An Untapped Way to Invest in Real Estate! - Tips For Realtors - With Scott Carson: Real Estate Fight Club

All right. I am here with entrepreneur Scott Carson. Hey, Scott.

Hey, what's going on? Jennifer, Proud to be here. Let's get our fight club on, huh?

Exactly. Exactly. Well, Scott, I'm glad that you could come on because you are the podcast host for the no Closer show. And we have, as real estate agents, we have a lot of clients that want to invest in real estate, but, but, like, don't want to be a landlord, you know, And I think notes is. It seems like it's like an untapped area, at least from, like us as real estate agents understanding it. So can you, like, one, like, explain what the hell it is and two, like, maybe some common myths or, I don't know, like, see what you can do without our heads exploding.

I would be glad to do because for the last, last 15 years, I've actually been teaching note investing across the country. And a large part of our audience is realtors who are looking to help their clients, but also getting to invest in stuff. So note investing kind of has two conifers. One is most people think like, oh my gosh, I'm going to have to owner finance my property, right. And over 30 years, and I'm just going to get payments for 30 years. I can't tap into it. And that's, that's not necessarily the case because there's different facets of note investing. One is, yes, if you want to own or finance it and not deal with toilets, tenants and trash outs, you can become the bank.

Right.

Set terms and go that route. Maybe even over finance the property a little bit if it's an appreciating market. I actually, if I'm selling a property, I don't like to use owner financing as an exit strategy because I think it ties up your money too long. But it's a great strategy. If you've got a weird layout, you're in a rough market. You know, we've got some friends out in Phoenix in other areas on the higher side, you know, half a million to a million plus who are financing as a. As a note.

Yeah.

Your attorneys and lawyers and doctors who.

We've done some owner financing on investment properties. That works out pretty well. I mean, you're right. It just depends. Right. So like all of the these strategies we're going to talk about today and different ways you can do it, you, once you know them, you can pull them out as the market shifts.

Right. But in a seller's market, like we're at now, I don't think it's a good strategy unless you're in. No, work it. Yeah. Now what? Another facet of what we do is, it's something that we've done for over 14 years now is in the note side is we're actually buying the debt from banks.

And I think you would need like a lot of money for that.

Most people, that's a big myth. Like, oh, I need three to five million dollars to tap it. And that's not the case. We actually. I'll give an example. I made an offer on 65 asset notes, first liens from a REIT, and I got approvals on about 25 of them.

Okay.

And the average bid on those are 50 each on average. I could buy one. I could buy them all.

Okay.

So that's that most people don't realize that. That you can pick up distressed debt somebody is not paying on their mortgage at a huge discount. You literally can pick up the bank.

So now you're the bank. They haven't been paying. Like, I don't know how you want to get into it, but yeah, like, what do you do?

Well, you have the same rights as the bank. Our biggest goal when we buy a discounted first lien is to reach back out to the borrower. You know, like, hey, what happened? Tell me your country western song.

Right.

And. And let's see if we can't keep you in the property.

Right.

The fact that we buy this debt at a big discount gives us a lot of flexibility.

Yeah.

To do a loan modification or forbearance agreement. To do a short sale. I mean, you're familiar with short sales because that's. We've prove short sales all the time. I approve on Friday. Or if they won't play ball with us being the new bank, then we go the legal route to foreclose.

Okay.

And then we can sell the asset off or if they file bankruptcy, that's okay. We get them back in a payment plan or liquidation. So the idea is that the assets, say, is worth 100 and they owe 110. If we pick it up at 50 cents on the dollar, that gives us a lot of flexibility to get them back on track.

So I imagine, like, this would be really good for one. Like our clients that want to invest, they don't want to deal necessarily with like the calls because, I mean, I own rental property and stuff only breaks on like Sundays in the evening or like Christmas. Right. And so it's like, if you don't want to deal with that, but you like the strategy of investing. No buying could be a good.

