Being The Bank Note Investing With Scott Carson From Make Money, Make Sense in Real Estate With Danté Belmonte

Looking to learn more on how to build wealth through real estate. You're in the right place. Welcome to the Make Money Makes Sense podcast with Dante Belmonte. Each episode we have the privilege to bring you a professional in the real estate world. One that will help you become a top investor. Whether that's a passive role or managing the day to day. Let's jump right in.

Welcome back everyone to another episode of Make Money Make Sense. I'm your host, Dante Belmonte. Thank you so much for tuning in to this week's episode. This week's guest is Scott Carson and Scott's going to be talking about note investing, being the bank when it comes to real estate. So this is a newer form of real estate investing that we're not really used to having on the show here. So I thought it'd be a great idea to bring Scott in, talk about his team and what they're doing with note investing. And you know, he is filled with energy. He really is. I mean he does, he has his own podcast. He's been on over 300 other podcasts. So he really knows what he's doing. Really enjoy having Scott on the show with that. Let's welcome Scott into the episode. All right, Scott, welcome to the show. How are we doing today?

I'm doing great, man. It is a beautiful day here in Austin, Texas. It's actually not going to be like the depths of hell in heat wise, we'll be lucky to hit 90 degrees today. So it's been a beautiful day. Got coffee, walking outside, getting some work done. It's a beautiful day in the neighborhood, gentlemen.

Awesome. I love the energy. Appreciate you having having you on the show here. So Scott, if you don't mind just taking a quick minute introducing yourself to our audience, tell us about yourself and what you do.

Yeah, so I'm known kind of across the country as the note guy. For the last 14 plus years, since 2008, I've really focused on buying mortgages and buying notes. And I'm even more nichier than just being a note investor. I focus on buying primarily non performing notes direct from banks and real estate trusts and other institutional debt. So we buy first liens where usually where the borrower hasn't paid in at least six months or sometimes up to six years. And our biggest goal is to buy that debt, try to work it back out with the borrower, get it re performing and keep them in the property while we get cash flow and then after a period of time sell that note off. If they won't play ball with us. Then we always go the legal route and foreclose or offer cash or keys and stuff like that. But over the last. So like I said, Since 2007, 2008, bought over a billion dollars in distressed debt. And I call Austin, Texas home. And I love working to create win, win, win scenarios. Win for us, win for the banks and win for the borrowers as well. So it's a little bit in the nutshell about what I do.

No, I like that. So you said you've been doing this since about 2007, 2008, is that correct?

That's correct. And the ex mortgage broker in me stopped originating when the, the music stopped back in the Great Recession and I just jumped on the opposite side, said origination. I just started dialing for dollars to call the banks and say, hey, I know you got some bad debt. What do you want to get off your books? Let me, let's make some, let's make some lemonade out of lemons. You know what I mean?

You're right.

Yeah.

So that was going to be. My next question is really, and I think you can answer that, how you got in, what you were doing before and how you got into buying non performing notes. Why don't you touch on that a little bit?

Yeah, it's an interesting story. I mean I started graduated college with a business and marketing degree in 2001 and did some things, but basically got into the finance industry. I was actually a banker for JP Bank One and JPMorgan Chase and a mortgage banker. And then your traditional banker here in Austin, Texas opened up about 14 different locations for Chase. And then a buddy of mine came to me in 2004 starting a mortgage company. And you know, I'm like many people, we were loving those fictional TV shows, you know, flip this House, you know, the HGTV stuff that doesn't make sense when you're a real investor. You see that's not how it happens. You know what I mean? I see see DJ down there smiling. So he's like, yeah, exactly. And I actually, you know, bought a couple of houses but fell flat in my face. We overpaid, I got laid off, my tenants got laid off. So I joked that I was a deadbeat borrower all the way back in like 2002, 2003. Luckily we got our assets out of a sling and was licking my wounds back in the finance. We were making good money doing that. But then when my buddy approached me that was starting this mortgage company with a couple investors that were traveling the country and all these big real estate expos and circuits, teaching creative financing, owner financing, subject to deals fix and flipping and stuff like that. This is really what I want to do. So for four years from 2004 to 2008, co own the mortgage company. We're just killing it, you know, getting 30 to 60 mortgage applications approved in basically every other weekend. But also had the chance to sit in the back of the room and hear some of the best minds in real estate and learn how to do real estate the right way, not the wrong way and you know, start dabbling into some subject to deals, started buying some onesie Tuesday nights, doing some owner financing. And then when everything happened in 2008 with a great recession, you know, the big short kind of kicked in. And then I said, okay, here's the opportunity, what I've learned. And then I also had some of my mentors that I learned along the way who had made a killing back during the savings and loan crisis, the Resolution Trust Corporation days. They're like, this is an opportunity to buy a lot of stuff at a big cheap price. You're never going to see it like this. So that's what I did. I just sold my half of the mortgage company for a buck because that's about all it was worth at that point. And then just started dialing for dollars, making 50 to 100 phone calls a day, a day to track down these notes, these non performing notes at banks and kind of the rest is history, as they say.

