a whole lot about. So, Ted, welcome to the Unstoppable CEO. I’m excited that you’re here and I’m looking forward to learning something.

Ted Thomas: Well, thank you. We’ll have a lot of fun together and we’ll answer a lot of questions for people and that’s why we came.

Steve: Absolutely, absolutely. So fill us in on your background beyond just what’s in the bio. How did you get into this business? And you’ve been doing it since 1989. So what’s that journey been like?

How Ted Became a Tax Lien Guru

Ted: Okay, well, the journey from 1989 on has been safe and secure. But before that, I was a big-time entrepreneur, a risk-taker. And I love to take risks. But my first career was a pilot. That’s pretty regimented so you can’t take any risks doing that. But then I decided to get in the real estate business and I could see the pot of gold at the end of the rainbow. And when I saw that I really went for big time, and I got over-leveraged in that business.

Built a big business, did millions of dollars in real estate, but in the crash of 87, 1987 that is, the whole thing came apart and came tumbling down and top of me. I was way over-leveraged. It was easy to make money on the way up, but when the market stopped, it wasn’t very good. Oh, what a lesson I learned there. So they didn’t teach that a Harvard Business School. They didn’t teach what happens when things go bad. So sure enough, I had to change. And that’s how I get in the business I’m in today. I decided to make a dramatic change. And I got into a business where you can invest with the government, get checks back from them.

I made it safe and secure from then on. It’s still a business which does have minor risk, but I could control my, I could control what was going on. And then I started helping clients do the same thing. Once I knew I could recover, then I could show other people how to do the same thing. But it’s easy to make money on the way up, but going down, oh my goodness you have no idea. When you’re stepping on those hands on the rungs of the ladder coming down it’s painful, let me tell you.

Steve: I’m sure it is. I’m sure it is. So you know, as you think back over the course of that journey, what are some of the things that you’ve really had to draw on when things weren’t going your way? You know, when times were a little bit challenging. What was it that kind of kept you moving forward and unstoppable?

Admit You’re Not Omniscient and Learn

Ted: Well, I’m a guy that has an ego about as big as a hotel downtown. And so I had to start swallowing that ego. I didn’t completely swallow it, but I had to rethink about what I was doing and start going to other people for advice. Start asking questions, start reading a lot, going back to school. I actually went back to school and learned a lot about marketing. I knew how to build a business, but I didn’t understand the marketing part of it as well as it.

So I learned how to do that. And then the toughest part is rebuilding your life with the people around you. The people that surround you are what makes the difference on where going to be 10 years from now, or five years, whatever. And if you got the wrong people around you, you’re going to stay in that wrong market for a long time. And so I was in a market where everybody just looked at what was perfect. And no one wanted to talk about, Well, how about risk? How are we going to manage that? And I didn’t know how to manage it, but I sure learned how that’s for sure.

Steve: Sounds like you were forced to learn, weren’t you?

Ted: Well, you know, I lived, let me make it as a joke because it’s a joke now. It’s a number of years later, but I lived in the country club right across from the clubhouse. You know, the guys were playing golf and all that. And I went from the clubhouse to the outhouse in one year. So that was a that, I had black hair and I went to white hair.

Steve: Wow. So I, you know, I’ve talked to so many entrepreneurs who have been through something like that where they, you know, they have that, they’re sort of at the top of the mountain. And the view’s great, and then all of a sudden the mountain gets pulled out from underneath them and they’re free falling. You know, and I wasn’t actually out of high school at this point. I hate to tell you that but I remember 87, 89. I remember it being a pretty tough couple of years there. Really three or four or five years, if I recall, right.

Ted: Oh, yeah. Five years of it.

Steve: Yeah, I mean

Ted: 70% drop in the market. I mean, I owned over 2000 apartments in Phoenix. Those $10 million buildings went down to 3 million. We owned eight. It was a complete disaster. But the problem with making a lot of money when you’re young, and I was young at that time, the problem is, you think you know everything. And all the people that surround you won’t argue with you, they won’t give you a different opinion. And if you haven’t hired older people, and get some of them looking at you saying you better not do that because this could happen.

Well, that’s a skill level, you know, that people develop at 40 and 50 years old. And you don’t understand that when you’re 30. When you make a million dollars a year at 30 years old, you’re untouchable. Talk about unstoppable. You’re buying other people Mercedes, not just yourself one. And when you come down from that, that’s something you don’t want to experience. And you can avoid it. The whole thing can be avoidable by bringing other people to the table that are contrary to you. And there’s people that are willing to do that.

