Closing Notes with Scott Carson in The Abundant Culture with Joseph Mims

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Warren Buffett, all to create a blueprint to experience life more abundant. Hey everybody, it's Joe. Welcome back to the Abundant Culture Podcast. We're so glad to have you back again this week. Today we are interviewing a note investor. Now some of you may not know this, but if you have a house note, a car note, maybe you have a note on your business or your commercial property or whatever the case may be, whatever you pay to the bank, there is a specific type of investor who can buy that debt from the bank. And we're going to learn how to do that in today's episode. We're going to learn what a note is, how to analyze notes, how to structure them, how to buy them, all these different types of things. And you guys might be able to get a free book on how to do this stuff as well. So get ready to listen to and learn from our good friend Scott Carson.

Hi Scott. And thank you again for coming onto the Abundant Culture podcast. We are super excited to have you today because we have yet to talk about note investing on the podcast. We've talked a little bit about real estate, but we have never talked about notes. So our audience, they might not even know like what that means. But before we get into like the meat and potatoes of the episode, please, please tell us your backstory. Like how did you get into business and why?

Yeah, no, I'm. First of all, I'm honored to be here. I'm definitely here to serve your guys audience. You guys are doing such a tremendous job with your podcast. I've listened to some of you episodes out there and if you guys are listening this, you barely go over and leave a five star review right now to them. But anyway, back to my story a little bit. I got started as a, you know, many, many real estate investors. I like watching those fictional TVs, you know, HGTV, flip this house where everything is accurate, that was out of college, bought our primary residence, our first house, and then bought a couple investment properties at retail off the mls. And then Austin went through a bit of a downturn. I was a distressed borrower because I was laid off and we were trying to make six mortgages, three first three seconds on a private school teacher salary. Yeah. So luckily for me, we were able to get rid of the two investment properties, keep the primary house, doing a forbearance agreement and loan mod. And I kind of was licking my wounds for a couple years. And then a buddy of mine approached me with starting a mortgage company. Other real estate entrepreneurs that were flipping houses but teaching creative financing, teaching like wraparound mortgages, subject to financing, owner financing and traveling the country teaching this. And they started a mortgage company. So I remember July 4, 2004, I was on a plane to or I put my last, you know, last day noticing that JPMorgan Chase, where I was a banker, vice president at Chase. And then the next week I was on a plane to LA talking about mortgages. And I was able to for four years as we traveled the country from 2004 to 2008, I learned all this great knowledge. I was able to basically had like a four year apprenticeship. Not only was I doing mortgages and it was a great time to be a mortgage banker and mortgage broker back. I made a lot of money, but I had to learn from all these great speakers from Ronald grand and just so many other people out there about creative and the right way to do real estate investing. Not something off of tv, right?

Yeah.

And learn the note business there from Bob Leonetti. He was my mentor at that point. His business partner, Jamie Kaliheen, she were just amazing. And when everything hit The Fan In 2008, I left the mortgage company and went out my own. Not only was I doing some rentals and fixing flips and wholesaling like a lot of people that was already starting to dabble the distressed note space. I mean, I've been in notes with owner financing and subject to deals. But I, you know, started dialing for dollars instead of calling the same banks that I was originating loans for a few years. You know, a few weeks earlier I was calling to buy their debt and I did that. You know, I'd be making 50 to 100 phone calls. I looked like Will Smith from the Pursuit of Happiness, just dialing for dollars, trying to get ahold of people. You know, at the end of the day I found like I'm a FUD because I Talk so much. See, my tongue was swollen from talking so much. And, you know, in 2008 through 2010, we look back a decade ago, a lot of good people went through financial hiccups. Yeah, right. A lot of people. And so I, you know, it was. The market was changing. I got caught with two big flip properties that I had to write big checks at closing. And if you're an investor, you should be getting a check and not writing a check at closing.

Okay, absolutely.

And I said, you know what? I gotta do something different. So I was starting to dial for dollars. And it was around the first part of April. It was baseball season. I'm a big major league baseball fan. Those commercials were coming about, you know, if you were to travel the country and how priceless it was. You know, $5 for a beer, $5 a hot dog. Seeing all the things I was like, that would be fun to do. And I'd gone through a divorce a couple years earlier, and I was like, I need to do something like that. Kind of shake it up. So, yeah, I literally. You'll crack about this. It's divine intervention, as I like to say. Sometimes there's somebody guiding us. No matter what we want to do, they're guiding us down a path.

Yeah.

