Back to the Future Investing: Scott Carson's Keynote at the Quest Expo 2018

You're going to take some nuggets today. If you'd like copies of my slides, they'll be available. What I want you to do more than anything else is learn something today. Is that okay? Is it okay if I teach you a little bit about what's going on in the industry, what you can expect in the next few years? Is that all right? Hear an amen. Amen. All right. Because you're going to this church of higher returns on a Saturday afternoon.

All right.

But literally before I get started, today's topic is all about back to the future investing. Anybody watch one of the three movies Back to the Future? Yeah, pretty funny. Pretty good. We'll get to that in a second. Before I dive into that, I always do a little personality profile, personality quiz. And I'm not sure exactly where I need to be for the mics don't work. Am I okay up here? Golden. Alright, awesome. So there's four shapes up here, okay. Circle, square, triangle and star. Don't look at me, look at them. I know, I little bit like a green circle up here. Okay, but look at the shapes. One of those shapes is calling to you. Show of hands, how many? The circle is calling your eyes. Raise your hands. Yeah, about 2, 3%. It's pretty normal. You guys are the engineers in the room. You know something about every little aspect of what you're trying to do before you pull the trigger. Does that sound about right? Yeah, I know. Okay, squares, raise your hands. A few more of you. Yeah, it's about 6%. That's pretty normal in a crowd. You guys or gals. Let's not forget the ladies like to know some points about the high, the middle and the low before we pull the trigger. Triangles. Triangles. It's a little bit bigger. Yup, exactly. You guys just give me the high points. You're like upper management. Just give me the high points. I'll go from there. Okay, rest of your stars, raise your hands. Turn around. Look. You guys learn best by drugs, sex and alcohol. So you are the VIPs tonight.

All right.

Can I hear a round of applause for that? Okay, come on, we're gonna have some fun. Okay, so who is this big green giant up here in front of you today? Well, like Nate said, I've been an active. I was an active mortgage banker for years. I was a financial advisor with a little small company called Smith Barney. It was owned by Citibank. Austin, Texas, has been home since 2001. I went to Southwest Texas State University, got my degree. Anyway, you got Bobcats in there. Can I hear him? Meow. That's our football team.

Meow. All right.

We've already made the bottom 10 on ESPN.com and we haven't even played a game yet. What's up with that? But anyway, active real estate investor since 2002. Full time real estate investor since 2005. Full time investor since 2005. I focused 100% of my time on non performing notes. You're like, why the hell would you want to invest in something that's non performing? And I'll talk about it later.

Okay?

This is 2008. So I've been doing this over 10 years now in the paper game.

Okay?

Weaklosenotes.com is my company. I host a little podcast called the Note Closure Show. Podcast. I've purchased over a half a billion dollars in distressed debt in the last 10 years. That's a lot of bad paper. That's been really good. All right, we'll get more into that later on. But I got a little book there if you want to. I got some copies at my booth out there. If I run out of copies, I'll give you an e book copy. But I have a big goal over the next five years and it's to help educate and create 10,000 note investors. Now, there's some people out there saying, well, that's too many people. That's going to ruin pricing for everybody. Not if you see what's coming. Not if you know what the economic signs are of what's coming down the pipeline. And let's face it, only 10% of people do anything anyway.

All right?

But there's a lot of opportunity still in today's market. I don't care who you talk to. I'll fight you if you say otherwise because I can prove it. But there's a lot of stuff coming. And if you think you've had it good for the last few years, you may want to be oh, shit for a little while. But if you know what's coming, you can take advantage of opportunities. Can we agree to that, everybody? Yes. All right, good. So we just wrapped up a two day event. So you and I have something in common. We both don't know what the hell I'm going to say the next day. 45 minutes. Seriously, I forget what I put in my slides. We just wrapped up a two day event here with 60 people, kid. And I just some great investors out closing deals on a regular basis. People closing their first deal to their 300th deal here in the hotel last two days. So I'm a little crazy, but it actually was our 20th note mastermind meeting. Thank you very much. Yes. People getting together on a regular basis still work on each other's business to close deals. That's one of the big things. We have a company called We Close Notes. It's not we talk about notes, we actually go out and close them. Whether it's one deal, five deals or 300 deals, we're getting stuff closed. I'll strike a pose for the photo over there. Yeah, gq, what's up? There we go. All right, so let's get to the nuts and bolts though, the meat and the potatoes, because we're in Texas now. A question I want to ask you, and I'm serious about this. What would you do if you could go back in time 10 years, you had your own personal DeLorean and you go back in time just 10 years to 2008. Think about that for a second. What would you do differently?

Okay.

What would you buy? What would you invest? What would you do differently with your life? What would you invest in? Would you buy more real estate? Exactly. Just crashed then. Amen to that. I would agree to that. What would you avoid? Okay, maybe some people, maybe you wouldn't have gotten married. I don't know. Okay. That's a non performer story of a different type.

Okay.

I only joke because in 2008 I got divorced. But what opportunities would you take advantage of if you knew what you know now? If you could go back in time 10 years, mine would be buy more stuff. I look back at the last 10 years and we bought a bunch of debt and I sit there and look at stuff and I should have bought a whole lot more because stuff was cheaper 10 years ago. You could buy, pick up stuff 5, 10 cents of what was owed. The market's changed, some market values have gone up. Can we agree to that? Everybody? Yes. Markets recovered.

Okay.

They're still on the non performing debt side of what we do. We buy direct from banks and hedge funds. I don't buy owner finance notes. I buy direct from banks and hedge funds. And there's still a lot of inventory out there that we're buying well below value.

Alright?

