Buying and Selling Notes with Scott Carson: The Jake & Gino Show

Welcome to the Wheelbarrow Profits podcast where you get multi family investing made real. Learn from top players in the real estate investment world as they share their secrets with you and discover proven strategies on apartment investing that actually work. To learn more about wheelbarrow profits, visit jakeandgino.com your one stop shop for everything multifamily. Now to your hosts, Jake and Gino.

Hello everybody. This is Jake Stenziano, host of the Wheelbarrow Profits podcast. Here with my co host, the multifamily mentor, the coach, the chef, the father of six, the best selling author, the G, Danny Gino Barbaro. Gino.

How's it going, Stenziano? I'm doing good, how are you?

You know, I'm always making it happen and it's coming. Winter's not coming. We're not talking Jon Snow, we're talking the live event, baby. November 11th and 12th. We are going to bring the pona. So folks, check out jakeandgino.com all the details are there. It is going to be a blast. But besides that, we have a very special guest today, Scott Carson. Scott, AKA the note guy, has been an active real estate investor since 2002 and has been solely focused on the note industry since 2008 where he buys and sells non performing mortgages directly from banks and hedge funds. Man, that sounds sophisticated. So Scott is also the CEO of weclosenotes.com and the creator of Note Buying for Dummies. So without further ado, Scott.

What?

Welcome to the show.

Hey man, I'm excited to have it, but can I. Do I have to talk as fast as you did the first 10 seconds to be honored? I'm from New York, bro. Forget about it. Forget about it. So, man, well, hey man, guys, thanks for having me on.

It's our pleasure. Happy to have you here. I don't know a lot about buying notes, so why don't you tell us how you got started? I know you got you started in real estate, I think. So tell us the backstory on that.

So, so I got started like many other real estate entrepreneurs, you know, watching hgtv, right? Flip this house, baby, getting all excited and that stuff and went out and bought a couple properties where the only person that made any money on those deals was the realtor, you know what I mean? Paid full values to be the next landlord in the Austin, Texas area where home is. And the market just went south, you know, Dell Computers, other people call that hell, laid off a bunch of employees which was like right next to where my rentals are going to be. So the market dropped on those. So I was literally a deadbeat borrower pretty much pretty rapidly. And so I didn't have any education. I wasn't doing the right things. You know, I thought I knew everything. And do you know anybody ever has ever gone through something like that? We all have rookie plenty of exactly. I ready to pull a trigger, but I didn't know what the ready or aim at, you know what I mean? And so I was able to get my assets out of a sling. Took a couple years, but we got back on track. I started taking education courses from different people. I got introduced to a couple people that taught me the note business here in Austin. And they were going out traveling the country to different seminars. And I was just sitting in the back of the room kind of doing mortgages for them and learning how to wholesale and options and fix and flips the right way. And so I started doing some deals between 2004, 5 and 6. And then when everything started to kind of tank on the mortgage market, because I was doing mortgages as well, I flipped and started buying debt in 2007, 2008, 2009. And Austin is a very competitive market here. I did really well on the traditional real estate side. Did a lot of short sales, a lot of fixed flips at some rentals, rock and rolling and stuff. But really saw what was going on on the paper side, as many people call it the dark side of real estate investing. You come to the dark side. Yeah, exactly. And stop doing a lot of different little things. Like I see so many real estate entrepreneurs where they're trying to do this and that and then trying to make money every way. I went down to start focusing on notes and haven't turned back since. It's been an amazing, amazing ride in the last decade. I think we timed the market really well. Got in when there was so much inventory. Still is a lot today, but completed over what are we over our 20002500 transaction. Buy a lot of notes on a regular basis and absolutely love what I do now.

So what were you doing before real estate before?

I was a financial advisor, actually. Financial advisor. I had a business degree coming out of college and then I went to work for Smith Barney. So I was making good money there as a financial advisor, then actually transferred over to JP Morgan Chase. So I was doing stuff for them mortgage, you know, being a mortgage banker and actually running some branches here in Austin, Texas.

So why did you leave that go to real estate?

I wanted the freedom. I wanted the, the Whole, you know, I didn't want to work 60 hours a week pushing on somebody else's dream. You know, about that same time I read a little book called Rich Dad, Poor dad, which I've seen before.

Right.

You haven't heard that one, right? Haven't heard that one at all. So started reading Rich dad, poor dad, thinking grow rich. I had a couple mentors that were really starting to teach me and push me in the right direction for a lot of that mental stuff. And so my dad was an entrepreneur growing up that we owned the local hardware store. So I had that in my blood. And I was always the guy that would do things. I was always great at what I did, but I was just pushing the envelope. Well, why can't I do that? Well, that's not. With what we do as a company. That's the right thing to do for the client.

I hit that hard my corporate debt days too.

Oh yeah, Yeah. I was, you know, was wearing a suit and tie every day. And finally the point was like enough's enough. And I don't, don't regret that at all.

Folks that are not watching on YouTube, he's got a Superman shirt on. So I do, you know.

Yes.

And American flag in the back.

Hashtag, amen. Gotta have that. Go. Go to our military. Our, our first responders. We got a big, big heart for our ex military first responders out there. It's gotta love you, gotta be American proud. So yeah. So yeah, wearing Superman T shirt. This is pretty. This is dressed up for the most part. No, no, no, no, no. You're a suit and tie. You're working for somebody else. You're working for the man if you're wearing a suit and tie.

So then you didn't go to the man. But why, but really why real estate? I mean, was it the rich dad, poor dad book or. Because I mean the financial services to me seems like a racket. It seems like when you get in there, it's really not about your client, it's really about you and it's about your commissions and it's not looking out for them. So I mean, how did you transition into real estate? What pushed you there?