Yeah, I love the term you had your ass in a sling. I was partly chuckling at that too. So I'm not sure if that was intentional or not.

But you know, I think, I think every investor, I think every investor at some point ends up that way. You know what I mean? We go through ups and downs and there's, you know, I wish every deal was hit it out of the ballpark, grand slam. But we all know that, hey, it's real estate, things change. Not every deal is as smooth as we wish it would be.

Yeah, and we, we've actually in several discussions, podcast meetup, have had a lot of discussion around the fact that real estate's not simple. Taking on a partner like I've done with Dante certainly has helped me in my momentum in terms of our business plan. But it's a tough business to do by yourself. And I do think it takes years. I do think having a formal education. So I'll make a tie in flip this house. If I remember correctly, I think that was Stan Merrill and his guys at ct Homes that did that program there, and they're all tied into Fortune Builders now. That company's still going. They're out in California, and they're doing all kinds of stuff. So they've really leveraged their business and their students in some creative ways. But I don't want to stay focused on that. I want to focus on you. One of the best ways I learn how to do things is like a lot of people through numbers. So take us through a deal, like investing in a note. It's really interesting. I've done some passive lending. You know, that's pretty cool. I, you know, I end up in a first lien position, promissory note, that type of thing. But this note investing is really interesting to me. I haven't done it before. So take me through an example, if you would.

Well, D.J. and Dante, everybody's in the note business. Just that most people are on the wrong side of the payment stream. That's right. You're paying out in the mortgage, the car loan, the student loan debt, the credit card, the IOU to Bubba down the road. That's. We're all in the note business, ladies and gentlemen, out there. So what you want to do is be on the payment stream. So I'll give you a great example. Simple numbers. I actually got a deal right now that we're working on. Right now, the borrow is about 125 on a property that's worth about 100. They haven't paid in a year. Bank is motivated to sell the note. We're going to pick up the note for roughly 50, 50,000 bucks. Now, the borrower still owes 125. The house is still worth 100. I don't own the house. I own the note. So by buying that mortgage, a first lien, that's all I buy. I'm now becoming the bank, and I have the same rights as the bank to work with the borrower to try to get them back on track. So the interest rate on the mortgage is 6%. They don't have the greatest FICO don't have the greatest credit. But that's okay. They do want to stay. And one of the things that we do as a note investor is we're not just evaluating the property for value. We're looking at the collateral file, and we're also looking at the borrower. And one of the great things that we are able to do is we kind of see underneath the kimono. You know, we can see the servicing notes, what the borrower's called into the mortgage company. And have they been responsive in a good way? Have they been negative? You know that gives us a lot of information if the bar is something to work with. And so we, based on what we've seen in the documents, the borrower wants to stay in the house. The bank is just wanting to move this off their books. So in at 50 the borrower interest rate is 6% of the mortgage. I believe we'll be able to get the borrower back on track with a loan mod. It's that reinstatement first. We always do a trial payment plan first before we modify. So if we can get them to start making their existing payment again, come back on Track, that's a 12% cash and cash return to us. Because it's at 6%, we're buying at 50. Now our goal is always to have the bar bring a little bit of money to the table. If you don't even pay the year, most people are saving money or they've got roughly two to three to four months of payments socked away somewhere or they can borrow. We want them to bring some investment to the able skin again. If you don't get any skin the game, it's very likely they're going to default again. So we're going to ask the bar to bring five grand to the table and either a lump sum payment or half down and then the another the other half over 12 months, like 200 bucks extra on top of the payment per month. So let's run some numbers here. We're in at 50. Their mortgage rate is 6%, right? At 6 grand, 6 grand on 50 is a pretty good return on investment. About 12% return initially. Well if we can bring another 5 grand to the table in the first 12 months, that's 11 grand on a $50,000 investment, that's over a 20% cash and cash return to us. Now our goal at the end of that 12 month period is we'll then modify the loan, we'll reevaluate the property for what it's worth and then either forgive some of the mortgage balance, it's kind of that dangling that carrot in front of the borrower to get them to move. If we do that, great. But now that we've got the borrower pay on time for 12 months, hopefully we can now sell that note back to the secondary market, back to Wall street, back to investors at 85, 90 cents on the dollar, which would be about a six and a half to 7% return based on the underlying rate. So if we bought it at 50, we got 11 grand in cash along the way. And let's just say we sell it at 85. That's another $35,000 in profit on the note, and that's what we get. So basically, 35 plus 11 $46,000 profit on a $50,000 investment is pretty freaking good. Now, let's say the borrower falls off and doesn't pay, then we foreclose. You know, it'll cost us somewhere between three and five grand to foreclose on this asset. So we're in at 55. Our goal would be to sell it at the foreclosure auction instead of having to do a lot of work. Repairs at roughly the same number, 80 to 85% of fair market value, because that's where we're seeing decent properties go. And the property's in good condition based on all our due diligence. So that may take six to 12 months to foreclose. We'll always approach the borrower and say, listen, hey, if you're not going to pay, you know, pay, you know, stay. All right, we'll give you. You like that, don't you? Dante over there, you know, pay you. No, stay. I mean, we want to keep them in the house, but some people, you give them an inch, they try to take a mile, we'll give. We'll offer them. If it takes us three to five grand to foreclose, we'll offer that initially as a cash for keys aspect. So listen, you're not paying in 90 days. Let's give you three grand a walk. Let's help you put down a deposit somewhere versus having a foreclosure affect your credit for seven years. At Dean Lieu, late mortgage payments will only affect you for 24 months. And so that's the case. Then we would hire a realtor to list the property and sell. If there needs a little rehab, great. We'll go in and put some lipstick on a pig. You know, paint and carpet cleanup. Not a lot of heavy rehabs and go from there. Does that make sense?

