Ned Carey On Understanding How A Tax Lien Works

April 20, 2022




GDNI 200 | Tax Lien


When dealing with a tax lien, you essentially become the tax collector. You pay the taxes, and when the property owner repays, they pay you in any interest in all due penalties. Exploring this world even further with Chris Seveney and Jamie Bateman is Ned Carey of Crab Properties, LLC. Ned talks about what a usual tax lien investment looks like, how he approaches implemented legalities in Maryland, and the best strategies for jumping into this real estate scene. He also cautions everyone not to depend too much on online gurus who promote various programs they wrongly sell as necessities for tax liens.

Listen to the podcast here


Ned Carey On Understanding How A Tax Lien Works

Welcome, everybody, to another episode. I am joined by my fellow cohost, Chris Seveney. How are you doing?

It’s a great day. How are you?

I’m doing fine. More importantly, we’re joined by Ned Carey of Crab Properties. Ned, how are you doing?

I’m doing great.

I appreciate you joining us. For the readers out there who are unfamiliar with you and how we crossed paths, the three of us have interacted a lot on the BiggerPockets tax lien and Note Investing Forum, my primary exposure to you. I think the same is true for Chris. Is that fair, Chris?

I was going to say, and if you scroll down the BiggerPockets that section and you don’t see Ned’s or my name pop up within probably the first 5 or 10 posts, something’s probably wrong. The website must be down. Ned, Jamie and I are very active contributors.

I’m less consistent, but you guys are always answering questions and offering free advice.

It’s like a ping-pong match because Ned’s specialty is tax liens, which I dipped a toe in for a very brief time. I think Ned dipped his toe in notes for a very brief time or may have done a note, but it’s interesting to have people from different specialties. That’s why I wanted to have Ned on. There are a lot of similarities between note investing, tax lien, and tax deed investing. We wanted to bring on the expert and start-up picking his brain.

I know we’re going to get into some fun stories. Ned, if you don’t mind, briefly tell us what’s going on with you and your business. We can backtrack and go through a little bit of your backstory.

I’m in the midst of analyzing properties for the Baltimore City tax sale. The list came out, and it’s about 19,000 properties. Normally, it’s between 22,000 to 25,000 properties. What they’ve done is taken a lot of homeowners out of the sale. They don’t like the idea of homeowners losing their property for not paying taxes. It’s a little bit smaller sale in 2022. By the time the sale comes in mid-May, half of those people will have paid their taxes.

They’ll probably be about 8,000 or 9,000 properties that go into the sale. Out of that, 4,000 properties will be vacant or abandoned. The taxes are more than the properties are worth. I saw one that I was going through. The back taxes are shy of $1 million. I think it was assessed at $7,000. Once you get upside down, it starts adding 18% interest a year.

Do you buy it primarily in the Baltimore area, or do you buy it in other states?

Tax Lien: Once you win big for the first time, you will become addicted. Be sure not to make many stupid purchases just because you are focused on getting the lean instead of making money.


We do Maryland. Baltimore is a very anti-tax sale, and we’re afraid it’s going to go away at some point. We’ve expanded into other parts of Maryland and going to expand conceivably expand into other states, but the laws vary so much from state to state. I’m reluctant to go somewhere I don’t know the rules yet.

In Maryland, I know it’s crazy the way the bid is. In a sense, it’s not a straight bid of, “I want to bid this much.” There’s some math that needs to be calculated or something, if I recall.

In Maryland, they have a pretty complex system that’s hard to describe without drawing it out or something. Basically, on the day of the sale, you’re bidding three things. You’re bidding on how much you’ll pay for the house in the event you foreclose. Also, because of what they pay, you’re bidding on what I call the stupid tax.

If you bid too high, they pay you a stupid tax. If you pay the stupid tax, you have to deposit extra money on the day of the sale, which does not earn interest. You’re bidding how much you’ll pay for the property, have to give them the day of the sale, and in a sense, bidding down the interest rate, depending on how much of this stupid tax you pay. It determines three things.