Like I said, we. I didn't want to do that. I was seeing that I was actually went from Smith Barn where actually had some training on stuff that went to the banking side and it was just, it was all about Chase, you know, what can you do? And I'm not bashing Chase. Well, maybe I'm a little bit. But anyway, Big corporation. Exactly. It's all about their bottom line, what's best for them, not what's best for the client. And that's not the way I felt about. And with real estate, I had some friends that were realtors, had some other friends that were investors that I got to learn from and saw what they were doing. I said, that's what I want to do. I want to control my stuff, my finances, my. My retirement ultimately, but more so my lifestyle and do what I want to do on my own time. So that's. That's what it all came down to. I mean, I still love finance. I do a lot of. Yeah, exactly. My personal finance is stuck in deep, baby. But anyway, you know, it's funny, I had a guy come in here the other day. The office was trying to pitch me on something. I'm like, well, what about this? And he was like, huh? How'd you know about that? And I'm like, dude, come on, man, what are you making on your. Yeah, you want me put something in and get a 4% return on my money? No. Come on. So that's. If that answers anything for you.

It does. No, no. And so then you transition into the fix and flip. But how did you. Like, how did you get into the note business? What really got you into that note business?

So the guys that I was running the mortgage. I was running the mortgage company. And the guy, Bob Leonetti, and his business partner, Jamie Kayla, he and she were amazing. They did a lot of fix and flips, but they taught the note industry. They were taught. Teaching a lot of creative finance, like wraparound mortgages, owner financing, selling the note off of the closing table. And so I got to spend really kind of three years while I was kind of doing the mortgage side of the business, you know, doing mortgages and things like that, learning the real estate side from them. I mean, a very unique position to sit in an office, not. Not too big and just literally learn. It was like an apprenticeship. So I got to pick their brain on creative financing and the note business. And then when everything hit the fan in 07, 08 and 09, it just made for an opportunity to go from you know, fix and flip and other things to this just river of dead, bad paper.

I guess you should say, though, because, you know, everything's. The world's exploding, and you're saying, give me some of that stuff, right?

Well, I'll tell you what, in the process, I was divorced, or I got divorced, had been married for seven years, got divorced. I don't have any kids. That I know of. Knock on some wood. I just had myself and the dog. So I was like, what do I have to lose? I mean, I can't get a mortgage closed now because it is. All our mortgage companies were going out of business. We're do business for and with and say, well, there's all this entity, there's real estate, the real estate still worth something, you know what I mean? I was buying, started buying debt from Wells Fargo and Capital One. And I'll give you an example. Wells Fargo Financial was a company that I got a list of 72 notes from. That was the stuff all over the country. And I was like, first lien mortgages. Exactly. First lien mortgages. And they were all ugly paper. I mean like subprime borrowers that was just. They had a heartbeat or could fog a mirror. They gave them a loan. And I was buying stuff for two grand, five grand, it was worth 40 grand. And I would get a deed only from the borrower and turn around and sell it for 20 grand. Or I had an apartment complex coming from Capital One that I wholesaled in 24 hours and made a quick $35,000 profit on.

Oh, so you're wholesaling these?

I was wholesaling, but I was also taking some down for myself.

That's what I was wondering because like, you know, I saw the big short, right, and then the strippers had five houses. So I don't that. When you say dirty paper, that's dirty paper to me, right?

That's dirty. I bought a note on an 8 Plex in North Carolina outside of Charlotte, that was an operating brothel that you want to get really dirty on paper. That was an interesting deal.

What are you buying these things for though? So you know, they're not performing like what are you talking, 50 cents on the dollar or what do you get them for?

Well then I was buying them for like pennies on the dollar. Stuff now is still in the 30, 40, 50 cent range, depending on where it's located and the value of the property. Now, but I'll give you example. We bought 23 notes last Friday for average of 33% of current market value. And they're all occupied paying cash.

Just come in with cash in cash.

We're using IRA funds as well. People come in, we'll fund it with us. But to pick this up and our goal, our ultimate goal is to keep the borrowers in the property. We want to reinstate it, have cash flow, you know, we don't want to have to do put money out for foreclosures or to fix up the property. I would rather keep the person in the house, adjust the payment a little bit, or say, hey, I know you haven't made a payment in two years, but let's forget about the daddy now.

Now we got.

I'm your daddy now. That's right. So let's have you. Can you bring two, three months to the table? Yeah. You know, I had a phone call today from a borrower who contacted me that we closed two weeks ago. She's like, I've been paying. I've got the cancel checks. You know, I want to stay in my house. It's a property in Dayton, Ohio. We paid 12 grand for the note on this deal. She's paying 568amonth.

How much is it worth, do you think?

Oh, it's worth in. It's worth 50. Yeah. Three bedroom, two bath. It's a 45% yield to us on that deal alone right there. She's ready to make a payment today. She's like, I didn't know who to pay last month, but I'm ready to make a payment today, and I'm ready to rock and roll. And so I had another one. A bar called me today who had moved out of the property, but he called me up and said, listen, I don't want to keep the property more. I live in a state of way. But my next door neighbor wants to buy the house. Would you sell them the house? I'm like, yeah, sure, no problem. Wow.

So let's rewind for a second. I just want to get your opinion on what the pros of note buying are and what the cons are, Because I think it's important for the listeners to really get an idea. And let's go through the framework also.

