Real Estate Deal Analysis & Advice

Meet the Investors: Buying Cheap Property With Tax Liens With Ned Carey

Expertise: Real Estate Deal Analysis & Advice, Real Estate News & Commentary, Real Estate Investing Basics
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In this episode of “Meet the Investors,” I’m in beautiful Baltimore, Maryland. I’d never been there before. I went out to meet the legendary BiggerPockets member Ned Carey.

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Everybody on BiggerPockets has a different strategy. A lot of people like BRRRR, some people like flipping, and then there are people like Ned who do things that are not often talked about and are highly lucrative. It's good to know how many choices there are when it comes to investing.

We’re going to go through a recent deal of Ned’s. We’ll go over the numbers, because I know everybody really wants to know those. And Ned will tell you more about his strategy for buying property dirt cheap through tax liens and foreclosures.

Related: Property Lien Search: How to Find Out About a Lien on a House

Meet the Investor: Ned Carey

Hi, I’m Ned Carey. I’m a full-time real estate investor. I’ve been doing this for about 15 years now, and I love what I do.

My specialty is tax liens. We buy a lot of tax liens, and we foreclose on a modest percentage of them and that becomes our funnel for deals.

I was in the bicycle sporting goods industry prior to this, and I was an independent sales rep. My partner in that business had a rental. He said, “Ned, why don’t we start buying some rentals? I’m doing really great with my rental.”

So we started taking some free weekend courses and boot camps and eventually I was sold. I got into real estate, and I loved it. I feel like my whole life was preparing for this, and once I got into it, it was like, boom.

Why I Invest in Real Estate

The great thing about real estate is it’s an IDEAL investment:

I: “I” is for income. You get income from rentals, rents.

D: You get depreciation, for “D.” There are tax benefits to real estate.

E: “E,” you get equity buildup as the value of the property goes up over time.

A: You get amortization, which is the paydown of your mortgage over time, for “A.” And remember, your tenant is paying for the property in rent over time.

L: And then the “L” is for leverage, which means you can use other people’s money to buy the property.

So in the literal sense, it really is an ideal investment.

I found BiggerPockets because I created my own Member Blog, and I was on all of the Forums and so forth. I loved to go on the Forums, and I learned a ton there. I also like to share my knowledge with other people there.

I love the community aspect and meeting other investors—even if it’s virtually. And a lot of the really smart people that I know, like J Scott or Russell Brazil or Alex Felice, I met on BiggerPockets. It’s really helped build my network.

I’ve wound up selling a lot of properties to people that I’ve met here, and I’ve helped a lot of investors do their first deal. So, that’s exciting and rewarding for me!

Related: Meet the Investor: Cash Flowing Rentals Despite an Incredibly Expensive Market With Russell Brazil

My Latest Real Estate Deal

Let’s talk about one of the properties we acquired through a tax lien foreclosure. You can see it in the video above. It’s in a pretty nice neighborhood of Baltimore, much nicer than most properties I get through tax foreclosure. We’re going to keep this one as a rental.

What Is a Tax Lien?

Basically, with a tax lien, the government is selling you the right to become the tax collector. So, we buy these at auction and the homeowner gets a period where they can pay off the taxes. They pay us back our tax money, plus they pay us interest. And interest in Baltimore city can be as high as 18%.

Therefore, even if they pay it off, it can be a very good investment. But for us, our strategy is to get the property and we foreclose. We buy them in bulk. We foreclose on about 10% of the properties, and that becomes our funnel for deals.

closeup of human hand with key dropping key into another person's open palm in front of a house

It’s not a strategy for everybody. You talk about getting properties for pennies on the dollar, but the reality is it’s a lot more complex than that. There’s a lot to it. But that’s why I like it, because it’s a specialized niche that I can be an expert in.

It takes about two years from the time we buy a tax lien until the time we are able to get a property and then resell it.

The Numbers Behind My Latest Deal

Our latest deal, we’re paying about $70,000 for the property as our all-in price for the purchase. Then, it’ll be about $90,000 in repairs. So, we’re going to be all-in to this property after repairs, ready to rent, for about $180,000. Two doors down in 2018 sold for $239,000.

The cool thing about the rehab on this house is I’m not doing any of it. My partner is in charge of all the rehab stuff. 

And that’s where you should be. Ultimately, your goal as a successful investor is to get to the point where everybody else is doing stuff for you.