Let’s back up briefly and walk us through a little bit of your backstory, wherever you want to start, but how you ended up getting involved in tax lien and tax deed investing.

I’ve been an entrepreneur all my life. I started at eight with a lemonade stand. My mom bought $5 worth of stuff, so I could make $1.15, which I never knew until I was an adult. My sister said, “Do you know how much mom spent on all that?” I used to be in bicycle sales and was an independent, representing various bike companies and part companies. I’d call on retail stores. My partner in that business had a rental. He said, “I’m doing well with this rental. We ought to get into doing rentals on the side.”

We started looking at various free weekend courses. I wound up deciding to buy into a year-long course on real estate investing. It was one of the best investments I’ve made. As part of that course, I talked to one of the instructors, and they said, “I hear people all around me talking about the deals you’re doing. I feel like I’m not getting any traction.”

He says, “One thing we teach is tax liens. In a tax lien, you can go down to the city and get what’s called the leftover book, which is the tax liens that didn’t sell on the sale. You can pick them up at face value, first come, first serve. Why don’t you go down, buy a tax lien or two, and you’ll be in the game?” I did that and spent less than $5,000 to buy two tax liens. They turned out to be both home runs. I got both properties. The first one I bought, I made $36,000.

This was what year?

This is like 2004, ’05.

It’s at least $50,000 now.

The funny thing is when I speak about tax liens locally, and I would show the house, tell the story, and show all the expenses. The original lien was $1,800. I had about $4,000 in expenses and so forth. I wound up selling for $40,000 or $45,000. It worked out, and I made $36,000. I would say that sounds great, but keep in mind that I haven’t done that much on a tax lien since. My partner and I kept looking. This was around 2018 or ’19. I kept like, “Maybe this is the one. Maybe we’re going to break the record.” Now we’re breaking that fairly regularly. It’s partly because we’re buying much bigger properties. We’re bidding on properties. We’re putting in $100,000 bids on $200,000 properties. If we happen to get one, that’s an amazing home run.

When jumping into real estate, you must know how to do tax. If you don’t know what tax is, you cannot do real estate. Click To Tweet

If you’ve lost money, do you think you would still be in it?

That’s the thing. I tell people it’s like going to Las Vegas. If you win big the first time, you go. It’s clear I was addicted because it’s like, “Let me bid a little more. I think I can get more.” I made a lot of stupid purchases because I was focused on getting the lien, not on making money.

There are similarities there with notes too. Notes are very addictive because of their availability of them. There are 18,000 of them. Even if it pairs down to a few thousand, there are so many where typical real estate investors go and look at properties. We’re all in the Baltimore, Washington area, where properties are so expensive, but you can start buying tax liens or notes and stuff for $5,000, $10,000, $20,000, and stuff. If you make that $30,000, it’s like, “Now I’m going to go buy 5 or 6 more.” You make a few thousand. The next thing you know, 2, 3 years later, and the scale keeps you wanting to buy more. Is it addictive to you like that in that sense?

Yes. The difference is I bought some things because I was so focused on buying more liens, assuming more liens would be more profitable, but it’s easy to lose money in tax liens if you’re not paying attention. I’m sure you will see it. I bought a note but didn’t realize it’s a second mortgage. The first mortgage is more than the property’s worth or something like that when I see that with tax liens. I’ve bought a lien on an empty property, a vacant lot. Can I get my money back? It’s like, “No. Was it vacant when you bought the lien?”

For our readers unfamiliar with tax lien investing, Chris and I aren’t experts in it, but I know I looked into it before choosing to go down the note path and studied it somewhat, so I am familiar with the general concept. There may be readers out there who have no idea what we’re talking about. You make the numbers up and walk us through a case study. What does a tax lien investment look like?

