(VIDEO) Baltimore Tax Lien - Yet Another BP Tag Team Deal

J Scott · 2014-12-10T05:45:09-08:00

Just another example of how BiggerPockets can bring people together to do deals and make money...@Christina R. spent time with @Ned Carey last year learning about tax liens, and took the leap and purchased her first lien in Baltimore City about 14 months ago under Ned's tutelage. I met Christina earlier this year while she was waiting to foreclose on the property, and she asked if I wanted to partner on the deal. I was looking to learn about tax liens, so I jumped in as well.Well, about two weeks ago, we got our foreclosure judgement, and it was time to see the inside of the property for the first time. Ned used the occasion as an opportunity to do a coaching session for our local RE Meetup Group (BWI Meetup).Here's the video:https://www.dropbox.com/s/vkwa56y3fvhah3v/jscott_t...On top of that, we have at least one BP member who will be helping us with the trash out and may have another BP member who will be helping us wholesale it once it's cleaned out.

Roy N.Pro Member

Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes

11y

The one next door appears to be available as well ;)

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Chris K.Pro Member

Investor · Baltimore, MD · Member since 2012 · 1k+ posts · 655 votes

11y

Definitely will be following the progress on this. You guys have a rough estimate of what it will cost to rehab that?

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J ScottPro Member

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OP

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

11y

Originally posted by @Chris K.:

Definitely will be following the progress on this. You guys have a rough estimate of what it will cost to rehab that?

We won't be rehabbing this one. We bought the lien for $1500, spent about $4000 to foreclose and pay off other taxes/liens, and will be auctioning it off in the next week or two.

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Michael Faulk

Realtor · Shreveport, LA · Member since 2012 · 311 posts · 58 votes

11y

Thanks for sharing this video with us.

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James Enright

Investor · Fairview Heights, IL · Member since 2008 · 189 posts · 62 votes

11y

Correct me at a tax sale, you do not own the property outright. You only paid the county taxes. You have to wait a certain period of time according to the Maryland state law. So therefore you can not sell the property until such time period passes. After such period ends then you can petition to foreclose on the property to get the deed. If I'm wrong, please explain more clearly how this works.

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J ScottPro Member

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OP

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

11y

Originally posted by @James Enright:

Correct me at a tax sale, you do not own the property outright. You only paid the county taxes. You have to wait a certain period of time according to the Maryland state law. So therefore you can not sell the property until such time period passes. After such period ends then you can petition to foreclose on the property to get the deed. If I'm wrong, please explain more clearly how this works.

Hey James - That's exactly how it works in Maryland...

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James Enright

Investor · Fairview Heights, IL · Member since 2008 · 189 posts · 62 votes

11y

Thanks ....Just checking...................

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Ned CareyPro Member

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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes

11y

Originally posted by @James Enright:

Correct me at a tax sale, you do not own the property outright. You only paid the county taxes. You have to wait a certain period of time according to the Maryland state law. So therefore you can not sell the property until such time period passes. After such period ends then you can petition to foreclose on the property to get the deed. If I'm wrong, please explain more clearly how this works.

James, basically that is correct. However you do not automatically get the property after a period of time, you have to file a tax foreclosure. You can start the foreclosure after 6 months and it takes about a year. The owner can redeem any time up until the day the foreclosure is complete.

That is how MD works. Each state is different, some are more advantageous to the investor than others. I Believe Illinois is a good state for tax liens.

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Travis Lauchman

Investor · Baltimore, MD · Member since 2013 · 65 posts · 23 votes

11y

Guys thank you for sharing the video! Really cool stuff. Let us know how it does at auction and best of luck for continued success!

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Mark Brogan

Investor · Roanoke, VA · Member since 2012 · 1k+ posts · 374 votes

11y

i noticed u said u will be auctioning this property off @J Scott i have considered doing that, how has that worked out for you in the past?

looks like a nice wholesale deal

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J ScottPro Member

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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

11y

Originally posted by @Mark Brogan:

i noticed u said u will be auctioning this property off @J Scott i have considered doing that, how has that worked out for you in the past?

looks like a nice wholesale deal

This will be a first time for us...I know Ned has done it successfully many, many times...

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

11y

@Ned Carey

@J Scott

it appears this is a property were the past owner may have Died intestate... I know out our way to find a home with someone's personal possessions in Situ is pretty rare. Or at least the relatives have not picked it all over and left the junk. This one looks like nothing was touched.