I totally think that's a great idea. Because note investing is a different animal. You've got to think. Think like a banker. Yes. We always evaluate the note for the collateral, what's it secure, and most of the time, the stuff that we're buying, what they owe is worth, I mean, is a lot more than what the actual property is worth. You know, they may owe 150 grand. The house is only worth 75 now. So we're always basing it off of true market value. But you have to think like a banker. A bank makes money by having the loan, having the payments come in. They're not in the rehab business. They're not in the, you know, the fix and flip side. Although that is, we do have that aspect of Some of the notes that we buy, we end up do foreclosing and sell them. But the. The idea is that you're buying the debt, all right? You control that house by being in the first link position. And I only buy first links. I don't buy seconds. They're overpriced. There's not that many left available, and that's a whole different ball game. But I want to control the asset. I want to be, as you say, the daddy to the borrower now and say, listen, you can either work with me and I'll keep you in the property. If you don't. If you don't pay, you're not going to stay. And that's really creepy that your door just behind you opened up like a ghost.

We run on the paid estate program, too, because we're multifamily, right?

Yeah. Yeah. Oh, there we go. Okay. All right. All right.

It works. You pay your stay, man.

Exactly. See, with the apartments, you're buying a property and you're controlling the tenants. We buy these pools with. We want them occupied. That's our best goal, is to keep them as occupied, and we want to work out with them. The fact that we buy this debt at a huge discount gives us so much flexibility. And what we can do is as workouts with the borrowers, if that makes sense.

No, it does not. Does. What do you hate. What do you hate about the note business? I mean, what. What could you say? I just despise this because we could say we don't like the tenants. We love other assets. What aspects do you dislike about it?

So I will tell you this. It's a. I'm. I'll give you a football analogy here. I'm like the GM of an organization, okay? So I'm like Jerry Jones for the Dallas Cowboys, all right? I'm the guy picking the head coach, which would be like my servicing company. And I gotta have them work with my borrowers to try to keep them in the property. And of course, what happens if you're the GM of the Dallas Cowboys? You got guys getting suspended and doing stupid stuff, right? They're not playing the same thing. You have bars that don't want to.

Stop smacking booty man hops down on St. Patrick's Day.

He's got to stop that. But that's what happens. I have to control my vendors and not always do the vendors do a good job. So I'm constantly kind of shuffling vendors a little bit. People just don't check their mail anymore. I mean, I'm Going to give them an opportunity to stay. It's their best bet to stay and work with me. If they don't, they want to be an ass. Hey, they're going to lose eventually. Yep. So I actually hate having to take a property back to foreclosure and I hate having to rehab it. That's my.

Why are the banks not taking these to foreclosures and selling them at a discount? That's the one thing that popped into my head.

Rephrase your question. Why are they not taking these things all the way to. So why.

If I'm a bank, right. I got this non performing note. Why am I selling it to you and not taking it to foreclosure and then selling the asset?

So velocity of capital. Yeah. For every dollar that's coming into the bank, the banks are leveraging that 10 times, 10 to 50 times. So it makes more sense for them to get 30 cents on the dollar what's owed now versus it drag out for a year because it cause the.

Process takes so long. Basically.

Yeah.

No, that's your honest question. I don't know the answer. I've been through like a foreclosure process or anything like that. Yeah, yeah.

No, that makes. But that's the thing. It costs them three to four times to foreclose or to rehab a property than it does for people like you and me. Yeah. So they would rather get that chunk now and be able to. No. Go out and re lend it three or four times, make their money back, get rid of that nightmare and put it on somebody like me who has the local resources and can be more flexible.

Does this work in different markets? Because where I used to live up in Westchester county, up in those houses, they didn't want to get rid of them because those houses were really higher end houses. So if there's some equity on it, does this work better in certain markets than other markets?

It works better when you're upside down. When the market is tanked. I don't buy notes with equity. So if the house is worth 400 and the borrower only owes 300, the bank's going to want very close to 300 because they know if they do foreclose they can get full value.

They've got it. That's right.

So I don't buy with equity. Some people try to do that. I think it's a waste of time. I think the higher value houses are going to drag out longer in foreclosure because you have higher educated, more intelligent individuals who have, you know, attorneys and other people that can drag foreclosures out. So really the, the sweet spot for me is in the, you know, $250,000 value to houses or less. And actually 95% of the default market is really on, on properties below 100 grand now on the east coast, you know, and where you're saying that would be like a doghouse, but in like Cleveland or Detroit, that's like Kid Rock's house. You know, he's living it up for the most part.

So do you.

Yeah.

Do you do apartments? Do you, do you do Maltese? And do you get any of those on your desk?

I have in the past. I honestly don't see much stuff right now. I honestly, I think I'm a big believer the apartment market is overpriced right now. Everything is being sell at low cap rates. And it just doesn't make sense. Or we see the banks know this. So I saw a portfolio of distressed apartments, apartment paper, sell it. 95% of what was owned.

You're not touching that.

Wow. No, that makes no financial sense to me.

You know, it's distress, bro. You gotta put money into it. I mean that's, that's crazy.

But they're just, it was some, some chic. Bought it from bank of the Orient. You know, he's got, you know, money, no holding costs. So he, he can he. His idea is that they're going to keep it and let it ride. But like that still doesn't make any sense. No.

Sexy. Right now the sheik just wants to sell. Sexy move.

All right. It's sexy. Oh, it's sexy. Yeah.

But he's got the armored Range Rover pulling it down.

Right.

But what, you know, this is the whole thing. I see people always at the peak of the peak. You don't buy the peak. There's no place for things to go down. Now if you're buying an apartment complex and it's like a big touch anything.

In a year because the same reason we just.