First of all, what’s a tax sale? There are two types of tax sales across the country. Some states sell tax deeds where the state’s gone through the property process to take the property and auction off the property. About half of the states have tax liens where essentially the state or usually it was the county is auctioning off tax liens. They are selling you the right to become a tax collector. You pay the taxes.

When the owner repays, they pay you any interest and penalties that are due. If you’ve ever been laid eyes on your taxes, you know how high those interests can be. In Maryland, it might be as low as 6% somewhere in some counties, but typically 8% or 12%, but Baltimore City is as high as 18%, and Prince George’s County is 20%. A 20% return on your money is pretty darn phenomenal. That’s the simplicity of it. The city or county is selling you the right to collect the taxes.

I had a cynical comment about where the Baltimore City money’s going, but I won’t mention that.

It’s ironic that they take the two locations that probably have the highest poverty rates and tax rates. I bet Montgomery County is probably not at 18% or 20%. In the wealthiest county in the country, you move next door to an area that’s more impoverished, and it’s like, “Let’s check up on taxes for the people who don’t have the money.”

What did some numbers look like?

The last thing to finish up is if the owner doesn’t eventually pay, you can foreclose on the property like you can with a note. You can foreclose on that property and get the property. Unlike a note, if you foreclose, someone bids higher. If you want the property, you’ve got a bid and can bid what you’re owed on the note. If someone decides to bid higher, they get the property, and you get the money you’re owed. In tax sales, when we foreclose, we wipe out any other mortgages or debts against the property. If the owner has personal judgments, they all get wiped out. We own the property free and clear, and there’s no secondary auction. We’ve already bid for the tax lien. The property is now ours.

If the property is worth a lot more than we bid, that profit comes into our pocket. My business model is set up where we make no money on the interest. We give them interest to people that fund us. The only time we make money is when we foreclose. We have to be careful. We’re targeting things that we think we can wind up getting. We focus on those properties. If we get a property, the lender still gets whatever interest they would have earned. We get the leftover profit from some of the property.

GDNI 200 | Tax Lien

Tax Lien: Since tax liens clear up dirty titles, there’s no need for a title search anymore.


I was going to say maybe if you could do a real quick with numbers. It doesn’t have to be a real deal.

Typically, I’ll give you that first deal as well as I remember. Its liens like about $1,800. I bought that at face value, and anything I sold it for above that would be a profit. When you foreclose on a property, you’ve got to catch up on any new taxes that are due in order to record your deed. In tax sales, it takes a year or two. You’re going to have two years’ worth of taxes and water bills.

If it’s vacant, you’re going to have two years’ worth of fines for trash and tall grass. Maybe the property keeps needing to be re-secured and boarded up by the city. You’ve got to pay all those bills in order to record your deed and sell it. That was a bad one because I bought it at face value. At an auction, typically, we’re paying anywhere from 20% to 70% of the assessed value of the property.

If the property is assessed high, you’ve got to be careful. A lot of people from out of state look at the assessment. They say it’s a $100,000 house. I can bid for $70,000. That’s safe. You guys and experienced real estate investors know if you’re buying a fixer-upper at 70%, you’re probably going to lose money. We’re conservative with how we bid. The only ones we make money on are the ones we take. We’re bidding pretty conservatively. Let’s say the taxes are $4,000. We’re talking Baltimore City. The values are pretty low here, but we might bid $30,000 or $40,000. It might sell for $60,000. We put that spread.

For me, what’s interesting is a little bit of the difference is on these tax liens. For notes, we bid off of the unpaid principal balance with tax liens, even though the taxes might only be $10,000, and you’re bidding on the value of the property. Basically, we’re not going to get into how the bidding works in Maryland because it’s confusing, and people’s heads would be spinning around and trying to explain it. Essentially, you’re overbidding the taxes because you’re bidding like it’s an auction of the property.