Would you say that was a rare find on this one as well ? Plus I dig the hat you were wearing. Was all that mail in the door Direct mail pieces and yellow letters LOL.

Be interesting to post the numbers.. So I read J Scott right your in this one 1500 for the tax lien 4k to foreclose and say another 500 in misc... so 6k all in... What would something like that wholesale for?... Then what would rehab be and how much would it end up costing a Turn Key buyer.. Or do the TK guys play in that market... If rent was say 600 and of course I am spit balling here... and we use the 1.5% rule which is usually the top of the TK promoters cash flow to back into sale price... property rehabbed sells for 30 2% rule to 45k 1.5% am I close on this train of thought?

I could see the attraction for those wanting to get in the game SMALL dollars and you actually buy a property... I wonder if this brings intense competition because of the very small dollars and bar to entry.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

11y

competes nicely with Detroit 2 to 5k homes.. does not look as dangerous as Detroit..

I would never walk into a boarded up home in Detroit without one or two folks armed

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Account Closed

Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes

11y

If youre in 5500, auction as is...how much you expect? Tuff place in a tough area.

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J ScottPro Member

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OP

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

11y

Originally posted by @Jay Hinrichs:

Be interesting to post the numbers.. So I read J Scott right your in this one 1500 for the tax lien 4k to foreclose and say another 500 in misc... so 6k all in... What would something like that wholesale for?... Then what would rehab be and how much would it end up costing a Turn Key buyer.. Or do the TK guys play in that market... If rent was say 600 and of course I am spit balling here... and we use the 1.5% rule which is usually the top of the TK promoters cash flow to back into sale price... property rehabbed sells for 30 2% rule to 45k 1.5% am I close on this train of thought?

I could see the attraction for those wanting to get in the game SMALL dollars and you actually buy a property... I wonder if this brings intense competition because of the very small dollars and bar to entry.

First, the numbers on this one are pretty uninteresting as a one-off. Ned does this at scale (hundreds of times per year), so even small profits per door can end up generating good cash. For us, this was just a one-off deal to learn the process. Actually, for me, it was just a fun gamble -- Christina mentioned the tax lien to me at a REIA meeting and 2 minutes later I offered to write her a check for 50%, while Ned was just laughing at me for my lack of due diligence... :-)

We'll be all-in for $6500 or so, and hopefully we can sell it for a profit. The auctioneer we plan to use thinks $8-10K is reasonable -- if so, we'll make a few bucks while we learned the process. Given that I've only had to go to the property once for about 10 minutes, it would be worth it... :-)

As for the numbers on the buyer's side? I have no idea. It's not clear to me who would be buying, how much they'd put into the rehab and how much they'd expect to rent it for. My guess is that they'd want to be all-in under $30K and rent for at least $600/month, but honestly, I have no idea.

Btw, this isn't a war zone...I'd be comfortable going there any time of day or night (though I grew up in a rough area and there aren't too many places I wouldn't go) and I went there with my wife and kids one afternoon earlier this week without any reservations. It's certainly not a nice part of town, and many of the neighboring row houses are boarded up, but it's not some place that I'd be concerned about my family's safety on a typical afternoon.

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J ScottPro Member

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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

11y

Originally posted by @Account Closed:

If youre in 5500, auction as is...how much you expect? Tuff place in a tough area.

See post above...after all trash-out costs and factoring in closing costs on the resale, we'll be all-in for about $6500. I imagine resale is between $5-12K, and most likely in the $7-9K range.

With tax liens, you don't see the inside of the property until at least a year after you buy them, so it was a gamble -- could have easily lost money and could have easily made a few thousand more. It only gets interesting at scale (in my opinion)...

And again, we didn't do this deal expecting to make any non-trivial amount of money...

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Brian K.

Rental Property Investor · Buffalo, MN · Member since 2010 · 511 posts · 92 votes

11y

Thanks @Ned Carey and @J Scott for sharing, the power of BP.

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Account Closed

Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes

11y

As someone has bought and sold these types more than a couple times, i would recommend post trash out to repair any significant damage, the important thing for these types of auctions is to make the house cosmetically appealing..ive found. Frankly, if you plan to leave damage( specifically significant stuff) i wouldn't bother trashing it out. Probably a waste of money. Anyone at an auction is looking for a deal, and are scared away by repairs of significance...among other things. Its important for top dollar given the board up is already staring in them in the face next door. Curiously, Why throw away 4k to get it back with such a tight margin (even if it were a good interior)?? You could've just filed court documents yourself. The clerks/ and or internet would've guided you. Foreclosing is a little more drawn out but Going to court is not particularly difficult (at least wasn't when i did it). Going to court a few times has got to be worth the 4k swing, particularly in a place like this....assuming that was what the 4k was entirely used for.