Yeah, yeah. So I will wait. You trust me, you would stick around for a year when the market's changing, I'll buy a lot of apartment debt at that point for pennies on the dollar. Because, you know, the big play is everybody to buy and buy it, hold it for three years, get it re gentrified and get revised and go get a traditional loan to get cashed out of the deal. Well, when the market changes, banks won't be given loans. We saw this back in 2007, 2008, 2009. I bought a 300 unit apartment complex in Indianapolis from Bank of Popular. Bunch of apartment complexes from Capital One. I've actually bought a bunch of notes that the borrower was a well known apartment guru on the hook. Not gonna drop a name. Oh, man, you gotta drop a name.

All right, but that, Come on, what's the name?

Dave Lindell. We bought some stuff that he was on the hook actually for. So. But hey, if you're, trust me, if you're a real estate investor, at some point you're gonna have, it's gonna happen, totally happens, but history will repeat itself again. But yeah, we see apartment complexes, they're overpriced right now. Doesn't mean I won't see more later on.

So let's go back to your first deal. I want to go into the strategy.

A little bit more.

But what was that very first deal, that very first check you got? And was that the nirvana, the epiphany moment saying, wow, this is it, I'm into this?

Yeah. So the first note deal I did, I was literally calling banks. I was literally like dialing for dollars. I made 53 phone calls out to different banks across the country. And I get a hold of this one lady in Houston and I remember her name was Kim. And she was not in a good mood. The bank was going out of business. And the minute she sold the last portfolio on their books, she was out of a job. It was her and the president of the lending company. And so it was a large portfolio of Houston area homes. It was a $5 million trade. My cut of the deal was 50 grand. It was a 250,000 wholesale fee basically to move it. And I got a fifth of that because I put people together. I, I was like, holy cow, I'll get 60 no's to make 50 grand. You know what I mean? And that was the big, oh, I can do this. Yeah, I'll dial for dollars. I'll do the whole financial advising side. Coming into the, you know, boiler room aspect, I'll drop a dial to get told no to get that one yes. And I'll give you I buy a lot from Capital One. It took me 70 phone calls over three weeks. I can't tell you how many times I got hung up on or transfer to Pakistan or India or someplace like that. But finally I got the right person who sent me a list. 33 page PDF. Okay. With all their assets, like six point font. They had so many on there, all 40, 49, 50 states. First you let it off. There was a six unit apartment in San Diego I flipped it, made 50 grand as well. Yeah, I flipped another deal, made 25 grand. I got another list of stuff in that I was wholesale for four grand or five grand a pop. I was like, this is easy to do. And that's when I was like, this is. This is all I want to focus on. So I stopped doing 12 other things and just focused on the note business. And it's been an amazing ride since then.

How has the investment strategy of the note business changed over the last five, six years? When you started?

That's a great thing. So I got started, like I talked to you a second ago, I started wholesaling, and then when I would buy, I was like, oh, I'm not going to modify. I'm just going to foreclose everybody out. That was what my initial idea was. I want to own the property. Well, when you're foreclosing, you've got to put out attorney fees and then repair costs to do that. Well, I had a lot of borrowers initially, early on, that wanted to stay, but they couldn't come up with a full, you know, a chunk. I look back now, those first two years, I should have probably reinstated or modified a lot of those borrowers. I've made a whole lot more money. All right, so that's. What kind of rates do you charge.

Like, on these guys? What are you. Are you competitive or you're not?

Well, 8, 9%.

No.

You know, if they want to get better.

No, it's go get it.

Yeah, they get it. That's right.

And we try to find something that makes sense for their budget. That's, you know, the aspect of it. If they bring a little bit more skin to the table, great, we'll drop the rate down. But I'm not going to give them 5%. You know, I don't run a charity. It doesn't say bank of Scott here for those rates. But what's happened also, too is as markets have changed, like Detroit, Michigan, you know, Ohio, Columbus, those markets have started to rebound the last two years. A lot of appreciation. So a lot of investors that were scared off are starting to flock to those areas now. I think Detroit came back as like the number one rental market with like a average 17% ROI on the rental market there based on sales recently. Well, I've been buying Detroit for three years. You know, I bought stuff at 5, 10, 15 grand that I could put somebody in for 7 or 800 bucks or kept the borrower in there at 500 bucks a month. And I'm sitting great and Writing an appreciation train. So, you know, moving markets has changed. I used to buy a lot in Florida. I love Florida. I got a lot of stuff down in Jacksonville, Miami, Tampa, Southwest Florida, too, that has gotten excited as the foreclosures have dropped, so pricing has gone up. So I've kind of adjusted where I. I've moved to. So one of the things I tell people is if you're in a state that has a lot of foreclosures, great, you don't have to go outside your state. But I'm in Austin. You know, we don't see a lot of. A lot of foreclosures here anymore. I mean, we do everything fast. I mean, fast foreclosures, fast highways, and fast executions. All right. We're dying to kill people here, I guess you could say. But when you have a fast foreclosure state, like Texas or Georgia, the price of the notes are expensive. 65, 70%, like, because they can snap their fingers in it. But states like Florida, South Carolina, Illinois, where you have longer foreclosure time frames, works in our favor because the banks then give us a bigger discount. Does that make sense?

Yeah, it does. Where did you start raising your money to get to do these deals? I mean, like, give me the framework. The first time you went out there, you're like, wow, I have no credibility. I have nothing. How did you get into it? And how did you think about using other people's money? Because that's a big question for our students.

I was a banker, so I had a lot of clients that were at banks, so I could see what they had. I had one guy had a 1500. Sorry, $1.5 million in CDs at, like 100 grand, making them 3 to 4%. So the first thing I did, I run up to the guy, I'm like, hey, I can make you a 12%. You know? And he's like, whoa, that sounds really risky. You don't know. You know, burned the bridges there. I'm like, I should have been bitter about it. You know?