Now some people will complain about it that all the low hanging fruit gets eaten up. Yeah, if you're only going to one spot, but you want to put a little bit of work and put a little bit of marketing behind your game plan, you can find a lot of great deals. Can I hear an amen from my students? Amen. Thank you. All right. So one thing that is equal to all of us when it comes to what we're doing, we all have 24 hours in a day, right? We've got to take advantage of opportunities that come to us. You have to focus on what you're doing. And one of the big things that I talk about doing is kill the squirrels, pull out an ar. Some of you are packing in here right now. I know I'm not going to point you out, but you need to kill a lot of squirrels and be focused on things. And we all, if you love the movie, we all love Doc Brown, right? Crazy, cantankerous old man who's been around trying to figure things out. And for me, back 10, actually 11 years ago, my Doc Brown was Mr. Johnson in Austin, Texas. And Mr. Johnson had been around for a while. He was 80 years old.

Okay.

Been around for a long time. And when everything started to hit the fan, he goes, Scott. I'm like, yes, Mr. Johnson. He's like, this is the best time. Yes. A lot of people are getting upset. A lot of people are crying because their property values are dropping or they're in foreclosure. Short sale. It will just be a blip on the radar the next 10 years because Mr. Johnson was around for the RTC days. Anybody know what the Resolution Trust, somebody lived through that. Anybody want to raise your hands? Yes, it's our little bit more of a seasoned audience.

Okay.

This is basically Resolution Trust corporations. When all the savings and loans were going out of business and millions and millions and millions of dollars of loans were being sold out there. Well, that's basically what happened in 2008. 1987 is loan debacle. 747 SNLs went out of business. Now that's not Saturday Night Live for the younger group. That's savings and loans went out of business. $450 billion in loans sold off. Big discounts. People were made or became millionaires very quickly. They bought stuff cheap. And Mr. Johnson, that's where he made his millions originally. And he was literally telling me, listen, that's what you need to do. And luckily for me, I had some other mentors along the way that taught me the paper game. Okay, but if you look back, what just happened 10 years ago, we had another meltdown. 465 banks failed and it had a $700 billion bailout that. Who paid for that? We did screw Congress. But the thing I like to bring up is if you think this is it, I'm here to tell you and you can Throw stones at me, I don't care. Because I'm going to take all of you here. But what I'm trying to get at is it's going to happen again. And there are some clear signs of what's going on in the industry out there that you need to take advantage of. So for those of you that are brand new or wholesalers or getting started and you're like trying to learn everything, this may not make a little bit of sense for you. That's okay. Take a deep breath. Relax.

All right?

There's a lot of great stuff here that will. I try to make it where everybody can understand it. That's why I used to call my classes Note Buying for Dummies. We would dumb it down for people to make it make sense. When you talk above here, nobody makes understands that you don't learn anything. Let's bring it down where it makes sense. So let's talk about some recent numbers.

Okay?

2010, we capped out at over 15 million homes underwater. I'm not talking about Houston. I know some of you guys experienced that not too long ago, okay? But underwater means they owe more on their mortgage than what their property is worth. As of May of this year, there are still 4.5 million homeowners still underwater. Ten years later, we're sitting at just under 30%. Now here in Texas, we've been pretty lucky, all right? We do things pretty fast here, obviously. We have fast highways, fast foreclosures, and fast executions. We're the envy of the mortgage industry or the mortgage lending industry across the country, because we do things a lot faster here. Why, though, do we still see this much stuff all across the country, though? Because there's longer foreclosure states. People don't do anything. The banks didn't want to do a lot of stuff. They wanted to sit there and wait, or they did a loan mod and waited for five years for hopefully the values to come back up. But that's not been successful. As of today, almost 1 in 10 people are still in trouble. 600 tickets sold, 60 of you then technically are in default or underwater. Now, the way it's been the last 10 years, a short sale, a foreclosure, bankruptcy is just a badge of honor these days. We all know somebody's been through that, right? Everybody. Doesn't make them a bad person. We all experience financial hiccups. I don't care who you are. We all experience financial hiccups. But there's a lot of options that the banks aren't offering people that's what I love about the note industry and buying distressed debt. We can offer them a lot of options. I'll get that in a second. This lily came out, like, last week. 713,000 homeowners across the country owe twice as much on their home as it's worth. They owe 200 on $100,000 house. I know that's scary. Hopefully. I'm not trying to scare you here, but I want to wake you up because there's opportunities here. Not to be the big, bad, evil investor, but to really help some people with what we do.

Okay?

The national default rate as of the end of second quarter 2018 was down to 3.25%. That's down from 3.46 the previous quarter dropped down. But that's exciting. Except as of last month, it bumped up 11% across the board. I want to say that's our bottom and where it starts to rise, based on the industry standards. I see.

All right.

But it's 11% increase in defaults over last year.

Huh?

That's significant. It is a very significant number. Exactly right, Beth. But I'm constantly looking at numbers because I want to identify markets, I want to identify opportunities, because all I do is this crazy note stuff.

Okay?

But the reason I love note investing is I'm seeing this stuff 6 to 12 months before you guys see it. If you're a realtor or you're a wholesaler or you're an REO refugee, okay? Or you're a lazy landlord that's tired of toilets, tents, and trash outs trying to buy a property, I see stuff six to 12 months ahead of what most people do. It gives us opportunities to come in and really do some good.

Okay?

So here you go. Here's the numbers.

All right?