Yeah, totally. You hit the nail on the head there, Jennifer, that we get a lot of tired landlords, they don't want to deal with toilets. And that's what's so great about the note business. It's really a vendor driven business. I'm not talking to borrowers. There's licensed servicing companies that are handling it all across the country for us. At those odd hours when little Timmy flushes the rubber ducky down the toilet, nobody calls bank of America to come show up. Right.

So when you're buying the notes, like they don't know. It's like you, Scott, buying the note. Like you're not. So you're not the one calling them to see like what happens. You like.

Okay, so like bank of America has servicing companies or any lender has a servicing company that's reached, notes are sold. But if you ever buy a property and you close at a table a month later, you often get a letter that your mortgage was sold. Right?

Right.

Oh hey, now it's the same thing in the non performing side. When I buy debt, it's my entity buying. So the servicing company for previous bank sends out a letter, says hey, thanks for not paying us. Now you, now you have to pay.

Right.

This company. And so, and so bought your note, bought your mortgage like a bank, you know, my entity buys it. So yeah, it's, it's, it's a beautiful thing. I have a call with my servicing company, you know, once a week to figure out where we're at. They give me an update legally where we're at if we've got it foreclosed.

Right.

Or things like that. And so it's kind of, it's a nice, I mean you've got, still gotta give direction to your service.

Yeah, of course, like you're, but you're the strategy, high level, you're not. So I think like one myth is that like you have to be directly involved like on the day that. And you don't. And I think the other one was that you have to like have a lot of money. Which you're telling me that you really don't have to have a big investment.

No, exactly. I mean we've bought, I mean we've closed over a billion dollars in distressed debt and all that's been funded with other people's money. 5%. And that's one of the things that we pride ourselves on, is showing you. Look Ira, self directed IRAs, that's one of the biggest buyers or financiers of performing or non performing debt out there. And there's you know, hundreds of thousands of investors out there with their money not making anything.

Right, right.

Glad to make a 4 to 6% return on their money to not have to do anything.

Right, Exactly. Are those like the two biggest myths or is there any others that.

Yeah, you said the thing on the head that somebody thinks, well, I have to go collect. You know, I got to go knock on the door and collect. No, no.

I have some really good collection stories and I'm sure you do too.

Oh, don't we all? I mean, I've got my, my. I mean, I don't talk to my borrowers, and we usually leave that for the servicing company. Every once in a while, I will get involved. I mean, okay, you know, sometimes you have to do. But most of the time it's. I get an email or phone call from our reps, say, hey, the bar wants to do this. Do you approve it? And I'm like, yes. The more chiefs that you can or more cooks you can keep out of the kitchen.

Yeah.

The easier it is so that people can leverage. Oh, so. And so said this and you know.

No, exactly. Right. Let me ask you. So I want to learn all on the podcast. Like, you tell me the difference between, like, the podcast and your class. Like, tell us about those.

Yeah. So the podcast, we've been doing it for four years, over a million downloads, and we're syndicated across 17 radio stations.

Hey, Boom Boom, do you have any listeners in Wyoming? Because we're having trouble getting Wyoming listeners.

No, I actually, I think I do have somebody in Wyoming. One person lives there in Helena. Actually out there, who knows? But we're in 110 countries in all 50 states. But so the podcast is kind of split up. Half of it is me interviewing vendors, investors, students of ours, other note, investors on their business, their strategies and things like that. You know, we focus mostly on notes. Yeah, we just talk a little about business and mindset marketing. We're excited to have you on. Learn a little bit as well, too. And then the other half is me teaching, talking about a subject. You know, subject here. You know, we filmed 700 plus episodes.

Wow.

A lot of. A lot of information, a lot of content. People like it because it's kind of bite size, anywhere from 30 minutes to an hour episode. But it's. It's a lot of intense stuff. Then our classes are much more obviously intense with nuts and bolts training. You know, I've been teaching.