That was your 10th call you didn't make.

I'm like, I'm all weird to this real estate thing. I'm gonna make it. And he's like, not gonna happen. So I started just sharing. Marketing. Marketing 101. I would share the deals that we were closing on on Facebook and LinkedIn and would go out and network to the local rea clubs and just share. Hey, here's a deal. Here's a property in Knoxville that's worth 50 that I'm picking up for 10. It's occupied. The bar can make it wants to stay in is can make A$400 borrowers.

Information though so you can kind of vet them before you buy the note.

So. No, no, no, it's a good question. I'll cover that in a second. But I just networked like crazy. I started every business card went into my database. I was sending an email out once a week, once a month. Hey, here's what I'm working on this week. I started doing videos on YouTube and that was looking back the last 10 years that's always been the biggest bang for the buck is video 24 hours a day, seven days a week. You know pre podcast, pretty a lot of stuff. I always start doing like a shaky camera. I'm all sweating in the 100 degree heat in my backyard. And people liked it because I was just a normal guy closing real deals and finding deals that they couldn't find that they were getting beat out for. And so that was, that's been the biggest thing. That's still why we still do a lot of videos. That's why we still network at investment clubs on a regular basis. It's just, it's an easy thing. Definitely worth going to like a self directed IRA club or a vendor like a quest IRA or equity trust or newbie or somebody like that. They've got different events go to those network, take business cards, share your deals that you're working through. Because so few people do anything, you know, if only 5% people do something, if you step up and say you're doing something immediately people are going to flock to you because they want to be around action takers, you know what I mean?

I agree with that totally.

Not enough people brag on their deals. So they'll you know, once they get something funny, great. But they don't ever go back, say hey we just closed on that and use that good deal to get, get the, the emerald working as like they say the bam, you know, the wafting of the high returns I guess you could say. So what was the question he asked?

I just wonder so if you can vet these guys. So okay, you see a house, it was worth a hundred and there's forty grand or something on it. And can you see the. You know because we get tenants, right. We screen them and everything. Are you going to see the credit? Are you going to see anything on this person before you. Because you're buying them essentially we're buying the paper.

So what we do some of the time we get the old collateral file. So like the 1003 loan application. And that gives us a lot of information. Usually we'll obviously get the Social Security numbers, but we're not running credit for the most part because we're still basing it off the value of the house or being the first lien position. What I do look for, we do a lot of Facebook stalking. You know, we find out who the borrower is, are they working, you know, do they have a Facebook profile? What do they have for assets when they got the loan? Yeah, you know, they have a retirement account and that kind of things. We look at what their existing payment is compared to market rent. So if their payment is less than market rent, hey, if you were going to move out of the house into something similar, here's you'd be paying $1,500 a month. Yeah, yeah. So it makes sense for you to pay 750 to me. You know, so we look into that a little bit. We call the power, you know, water companies to see if power is on. If it's on, great. If there's a big balance, we kind of shy away from that. But if it's paid up to date, great. We check property taxes, are those paid? Most of the time they're not. So it's just a matter of kind of you know, getting a kind of feel for things. And I call it fuzzy math because there's a multitude of different exit strategies we can do. But our biggest goal is, okay, let's keep it occupied, make sure it's occupied and go from there. Try to reinstate. They don't reinstate. Okay, we'll foreclose or give cash for keys and then, and then sell it as an rm.

Utility bills give you a good idea on that, right? If they're paying, then that's a, that's a quick no brainer, right?

It's funny because the utility department people there give so much information out. Oh yeah, this guy was in here last week and him and his girlfriend got in a fight in the hallway. Or they're on a payment plan or they owe three grand or we're about to turn the power off. I mean that's, you know, that's awesome. I mean I can jump online, check a borrower's name and skip trace and get a phone number and call it and see if it's a working number and then. Okay, sorry, hang up and okay, I got contact information for them, you know, or email addresses. Yeah, people call me all the time like, oh, you know, I can't Afford to pay anything. I said, oh, really? It looks like you just bought a new car on Facebook. How's that worked out for you, you know.

Or I'm on vacation. That's right.

Yeah.

I would wait for two weeks.

Oh, I had that. We bought a note and then literally the lady said, either we're going to make our mortgage payment this month or we're going to go to Disneyland. I'm like, okay, great. And she's like, well, can't afford it. Oh, how was Disneyland last week? She's like, how'd you know? Like your Facebook profile, public.

That's crazy, isn't it? Scott, how did you get into the education? Because you've got a really big platform, the education. What was the idea? When did you start it? And are you a lot of questions about the education. Are you using that to bird dog for deals or how does that all working out?