There’s people that will sit in a board of directors and tell you, Ted, I don’t care how great you are, but you’re going to make a big mistake if you do this. You don’t want to hear that but at least you have the thought process go into your head. If it’ll go in your head, you’ll start to regurgitate that a few times. If it could just slow down, if it could just be a speed bump, you wouldn’t take on that extra debt in the bad market. But you know, debt is easy to take on. I mean, million-dollar debt. I used to borrow from Mitsui in Tokyo.

I could buy anything I wanted in any market because I was the young hero that was going up, up up. But when I got there, I was up, there was no one to help me coming back down. Everybody bailed out of the ship, everyone. You know, they were afraid. People are, people can’t stand the negative part of a market. I mean, we just want to talk positive all the time. If you’re in a board of directors and you’re running a business, you need the other side of it.

You know, bicycles get flat tires, cars get flat tires, people bump into you in the parking lot. They didn’t mean to, but they’re absent-minded or whatever happens to them. And, you know, you need some of that in your marketplace. People won’t talk to you like that though. If you’re 30 years old, everybody is patting you on the back. And, you know, if you research the word sycophant, you know what I’m talking about.

And there’s a lot of sycophants that surround you, especially if you’re paying them good wages. They just want you to, they’re really taking on to your bandwagon. But boy, will they get off quickly when it’s bad. They’re not going to hang in there. It’s not going to happen. So I’m not negative in any way. It was my own fault. I have no one to point to. When I ended up in a two-bedroom apartment I had no one to blame. I couldn’t turn and say, I didn’t. All I could say is I did it wrong and I’ll do it right the next time. It’s all I could say.

Steve: Right, yeah. I think there’s a lot of wisdom just in that. There’s so much in all that you just shared with us that I think is valuable. But at the end of the day, you’re right. All of us in business have no one else to blame. I mean, we sort of have to be mature enough to own our outcomes, and not just own the one we just created but then own the next one that we’re going to hopefully do better in the future.

So yeah, I think that’s fantastic. And I appreciate you sharing that story. So let’s take a quick break because I want to come back and make sure we have plenty of time to talk about the work that you’ve been doing over the last couple of decades about tax liens. This is something that I don’t know a whole lot about. And I would venture to guess that a lot of our listeners are very familiar with it. But it’s a fascinating topic. So let’s come right back. We’ll take a short break. We’ll be back with more with Ted Thomas.

Commercial Break:Hi, this is Steve. I hope you’re enjoying this interview. We’ve got more to come in a minute. But what I’d love for you to do right now is rate this podcast. Leave us a review. Rate us on iTunes. It’ll really help others discover the podcast and help us help other CEOs, other business leaders become unstoppable. So if you go to unstoppableceo.net/iTunes, you can find instructions there and links that will take you right to where you need to go to review the podcast. Thanks so much. Now back to the interview.

Steve: Welcome back everybody. This is Steve Gordon, and I’m speaking with Ted Thomas. Ted, thanks for sharing all of your wisdom in the first part of the interview. I’d like to turn our attention to tax liens. And have you educate us a little bit on what you’re doing now and how you’re working with folks.

Tax Certificates: A Well-Hidden 200 Year Old Market

Ted: Okay, well, let me start out. So the new listener understands this is just an alternate investment that is sponsored. And it’s managed by the local governments. And so it’s as simple as this. Every property in the United States generates a tax. It’s an old fashioned wealth tax years ago. But let’s say, well, let’s just use Florida because where, I’m in Florida right now, it’s a very easy state for anyone to understand. But this works at all states in the United States. Anyway, in Florida, we have a tax, it’s about 1% of the value of the property.

If the property owner doesn’t pay their tax, the local government will say, look, you haven’t paid your tax, so if you can’t pay it, we’re going to issue what’s called a tax lien certificate and let someone else pay your tax. Now, why would the government do that? Well, they do that simply because the government has employees to pay. I’m talking about local government, now your local county whether you and you know, Miami Dade or you’re an Orange County, wherever you happen to be Jacksonville, whatever. So that local county has police to pay, they have fire department to pay, they have school teachers to pay.

So they sell this little certificate. So visualize a piece of paper that comes out of your computer. That’s about the size of a tax certificate. Now that tax certificate, if you don’t pay it, you now still owe it but someone else has paid it. So the someone that paid it now controls the property, the property can’t be sold, it can’t be remortgaged. Nothing can happen until you paid it. Just so you know, 97% of all the people in the United States will pay their taxes. But maybe they had a crisis. They had a roof blow off their house, or they had a car accident.