Let me ask you this. So if somebody is like taking your class and I want to hear more about the class versus like, maybe they have a set of money and they're like, okay, I'm either gonna buy like notes and take the class and learn how to do that, or I'm gonna like invest in a reit. What would you say is, is the difference there?

Oh, great, great question. Okay. And two totally different strategies, depending on the individual investor, right? Totally different. Now if you're, you know, if you want to be very passive, very hands off, and you're, you're happy making a 6 to 8% return on your money, a REIT would be the best thing. Or a fund something that's you just basically getting a monthly or quarterly payment. Totally hands off if you're happy with it. If you're wanting to be more aggressive, maybe you need to catch up on your retirement funds. Or you like I almost say getting your hands dirty, but getting your hands in deals and working through it, the classes are a little bit better for you than to go out and buy some stuff yourself. We really have a great kind of hand holding approach to. As people have questions, they call our team, call me, and we walk them through the process. Or we've got a great community of other note investors out there to help.

Answer questions and be resources, mostly teaching them to people to buy notes. Like where they live or is it mostly like where they don't live?

It varies. Now in the Buckeye State, you know, that's a great. I call that the land of milk and honey when it comes to notes because there's a lot of distressed debt there. If I live there, that's all I would buy there. I live in Austin, Texas. I haven't bought anything in Texas in like eight years because it's overpriced. I buy a lot in God's waiting room down in Florida. You know what I mean?

God's waiting room.

You know, people are dying to move there, right?

Ah, but I'm, it just depends on the numbers, I guess. And that's like part. I assume that's like what your class goes over so you can like identify deals. I feel like just in like the conversation that no buying is for like investors that have been invest like landlords and they've been. Or people that were thinking of being landlords but don't really want to be a landlord or like landlords that are like tired and they're like, I still want to like be in it, but I don't want to be in it like that.

So we, yeah, you know, that's, that's a good chunk. That's what we see the most amount of success is those like the people that understand systems, they understand leveraging to vendors to do the heavy lifting. If you're trying to be a jack of all trades to get everything done.

And pinch, it's not happening.

You're going to end up very easily being frustrated because it's our normal deal time frame isn't like 90 days like you would like a fixed flipper buys a house, rehabs it right on the mls. But we do see a lot of REO investors coming over or people that are looking for foreclosures coming in the note business because they can't find anything that makes sense.

And so the price thing that makes sense. And nothing has made sense to flip in a long time. Even the rentals are. I mean I'm like a landlord, I don't flip. But like even the rentals are really hard to find right now. And at some point it's like you, you're done. Like you can't take on any more tenants, you know, but for me at least, like I don't want to be a hundred percent passive, you know, like I like to look at my asset.

Well, but that's, that's the thing is it's. There's a time to make money and there's a time to be passive, you know. And I really believe that the next 24 to 36 months is the time to, you know, make as much hay as you can, make as much profits because you're seeing things kind of fall, fall down distress debts is increasing. Like we. Since we've had the COVID and the foreclosure eviction moratorium.

But you see that it's gonna like your, your predict that we're gonna see like that.

No, no prediction. I see it already is what I'm saying. It's happening because the banks we, we're not dealing with mailing out postcards or yellow letters or door. We deal directly with banks and lending institutions. And when I get more emails and more phone calls than I've gotten in a long time of people calling and asking what I'm buying.

Yeah.

Or banks returning messages or emails. And so yes, we do have some stuff.

Yeah.

You know, that's the thing about note investing is we see deals six to 12 months ahead of your traditional buyer.

Right. Because yeah, you're getting them before all that happens. That's interesting. So do you, how does your class run? Is it on demand or do you do have a live.

So we do a class every third Saturday of the Month is a one day class. It's kind of a wet. It's called note weekend. And if you go, if you're interested, if you go to note weekend and type in the keyword fight, you'll get it for free. Listener of the real estate bike club here. Okay. We have a quarterly three day class that's much more intense. You know, it's a full day on finding deals, a full day on funding and a full day and making money.