It definitely makes sense. And there's a lot there to unpack. So I think we're going to have a few questions, which is good. But my question is, so why doesn't the bank that you purchase the note from, why don't they just do what you're doing or foreclose on the property? Because if it's worth. If it's worth 100, they owe 125 and they sell it for 50. The bank's immediately out, call it 75,000. Why don't they just foreclose on them and sell it at that 80 or 95 or 90% market value?

Great question. Some banks will do that. Not every bank will sell a note. I mean like bank of America, Chase, Citi, Wells Fargo, they're not going to sell a one off note. We deal with a lot of smaller and regional banks and then some big banks too but they just tired. Banks sometimes get tired of borrowers. We dealt with a bank, I'll give you an example in San antonio that had 50 notes. We were buying, they were the local bank. They didn't want to be the bad guy. They didn't want to, they knew all these bars so they sold the notes off to somebody, us so that we could bet be the bad guy. It also you have to look at the velocity of capital and depend on where it's at. So like dj, I think you're originally. Oh you guys. Dante, New York State DJ up by Syracuse, New York. Three years of foreclose, okay, that's not with the foreclosure moratorium. So the bank, it makes more sense for them to sell that Note off at $0.50 on the dollar versus going through the two year, three year foreclosure process. They can get that 50k in now, go out and leverage it out, lend it out 10 times, increase their velocity capital versus having to go back and foreclose. So you know, some states, some banks, they just want to deal with the higher value stuff. The low value stuff doesn't make sense for them a lot of times We've also dealt with different real estate investment trusts that bought portfolios and note thinking it was going to be easy. And it's not easy. It's not like the property management side of things. It's a little bit different. So it was a different mindset for them. They're not set up to service the loans, they're not set up to handle it. So they rather sell it off if the borrower doesn't reach back out to them and get back on a re performing status. So banks try to do this sometimes just having a third party come in with a clean slate. They'd rather take a bird in hand versus two in the bush if that makes sense.

Absolutely makes sense. And the example is phenomenal. That really gives a good sense of kind of this business process that you have.

Yeah, I don't know if you can see this but this is the actual loan file on that exact deal that we're working on there for you.

So that's, you know Scott's showing us an inch thick pile of paper. So. But one of the questions I had is give us a sense of how much moves in what direction. So for example, of all these notes that you're able to buy, what percentage are you able to, I guess, recover, get payments from the homeowner and sell back to that secondary market?

That's a great question. I'm really glad you brought that up. So we focus on occupied assets. We don't like to buy a lot of vacant assets in our due diligence. So when we get a list in from a bank, that's immediately what we look at is it occupied. We're calling the utility departments. And since we're the bank most of the time, the counties and the cities and the utility partners will give us a lot of information they won't just give anybody else because we have a vested interest in the property. So if it's a vacant property and it's been vacant longer, the power has been turned off for six months or more, we'll usually won't approach it because we know it's probably going to need work. It's been vandalized. You know, the air conditioner's gone on a vacation, a walk about the, the copper goblins have showed up. You know, if it's north of the Mason Dixon line, it may very well have an interior water feature right now or an ice sculpture here in a few months when it gets cold. So we like occupied assets because somebody's keeping the heat on, at least kind of maintaining the property out of that amount. It's probably about 60%, 60 to 70%. It'll vary from asset to asset because you know, sometimes like we bought a portfolio of 70 assets, 70 contract for deeds, first liens, stuff like that, where we were able to get 36 out of the 70 to reinstate in the first two weeks just because the servicing company that was handling the phone calls and outreach tried to do everything automatically. You know, they didn't have a person that these borrowers could talk to to set up their ACHs and stuff like that. And we had, we had our team call out immediately, drop letters and it was a really great success rate. So we really try to exhaust that. Hey, let's get you back on track. What's the situation? What's the country western song that you've gone through? You know, job loss, sick, you know, dog got run over, whatever it might be. Spouse left you. I can relate.