That’s interesting from my perspective. That’s a big difference between notes and taxes from that perspective. With notes, you can only get paid what the total payoff is, the unpaid balance plus any fees. Here, you’re covering the taxes, but you’re looking to get the property. Readers out there, that’s one major difference. You’re bidding on these. One of the things I hear a lot about tax liens is, you got the big boys like Black Rocks or some of these other companies coming in and buying these thousands at a time. Basically, buying them for 3%, 4%, or 5% yields. Is that the case that you see in Maryland a lot? Is that a mix of yes and no? Is it completely fictitious?

Those numbers you quoted are on the high side. They’re bidding down to 2% in 2021. You wonder, it’s like, “Are they getting free money?” I think these people have so much money. They’re deploying it any way they can without necessarily looking at or understanding the risks they’re taking. We used to see a regular cycle of big players would come in and usually out of state.

They would bid the prices up and the interest rates down way down. There’s a long lead time in tax sales. You’ve got to wait 6 to 9 months before you start foreclosure. The foreclosure can easily take a year. Sometimes they take two years. It takes a while to realize if you’re going to take the property, are you going to make any money on it? We’d see these people come in and bid too much.

It took them about three years to realize that they didn’t make any money after they took the losses that were leftover in the end. We’d never see them again. You’d see these people come and go. The world is so flush with money. Big money has so much money that they’re throwing it at these things. We see it all the time. I’ll give you an example. One county put a limit on the bidding, 300% of the assessed value. I think this was Harford County, Maryland, but I’m not 100% sure.

The 300% was the limit of how high you could bid. When the auction opened, all the good properties boomed like that. In a $100,000 property, they were bidding $300,000. In a $200,000 property, they were bidding $600,000. They’re assuming people are going to pay off and going to get their interest. The problem is if the word gets out, my attorney threatened to do this. He would start calling people and tell them, “You need to pay your taxes.” If you don’t pay them, you either get three times what your property’s worth or the tax lien holder will walk away, and they’ve paid your taxes.

Let me ask this question if the taxes on a property, let’s say, is $50,000. The property is $100,000, and they bid $300,000 on it, and you let it go. The tax department basically gets their $50,000, unless there were other loans on the property. You would get those funds. It’s similar to like a foreclosure. It goes in order of priority to cover those liens. In that instance, let’s say XYZ Fund bids $300,000 on a property. Where does the $300,000 go to?

In the example you gave, nobody’s going to pay three times what the property’s worth. Assuming a case where something’s worth $100,000, they bid $70,000. The person loses their house, but let’s say the taxes were five. It has a $65,000 spread between how much the taxes were and how much the bid was that goes to the homeowner or other people in the title like lien holders. It’s a race to the courthouse. There’s a court case that says if the homeowner gets there and claims that, at least in Baltimore City where this case was, has no obligation to figure out if somebody owed that money before the homeowner?

You must know your market. Otherwise, you will not know what numbers to plug into your formula when developing strategies. Click To Tweet

They’re allowed to give it to the homeowner. I guess that’s a note to your note holder friends and readers. If it’s in tax sale, number one, you can be wiped out. However, if there’s a bid balance, in other words, the bid was more than the taxes owed, you can apply for that balance. You got to be paying attention because somebody else may apply and beat you to it.

When you’re doing your pricing and due diligence, pre-bid, how do you factor in mortgages and another potential, maybe an IRS lien or something like that? How do you factor in other potential liens? Do you navigate?

It’s funny. I see people teaching this and gurus and say, “Do a title search.” We never do a title search because it doesn’t matter. In a tax lien, we’re in the first position, no matter who else is there. We wipe out anybody else. In fact, tax liens are a way to clear up dirty titles. There’s no need for a title search. We do some that work to check things out. If there’s a big lien, we will see if the people aren’t in bankruptcy. The reason we do that is bankruptcy will void the lien. We don’t want to buy a $30,000 lien and find out six months later that it’s voided, and we’ve earned no interest. If we spend legal fees, we won’t get the legal fees back. We’ll do a little bit of due diligence behind the scenes, but we don’t need to do much because the tax sale wipes the slate clean.