Something went wrong, but they’ll come in and pay but when they come in to pay, they have to give you back all your money. So that’s the beauty of the investment. You get all your money back plus in Florida up to 18%. Now compare that with Bank of America or Wells Fargo. Then you say Wait a minute, I can make 18%. And so you can buy these with your IRA, you could buy it with your savings account, whatever you want. Now, these certificates are available like on hotels, or they might be available on mansions. It doesn’t, no one is excluded from the tax. Everybody has to pay tax.

And rich people in the country club have problems and people that are average people. So there’s all kinds of certificates. So let me tell you how many there are. So I’ll just use Florida and remember we can expand this up through the United States. Just in Florida, there was 1 million property owners that didn’t pay their tax in 2019. 1 million. That means there was 1 million tax certificates available. So you could buy them in Pensacola, you could buy them in Jacksonville, you could buy them in Fort Myers, wherever you wanted that you didn’t think of in Florida. So those certificates are available, and there’s thousands of them.

And the local government just wants you to give them the money. This is the beauty of the investment. You can’t give money to Ted Thomas. I’m just an educator. Alright, so you invest with the local government and you’ll actually get a check back from the local government. So that’s how simple a tax certificate is. In other states, they have what they call tax deeds. That simply means that people didn’t pay the tax. And you know, if you don’t pay a tax to the government, they’re going to slap your hand. When they slap your hand, they’re going to say, look, you got to pay, or we’re going to confiscate your property.

And so they confiscate that property. And when they do that, they don’t want the property. The government owns all the land anyway. So they don’t want it. So they just put it back in the marketplace for 10 or 20 cents on the dollar. So half of the states sell tax liens and the others sell tax deeds, it’s just an alternate investment. You could never invest with me, as I say, I’m a teacher. You always do that directly with the government.

So it’s administered and it mandated all of the rates that you can earn, mandated by the government. Now, Florida pays 18% and then I’m going to be quiet and you can ask a question. Florida pays 18%, Illinois pays 36% on a tax certificate. Texas pays 24. Okay, California, which everyone’s going to ask me about that, California, they sell the property for just the back taxes. So push it in the back of your mind you say, How could they sell the property?

Well, they do. The government has rights in the property if you don’t pay the tax. Places like Los Angeles, which is probably the third or maybe the fifth most wealthy county in the world, for that matter, they will have 1000 to 2000 of these properties every year with a starting bid of 10 or 20 cents on the dollar. Every year. And this has been going on for 200 years. So nothing is new about what I teach.

Steve; Wow. That’s astonishing. Number one, that there are so many of them and there’s so many people not paying their taxes. But two, the fact that this seems relatively easy to do.

Ted: It is easy. Now, let’s not try to learn the whole country in one phone call here, but we teach you because each state has its own rules, but it’s always the same exact concept that I just talked about. Now, this is such a big business. I mean big. Two to 3% of all the properties in the United States, just so you know, there’s 100 million taxable properties in the United States. Two to 3% of them will go into default every year. I mean, I have databases on this, because we’ve been teaching it for decades.

We teach people that in other countries. I teach this in the United Kingdom, all the provinces of Canada, Bangkok, Thailand, we teach it in Singapore, I teach in Australia, and I do it online. I can teach a person to make money sitting at the desk you’re sitting at right now, I can have you doing it from the kitchen table because now it’s all gone on to be able to do it online. But you don’t want to, you would not marry a woman without seeing her.

We kind of joke about that. But you don’t want to buy a property without seeing it either. So same kind of thing. So but it’s not a complicated business. But it does require some diligence because you’re investing money. The first time you do it your knees will kind of bump together because oh my goodness, am I doing the right thing? And you start small. You can start with 1000 bucks if you want. You could do 50,000.

I mean, I’ve bought certificates on shopping centers, and the shopping center about $100,000 tax, I can buy that certificate. Well what if you can make 16r 18% on $100,000 investment, you’d like to do that. And you’re investing with the government and getting a check back from the government. Makes it pretty safe and secure. That’s what the people like. Safety and security.

Steve: So when you say you’re investing with the government, you’re getting money back from the government, if I’m understanding that, they’re still collecting on the tax at some point. So that property owner wants to eliminate the tax lien so they can do something with the property at some point in the future. And they go in and they pay the tax bill and the government says, well, Ted has the tax lien for this. So we’re going to now going to cut a check to Ted.

Ted: Well, your definition was a little more complicated than mine. Let me simplify it. If the tax isn’t paid, the government will issue a piece of paper. Anybody can buy that piece of paper, you can buy it, I can buy it, someone in Manitoba, Canada can buy it. Okay. When they buy it, they will send their money to, let us do Duval County, that’s Jacksonville, Florida.