I'm in the south, my country music now.

Yep, no doubt been there Done that. And so yeah, we give them an opportunity to get back on track. If they can't make the payments, then we'll look this up. You know, do you have somebody wants to take over payments now? Okay, can you sell the property even on a short sale? Or we, you know, if you got somebody, you know, got some money in an old 401k or an IRA, we could do a settlement and sell you the property or just let you walk away in a lot of cases. So most investors, they're buying 10 notes, they're probably going to get four to five reinstated, two to three where the borrowers deed the property back and walk away and then the other two to three will end up being foreclosures.

With this current, with the coronavirus, forbearance moratoriums, you know, all that fun stuff. How has that affected you guys and your business?

Great question, Very good question. With our existing portfolio, we're pretty lucky. About 85% of our existing loans, the borrowers just kept paying. We had a few that reached out for forbearance agreements, 90 to 120 day delays. I was like, that's fine. We've had a portion that didn't pay which we couldn't foreclose, which we couldn't evict on. So I'm very excited when the moratorium ended, I was chomping my bit. I'm like Biden, don't you dare extend it any longer. Okay. But that's, you got to think there's a lot of landlords out there that too that are struggling. They own property, they can't evict the tenants, they're not collecting. So it's led to an opportunity for us to see those second homes, those investor homes that aren't government insured, government backed, that we could pick up and buy. It's been an interesting time. The last year we see more commercial notes that we could pick up at a discount than a lot of the residential notes from some of the regular players because they're holding on to the government backed loans pretty well. But now that we've entered the fourth quarter, we expect the next six months to be just amazing. With a good sign of this guys, is when bankers start calling you. You know, when bankers start calling and asking, hey, what are you buying? I know we talked a month ago or two months ago, you want to take a Look at these three deals or these four deals or these 10 deals, that's always a good sign. Hey, are you still buying? And we've seen an increase that through LinkedIn and email blast, because that's one of the ways that we market to find these deals is contacting asset managers on LinkedIn and just a trip marketing campaign once a month going, hey, what do you have on your books that you're looking to get rid of?

And that was one of the things I was going to ask is, you know, the, the marketing or the way you guys develop leads. So you said you're calling your banker relationships people, right? You also have them calling you. You mentioned some of the marketing that you're doing. Are those all the different, how do I say, reaches that you have out there? Is there other stuff you guys are doing?

So this, this is what's great about note investing is we do very little direct mail and nothing wrong with direct me, I've been an active investor for years prior to this where we send stuff out. But you're just not going to send a postcard to a bank, hey, you know, you're in trouble, you know, and so we're not dealing with the homeowner on the front end side. A lot of people like, oh, can I have my buddy who's six months behind call you? No, it doesn't work that way. So we do a lot of email marketing. Once a month we send an email blast out to our list of contacts. Now you can go on LinkedIn. And this is a great tool that we use. It's not calling customer service, you know, in a bank or anything like that, or a mortgage company. It's literally a specific names for these departments. One's called the special assets manager, the secondary marketing department. Insurance companies that invest in it or REITs have whole loan trading desk or the chief credit risk officer if it's a smaller local bank in a lot of cases. And there are some great things that we use to kind of see which banks are in default or you know, what their ratios of default is going on. There's, you know, every bank files a quarterly report with the fdic. Well, there's a company called Bauer Financial that evaluates all this quarterly reports and sends us a spreadsheet to show which banks have an increase in debt or increased ratios that have gone to default. How much is over 90 days in default, whether it's residential, commercial, we can look at and how much is in default. 30 to 89 days is moving down that pipeline. So we leverage those things and then it's LinkedIn connections. You're reaching out, hey, what do you have on your books? We're buying, you know, and just that steady marketing digitally to make things happen. And then we'll get lists in from banks. Some banks have been getting listed every quarter for 10 years now that we can cherry pick from others. It may be once a year that they send stuff out, but that's what it comes down to is one of our. A lead for us isn't just one bar with one property. It's a bank that usually has assets across their books that we can continually cherry pick from and go from there. And then one of the biggest ways we close deals is just like anybody else's. If we make an offer and they didn't like it, we'll follow up every 30, 60, 90 days. And they'll often get a lot more motivated as that mortgage becomes more in default and we get closer to the end of the fiscal year for them.

So I would imagine with all these notes you guys are purchasing all these non performing notes, you guys have a lot of capital tied up at a lot of different times. Are you guys using private money or investors money with you to do this?