Good question. So I started buying my first notes. 2007, 2008. I went out to an event, somebody else's event, and they asked about notes and somebody, the speaker didn't really know about it. I said, well, I do notes. I just said, this is what I do. And I got bombarded with like 30 people. Like, do you have a class? I'm like, yeah, sure, I got a class. Whatever. I literally made it up on the whim. And we had 30 people come out. And so I just started class. And the way I teach, it's not an upsell to an upsell. It's literally, hey, let me give you the tools. If you do it, great. If you don't, no biggie. You know, so, like, I'll show them how we pull asset managers. We make these bank lists that we reach out to. I give them scripts. I. I literally would go through that stuff to bird dog because I was only one guy at the time. So I did it. So, hey, if you're going to call banks, here's 30 people. If you call, send me the list. And that's what happened. People would send me the list. We'd work on it together. I'd help raise capital. The people that were bird dogging, we get a big chunk of that because they put work into it and just grew over time and to the point. Now I don't really use it as a bird dogging thing. We use it as more of a capital raise because we got plenty of deals coming in on a regular basis that, hey, if you want people like, I'm lazy. What you mean? I actually have to actually do something. I'd rather write you a check. Well, write me a check. Once you partner up on a deal, you know, we'll help you earn while you learn for the most part. So we do it. It's fun. I mean it's, it helps us build credibility on stuff. It's actually worked out well for us. When we've reached out to asset managers, they Google us, jump on LinkedIn and see that we're serious and like, oh, you've got a big. You can move a lot of stuff. I'm like, yeah, we can move a lot of stuff. We're buying for our own portfolio first and foremost. But if I had something I don't like, I probably got 10 people that'll take a look at it for you.

And how have you been able to scale up? I mean, you started out by yourself, so as far as getting back end team team members and growing the business.

So I use a lot of VAs initially virtual assistants to do a lot of the initial due diligence, like pulling values, checking taxes. I think the most valuable hire that anybody could do as soon as you'd be a full time real estate investor is hiring a good assistant because they will exponentially help you out. If you want to go to making six figures, hire an assistant because every assistant you hire should be worth six figures to you because it'll free up your time. So I've gone through assistants. Some were virtual, some traveled with me. My VP of operations, Stephanie Goodman's been with me for five years now. She traveled with me to different events and we have vendors that do a lot of the heavy lifting, like I said earlier on, so that that helps scale. As I brought on vendors, I brought on a vendor to handle the collateral, the reviews. I brought on a vendor for the surfacing, I mean the servicing and more of the borrower reach out. So I delegated me making phone calls the borrowers to a professional who was actually better at it. And it allowed me to go buy more assets, focus on the acquisition and the funding side, which is my strength.

What's your favorite part of the business? What do you like the most about it?

I love closing deals, but I love, I absolutely. It's my joy to get a phone call or an email from somebody, hey, I just closed my first note deal or I just got my first deal accepted. Holy shit. What do I do now? This is a podcast. We can cut a little bit, right? That is the biggest joy because I know how I felt. I've helped people leave their jobs. I got a guy, Wayne, out of Dallas was working 80 hours a week traveling abroad, hating his life. Absolutely. He would spend time at night or on the weekends and we'd spend on the phone. And in the last three years, he's bought over 300 deals. He left his nice six figure salary job to do this full time.

A lot of folks out there that are working there miserable right now. That's what back we get. You feel, you know, that 40, 40.

40 dream is, it's, it's a dream, it's a waste. Work 40 hours a week for 40 years to retire in 40%. That's such a crock of crap. And it's nice seeing that more the entrepreneurism come back into the United States a little bit more. So every time, especially the last few years, it's really become, as people get laid off, they got to find something. And I think real estate is still the number one way to build wealth out here. And the way that our lending laws and the states are set up and things like that is still the best opportunity out there. You just got to be kind of willing to learn, you got to set aside stuff and you got to be coachable. A lot of people aren't coachable. You know, they. I'm doing it my way. Well, your way isn't working. All right. I got 10 years experience behind me. Let me help you out. Let me save you the mistakes it's worth. You know, you spend a little bit time with me and a little bit of money, it's gonna save you a lot of money and make you a lot more money in the long run.

So what, what are the characteristics? Bake a Wayne make someone who's gonna be a really good student other than coachable. But what are the skills do you think that people need? What other, I guess, motivations do you see? Because it's, it basically comes down to you. You can basically see a couple of guys and you've seen those characteristics go through on the same type of person.

So somebody who likes numbers, is good at math, is usually a good thing or more so understands they can use Excel. Cause I live in Excel, you know, that's what we're getting these tapes from. Asset managers and things like that. Engineers are okay. Engineers often have a tendency to overanalyze things. Paralysis analysis at some point. Right? That's, that's the thing. Somebody's happy, want to pull a trigger. People that have mortgage backgrounds often really do good because they understand that aspect. But military guys actually do really, really well.

They're willing to jump out of a Helicopter, bro. That's what I'm saying.

Well, that's it. But they're coachable. You give them a system, you give them tools, they can put it to work. We've got a couple guys right now that are actually over in Afghanistan. They're closing deals in their off time. I'm getting text messages from them. You know, one just closed On a deal, St. Louis, and his wife was handling the collateral and other things, but that's it. You know, military do well. Engineers do okay. Just. Just people that really are tired. Landlords do really well because they understand the cash flow aspect of it, but they don't want the 2am phone calls. They don't deal with, you know, toilets, tenants, and trash outs.

Mm. So let me ask you what. What I guess is your best tip for. For listeners wanting to get into note business.

Oh, the best, best thing. You got to get educated, because it is a different mindset than fix and flip or being a landlord. There is a lot of information online. I mean, there's a lot of stuff online. Be an avid reader. Put down the remote in the Game of Thrones for a week and spend some time watching tv. It's on Amazon, dude. You can catch the replays later on.

I'm watching them right now. Okay. The second time through. All right.

But, Scott, the funny thing is there isn't that much on notes as you think it is. I mean, you go on, you see the fix and flippers. You see a lot of the multifamily. Not as much as fix and flippers as residential. But where would you go? I mean, where did you go when you first started out? Now they can go to your website, but where did you get your information? Because even if you want bigger pockets, these other sites, they don't know what.