3.25% as of Q2, 2018. Foreclosure rates. Let's talk about this. Because they dropped down AS we talked 11% over last year. Florida is at 9%. Texas is number two in the nation. That should scare the shit out of you. It's not just all Houston, okay? A little bit has got to do with it. They call it the Hurricane Harvey effect. But Florida's number one. It's been like, number one, number two for the last 10 years. Texas being in the top two or three is disturbing. That means there's opportunity there to help people out. Values dropping. It's not all in Houston. Other states are in trouble as well. Mississippi, Louisiana, Alabama, West Virginia, Indiana, Nevada. When I see numbers like this, this is the face I make at night. Great Scott. Because I invest outside of my backyard. I don't buy a lot in Texas. I buy a lot outside of Texas where the numbers make sense. Because there are one number that unites all of us as real estate investors. What's that number? Return on time, return on investment. Roi. Right, roi. But the second number a lot of us really fail at is rot. Return on time. You have to look at what you're doing. And what does it make sense? A lot of us are making a pretty decent roi. But you spend all your time on an asset, your return on time is down below minimum wage. Should look at that.

Okay.

But there are a lot of opportunities. So some of you probably have read the book or. Read the book, the Big Short. Anybody? Or you watched the movie with Brad Pitt. Christian Bale. Sorry. I know Brad Pitt was in there. Okay, so things that were happening in the market in 2007, 2008, 2009, because I was a mortgage banker then, are 100% financing. Okay, we'll donate the down payment. 100% down. I mean, 100%. You don't have to put anything down. 51 and 7 1A ARMs. If you don't think that ARMs are back. They've been back for years now.

Okay.

One day out of foreclosure of bankruptcy. That's a solid buyer. It's a solid lender. Okay, 500 fico options. Yeah, we'll give you a loan. You got a 500 fico. Put 30% down.

Okay.

520. Oh, don't worry, you're out of bankruptcy. Foreclosure, we'll give you a loan. NINJA loans. Yes, they. Yes way. No income, no job, just off of assets. Those are back. There's a lot of companies out there that are back in the lending business that aren't true banks because they see the opportunity. And these are the same guys that started the mess beforehand. They cashed out, took their millions, their billions, filed bankruptcy in their company, took their millions and waited. Now they see that the lending options are coming back. They want back in 90, 95, 97% ltvs. She's bought a house. First time homeowner will donate the 3%.

Okay.

And when I see that stuff there, it scares me for the homeowner, scares me for the consumer on that. But me, the investor in my brand, I'm like, I'm licking my chops. I'm salivating.

Okay.

Like a dog in the heat, ready to go.

All right.

And the bankers got really original in how they call this stuff. It's not subprime. It's non prime. Boy, those guys could learn how to market a little bit better, couldn't they? But seriously, serious as death. And there are programs for all these types of things in all 50 states. It's not just in one or two, but all 50 states have programs for this.

Okay?

And let's just throw some of the names up there. Maybe you've heard of some of these guys. These just are the biggest. 15. I was looking the other day, over 90 different lenders doing stuff in states. This is a cartoon from 2008. Forecast more flooding in New York. This is history repeating itself. This is you jumping in the DeLorean, going back 10 years. Today, you're back to the future. What you choose to do with that information is solely up to you. You could sit around, not do anything. You could take advantage of it, start buying, learning the note business, okay? Because whether you believe it or not, every one of you is in the note business. You're still on the wrong side. If you've got a mortgage, a car payment, credit card, student loans, you're in the mortgage business on the wrong side, okay? You're on the wrong side of the tail of the tape.

Okay?

So I love this business because I can look back and see these things. It's like I'm like Marty McFly going into the future to get a sports almanac for the last 30 years or the last 50 years. I know things I see signs that happened 10 years ago are starting to happen now. You start to see an increase in garage sales out there. You know why garage sales happen most of the time? People that cashed out of their house or put in an equity loan and pulled capital out of their property, now they can't afford the mortgage payment, so they got to sell off the toys to pay the mortgage payment. Now, mark my words, people going into default. Default rates are up 2, 3, 3, 4, 5% all across the country. So the question is, people ask, okay, this sounds great, Scott. Awesome. Great Scott. This sounds awesome. Where do we find these deals? Where do we find these deals?

Okay.

Variety banks, hedge funds, okay? Servicing companies. Is Shantae Duffy in here? She went back already.

All right, fine.

Auction websites, auction.com used to sell notes. Mortgage bankers, private investors, okay? There's all sorts of people that have defaulted debt as either they've bought or they have it on their books. Millions and millions of loans out there still. We're still gonna probably originate across the country. Around 16 million loans this year. Origination and refinances. You don't have to be too smart to figure that a 4% default rate on 16 million homes is still a lot of paper. Can we agree to that, everybody? And the beautiful thing is there aren't 100,000 investors chasing these deals. There's probably truly about 5,000 true non performing note investors across the country. It's a whole lot cheaper than the wholesalers, the fix and flippers, the weekend warriors out there. There's a lot of inventory that people aren't tapping into. And am I passionate about marketing from this morning's panel, would you agree to that? Yes. It's a lot easier to reach out to 1000 banks on a regular basis with one email and get a list in once a month or once a quarter that has 100, 200, 300 loans. Because you go back to the list of the banks here, Quicken Loans, I've been buying notes from them for over two years now. They sounded a quarterly list. The stuff that's non performing, how did I get a hold of them? LinkedIn free.

Alright.

Angel Oak, been buying from them for a little while. Caliber Home Loans, Carrington. These are not any new names, but a lot of, a lot of you didn't know that.

Okay?

These companies have this stuff out there besides bigger banks. And whether you believe it or not, every bank has defaulted notes. Now don't come up to me afterwards, say, Scott, can you help buy my mortgage from Chase or Wells Fargo or Bank of America? No. Unless you want to write a $50 million check. No. But there are still 4,000 plus banks out there that have stuff on their books on a regular basis. You go to the fdic.gov website and check out their quarterly reports and see how much they're in default. And the busiest time of year is right now. Between now and the end of December. Banks are looking to get off their books. Banks are starting to put money back into reserves to sell this debt, bad debt off.