Advice for Other Investors

The great thing about real estate investing is the lifestyle. It’s still work—I still work. But I get to take my dog everywhere with me. Even when we go to a title company to a settlement, she comes in with me and everybody knows her.

Listening to the podcast, they have the famous four questions. One of them is, “What do you think is holding back investors?”

I was thinking about it. Typically, with new investors, what keeps them from getting started or really making it is knowledge.

And then I thought, “Well, how can that be? I know multiple people who have spent $50,000 or more on courses and seminars, and they haven’t even done a deal yet.”

I thought about the different factors for why that might be the case, and I still came back to knowledge.

Educate Yourself

There are three different kinds of knowledge you need:

  1. Strategies
  2. Deal Evaluation
  3. Market

Strategic Knowledge

When you first hear about wholesaling, you might go, “Man, that is awesome. I can actually make money on a property I never even own?” Or, “I can make money selling a property with no money?”

It’s not quite that easy though. But when you hear that, it’s like, “Wow, that is awesome.” And it’s exciting and fun to hear about these cool strategies.

You can get that on BiggerPockets by the boatload. It’s a great place to learn.

BiggerPockets was started with an anti-guru sentiment. Like, “Why are we paying these outrageous prices to learn from gurus?”

Josh Dorkin created this website instead, saying, “Hey, let’s teach people all the things they want to learn—for free.”

One thing about the gurus, they love to teach the stuff because you love to learn it. They’re selling the dream, but they’re only teaching you part of the equation. The strategies are important, but familiarizing yourself with those is the easy part, the fun part.

Related: Warning: Why You Shouldn’t Buy What the Gurus Are Selling

Deal Evaluation Knowledge

The next thing you need to know is how to evaluate a deal. Because if you don’t know the numbers and how to evaluate, you’re not going to have the confidence to pull the trigger and do a deal.

Related: 6 Metrics You Must Know to Identify Great Investments

Or, if you don’t know the numbers, you might do a deal and get it wrong. There are a lot of hidden costs in real estate, and you’ve got to learn those hidden costs. And that’s part of how to evaluate a deal. And that’s also something you can learn on BiggerPockets.

Market Knowledge

There’s a third type of knowledge, and this is where most people fail: knowing your market. You can have the formulas down cold. You can take a test and get 100% every time. But unless you know what numbers to plug into the formula, it doesn’t do you any good.

You’ve got to know the expectations of buyers if you’re flipping houses. You’ve got to know the expectations of tenants to know how to renovate your rentals. And that comes from knowing your market. That’s why these kinds of articles and videos—seeing other people’s deals—can really help you understand.

Related: Meet the Investors: Escape the 9-5 Via Tax Strategies With Natalie Kolodij

I’m Ned Carey. I don’t want you to make the same mistake I did. I put off investing in real estate for years because of naysayers in my life.

Don’t do that!

Get into real estate, use BiggerPockets, and then you can spend your day playing with your dog like I do.  

What type of knowledge do you find most helpful in real estate investing?

Share your knowledge in the comments.

Alex has spent his career in sales and finance industries and now invests in rental real estate along with working in the underwriting department at a bank in Las Vegas. Alex is an expert in long-d...
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    Stephen Kehoe Property Manager from Maryland
    Replied 21 days ago
    Wow, I didn't know it takes two years from acquiring to reselling.Thanks for continuing to spread the knowledge Ned.
    Fritz Alvarez Investor from Seattle, Washington
    Replied 21 days ago
    That's one fast moving dog....
    Charlene Garrison Investor from Detroit, MI
    Replied 19 days ago
    Thanks Ned! You shared information that is clear and concise. This newbie feels better reading that different approaches to this industry all work, once the basics are mastered! I am spending time daily doing deal analysis. I am feeling better each day, arriving at questions and answers and generally loving it. Thanks again, Charlene
    Jerry K. Specialist from Phoenix, AZ
    Replied 18 days ago
    I always learn something from Ned. Nice interview!
    Elise Hazzard Property Manager from Saint Petersburg, FL
    Replied 14 days ago
    Ned is truly authentic. In his own space, willing to share, AND has a great sidekick!!
    Christopher Stacy Rental Property Investor from Wiesbaden Germany
    Replied 13 days ago
    Wow! I am also surprised that it might take 2 years to finally resell or rent a tax leun property. Is that just in the Baltimore area or Maryland or all over? Thanks for the great article!