Yeah, 95% is OPM private money marketing using self directed IRA funds, some lines to credit, stuff like that. Occasionally we'll tap in and we've got a couple investors or hard money lenders that will do lend us on a collateral assignment where they use the actual loan file as the collateral for it and lend the money to us. But most of it is with investor money. I mean it's one of the funny things. When I started buying notes back in 2008, people were like oh that's cool. But I don't know how the heck that works. So I actually started teaching classes as a way to help educate people on what to do. And that's led to people like oh, I like that, I don't want to do that work. Can I just write you a check and we'll invest with it and go from there.

Exactly. It's like that educate and nurture stage where you build that investor relationship. What is some potential returns look like when you have someone come on you're using other people's money. I'm sure it varies but talk to us about it a little bit.

So it all comes down to what people are looking for. We don't usually if somebody wants a passive, passive investing with us where they're not doing any of the work, anything like that, the highest we would go is 12%. But it's really rare because we are a big opinion that people aren't going to go out and do the work themselves. They don't deserve to get the returns if they're not doing the work. So we work with a lot of people that have IRAs, making nothing or savings accounts or certificates of disappointments, you know what I mean? Or they got a 401k that's now a one on one K. And so depending on what they're investing, their history, we may have them in at 4%, 6%, 8%, you know, passive, with a maybe we've got a fund that we're working on that will give them a kicker in the back end. We do with some of our students that we work with, we'll go splitsies, you know, they'll fund the deal and then we'll work out the deal together and it'll just be a 50, 50 split.

Smart. So you mentioned long foreclosure times, places like New York State and so on. Are there certain states you're targeting or not targeting?

New York, New Jersey, I don't like the three year aspect of that. You got to, you know, New York, you got to hire an attorney to talk to an attorney to have an attorney, you know what I mean? Yeah. New Jersey is about two years. It's not so bad unless it's a vacant asset and then they've got the expedited foreclosure process. I am not a fan of Crook County. You know where Chicago is? Cook. That is such a corrupt place to foreclose. Illinois itself is not a bad 9 to 12 months but Chicago itself takes forever to foreclose. And if you're not literally living there, the judges are always going to side with the tenants of the property owners and all. And we've had deals that taken a year because they kept giving 90 day extensions to the borrowers out there. So not a fan of that. Kentucky. Don't buy a lot of stuff in Kentucky because they've got some bond requirements they want. You have a million dollar individual bond on it to take deals down. The value of the assets just aren't really what we want there. So those are the states that we don't really do a lot in, but we buy just about everywhere else for the most part. Our favorites are like Ohio, Michigan, Indiana, Illinois, Chicago. I love God's waiting room. Florida as we like to call it there. A lot of people have not liked Florida over the years because it has, it did have a 12 to 18 month process to foreclose but the market was hit so bad years ago. We bought a lot of debt and we just rubbed that appreciation way back up and still Buying in Florida, Got some great deals down there right now. I don't see people ask me all the time, hey, what about California, you know. Oh, you see anything in California? Yes, we'll see stuff in California, but it's the land of fruit and nuts. I mean it's just still overpriced. I saw a portfolio of non performing apartments go for 98 cents on the dollar, which I'm like, how can you make any money unless you've got like negative, you know, 1% or you want to make a 3% cap rate on that. So we don't buy a lot in the west coast is because it's overpriced. And for a million bucks in San Diego, I could buy almost a block in Kansas City. That makes sense, right?

Oh yeah, definitely. Talk to us a little about your team. What does your team look like that you work with and what are their, what are they doing? What does your day to day kind of look like?

Great question. The beauty thing about being a note investor is I'm more like a, I'm like a general manager, a football team. Okay. I'm putting people in place. I'm not going out and knocking on doors. We have a servicing company, Madison Management and a few others that we use. They're out of Reno, Nevada. They're handling the day in, day out phone calls the borrowers if they're not paying. Okay. Now I do have an assistant that works out of New Jersey. She actually initially when we buy a portfolio note, she does the initial borrower outreach in the first seven days getting see what's going on. It's a fresh, fresh voice, kind of a fresh start for the borrowers, you know. And so she's really good at negotiating. She used to work for a servicing company for years. And so she handles the day in, day at negotiation. She keeps track of what taxes are owed. If a borrower suddenly falls off and stops paying. She works with a servicing company to tell them exactly what we want to do. If a borrower calls in and tries to negotiate, she's the one saying, okay, we'll go, you know, go A, B, C or D. One of these different ways. That's kind of the day and date operations. When we take a property back or if a borrower doesn't, then we kick it to our real estate attorney network across the country and then we're communicating with those attorneys once every two to three weeks or at least once a month depending on what state it is when an update comes in. I mean if you're Going to foreclose. It's a lot of hurry up and wait on the court system here to make things happen. And then once we foreclose, then we work with our Realtor network to liquidate the property. If we don't sell the auction, if we take the property back, dealing, then we find somebody locally to list the property and get it sold. Like, I'm working on a property right now in Francis Francis, Oklahoma, with a realtor out there to get it sold. And we. It was, you know, the beautiful thing is if it's in a rural area, a lot of times we don't pay much for it. And so we're able to move it because it's like there's not many people there. We try to stay in cities of 50,000 or greater for the most part. But occasionally you're buying a portfolio, you lined up with anything. So that's the case. But literally my day to day, usually half of it is, you know, just touching base. Hey, where are we on these assets? Like, I've got on the 6th of the month, mortgage was due on the 5th. So we get a report sent to us today, like, hey, who's, who's defaulted, who hasn't paid? And then we kind of start that proceeds. Okay, let's make sure they're calling, do we need to proceed with foreclosure? And then go from there. And then as we have. And then usually Wednesdays also is the day that we usually get our updates from our lenders who have deals. You know, we send it out email on Tuesday, Wednesday starts feeding in results of, hey, yeah, we've got something, or we don't have anything this month. And then we're evaluating those portfolios and going from there.