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J ScottPro Member

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OP

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

11y

Originally posted by @Account Closed:

As someone has bought and sold these types more than a couple times, i would recommend post trash out to repair any significant damage, the important thing for these types of auctions is to make the house cosmetically appealing..ive found. Frankly, if you plan to leave damage( specifically significant stuff) i wouldn't bother trashing it out. Probably a waste of money. Anyone at an auction is looking for a deal, and are scared away by repairs of significance...among other things. Its important for top dollar given the board up is already staring in them in the face next door.

Curiously, Why throw away 4k to get it back with such a tight margin (even if it were a good interior)?? You could've just filed court documents yourself. The clerks/ and or internet would've guided you. Foreclosing is a little more drawn out but Going to court is not particularly difficult (at least wasn't when i did it). Going to court a few times has got to be worth the 4k swing, particularly in a place like this....assuming that was what the 4k was entirely used for.

If we were doing 100 of these, it would make sense to have a team in place to do renovations, in order to generate an additional 6-figures each year, but for a single deal, it's not worth spending a week (and a bunch of headaches) coordinating contractors to make a couple thousand dollars more. So, that's why we're not doing it on this deal...

As for the $4K, about half of that is prior year taxes and liens, so the legal fees account for about $2000. We can get the deed recorded for next to nothing, but the foreclosure work and the seller portion of the closing/title work on the sale is about $1500-2000. Again, if we were doing this at scale, it might be worth figuring out a cheaper solution, but on this particular deal, I've spent about an hour of my time, and I have no interest in spending any more...we're not doing this one for the money...

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Account Closed

Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes

11y

makes sense, however....there is no guarantee that a messed up house in a messed up area will sell at auction. often times everyone passes, regardless of the price as a result of the condition and the amount of viable alternatives.

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J ScottPro Member

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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

11y

Originally posted by @Account Closed:

makes sense, however....there is no guarantee that a messed up house in a messed up area will sell at auction. often times everyone passes, regardless of the price as a result of the condition and the amount of viable alternatives.

When you say "often times," what percentage do you mean?

I've talked to people who have auctioned many hundreds of houses between them, and they say it's very rare that an auction will bring nothing.

Perhaps it's the auctioneer you're using?

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

11y

@J Scott

agreed on the area.. most low end areas I have seen when I look at that video and Ned I assume that was Ned leading the charge.. was able to remove a plastic pane and some card board and walk in and the persons belongs are still there.. then that is an area much safer than 99% of the areas of the us were you buy sub 10k homes.. unless your out in the rural farm areas were there is no theft or vandalism to speak of.

Small dollars turned quickly create nice APR...

But like you said you need to do hundreds a year to make any real money...

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Mark Brogan

Investor · Roanoke, VA · Member since 2012 · 1k+ posts · 374 votes

11y

please keep us posted on how it goes j

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Account Closed

Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes

11y

As far as auctioneers, As far as percentages....figure anytime a property is too much money relative to the repairs required/ neighborhood and/or nobody shows up....the house doesn't sell.....and keep in mind, the auctioneer will never tell you it wont sell, you're paying them upfront and if it doesn't sell, who cares. Figure every low-end auction block with a 5-7 property sale, anywhere from 1-2 don't sell every time. Sometimes more. Rarely do they all sell. As far your situation, I'm just trying to give you some helpful advice. This is the type of stuff I'm involved in all day long, last i checked you were flipping for a living, listen to me if you want, don't if you don't.

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Ned CareyPro Member

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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes

11y

Originally posted by @Mark Brogan:

i noticed u said u will be auctioning this property off @J Scott i have considered doing that, how has that worked out for you in the past?

looks like a nice wholesale deal

Mark,

I auction off most of my wholesale deals that I have acquired via tax sale foreclosure. The reason is I do a lot of volume and it is easy. On nicer properties we take the time to market them ourselves and get a better price doing that.

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(VIDEO) Baltimore Tax Lien - Yet Another BP Tag Team Deal

(VIDEO) Baltimore Tax Lien - Yet Another BP Tag Team Deal

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