When you bid on tax liens, approximately what percentage do you end up with those tax liens? Secondly, what percentage do you end up with the property?

I knew this question would come at a point, so everybody wanted to know. Typically, nationwide, I’ve heard the numbers about 4% of properties get lost to tax sale. An awful lot of that is going to be vacant lots, somewhat worthless land, or maybe non-billable lots that might be worth something to somebody, but it’s not like good buildable land. In Baltimore City, I’d say the number is about 10% because we have so many vacant, abandoned properties and so much poverty here. Over a couple of years, we thought it was as much as high as 15%. I’d say our take rate is probably closer to 10% of what we bid on now.

That’s what you end up with the property, you’re saying?

Yeah. If you’re bidding for interest or not vetting the property very well for how much it’s worth, you got to realize you got a 10% risk that you’re going to get the property, and that property might not be worth what you bid. That’s a disadvantage for people looking for interest. For people looking to get the property, that’s a big advantage. Typical numbers would be 12,000 properties in the tax sale. We will look at as many at 6,000 to 8,000 of them in the two months the list comes out.

We have two months to go look at those properties. That sounds like a phenomenal number, but I can remember driving down the street. I had a helper, and we went down this one street, McCullough Street, right down the center of Baltimore. I said, “How many properties do you think we looked at?” She said, “I guess about 40.” We had looked at about 150. I said, “Remember that big, long street we drove down there. There was 50 on that one street.”

In Baltimore City, there might be 2, 3, or 4 on the same block. You drive down the street slowly and look at the general condition. Is it boarded up? Does it have windows? Are the windows new? Are they old wood windows? Are they ‘60s aluminum replacements? Are they brand new windows that still have a little sticker in them from being brand new? You look for stuff like that. We can do it fairly quickly, but we look at a lot of properties.

That was the question I was going to ask is, do you physically go look at them, or do you have a team go look at them? You don’t hire like agents or somebody else. You or a team member go physically look at it.

We go look at them. In other counties, not so much, but in Baltimore City, the properties are so distressed. The housing stock is so old. It’s important to look at the property. We will drive by and vet 8,000 properties. Out of that, we’ll wind up bidding on 2,000 to 3,000. Out of that, we’ll wind up getting somewhere between 500 and 1,000 is what will win. Out of that, we’ll maybe take 10% of those properties.

What do you do with the property? Does it depend on the property? Do you fix it up? Do you list it? What do you do with the property?

GDNI 200 | Tax Lien

Tax Lien: About 4% of properties get lost to tax sale, and an awful lot of that will be vacant lots, worthless plots, or non-billable land.


My partner so badly wants to be a rehabber, but we’re not good at it. It took us two years to figure out we could have wholesaled it for the amount we made after two years of hard work. We sold two. The only reason we made money is that the market went up in the last few years.

Is there a secondary market as well on these? After you buy them, you might sell some of these off to other investors, or do you take them through conclusion?

Great question, but I want to finish that other answer. Basically, what we do is wholesale the properties off. Primarily, we give them to an auction company. Ashland Auction is what we use, and they auction them off. Occasionally, if it’s something nice, we’ll keep it as a rental. To your question, Chris, is a secondary market. As far as I know, there’s no real secondary market. There are companies that are associated with gurus and selling classes that talk about a secondary market.

I think basically what they’re doing is recycling other people’s crap. I remember a guy calling me from Florida and talking a lot of stuff about how they buy and sell liens in the secondary market. He says, “I got a big portfolio,” when he sends it to me. I didn’t know exactly what it was. It was a big bidder from Baltimore that had properties where the judgments were as old as ten years old. Many of them had been foreclosed on. I saw some that we had foreclosed on after he did. It was still on his list. You’d see people trying to recycle things, but basically, it’s crap. They can’t sell themselves.