All right?

They become motivated. Okay, so let's talk a little bit about some of the stuff that we're seeing out there. Got real quiet, kind of scaring me a little bit there, but that's all right. 90% of these homes that we see out there below $150,000 in value, okay? When you buy a note from a bank, you become the bank. You step directly in the bank's shoes. You have all the same rights that the bank has to do that.

Okay?

85% of loan mods failed from the banks in the first three years.

Okay?

Actually in the first year there was over 3 million loans modified with the Home Affordability Modification Program. HAMP. And what the banks did, they didn't reduce what was owed. They just dropped the interest rate from 5% down to, like, 1 2%. Fix it for five years, let the property value come back up, and then after two years, three years, four years, they adjust it to 5, 6%. Well, you've got somebody who's been living in a house, making payments on time with a budget mindset, and their interest rate doubles. Do you think they can afford that payment?

No.

Banks are guilty because they did fuzzy math. They just tried to make the math work. But that means we still got great opportunities. If I'm buying a note and I see somebody's lived in the house for two years and they've been making payments and they went in default when the interest rate adjusted, I want to keep them in the house, okay? I want to rehab the borrower, not rehab the property, because that's my mentality. You can use that. Rehab the bar, okay? Because I stole it from somebody else, which is okay. All right. Pricing on these deals ranges from 25% to 75% of AS IS, depending on the market. You're gonna get a little bit cheaper in some rural areas versus, like, main areas.

Okay?

We buy a lot in Ohio, Michigan, Indiana, Illinois, Tennessee, South Carolina, North Carolina, Oklahoma, Missouri. Still lots of great states out there, but it's all. We use vendors for a lot of stuff. And the people think is you have a variety of extra strategies. We'll get to that in a second. But like I said, our biggest goal is to keep people in their homes. When we buy a note, we reach out to them. Hey, let's try to work out a situation. But if, you know, pay you. No, stay. You know, pay. You know, stay. I'm willing to help an investor out. I'm sorry? I'm willing to help a borrower out, try to keep them in the house we can, but if you're not going to work with us, we're not going to keep you in the house. I don't run a charity. I donate to charities, okay? I still run a business, okay? Still run a business. And there's a lot of opportunity helping. And about half the time, of the stuff that we buy, about half the time, we get it reinstated or modified in some sort of fashion. The other 50%, we end up taking, like, a cash for keys or deed and lieu from the borrower, or we foreclose still. Foreclosure is still a thing that happens out there. So that's just some of the exes, but some of the 10 exit strategies. You can wholesale the note. So that means just flip a note to another investor. It happens all the time. You can reinstate the loan, which is the first thing that when we buy a note, our servicers, our attorneys are reaching out and saying, hey, can you start making that payment on time? Let's worry about what you're behind on and put later. You can modify the loan, do a trial payment plan, adjust the interest rate. Just the payment amount.

Okay.

Do some flexible things for the borrower. You can also do a loan assumption a lot of people forget about. We let people who are like relatives, family members of our borrowers come in and assume the payments. We can allow that because when I buy the note, I'm the bank.

Okay.

Cash payoffs happen occasionally.

Okay.

I got noticed today that actually on one of your deals, it's actually got a cash payoff coming. It's pretty sweet.

All right.

Short sale. I am the fastest short sale negotiation company in America. Anybody else dealt with short sale in the last 10 years, raise your hand. Not the easiest thing, right? For me. Borrower tells me, want to sell the house. We had a cash offer. I look at it, what did I pay? Hang on a second. Let me talk to the short sale negotiation company. You're approved. That's what it is. If it makes sense, it makes sense. I don't need to sit here and try to squeeze every little dollar out of the deal. My thing's all about velocity of capital. That's one thing you should be thinking about, velocity of capital.

Okay.

Now, the average note deal takes a little bit longer than your wholesale dealer. Fix and flip, 6 to 12, 18 months, depending on the state's end, but still a lot of opportunity. Deed lieu, cash, your keys. This happens a lot of time. Borrower will just walk, sign the property, will walk away. Had this happen on a property in Cincinnati two weeks ago. Borrower moving out of the house, moving with family, can't afford the payment. They literally sign the property over to us. They owe 30. It's worth 60. Mike, you sure you don't want to sell it? No, I just want to be done with it. I'll dance a jig in the middle of July.

Okay.

It's Christmas. Resell the performer with us working to get notes re performing. One of the beautiful things is after six months, after 12 months, there's a lot of investors out there that want to buy a performing Note in their IRA, make a 6, 8, 10, 12% return on their money. And that's a beautiful thing.

All right.

Kristen was talking about that up there earlier for stuff. And performing foreclosure is my least favorite exit strategy. But it still happens a chunk of the time.

Okay.

And yes, you need an attorney in every state that you're buying notes into foreclose on, but that's what they're there for. You're not going to go down and do the foreclosure, you're not going to do the loan modification. There are professionals out there to let them do their job.

Okay?

And last but not least, if you buy a note, you don't like the note, alright? It's not going the way you want it to go. You can sell the note to other investors. We got any interested note buyers in here? Got a few.

All right.

Some of you guys are serious. All right, good. So the question, I always feel like I'm like Doc Brown, how am I going to get this thing to work? I got a deal here, which way is it going to go? And I don't always know. I would love it that every note I buy that's occupied becomes re performant. Doesn't happen. People just flake. People have their head shoved in the sand.

All right.