So they’ll send the money to Jacksonville Florida to Duval County. Duval county will do all the tax collections and everything. This is a passive investment. You sit on your rusty-dusty, you don’t do any work. Alright, so you’d send that money to Duval County. When the people come in and pay their tax, and 97% of them will pay the tax, when they come in to pay the tax, Ducal County takes the tax money, and then they send that to you.

Okay, and they send the penalty money to you. You’ve done them a favor. They feel really happy. The federal government runs this way every day. The federal government needs money to pay their employees. So they go borrow from Chase Bank or Bank of America and then they pay an interest on that. In this case, the government gives the client URI to buy the certificate, they pass on that money to that person.

Steve: Okay, so

Ted: It’s all done. You can’t, there’s no in-between. There’s no bankers, brokers, wheeler-dealers in this thing. There’s none of that. You’re buying directly from that treasure in that county. You’re not buying from me. I just as I say teach it.

Steve: So sounds really simple. What are the downsides? What are the risks?

Drawbacks of Buying Tax Liens

Ted: Well, good. It is really simple because it was invented before people could read and write. This is a 200-year-old system. This has been going on for 200 years. Okay, here’s the downside. Nobody makes a market in tax certificates. And 99% of the people that are listening to us talk, have never heard of what we’re talking about. And there’s a reason for that. And the reason simply is the government is just lousy at letting people know about this system.

For example, you live in Florida, and I live in Florida, but we don’t know a darn thing about Jacksonville because Jacksonville, which is Duval County only advertises that they have this auction in Jacksonville. Yet there’s people all over the world investing there that I’ve taught how to do it, okay? So a place like Miami Dade, they’ll have 65,000 taxes certificates. They only tell people in Miami Dade.

They don’t even tell Broward County which is Fort Lauderdale right next door. So the system has been around for decades and anybody can learn how to do it. And local people do learn. Certain local people will go to those options all the time. But there’s so many. There’s so, there’s, we’re in a land of abundance, as we all know, all of us entrepreneurs, abundant thinkers, this is abundance. And we’re talking about two and a half to three million of these every year nationwide.

Steve; How many go on unpurchased? So if the government standing there ready to issue a certificate, what percentage goes unpurchased?

Ted: I don’t know if I can give you an exact number on that. But I can tell you that they’re never able to sell all the tax lien certificates or all the tax deeds. They’re never able to. And actually, I even have a course that teaches people how to buy those. I kind of invented this, buy it over the counter. In other words, if you wanted to, if you could wait till the auction was over and then go down and buy the leftovers if you wanted to. So I call that buying over the counter. I actually teach people how to do that.

And that works especially well, for people that want to buy property. What if they have the auction and nobody shows up? It snows that day. Okay, well, it does. You know, a place like Snohomish County in Seattle, it’s snowing, so nobody shows up. Now, what are you gonna do with the property? They still want to get rid of it. Otherwise, it’ll all deteriorate. And so then they’ll sell those over the counter. The beauty of buying it over the counter is that there’s no one competing with you.

Steve: Very interesting. Very interesting. So why don’t more people know about that? I mean, I get that they’re only advertised in certain places but this just doesn’t seem to be on the radar of most people.

Ted: It’s not. Two things and they’re both the downsides. Okay. The downside is you have to do some four-letter word, WORK. Okay, most investors want to pick up the phone, talk a broker, yeah, buy me some of that and then they go home and pray that the investment goes up. This investment we buy, we know it’s going to go up because the government’s going to give us a check. So you have to do some work and do a little bit of investigation.

For example, you don’t want to buy in Jacksonville in certain areas that, let’s not criticize Jacksonville but every city is going to have a bad area, okay? All right. So you know what to buy there for sure. There’s going to be some available there. So don’t just wing it and call up and say, yeah, I’ll buy a bunch of those because you might buy in the ghetto. You don’t want to do that. So that’s a definite downside. The other side of it is you can’t withdraw your money. You have to wait until that person pays their taxes.

Now, here’s the question you’ve missed, but I’m going to bring it up, and it’s going to hit you like a bolt of lightning. The question that comes up for the conservative investors, Wait a minute, Ted, what if the people never pay the tax? You say, Oh my god, I bought something. I don’t want a property in Jacksonville. I live in Dallas, or I live in Manitoba. I live in Vancouver. I don’t want to property in Jacksonville. Well, here’s what happens.