The hell you think. Yeah, there's. There's an. Every person has a good nugget on bigger pockets. There's three people that don't know what they're. Couldn't find their way out of a wet paper bag. Who are authorities talk to people that are closing deals. That's the biggest thing. No matter what. If you want to be an apartment investor, go find somebody who's closing on apartment deals for a long haul. Not just the last three months, but the last three years or four years. That's what I did. I went and found people that were closing on notes, and I would just. I would take him to lunch. I would. You know, I flew one guy out to a place, I paid for his room at an event to Say, hey, can I pay if you'll give me a half. Half your day, one day just to kind of sit there and mentor me. And that's, I think that's the biggest thing. The people that are the most successful at what they do are also the most giving of their time. I find that out there. And the note industry is different than a lot of the other niches out there. I think wholesalers, some fix and flip areas. A lot of people are very cutthroat because they're limited. They don't want to share resources. The note industry is still so small that we see probably about 5,000 True Note investors in the country that are doing on a regular basis. But we really believe in a term called coopetition, cooperating. We're all competitive because we're all looking for our own business. But there's enough inventory with the still 5,6 million, $5,6 million loans underwater, the 3 million modifications that are defaulting. There's still such an inventory out there. There's plenty to go around. And that's not always the case in other niches right now. So cooperation and competition combined together really makes for a great, a great way to bounce ideas off of each other and kind of mastermind together to take things to a different level.

What did you just call that?

Coopetition. I know I did not create the word, but I'm giving credit. Coop.

Petition competition. All right.

Yeah.

So what about on the, you know, we talked about personal finance. What about just on the personal success, success side of things? What is your best habit for success that you do on like a weekly or daily basis that's separated you because we talked about entrepreneurism. I think habits play a big role in that.

So from 2010 to 2013, I lived on the road. I traveled non stop. I sold everything here in Austin. I went from city to city and I took my health for granted. You know, I put on a lot of weight. Sponsored by Crown Royal and Ribeye Steaks. Okay. Oh, it's great. Love it. I had a lot of fun traveling, but I wasn't serious about my health. In the last two years, I've been much more focused on that. I'm still a big guy, but I take every Monday through Thursday from 12 to 1, I go across the gym and I just spend it there, you know, so spending that time working on myself physically and it gives me time to really dive into the. After the rest of the afternoon and the evenings to work on stuff. I'm an avid reader. I mean, I got a bookshelf over here. I don't know if you guys can see. I got tons of books that I read on a regular basis. I listen to some different podcasts like the Tim Harris and the Mark Cuban podcast, things like that.

Podcast. How is it?

I'm sorry, it's his blog. It's his blog. He writes on a regular basis. Tim Ferriss is a great podcast listen to as well. But I just, I try to. I get. I got. I got rid of negative people. I think that's.

I love it.

I hate negative people. I. In my office, even my staff, we have a 30 second rule. If something went wrong, you got 30 seconds to bitch about it and then move on. The minute I.

Lady told me the other day, you'll crack up about this. There's a such thing called a three second rule. There's corporations now that time. How long you hug somebody? That's why I couldn't. I couldn't work. I couldn't. I didn't fit. Like you're gonna tell me how long it.

Dude, you. If we work together, you would be sexually harassing me on a daily basis. The hug, that just lasts too long.

So now it's like a joke within our company. Like everyone's joking about the three second rule, so. But it's just.

I thought, I thought the three second rules. You drop something on the floor, you got three seconds to pick it up before you can eat it, before you gotta throw it away.

That's the five second rule. 25 second hug. Wow. I remove ugly people. I think that's. So many people have toxic, you know, personalities. They're. Oh, they're Debbie Downers.

You got to get down, man.

Yeah, so I got rid of those people and just stopped, you know, stopped hanging around this bit. And a lot of that was family. Family, close friends and stuff like that. I just had to stop hanging with them. And it was amazing. I saw an image. To be the conductor of an orchestra, you've got to turn your back on the people behind you to really be successful.

Winter is coming, you know.

Yeah. You know that the picture was with. What's his name? Yacter.

Yeah. George Clooney.

George Clooney. Yeah, I saw that. I saw it today, actually. That was pretty interesting.

I thought it was pretty good.

What about you said you're an avid reader. What's a book that you'd like to recommend to the listeners? Something that brought value to your life?

The best book that I can highly recommend. And I think I've got a copy of here. It's called Outwitting the Devil, Napoleon Hill and Sharon Lecter. Sharon Lecter is the co author of Rich Dad, Poor dad as well. Yeah, and Sharon's actually a friend of mine out of Arizona. Just an amazing woman. But that book talks about how people drift. I think it's so relevant in the real estate industry, especially those that like to go to every seminar, every workshop, but they never pull the trigger. They have another excuse to do something else. They chase a Chinese shiny object syndrome. You know, focus on one thing and focus on. The most successful people are those that eliminate distractions. You know, they're focused of mine and focused on action at what makes them successful and allows for them to be able to help more people. Those that are all over the place never get anywhere. They never can accomplish anything because they never have enough momentum going forward and never have enough success to be successful.

This guy over here and I, we both had a, had our side piece businesses for the last few years. We both shut them down for the most part this year and just like honed in, you know, on our multifamily business and you know, it's, it's, it's, it's working well.

So I'm well, definitely willing to bet that you guys are seeing a lot more activity on that stuff. Don't be wrong. It's sometimes scary to let go of that railing on a business that's had for years. But at some point, if you're doing the right things, that becomes more of a.

In my corporate job, in my other startup that I had, the multifamily real estate that we do has always imposed its will and just, it's an aggressive, jealous lover and it just pushes everything else out of the way and there's nothing. I just like, I'm not gonna stop fighting you. You take over. That's it. That's what we're doing.

Yeah, it's pretty cool.