Okay.

Most people, I would say, hey, dip your toes in the water. It's normally 49 bucks. You get a thousand dollars worth of bonuses along with it. If you can't make it live, you get the replays as soon as you get signed up for the previous one.

Okay.

Replays the live event. So it's really kind of two classes at once.

Okay.

And it's literally just me kind of walking through a little bit. Kind of helping you understand like the.

Process because it is, I mean you're dealing with the banks and it's just like I imagine it's like a, it's, it's a repeatable process every time everybody.

Exactly. And every deal is a little bit different because you got to know what's going on with the borrower. But it is a lot of, whether you're looking for residential or commercial notes, it's a lot of the same thing. It's a lot of using LinkedIn and some of, some of the different websites to find the list of asset managers or the secondary marketing professionals at banks that handle the note sales. And then you got to know what to say, what not to say.

Are there banks that like, you're like, I'm never calling that purse like that bank because they're the worst. Because we had those in sales. I'm like, when people like my, my, yeah, my loans with this bank, I'd be like, I'm sorry, we can't help you.

So you would probably say like nation star. Mr. Cooper is pretty horrible when it comes down to short sales back in the day. And that's why they changed your name, Mr. Cooper. They still don't sell their debt unless it's a huge portfolio you're not going to buy, you're not going to buy a one off note from bank of America, Chase City or Wells Fargo. You know, that's okay. There's plenty of other lending institutions out there. So we've bought a lot of like.

Credit unions and stuff.

Not so much credit unions because they're not really a big mortgage company. Mortgage bank in a lot of cases. Most of it's regional banks. You know, we like to target banks that have at least five branches or more.

Okay.

Because they have to be a little bit more aggressive on their lending. A solo bank, they're very, very conservative. They're often, they're often take the deal all the way through foreclosure and take the property back. But when you start getting those larger regional banks, you'll start seeing stuff, I mean, like, oh, you know, lending, not lending tree, but Quicken loans out of, out of Cleveland there. You know what I mean? They send a list out quarterly that we cherry pick from, you know, like Synovus bank out of like Georgia and Atlanta, Stuff like that. They send out a quarterly list that we can cherry pick from. So we find all sorts of deals out there. Unfortunately, there's not like a loan MLS for the most part.

Right. You should invent that.

The reason it would be great if I did. But every bank has a different process. Every bank doesn't sell monthly. Some just sell once a year, like the fourth quarter and the first quarter, which makes sense. Yeah, I get it. It's just that you never know. Stuff is moving so fast.

Yeah, yeah.

Business, it's a little bit different animal. So I actually kind of like keeping it a secret so that we see.

Well, I'm glad I met you because I did think that if you were buying notes, it had to be like in bulk and like millions of dollars and all this stuff. So I think it's really cool to learn that you don't have to. So just once again, the podcast is the Note Closers show podcast. And then what's the website for the class?

It's easy. You can catch everything that we do by going to weclose notes.com, whether it's our classes, our different podcasts, or Monday night webinars that we do. It's the mothership of the note business. We close notes dot com.

That's so easy. And so if they just have specific questions for you, just go there as well.

Yeah, they can go there. They can always shoot me an email@scottclosenotes.com if you email me and mention this. Like I said, you get the class for free or you go to noteweekend.com and use this special code fight. You'll get it for free. But do me one big favor, everybody. When you're listening to this, go over, hit that, hit that subscribe button and hit that five star review and leave Jennifer a five star review. As podcasters, we love that. We love it. We love to hear from our audience. You don't like me, but we love Jennifer. So go out there and leave her a five star review, everybody.

Awesome. I really appreciate you being on Scott. Thank you so much.

Thank you, Jennifer. It's an honor. And keep kicking ass and taking names. I love the Cincinnati market. I love Ohio. It's a great place.

Yes, it is. All right, see ya.