They gas leak our door knockers. Anybody ever been gas leaked in here before? You don't know what I'm talking about. So when you send somebody out the house, you know it's occupied, cars in the driveway, you can hear the music on him talking in the kitchen and you hear the knock on the door and you hear somebody go, sh. Somebody's walking. Careful. That's the bank. Seriously? Happens. Okay, so a lot of real estate investors, a lot of you in here are probably out here just working your ass off dropping postcards all over the place trying to find this. It only needs five grand. Paint and carpet. It's good. It's gotta lean on it, doesn't it?

There.

Can you hear the wind whistling through the windows?

Right.

And you want to work your magic for five grand and turn it into this. Voila.

Right.

Well, I want you to think a little bit differently because as note investors, we think a little weird if we thought I was strange. Wait till you see. Because we don't think on an individual basis. I know a lot of people get so tied down in the specifics of one specific deal. I think on a bigger picture, I think like this. I'm not chasing that one asset. I'm not chasing the borrower or the distressed owner for one deal. That's not a good Return on time. What I'm chasing is the banks that I can get an email out to and I get a listing that has assets all across the country that I can buy. I can cherry pick, I can do a carve out, I can buy one off or I can buy 100 every quarter, every six months, every month sometimes. Okay, Yes. I love God's waiting room. We call that Florida. Anybody from Florida in here? I'm sorry, I spent a lot of time there. I love it.

Okay.

But there's stuff all across the country, and that's just a chunk of our portfolio. Because we buy on a regular basis, we average about one closed note deal per day on an annual basis for the last four years. Now do all of them in my portfolio. No. Some we get in, some we wholesale out, some we keep for performing. If the borrower's not gonna go with us, we sell it off. Otherwise, we foreclose.

Okay.

We do a lot of creative stuff with things, but that's just a chunk. Cause I think big picture.

Okay?

I think big picture on how to get things done. And that's what a lot of people aren't thinking big enough. You want to close 10 deals, you probably got to make 100 offers. The beautiful thing is there's still plenty of inventory out there to make those offers. We made an offer on a tape of 60 assets yesterday. We got another one we're working with for 287, another one for 75. I don't have to close in a week on these. I've got time, 30, 60 days to due diligence and carve them out. If I'm looking at an asset and it looks like that last piece of crap property, I kill it. It's. The power is off and it's been vacant for three years. Where the air conditioner did a walkabout.

All right?

Or the copper goblins showed up. That happens, okay? I don't want it. I kick it out.

Okay?

So. And these houses aren't like your Sugar Land or your huge multimillion dollar houses. All we do see some higher end homes. A lot of these are your bread and butter, cookie cutter homes. Three bedroom, one bath, 1200 square foot, 1950, 1960s, 1970s. I may not live in there compared to where I live at in Austin, but somebody's lived that for 15 years. Somebody's lived in that for five. They called it home. They're not trashed out. They're not in the best of shape sometimes, but still, I'm happy with those. If somebody Wants to call that home. They want to pay me 300, $400 a month on a payment and they'll keep it up. Pay the taxes, insurance and they. All they need me to do is reach out and give them a hand up. I'm willing to help them out with that. Who would not be willing to help somebody like that? Right? That's how we make America great again. One mortgage at a time, everybody.

Okay.

So I don't know, how am I doing at times? Oh, I'm doing. Whoo. I'm blowing through this thing. All right, all right, we'll just sit down and chill for five minutes here. But anyway, like I said, I don't remember what's on the slide at the time, but when I talking with the real estate investors because we do a lot, it's been helping a lot of entrepreneurs do some things. When you get into the note business or in the real estate business, you're like a brand new puppy. You're like, yay. I'm a real estate investor. I'm a CEO of a one man corporation. I got a business card, I'm legit. I got a logo even more legit.

Okay.

But we're excited. We get all excited about things. Oh, I'm gonna send out postcards, I'm a wholesale, I'm gonna do some Facebook advertising. I'm gonna run myself ragged till I look like this. In about a month. I want to kill somebody. I want to kill a guy that I paid 40 grand for.

Okay.

And the thing about notes, thinking about note investing, and there are so many little niches of note investment. Whether it's first like I do or seconds, or owner finance notes or residential commercial. It's not the same basis aspect of it. You're working numbers, you're working math.

Okay.

And the beautiful thing about notes, that's one of my favorite pictures of Jack Nicholson. There are people out there to help you out. You are not alone by yourself. Whereas a lot of us, when we get into real estate investing, we feel alone. We feel like we're on that desert island. I don't know who to talk to. I can't talk to my family because they don't know what they said. I can't do this.

Alright?

And the best thing you could do with family that says you can't do this is give them a shut up check. Here you go, here's the checkup. Shut the F up.

All right.