So it really sounds like you have a great team and a bunch of great processes in place for your business. And I think that's huge. Whether it's note investing, flips, syndications, buy and hold two families, whatever you're doing, I think a team and system and processes are super important. So I definitely love what you're doing. I definitely call us an alternative asset because it's not your traditional way of investing in real estate. It's very unique and you don't hear much about it. So I think that's pretty cool. Dj, before we switch over to our next section of the show, did you have any other questions for Scott and what he's been doing?

I think I have a ton of questions, but I think we've asked the most important ones. I think we've gotten Just a tremendous sense, Scott, of how this works. Again, I go back to that example. I think that's phenomenal. Would love to spend a ton of time just going through, you know, different details and of how you guys execute this thing because I, I think it's absolutely wonderful.

Can I throw in a question that you guys didn't ask?

That probably.

Absolutely, please, please. How do you, how, how do you fail at note investing, I think is a big question for people because if you've got the team and you've got the vendors and you've got the capital, you're off and rock and rolling. The biggest mistake that we see investors make that get into the note space is they try to treat this asset class like they're buying a traditional piece of property. And it's not the same thing. We don't go off of ARV or after repair value. We don't own the property when you buy the note. So a lot of people think they're going to be in and out in 90 days. That's not the case. It's usually about a 12 month process once you buy a note to work it out and get back on track. The other thing that people screw up on is they don't do enough due diligence. They don't check taxes. You got to check taxes. What's. So you don't get wiped out in a tax foreclosure. You also, you don't have an attorney review initially review your docs, make sure you've got all the documents that you need to foreclose, you know, and then you people screw up and they trust Zillow or Google street as the views. You can't, you gotta send somebody out. Whether it's paying a property preservation company, go out and take a look at it for 85 bucks, or your buddy or a realtor, 50 bucks. Go out and put eyes on the property. Make sure it's actually a property and not a steaming pile of crap next to it. Because you'll see that sometimes like in Chicago or Detroit or Ohio, people get all excited about what the property looks online and they go out there and like it's an empty lot, you know, you know that kind of stuff. So that you always, those are things you got to do. It's not that expensive to do, but you've got to do your due diligence trust. But verify is keywords that I think everybody needs to realize. And don't be afraid to ask questions. Our vendors are there to work for you, but they're not there to imagine what you need. So I see a lot of investors, they get excited, they buy it, but they never reach back out to the servicing company to tell them what they want to do. And the servicing company can't make a decision without getting your approval first. So those are some of the things that people screw up on the trust.

But verify. I always laugh at that. Used to use the phrase a lot, and it's kind of like. Well, it means I'm not really, like, I'm willing to move forward, but I'm definitely going to verify.

Exactly.

Yeah. It's great stuff. Yeah, yeah, yeah. And I was actually going to, you know, one of the questions I had stuffed in the back of my mind was that average hold time. So I'm glad you mentioned that.

Yeah. I mean, if you're buying, I mean, it doesn't. I mean, we buy in a judicial foreclosure state a year or greater. It doesn't mean it takes a year foreclose. A lot of times we get the bar back on track and 90 days or less with just reach out to them. But you got to keep that in mind when you are buying a note in, like, South Carolina, it takes a year to foreclose. It can take that time to foreclose. So you got to keep that when you're making a bid. The good thing is, if you're buying in a longer foreclosure state, you usually get a little bit of a bigger discount than, say, buying in my state, Texas, which is the fastest foreclosure state in the nation. I mean, 21 days. I mean, we can foreclose fast here. Georgia's got fast foreclosures. I mean, North Carolina, you can foreclose relatively quickly. You just have that weird kind of bidding thing after the auction. But, you know, just got. Every state's a little bit different. We always tell people, say, start off with two or three states. Get to know what's going on there before you decide that you're going to be buying in all 30 or all 50 states.