What happens if the people don’t pay the tax, you get the property without a mortgage. Wow, get the property without a mortgage. So of course, you’d hire a broker and sell it, that’s what you do. But that’s the downside, you don’t want to buy in a bad area. So what you do want to do is you want to learn, that’s what we teach, go buy in the country club, by a tax certificate in the country club, and then go home and get right next to your bed and pray that they don’t pay.

Because if they don’t pay, you’re going to get a property in the country club and it won’t have a mortgage. It’s the law in the United States in every county. So the longer I talked, the better it gets is what’s really going to happen because I’ve been teaching people how to do it for 25 years.

Steve: Well, and I guess that kind of a property because you’ve got so little invested you can fire sale it in any market and ought to be able to get rid of it and still do well.

Buy Low, Sell Low

Ted: So you’re going to fit very well in my class because I teach them buy low and sell it low. Don’t hang around to try to make all the profit. If you got a property, you see taxes are only 1% so if you bought it and ended up with a tax certificate you probably paid two years tax, okay? So now you get 2% in the property. Sell the darn thing for 50 cents on the dollar, you’d be happy, right?

Steve: I think everybody listening would be if they can do that.

Ted: I have people buying properties, buying tax certificates for $11,000 and then reselling the property for 180,000. It’s happening every day in America. It’s just that those people are not going to tell you about it. Once they know about it they’re not going to tell you. They don’t watch it at the auction.

Steve: I’m sure, I’m sure. So who comes to you to learn about this? Do you see entrepreneurs coming to you? Who’s kind of a typical

Ted: I’d love to have more entrepreneurs, I’d love to have more young entrepreneurs, but the challenge is they don’t have any money. So our average client, and we can look at it, show our database, the clients run 45 years old to 105. Okay, seriously. 45 to 105 and 63 to 65% are women. And the way that, women are drawn to it because we tell people buy it and whatever you do sell it. Just make a profit. Do not fix it up. Do not do a fixer-upper. Because that’s where you’re going to get killed.

And people watch a TV show and it looks Oh, look at this old crappy house. And then 30 minutes later, it’s a gorgeous mansion, right? Nobody knows how much money they spent. Nobody knows. Whatever. I’m not going to go into that because it sounds like I’m just being bad-mouthing, I’m not. You don’t want to fix up houses. Take my word for it. I’ve been doing this for a lot of years. And if I made mistakes, that’s where I made them. Because you think you can fix it up for 20 grand, and it costs you 120. I mean, there’s all kinds of problems.

But let fixer-upper guys do that. So if you buy it at 10, 20, 30 cents on the dollar, sell the thing for 50 cents on the dollar, take the check and go and buy another one. Because there’s always another option. Well, you live very close to it. So in Georgia to give you an example, they have 169 auctions every month. Every county has an auction every month. Every month. And the minimum payment in Georgia is 20%.

You can’t make less than 20. If you own it for one day, you make 20%. You hold it for 365 days, you still make 20. So each date is just a little bit different. And they do it, do their own thing. But it’s a good business for someone that has a little time put into it. It’s an alternative. And it’s like, what we’re doing now is we’re just kind of opening up minds and letting people know a little bit about it. They can watch videos. I put free videos on my website. They can go look and go do questions and answers just like we are now except we show them video people doing it. They can see it.

Steve: That’s great. Well, so that actually brings me to my next question. So for somebody that’s listening to this that’s interested, you know, we have a lot of entrepreneurs listening that, and entrepreneurs are always looking for a way to take the profits that they’re making in their business and go put them to work somewhere else because you can’t put them in a bank anymore. You don’t make any interest there. If they want to learn more about this, what’s the best way for them to get in touch with you and learn more from you and your company,

Ted: The easy way is just go to tedthomas.com and what will be there is there’s a series of videos. There’s three videos about 20 minutes each, where they have a skeptical reporter just interviewing me like we’re doing now. And that gives them a lot of information. There’s an inexpensive course at the end of that if they want to order something like that. But they can find me on YouTube and they can learn about it that way.

But the business has been around for 200 years, I didn’t create it. I just found out about it. When I went to actually bankrupt I wanted to get into something that I wasn’t gonna lose my assets again. And so I got involved in it. So you can start small, you can start big but I would start with tedthomas.com and then kind of work from there.

Steve: Very good. Ted Thomas, the legend of tax deeds in the United States. Thanks for spending a little bit of time with us and educating us all.

Ted: Well, you’re certainly welcome and thanks for being so organized. And I love the way you prepared for this event. So I’m really impressed with what you did. So I look forward to seeing you again.

Steve: Thanks Ted. Take care.

Ted: Bye-bye.

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