So one of the beautiful things is those of you guys that have IRAs, a big round of applause if you're a Quest IRA client. Come on. The best in the industry. So a lot of people use their IRAs to go out and find deals that are upside down. I have fun with my presentations. Half the time I don't remember, but anyway. But that's the beautiful thing is we help people. Go find them. Go direct to banks. Jumps on Scotsman guy, jump on LinkedIn. Here's a little tidbit for you. If you write anything down, write this down. If you go onto LinkedIn and do a search by titles and look for special asset managers. Not special ed, special asset managers, or secondary marketing managers. Some of you guys are my students. You've heard me say that a million times. But anyway, special asset managers, secondary market managers. These are the people at the banks, the institutions that have a couple marbles that are looking at their portfolio that they got to sell off their books, okay? Now sometimes our lot in their time, they're in Florida or California, hanging 10, dude. Or in New York. But oftentimes they're a different bank location than the main branch you're dealing. So don't go down to the branch down the corner here and say, hey, I want to buy your notes. This guy, Scott Clarkson, this big green giant, said I could buy notes. They're going to laugh at you and call security, okay? But if you reach out to the people in these in the bank through either main corporate office or jump on them online, reach out to them. If you do a search for special asset managers, I think it'll pull up 800,000 plus people that have that in their job titles. What did I just say? Special asset manager, Secondary market manager is like 324,000. That's what we do. Jump on there. Drop a little message. Hey, what do you have in your portfolio you can get rid of? What do you have on your books you're looking to get rid of? Do you have anything with any hair on it? Some of you guys are like, hair. I haven't seen hair in years. All right, but that's the thing. The hairier the note, a lot of times these banks want to get rid of it because it's a problem for them. They want to get off their books. Because if you don't know this, banks leverage every dollar they have in deposits. You guys know that, right? You think back to 2008, what was the ratios that they were at in leverage? Anyone want to take a guess? It's like 15 to 1. Do you think the number's gotten higher or smaller? Yeah, try like 50 to 1. Now, there's been some lousy going in and allowing to move stuff off books, but they're leveraged to the hilt. They are too big to fail now. It's going to happen again. It is going to happen again. They're still repackaging these crappy loans and selling off by some other name.

Okay?

So there's always going to be distressed debt out there, whether you believe it or not.

All right?

And we find that. We help people find that. I'm going on time.

All right.

We use professionals. We use realtors to go out, take a look at property. They'll drive by, take photos, pull comps, and see values on it. They'll jump online to, like, pro. Title USA is one of our vendors to check title, see what's in O and E reports, ownership and encumbrances reports. Those are pretty cheap. That tells you what's on the asset as far as title.

Okay.

We also will jump on and look at, like, massive management servicing companies. They will handle the mail, they'll handle the talking to. You don't have to do it because a lot of you are like.

I.

Don'T know what to say. That's okay. You don't have to know what to say. Turn to the professionals. They get paid to do that. Or you use attorneys. Singer Law Group is a company we use out of Irvine that helps us find attorneys all across the country for deals, for attorneys, for bankruptcy attorneys. Whatever we need, we use a lot of the vendors out there to do it. So the point is, you're not pulling your hair out. You're actually looking pretty calm and cool. Yeah, I'm at the Laker game. Yeah.

All right.

But a lot of us run around like a crazy chicken. We'll try to do it all ourselves. And you can't do that.

All right.

Note, business is one of those great places that the more you use your vendors, the more you make, the more fun you have.

Okay.

The more deals you end up closing.

All right.

So I like to say there's no time machine needed out there for you. You don't have to go out and create a. I was going to try to drive up in here in delorean, but my next door neighbor would let me use the car. You don't need a flux capacitor. You don't need plutonium. You don't need to go blame life on the Libyans to kill you. What you need more than anything is just kind of a game plan, kind of a business model. Works now. I can't cover notes in an hour. It's a longer process than that. I will tell you. There's. I'll give you some websites for stuff, for great. Some information, but literally the time is now. If you're serious about being a real estate investor.

Okay.

And the debt game is miles upriver from the sources because everything starts with a loan. The bank gets paid one way or another. The bank gets the property. The bank control of what's going on.

Okay.

In Texas is a faster foreclosure time frame. I don't buy New York or New Jersey because it's like 36 months to foreclose there. You got to hire an attorney to talk to an attorney to have an attorney there.

Okay?

But there are plenty of other states out across the country. Great returns, pretty fast foreclosure states, great opportunities, and you know what? Blue blooded, salt of the earth Americans who want to live in their house. I have one borrower who. When I bought the note out in South Belois, Illinois. Anybody know where that's at?

You do?

I had no clue where it was. I bought it as a group a bundle. I paid. Paid 12 grand for a $60,000 first lien. They owed 60. The property value dropped to 35. I paid basically 33 cents on the dollar for the debt. 20 cents on the dollar for the. Sorry, $27 for the debt, 33 cents of value. Okay, this lady, when I got the loan file, it was literally this thick. She's been trying to do a loan modification for four years. That's four years worth of bank statements, hardship letters, tax returns sent in. And I got the file folder. I'm like, okay, she's been trying to do a loan mod. You know what I think I'm gonna do? I'm gonna do a loan mod for this lady because her loan had been sold four times.

Okay?

Four times her loan been sold. So we get on the phone with her, call her up. She answers. Sheila's her first name. Husband's name is William. I said, okay, Sheila, I'm your. I read her Miranda rights. I'm your lender.

Da, da, da, da.

What's going on? What do you want to do? She's like, oh, my loan got sold again. I've lived here for 18 years. We raised our three kids here. We didn't do a lot. The market value went up. We took a loan out, a little cash. My husband got sick, lost his job, had a heart attack. We were just hanging on. I was like, okay, what's the current situation? Well, he's feeling better. He's doing back to work. I'm back to work. It's like, okay, could you make your existing mortgage payment? What? I said, yeah, you want to just make your existing mortgage payment? We'll worry about the couple years behind on later on. Yeah, I would love to do that. Okay, can you bring a little bit extra to the table? Can you bring a little extra skin in the game so I know you're motivated? Can you bring five grand? She's like, I can't bring five grand. What? Can you bring 2,500. Okay, let's do 2,500. Could you pay a little extra $200 extra per month for the next year? Yeah, I could do that. Okay, great. I'm going to make you a deal. I'm going to drop your interest rate to 0%. So every penny you pay goes to principal and interest. And you'll have your house now paid off in 72 months versus another 20 years. She was pretty excited about that. But I had the flexibility. I was into it for 12. I knew I was going to get five grand in the first 12 months plus a year of mortgage payments. I was going to make almost an 80% return on my money that first year for that deal. She is paid on time almost and only missed one month in the last three years.