Yeah, I like that. Scott, that's some good info you just dropped there and some questions that we missed that you put in there. So I appreciate that. But we're going to head over to our next section of the show called the Curious Cues. Scott, we're going to throw some questions at you and get your answer. Are you ready?

Bring it.

Favorite podcast you enjoy listening to?

Oh, man. You know, it's not. I love.

He's got a lot to choose from.

I got a lot to choose from. But it's honestly, it's. It's Southern Fried True Crime. When I'm bored or sitting outside and I want to rest my mind, it's actually Southern Fried True crime was pretty good. There's so many of them. I'm a big fan.

What's Southern Fried true Crime about? Is it just like.

Yep. Yeah. It's a lady that goes back and researches all these like bad crimes, murder mystery kind of stuff. It's not quite like it's kind of like stuff on any tv. That's interesting. But also the business lunch with Roland Fraser is a great podcast as well. I've known Roland for years.

I like the fact that you gave us a non real estate one. One that just entertains you.

Clear the mind, let the mind wander.

We need to let our mind rest at some point. That's how we stay fresh. So yeah, I like that.

And a favorite book you enjoy reading?

Oh my gosh, this is easy. There's two of them that I probably recommend more than anything else and I like go back and read. One is Tribes by Seth Godin. Phenomenal book. Easy book to read. I literally can see it right here. I've probably given 100 copies of this Way. But it talks about how we are all a part of different tribes. Whether it's our real estate stuff, our family, our college friends or buddies we hang out with, whatever you're part of. And tribes, we all need leadership. Especially leadership is needed so much today in the crazy world. So your tribe might as well listen to you if you've got, if you know what you're talking about versus somebody else. So Tribes is one of the most important things. It's one of the biggest marketing books. I think it's important even though it doesn't get credit as a marketing book. And then the next one, something I read every year and I'm proud that one of the authors is a friend of mine. It's Outwitting the Devil by Napoleon Hill and Sharon Lecter. It came out about 10 years ago. Napoleon Hill actually wrote it back in 1938 but didn't release it. And what it is is a book about him having a conversation with the devil and asking the devil how he is successful in keeping people from achieving their greatness. And he says, I just, I throw distraction at them. I help them drift, I help them get off task. I outwit them that way. And the Napoleon Hill foundation found the manuscript and brought it to Sharon Lecter, who's the co author of Rich Dad, Poor dad and A bunch of other great books out there. And she didn't really rewrite it. She just started. She took the manuscript, kept it as Napoleon would do, and started adding sections at the end of each chapter, what she thought and how she thought Napoleon would think of the things today. And it's an amazing book. I think it's trying to get into a movie as well, too. But that's a book that I think is just eye opening because I think all of us are met with distractions we like as entrepreneurs, we get that bug to do something new. And it's a great book to realize that sometimes saying no is saying yes to success.

I like it. Biggest hurdle in real estate you've had to overcome.

Ooh, biggest hurdle in real estate, man. Golly. I would go back to 2008 when everything hit the fan. Leaving the mortgage industry, starting something new. Trying to figure that out. In 2008 was an interesting year. Not only did I end up leaving the mortgage industry and starting to sign up, got divorced, had a business partnership that went a different way. So kind of reinvented myself back in 2008. And I think even though it was difficult, I think it was a blessing. I don't know how faithful you are, but I think the Lord doesn't give us anything that we can't handle and go from there. We all have individual deals that go south and so working through those deals as well from time to time and difficult, but I think that would be the biggest thing.

Yeah, I love that you said that, especially because everybody goes through challenges. I recently reinvented my career. It's something we always try to keep in mind with everybody we talk to. That life's not easy for anybody. You know, the. The. We all know about the social media and how we appear there versus what's really going on.

Well, what the. The biggest thing is. This is stupid trolls. I mean, you have all these people to social media, the cancel culture out there. You know, nobody's perfect with things. And you just see it on a day in, day out. Like what happened to Kevin Hartwood, the Emmys a few years. People going back 10 years ago to a mistake that he made. Look, I think we make money in how we get through those things and how we handle adversary. You know what I mean?

Dj yeah, yeah, I totally agree. And I think too, we're somehow. What's got lost in the shovel, in the shuffle is forgiveness. Right? And that's. I think that's a big thing. People aren't perfect. And, you know, starting with the Guy looking in the mirror right now, you know, I'm not perfect and, you know, try to set my expectations accordingly and just love on people.

So, you know, and that's the thing too is I think also too, it's, you have to think about, hey, things. Things go awry in real estate and it may not go exactly one way, but hey, let give me some opportunity, let me figure this out, and I'll find a solution. It may not always be what you think you wanted to do, but oftentimes, hey, where there's a will, there's a way to make things happen.

Yeah. And that's why I love what you're doing because, you know, you mentioned you have people that you partner up with to get these deals done. Same thing with Dante and I in syndications. It's one of the things that warms my heart. It's not necessarily about us, but being a part of a good team. And we're always trying to put together good teams and build some financial success in the process. And that's it. My joy comes from other people's success.