What project you excited about right now?

Project I'm excited about right now. We actually we've been, we just launched this week our own Note podcast. Actually. It's kind of funny. We were doing a lot of Facebook lives since October. Doing a lot and having a lot of great momentum. Doing like a daily 10am Facebook Live with just whether it was 18 minutes or 20 minutes, whether it's hey, what we're working on today started kind of like a what's the note guy focused on today? What's my staff focused on? And so we had a lot of success with that and we had a couple people come to us. Hey, should do a podcast. You do a podcast. So it was like, okay, fine, we'll do it. All we gotta do is film and we ship it off to somebody and somebody does the magic to it. So we're really excited about that. Yeah, we've got sponsors that came out of the woodworks. Hey, we want to sponsor it. I'm like, okay, sure, why not? We'll let you sponsor it.

I take you.

So.

So, Scott, what's the. What's the, I guess the reason or what's the idea? Do you want to monetize a podcast? You want to get your word out? You want a bird dog?

What's the.

I guess the end result, because there's a lot of work goes into a podcast. I mean, we start. We started out in the beginning by just, you know, you want to get accredited investors. We started out just fumbling and bumbling. We've been doing this for a while and we still don't know why we're doing it. We just like getting on the phone and talking to different guys.

That's. I totally agree with that. That's why we did it with like the Facebook Live aspect. It was like our own podcast. Anyway, we could download. Gets thrown up on YouTube and Vimeo. It becomes something. The thing I like about podcasts or that you have to keep in mind is this. My smartphone is the TV of today. Right. And so there are so many people that use this to communicate, to watch tv, to listen to things. And if you're not using that to market to them for what we're trying to do, things bigger and better always, you're missing out. And so while I think we do a supremely better job marketing our note business than any other educator in the industry, we are always looking for that. Next thing you know, what can we do to leverage our time smarter to attract a bigger crowd? We stopped doing hotel workshops two years ago and went to doing virtual workshops before anybody else was doing them. And that has exploded like crazy for us. And it means I'm not traveling as much. I'm staying home, enjoying. I'm wearing Superman T shirt every week.

Virtual workshop. Virtual workshops is basically live streaming. Your live streaming from some area. That's awesome.

Yeah, we. We have actually a. We actually did a convention live stream, not a. We actually did a three and a half day convention. We call it Note Camp. We bring 30 speakers on. We got two live streaming sessions. So if people can flip back and forth who they want to watch if they've seen somebody. All right, great. I don't want to see my. Gonna see this other person. They can do it. It's live. It's. It's recorded so they can catch it, replay. We went from our first time of doing it, we had 300 people on it for three and a half days. 90% attendance ratio. Well, last time we did in April, we had 735 people. The. Yeah, we expect to have over a thousand here in October when we do it again. So speakers love it because they can do it from their home and their hotel. People that are watching love it because it's live. They can ask questions. They don't have to spend thousands of dollars traveling to an event, going to a hotel, and. And they can literally watch from the comfort of their own home, office, or pool. Although we did have one creepy guy send me a photo of himself with my face on the screen. I think he was butt naked underneath. I didn't see him up, but he sent a picture.

Watch out for Gino on this kind of stuff, man. To Florida. We were doing video podcasts. I'm like, bro, you got to put a shirt on.

No, dude, we do audios. We do audio. So I get on and I'm on. He's like, dude, where's your shirt? I'm like, we're doing podcasts.

We're doing audio.

He goes, we're doing YouTube this week. I'm like, dude, where's the memo? I. I didn't get the memo on that.

But that's the. That's the beautiful thing, online education. Everybody can do that now. You've got a smartphone. You can be out there and communicating, and the world gets smaller every day with technology. You got to learn to embrace it. Some people are still doing business like it's the 1990s, and they're wondering why they're not having as much success. Because, hey, if you ain't involved in and moving forward, you're gonna get. You're gonna get left behind pretty fast. But that's the beautiful thing. You can market your podcast. You can tweak it all out. There's so many ways to do that, to take your business to the next level and really share that information. Anytime you can give info, like in a podcast or videos, it's so valuable, you get it 10 times back to you.

You know, I agree.

It builds credibility. There's a lot of times we get people that call me up and say, hey, I've been following you, watching your videos for six months. I'm like, okay. Yeah, my wife and I love to watch your Videos before we go to bed. It's like, oh, am I the aphrodisiac in your love life? So, but that's, that's the thing. Video is a smart thing to talk about the deals you're working on.

Talk about the deals they're saying, man, he's looking good.

I don't know, man. Baby, baby, they're not, they're not. They're not good enough for Playboy Channel. It's my mind, all right? I have a beautiful mind.

Okay, so, all right. How can listeners get a hold of you? Pretty interesting stuff. I'm sure some of our audience is going to want to say, hey, man, how can I get a piece of the action?

You can go to weclosenotes.com we close nuts because that's what we do. You can go out and Google Scott Carson. I'm not the soccer player, although I appreciate the I love Scott Carson T shirts that he has on his fan club. But yeah, we close notes.com is my website. You'll find all the information you need to get a hold of me there.

Awesome. Hey, appreciate your time, Scott.

Hey, guys, anytime I get anything I can do for you, let me know. We're here to help out. It's definitely a. I think the more us that are working together, that are doing big things, the better it is for everybody. You know what I mean?

I agree with that, Scott.

Thanks. Coopetition. Coopetition. Hashtag coopetition.

All right, everybody, we trust that you enjoy the Wheelbarrow profits podcast. Visit jakeandgino.com your one stop shop for everything multifamily. See you next time when Jake and Gino share more of their investing secrets with you.