Okay.

And one of the beautiful things is I found out at the closing when she showed up to sign the documents with our attorney, her husband cried at the closing table. Which happens. But the beautiful thing is we were able to keep them in the house. She lived there for 18 years. 18 years of emotional equity. Raised her kids there. It was known in the community, didn't have to breed anything. And about a year goes by after we did the loan, I get a letter in the mail. Her eldest kid was a daughter who had a baby, and they named the kid Carson after me. It's pretty cool. So I don't have any kids of my own, but hey, that's great. Awesome. But those are the kind of stories that we get. And you also have the other stories where you have the borrowers that want to fight you tooth and nail. I got one deal in Chicago. Oh, my gosh, it is crazy. Three years. Don't buy in crook county. Avoid Chirac. Three years on a foreclosure. Part of that is because we had a crazy borrower who pulled a gun on the process server. Wasn't even the borrower. He's the renter. And to evict anybody in Chicago takes forever. That's okay. We'll come Out. The property values appreciate over the last three years. We'll come out. It should have been a pain in the ass. Okay, you got another one. We bought a note on a property in Phoenix. It was an investment property for this borrower. They owed 130,000 on it. As it sat, it was worth about 55. A little duplex. Not the greatest thing. I was going to pick it up for basically less than five grand. We reached out to the homeowner, and I called him up and said, hey, I'm now your borrower. I go, do you? He had a Spanish name, said, habla ingles? He goes, un pequito. I said, tu ingles es muy bien y mas espanol. He goes, cc, my English is better than your Spanish. I was like, okay, I'm calling about the house at 1900 Holly Street. He's like, oh, no Oblonglass. No oblong. And hung up on me. Sometimes you just can't help people.

Okay?

If you'd have put 50 grand into the deal, it'd be worth about 160.

Okay.

I called my realtor, went and knocked on the door. We sent a letter out. Finally, they came to the table, called us up. They were willing to sign the deed over to us. There wasn't a second lien on it. There was about three years in back taxes, which I didn't care. We were just going to pay that. But I found out that they must have used the Rosetta stone because he spoke fluent English. At the closing, the duplex. I wish I threw this picture in there. I didn't, because I usually talk more than an hour. But anyway, it was a duplex. And the funniest thing is, when my realtor went by, there, there was people in it. I'm like. When I was talking to Mark, it's like, are those your tenants? He's like, no, I think they're bums. And these were some creative bums. Should have hired him as property manager because they had dug a trench and were stealing power from one of the neighbors and water from the other one. They had big screen TV watching tv. We see that in a lot of the houses that we end up buying. Big screen TV people aren't educated. We live in a highly, highly uneducated, a financially uneducated society out there. And us as real estate investors, I think it's up to us to help make America great again. Amen.

Right?

We make a lot of money, but we can help a lot of people, too. And I would rather help 100 people versus one and have to go out and rinse and repeat. 60 people, 30 people. Whatever your goals are, you can do a lot of great things here. But the thing is, history is going to repeat itself. It's totally going to repeat itself again, whether you believe me or not. You can call me a liar. That's fine. We'll compare HUDs, we'll compare deeds of trust.

Okay?

We'll compare who's closing more deals in the next five years. Because history is going to repeat itself. That's why I make the joke about the whole back to the future thing. Because if you know what you can do, you know what you're capable of doing, and you take what you know now and where you go back, what would you do again? A lot of things differently. Right, everybody? A lot of things differently. And that's where this business is. It's still a small business stall. Very niche. It's very friendly. And we have a term that I don't think any other industry has out there, a term called co opetition. Some of you have heard me say that before. Co opetition. Is Joel Markovitz in here? He's too busy eating lunch still. Okay. Good job, Joel. He coined the term, actually, and I'm stealing it from him. But we have a lot of note investors that get together and they work to cooperate. Sources, vendors, deal flow attorneys, realtors. Okay, but we're all very competitive. We all want to close deals. We all want to make money. We all want to tell our boss to take this job and shove it. Can I hear an amen?

All right.

We all want better for our lives. We all want to make more money. We want to have more freedom to do whatever the hell we want.

Okay?

A lot of us want to do that. I'll get to you in a second, buddy. If you want to ask a question, come on up here. But the future is now out there for you. And that's one of the beautiful things about bringing people together. I love events like this. Once again, let's give Quest a big round of applause for putting on such a great event. Because I already know that we have something in common. All of us do. We're all investors. We're looking for deals. We're looking for money. We want to do better. Right, everybody? So it's all about doing some things. So before I take some questions, if you guys, I'm smart, I have a thing. If you want more information, all you gotta do is pull out your smartphone, text the word notes. N O T E S this cell phone is not going to sell you anything. It'll literally send you a link for like over 80 hours of videos and some stuff. You go to my website, weclosenotes.com and then we also have a little small podcast called the Note Closure show up there. So, question. Yes? I was wondering, are you buying one offs like the majority of the time, or are you having to take down like $2,005,000,000 packages of pools of notes or something like that? I didn't think the one offs exist. I was surprised when you were saying that. What's your name? Jared Wilson. Jared, where are you from? Dallas, Texas. You're from. You're not too far, huh? Yeah, yeah, I'm just. 20 minutes. 20 minutes.

Okay.

So back 10 years ago, you would need to have really 2 to 5 million. A lot of times it was totally different market than it is now. When I started off, it was one offs here, there. You know, I wholesaled a property in Jacksonville, a note to another investor for four grand, another one for six grand. I took down a six unit apartment complex and San Diego inflicted for 35,000.