Amen to that, brother. There's nothing more delightful than seeing somebody close on their first deal or their first investment. And that faith that they build in themselves, it's literally like they're floating on the ground going forward. It's such an amazing thing, isn't it?

And it's one of the coolest things about the real estate community. Just people helping people and trying to find mutual ways to win. It's awesome.

Amen.

Yeah.

Next question we got for you is favorite non real estate related hobby. What do you like doing in your free time?

I like. I usually prefer traveling. A couple times a year we'll take, you know, cruises or go abroad internationally. But that's been a bit of a small thing this year with COVID and things. So the last two years I have found out that me and my significant other, we have a green thumb. So we've turned our backyard, which is basically just a brick wall. I mean, most real estate investors have the worst yards because they're not spending any time on their own stuff. But I found that I really enjoyed the gardening stuff. So I've turned Steph and I, not just me, but we've turned our backyard into a tropical forest with 10 foot tall banana trees and cannons, tomato vines growing 10 foot tall cucumbers. So it's always, it's turned into a bit of an oasis or our own personal garden of eating. Every morning I get up, take my coffee, go out there Sit, talk with the mockingbirds, the squirrels, banana. Well, not yet. It takes three years for banana tree to have bananas.

Well, there you go. You learn more than just real estate here.

Yeah, that's, that's, that's one of the biggest things. I mean, I think travel, come back once we get some common sense out there with things. I think we're starting to see that unfortunately in Europe a little bit more sooner than we're seeing here in the United States. But travel, it's always one of the things I think you appreciate more what you have here when you get over or get to places that aren't as economically and as well off as we are here in the United States. So that's always the biggest thing. Yeah, yeah.

Hear you on that. Newbie advice. So what advice would you give to someone that's looking to get started, whether that's in the note business or just in real estate in general?

Take action. The only thing you guarantee by not taking action is failure. You're going to learn more. I mean, you can listen to all the podcasts, take all the workshops, read all the books that you want, but if you never pull the trigger, make an offering, or go out and buy something, you're never going to learn. I had some of the best mentors in the note business when I learned for four years. But I learned more by buying that first note and figuring what the heck to do and reaching out to people that I know. So that's, I think that would be the biggest thing. Just take action. No matter what it is, take action. It's never going to be as bad as you think it is. So many people are scared of failure. Just fail forward. I mean, you learn more, you'll be more confident, and you realize, well, that wasn't nearly half as bad as I thought because our minds like to play tricks on us. So go out and take action.

And I want to jump in on this one because this one's big with me because I was there for a while and I think the weight of inaction and not progressing is worse than the weight of having to get through challenges in the deal. Because when you're going through challenges in the deal, and I can almost equate this to, like, the anxiety of moving. When you have to move, there's things you're going to leave behind and that part of it stinks. But, boy, once you get on the road, you're looking ahead to new, adventurous things. So as you go through your first deal, it's like an adventure. Yeah, stuff's going to come up that you're not going to be perfect on. But the weight of that and the burden of that is so much less than being stuck. So, you know, just, I think that's great advice. Go for it. People, take action.

You know, one of the biggest things too is the perfectionism of people. People want everything to be perfect. And best advice ever got from somebody was saying, hey, perfection equals broke. If you think about iPhone, iPhone's coming out with the, this is like the 12 and they got a 13 out. If they had waited for the perfect cell phone before they launched, they would never have done anything. And I think that real estate marketing, hey, just get the word out. Sometimes 70, 75, 80% of perfection is better than nothing. Delivered equals positive cash flow. You can always go back and edit the second, third and fourth time around.

Yep, it's true. I like it. Well, Scott, this has been a phenomenal episode. We really appreciate you taking the time, joining us this week and speaking to our listeners about note investing.

Real quick.

How can someone get in contact with you if they just have some questions about note investing and they just don't know who to ask?

Easy, guys, very easy. Go check out weclosenotes.com that's we close notes dot com. That's my main website with our training, our podcast. You can check out the Notebook show podcast. I will tell you this, guys. Go out there. If you're listening right now, click on over, hit that subscribe button, hit that, leave a review and leave these guys a five star review. They didn't tell me to say that. But we as podcasters love to hear from our audience. So if you love this episode or love something that they're doing, because these guys are kicking ass and taking names and you know it, the double D's here, Dante and DJ kicking ass. Okay, go out there, hit that subscribe five star review and refer to at least somebody, at least one person out there.

Thank you, Scott. Much appreciated.

Yeah, thank you, Scott. That was great. We really appreciate having you on and we'll definitely have you on again soon.

Hey, sounds great, guys. Keep making cash.

Thanks for listening. We hope you were able to take some ventures value away from today's episode. For more information or to connect with Dante, visit victorycapgroup.

Com.

See you next week.