The reality is all the big bidders want to make as much as they can. It’s like a bank. They say, “Banks short sales.” Banks don’t want to own properties. They’ll give it away on a short sale. It’s like, “No, they don’t. They want as much as they can get.” The only reason they do a short sale is they think that’s the fastest, easy way to get a decent amount of money. The same is true with big bidders. There’s no reason for them to sell awfully unless you realize this is junk.

That’s probably one thing that’s a little different with notes. There are certain things with notes, and you might buy a pool. It’s nationwide. You might have stuff, not in your area. That somewhat creates a secondary market. It’s one of the questions I wanted to jump back to. You’ve mentioned a few times gurus and stuff like that. This question gets asked a lot.

The question is, with tax lien investing, I see people sell these programs or software and all this other fancy stuff, again with YouTube, BiggerPockets, and everything that’s on the internet. Do people need that? One thing is you want to join a membership group where people can share your stories. That’s one thing, but all these fancy software that people sell, is that necessary for tax liens?

We don’t use it. We spent about $3 million a year on buying tax liens. We don’t buy anybody else’s software. I guess I’d put it this way. Number one, I’m very skeptical about the tax lien space because I’m so aware of how narrow the margins are. When I see people bidding at 2% and knowing they’re borrowing at 2% to 3%, the only reason they’re making money is they’re going to make money on the legal fees. If you’re not an attorney, you can’t make money on the legal fees. There are attorneys that run funds nationwide, and they make money on the legal fees.

They have that advantage that most people simply don’t have. The margins are so narrow that there’s not this extra that people are talking about. Nobody’s going to tell you in detail about Maryland because the 50 different states all have 50 different laws. Nobody knows them all, and nobody knows them in the detail that I know in Maryland. I’m skeptical of tax lien gurus in general. As you guys know, the barrier to entry to the guru business is basically the cost of the website.

Even a website is cheap. All they got to do is see so many gurus that are rehashing stuff from other gurus. You know it’s wrong and where they got it, but they’re still rehashing it. I’m skeptical, especially in the guru space. Having said that, let me say this to people. There’s no better place for me to invest my money than in me. I’ve spent well over $100,000 in courses, classes, and not just real estate investing classes. I got a personal life coach, a business coach, members of masterminds, and so forth. I spent a lot of money on that and courses and classes before. When I was doing that, I was already in the business and generating money. I saw a payoff from that in the business I was already doing.

We usually ask for a Note and Bolt, and I think that was a good one right there.

It’s interesting to make that point. You should invest in yourself, but where you put that investment, the number one thing in note investing, probably in tax lien investing or any type of investing, is due diligence. People will do all the research on how to buy this or that. They sometimes miss the big shiny object in front of them. Is where are you getting that information from? You want to make sure you’re getting it from somebody who can be validated because a lot of the gurus are very good.

You cannot know your market just by sitting behind a computer. That’s something you will accomplish by going out into the marketplace. Click To Tweet

They might have marketing backgrounds or other types of backgrounds where they can talk good and could sell on your own back because they go from such a high level of something they learned. They’re rehashing a lot of other stuff, but they’re not rolling up the sleeves and giving you any information. It’s stuff that they pick and choose and the information they provide you.

They’re selling the sizzle, not the steak. You want a Note and Bolt. Here’s one. There are three kinds of knowledge you need to invest in real estate. The first type of knowledge is you’ve got to know the strategies. You’ve got to know how to do tax. If you don’t know what a tax lien is, you can’t do it. You’ve got to know what it is. Wholesaling is a great example because it’s like, “I can make money on the house I never even owned by putting it under contract and selling a contract. That’s amazing.”

When you hear that the first time, it’s like, “That’s amazing.” That’s what the gurus are selling. That’s fun to teach. It’s fun to learn. When you’re hearing it for the first time, it’s eye-opening. That’s the easiest part to learn. You can learn that free on YouTube, BiggerPockets, all kinds of websites, forums and so forth. The second type of knowledge is more important and taught much less. That’s how do you evaluate a deal? How do you run the numbers? What are the formulas?