Okay.

The average, I'd say value of the trades we're seeing is somewhere around 250,000 to 500,000. Because you got to realize we're buying first. And yes, we do a lot of one offs. A lot of people do a lot of one offs. And there's nothing wrong with that. It's just that if you're buying from a fund and you're buying like the pristine asset, you're going to pay more, you're going to pay a premium for that. It's not 5 cents, a dollar, maybe 35, 45, 55, 65. But the beautiful thing about coopetition is a lot of people get together and work on taking down portfolios or pools. Pool could be five. Laura Blanc, where are you at? Raise your hand. You just closed on what? On 15 notes in the last six months. You closed on three. Where's Scott Van Campen? You guys just closed on three notes yesterday. All right, you guys have closed on 50 notes in the last two years. One offs, doubles, triples, quadruples.

Right?

So it's about building a market, knowing your markets. I always tell people, the United States is a big place. You're not gonna buy everything there. Pick out 1, 2, 3 states and focus on the bigger cities there. And it'll make you a lot less stressed out. You'll have a whole lot more hair.

Okay.

At the end of the day, and there's opportunities. You build your vendors you build your teams there, but there's opportunities for that. If you want to do one off, great. But I always say stretch yourself. A lot of people get scared and they only make bids on what they have in their IRA account.

Alright?

Oh, I can only make two bids because that's all I can afford. Trust me. You don't have a hundred percent accept ratio. I always tell people you're only going to probably have about a 10% acceptance ratio. Make 10 offers, that way you sell at least one or two and then go from there. You know what, if you get all 10 accepted after you get all excited, then go clean your shorts, reach out and talk to people. Reach out. Mark, hey, I got another deal I'm working on. Either wholesale it or looking for somebody to help fund the deal. Make sense? Thank you, sir. You're welcome. Give a big round of applause. Is never easy to ask a question, buddy. Any other regular questions? Any other questions? Yes. You're kind of, you're kind of landlocked there. Okay, I'll come to you. What's your question? Brand new. You're brand new. All right, awesome. What's your name? Brian. Brian, where's home? Dallas. Dallas, okay.

All right.

What's the process if someone wants to get started? Is there a fee that you charge for bringing in? No, there's plenty of information out there online. You could literally find a thousand videos on weclosedotes tv. There's training available. I'm not here to sell training on stuff because we do so much stuff out there. Anybody would agree that we have a little bit of content out there by round of applause that watch us.

Yeah.

That we have training, classes, stuff like that, whatever. But I always say go learn first. See, this is for you because it's not for everybody.

Okay.

This is not for everybody. And if you're, if anybody's in here, like I got to make money now. This is probably not for you. You probably need to go get a job. I'm sorry, you want me to be honest? Me blow smoke up your ass? I'm not going to do that.

Okay.

But there's. We have a lot of people that work full time and do this on the part time. I saw Ron Lambert in the back, back there. There he is. You still work a heavy workload. You love what you do, right? You send your boss Christmas cards every year, right? Yeah, maybe not. Whatever, he's lying. If you got money to invest, you know what, Reach out to people. Hey, I've got some money investing. I'm going to Put it to work and then talk to people.

All right?

You don't need a half million dollars. You can start off 25, 50 grand. Buy one or two. But I always say, buy a couple notes. If you buy just one note, you're going to be so fixed date. It's like it's my baby. I want to see it, I want to touch it, I want to rub it. Am I lying? I'm not lying. You're laughing because I'm calling you all out on this. Okay, but the thing is, you get two, three, start putting your systems in place. There's vendors, there's meetup groups, there's webinars all the time. You can learn a lot of great information out there and network a lot of people here that know. Because whether you believe it or not, I don't know if Nathan told you this biggest portfolio of quest is in notes. Right, Nathan? Definitely. Definitely. Yeah. Keep his mic off. We don't want him taking my time.

All right.

Good question, though. Give them a big round of applause. Who else? There you go, people. There's enough sharks in here, all right? They'll take your money for you.

All right.

What else? Anybody else? Come on. Do you just need a longer break? Good question. The question is, when I'm buying a note, am I buying the total debt or the principal? Technically, you're buying. You end up, when you buy a note, you get all of it. The unpaid balance, the upb, unpaid principal balance, and the rear. Just because you become the bank, but you don't buy off of the payoff. You buy off of the upb. So there are some hedge funds smoking some great crack because they want you to bid off the full debt, and that's not going to work. I only buy off of the unpaid principal balance. And then it's up to us to work our magic, right, Natalie? To work our magic to go collect on what's owed. That's our gravy. If we can get that. Awesome. We'll work on it.

Okay.

But no, you only buy off of unpaid principal balance. And I will tell you this. Don't do a skinny deal, don't get deal itis or don't suffer from a syndrome we call OTSC when you're looking at property. Oh, that's so cute. Roi, what is my numbers? What are my exit strategies? Is it occupied? Is the power on? All right, has the payment been made in the last 12 months? So those are signs that somebody wants to stay. Did my realtor drive by? Not like a drive by, like da da, da, da, da, da. That would be Chiraq. But anyway. Do they do a drive by? Is there plants on? Is the lights on? Is there a car in the driveway? It's a nice neighborhood. Those are great things that you need to do to look at an asset. Before you say, because I'll make a bunch of offers, we'll kill the offers because it just doesn't make sense on some things. Or you'll find something out.

Okay.

Like your borrower is locked up in the Gray Bar Motel. Nobody knows what that is. That's a jail. And they do. For $500, it's really easy. Get a deed in lieu. Cash for keys. Sign.

Okay.