There are a lot of crude formulas, like the 70% formula, which is pretty popular, but that’s a proven formula, but at least it gives you some basics. That you can learn on sites like BiggerPockets, but the third part, you never hear anybody talk about. It’s maybe the most important part. If you had this part down, you wouldn’t need the other parts. That’s knowing your market. Does that mean what does a house worth? What is another investor willing to pay for it? How much does it need repairs? What do repairs mean? Can you get away with roll sheet vinyl, or do you need to put down some high-quality wood-looking vinyl? Do you need real hardwoods and tile?

Can you use vinyl or a cheap surround in your tub? Do you need ceramic tile? Do you need expensive Italian travertine tile? Knowing the expectations of the buyers, the renters, other investors, what rents are, what to sell for, and knowing all that stuff is what you need to know when you know your market. If you don’t know those things, you don’t know what numbers to plug into the formula. You can’t know repairs if you don’t know what finishes you got to put in the property in order for somebody to want to rent it or buy it. Knowing your market is vital, and that’s something you don’t learn sitting behind a computer. That’s something you are going out into the marketplace.

I see a lot of people trying to automate things nowadays, and I love automating everything in general. To me, automating things like your bidding strategy or things like that is flawed because the simple fact is it depends on the area and the exact situation. In note investing, it’s very different where, for example, in Florida, if you’re going to go foreclosed on somebody, I’m looking at a note and they’ve been fighting this foreclosure for five years. That’s going to be different from a single individual who’s passed away and had one heir out of state because they’re probably not going to want the property. How you evaluate that time value of things would be significantly different because you can’t put everything in one bucket.

That’s one thing like you said, that third is so important, the market, as Jamie always says too, “The minute you hit enter on your calculator, it’s wrong.” It’s a forward-looking forecast, which it’s never going to be. It’s the best guess, but it should be used as a risk evaluator to see how much meat is on the bone? When it does hit the fan, am I still protected? That’s how I use my calculator more than anything now is more of a risk assessment tool.

It comes back to real estate is local. Interest is.

Local in Baltimore means, which block is it on?

It’s very block by block. We drove through the area of West Baltimore. It’s crazy. It was eye-opening. It was good for our kids to see. It’s like, “No people live like this.” I was going to ask you, speaking of Baltimore, I was curious. As we start to wrap up here, I wanted to get this one in. I’m curious about ground lease because Baltimore is one of few cities that I know of in the country that it’s such a prevalent thing. Have you ever looked into either investing in those, or is that ever a factor in your business?

It’s only to a small degree. At one point, when you could create a new ground lease in Baltimore, they call them a ground rent. I was looking to create some, get it under contract, create a ground rent and sell the property. I’d continue to have some money coming in from that ground rent. For people who don’t know it, in Baltimore and a few other places in the country, there are these ground rents or ground leases where somebody owns the land and somebody owns the house on top. The guy that owns the house has to pay the guy that owns the land. Basically, all liability goes to the guy in the household. Taxes go to the guy in the house.

The guy that owns the land has no risk other than he’s got to wait for that check to come in. Eventually, if somebody doesn’t pay theoretically, you can eject the property owner, but that’s very frowned upon. They passed some new laws, and the courts on being cooperative. Ground rents are going the way the dinosaur. They tend to these small amounts. You’re talking $60 to $120 a year for these groundworks.

GDNI 200 | Tax Lien

Tax Lien: 50 different states mean 50 different laws. Nobody knows them all in detail. That’s why there cannot be a guru who knows them all.


I know you have the option. At least in Baltimore County, you can buy it out. I did that on one of our rentals, 6% interest per year. They give you that option legally. I think the ground rent owner has to accept it. I believe so. Chris, did you have anything as we get toward the end here?

It was very educational, learning some of the ins and outs of tax liens and so forth, getting a high level and understanding. Speaking of ground rents, I tried to do that in other states, be like, “I own this property. Can I keep the land?” Basically, lease the house and get rid of all liability. My attorney’s like, “Nope. I’m a single-family. Nope.” Commercial stuff, there are ground leases all the time on commercial, but they’re like single-family now. They’re like, “No, not at all.”

We didn’t ask you for a good deed. I don’t know if this is a good deed.

I do have a good deed. One thing we wind up doing is. It can be heartbreaking. This is a tough business to do if you have a heart because you get occupied properties and people. Everybody’s got a story. One I’m working with now has had some health problems. She’s been out of work during COVID when I called her to follow up because we didn’t have the heart to kick her out.

What I finally followed up, and it’s like, “This has been long enough.” She says, “My son was shot yesterday. Someone was murdered yesterday.” It’s like, “What are you doing?” We always get these sad stories, and one that worked out very well and I’m proud of. These two women were renting a property that we had foreclosed on and wanted to stay in.

We didn’t want to rent to them, but we offered to sell them the property over time. I think $800 a month or something. It wasn’t significant. We’re not good at collecting money. This woman would call me up and say, “Ned, I got some money for you.” I’d go out, and she’d hand me $800 in cash. Sometimes she’d give me 2 or 3 payments at a time. Sometimes she’d be a month late, but she’d call me out of the blue. I’d get a call, and she’d pay me. I thought she was making an effort and doing it.

It stopped. When I finally called her up like 4 or 5 months later, she said, “You wouldn’t let us keep paying. It was too late.” I said, “No, you keep paying, and you pay us what you agreed to. We’ll still do the deal.” She got on track. A few months later, she said, “Ned, somebody called me wanting to buy the house. It’s one of these we buy houses.”

I knew it was a wholesaler. I could say, “Look, you’ve defaulted on this. I’m going to go sell it.” I said, “I’m not going to do this to this young woman.” We worked it out. I worked with her and helped her go through the deal. Ultimately, I forget how we did it. It might have the wholesaler wound up buying it from us. I gave the woman a profit she would have made. Anyway, this young woman made $12,000, which could have been money in my pocket.

It was likely very significant for her.

One day I sent her, “Checking on you, seeing how you’re doing.” She goes, “Thank you so much. You changed my life.” She sent me a text saying, “You changed my life.”

That’s one of the things I love about note investing too, we have so much discretion with each situation. Ned, where can people reach out to you if they want to connect with you?

Probably the best way to reach me is on BiggerPockets. Look for the profile for Ned Carey. The right Ned will be a picture of me was shorter hair but a dog sitting next to me. I don’t think there are too many Ned Careys. If you want to tag me in a post, put the little @ sign and then type Ned Carey, and my name will pop up, and click it. That will tag me in the post. I’ll see it, and I’ll respond.

If you go to the tax liens notes section of BiggerPockets, if you can’t necessarily see him, you’ll know when something’s wrong. You’re in the wrong section.

This has been good, Ned. I appreciate you coming on. Chris, do you want to take us out?

Thank you, everyone, for reading this episode. Make sure to please leave us a review on your favorite listening station and, as always, go out and do some good deeds. Thank you, everyone.


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About Ned Carey

GDNI 200 | Tax LienNed is a successful full-time real estate investor. He is also a licensed real estate agent, specializing in investor and commercial properties. Being an active wholesaler, rehabber and landlord, he knows what it takes to make a profitable transaction.

Because of his depth of knowledge and variety of experience, you will see insights that you don’t see from the average real estate Guru. This is exactly why several investing organizations in the Baltimore Washington area have asked him to speak to their groups.

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1 Comment

  1. Lydia DelRosario

    I am just starting out on my real estate investing journey and I am currently educating myself as much as possible and trying to identify my niche areas of interest and strategies. I am quite interested in tax lien investing, particularly as a means of obtaining better interest rates than elsewhere. However, in doing my research I have so many questions and I would be grateful for any thoughts and guidance.


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