So I plotted out what would it be like if I left Austin and went and hit all 30 teams? How long would it take me if I went in like a circle around the country and it's like 30 weeks to hit all 30 teams? I was like, okay. And I was like, okay, what city am I in, what week? I actually put it on my calendar just for the heck of it. I literally wrote it down in the matter of about a four week span. I got phone calls from real estate investment clubs and conferences that were starting to see my social media marketing on, like, Facebook, my blogs, writing about some of the notes that I was buying, some of the details is doing. They asked me if I would come out and speak. And someone were like, we'd love to pay you to come out and speak to our event or come out to our RIA club. I'm like, okay, when do you want me to come speak? And the dates lined up perfectly when I would have been in that city for this mythical baseball trip. Wow. Very. I mean, my hair still stands up to this day. Right now it's going. I'm getting, you know, just because I was like, okay, thank you, God. Okay, I get it. So that's what I did. I sold everything I owned in Austin and decided I was gonna hit the road for 30 weeks. Well, that turned into three and a half, four years of nonstop travel speaking. I've bought over a half a billion dollars debt for own portfolio in the last 10 years and spoken in multiple countries in just about every major city out there. And that's kind of how I got in. The note business was just going from the mortgage side of things. And as I was traveling, I was actually going in and meeting with bankers at local banks. And I spent a lot of time in Florida, as I call it, God's waiting room. It was hit really bad back then. I would literally go in and talk with bankers and they would like, oh, what do you know? And I, you know, I have a short haircut anyway most of the time. And they're like, oh, what do you know? I'm like, well, I know you've got $35 million in bad debt in your books. It's at least six months delayed and you need to move something not yesterday, but a week ago. And he's like, okay, come in. And then just literally I would sitting down and looking at their whole portfolio and started buying and build this. I built this nationwide network of investors across the country because I was seeing so much stuff that I couldn't buy for myself. So it was better when I bought, when you buy a book. So I was like wholesaling deals and taking deals down for myself. And that's kind of how I became the note guy. And really kind of the story of how I got into the note business and I mean, flash forward at 12 years or 10 years from that trip and it's just been an amazing ride. We've helped so many investors tap into the world of debt, whether they're buying non performing notes, which we've seen a lot of that. We're gonna see a lot more of that in the future. Or performing notes or lending their money or using the strategies that we teach to really help them market their real estate or their business. That's a long answer to a short question I think, huh there Jasmine. Sorry.

But it works though.

Yeah, we like it in depth because that's awesome. We really like to hear people's stories because a lot of times you don't get to hear, you know, the, that middle section about, you know, what happened after you started but before you were super successful.

Yeah, absolutely.

There was a few trips where like the credit, like my, you know, I had, didn't have that much money in my account because I was traveling and on my own. Like I remember sitting in Miami Beach, I Was there for a week and the hotel mistakenly charged my card five grand versus dollar five hundred, one little zero.

Oh my goodness.

And that tied up my account for two days, actually three days, because it didn't earn a Friday. Well, the credit card come in and release the funds back till Monday at midnight. So I'm sitting there with like literally 20 bucks in my pocket. I'm like, okay, what am I going to do?

A lot of peanut butter and jelly, it sounds like.

Yeah, peanut butter jelly, Taco Bell. All right. Taco Bell tacos.

Absolutely. Yeah, those are go tos for sure. So for individuals who may not necessarily understand, you know, banking, lending or notes, could you kind of explain to somebody, I guess, what's, what are the different types of notes and I guess what are the nuances behind all of those different notes?

That's a great question, Joseph. So I will tell you here. If you have a mortgage on a house, you got a car loan, credit card debt, student loans, medical bills, you got an IOU from your Uncle Bob, Bubba Joe, you're in the note business, you're just on the wrong side of the payment stream. Most of us have money going out in the note business, going and paying banks, paying financial institutions. And what I do is our goal is to have it coming into us. And so what I buy is we're buying mortgages or loans on residential and commercial properties for our own portfolio. So when we buy a mortgage, we're not necessarily buying a property, we're buying the debt and basically becoming the lender or the bank for that individual. You can buy debt on any type of really asset, whether it's like I said, commercial houses, airplanes, buses, trucks and cars, as we all know, have stuff on it. Student loan debt, there's all sorts of debt out there, as we call it notes or paper. And when you're in the paper industry, it's usually a pretty profitable place if you know how to do that. Because all the banks, that's what they focus on. That's why they're the largest institutions, the biggest buildings. They're not actually in the real estate space. They're actually in the money space of lending money and making money off of the arbitrage between what they're paying people to deposit their funds to what they're lending money out at. So as a note investor, if you're in the note space, that's what we're actually doing is we're buying this receivable, 30 years, 20 years receivable, and we're buying it just back on Stuff that's secured or collateralized by a single family home or a mobile home or an apartment building or a medical office or a high rise or you know, a condo in Miami beach, whatever it might be. That's the paper, the mortgage that we buy. And we're usually buying it at a substantial discount below what's owed because we're usually buying stuff where the borrowers have not made payments for a period of time, you know, six months or more. And the banks that we're buying this stuff from will often take a very big discount to get it off their books because they'd rather get 50 cents on the dollar now than. So they go out and lend it 10 to 15 times, make a buck versus sitting and drag it out for six months, a year, two years, whatever it might be. That makes sense.

Yeah, it does. So when somebody hasn't necessarily paid on, let's say it's their, their mortgage for the past couple months, that's considered a non performing note, correct?

Usually is, yes. We live in strange times these days though. And I don't know when this is coming out live, but right now with everybody kind of really, with a big chunk of the country being on what's called a forbearance agreement, they've already got agreements with the bank to delay their payments for a period of 90 days to six months. And that's okay. We see that. You're going to see that probably for a year where people are on forbearance agreements. It doesn't necessarily, it's non performing when you have such a national crisis going on. But for the most part, like if you look back 12 years ago, people were laid off of work, people were making the mortgage payments because they couldn't afford it. You know, they were on adjustable interest rate loans or subprime loans that had higher interest rates. And so it's basically a non performing loan is where somebody can't pay that mortgage for 90 days or greater. We don't usually, you know, if it's less than 90 days behind, it's sub performing. But once it goes beyond 90 days, that's kind of the main triggering point where it goes from being sub performing to non performing. And then the bank start to get really aggressive with the outreach with, you know, filing with an attorney to start the legal process of foreclosure. Unless the bar can kind of come back to the table and work something out, whether it's a, like a forbearance agreement, a loan mod or some sort of exit strategy to try to make It a win. Win.

Awesome. And with the. You mentioned that, the forbearance agreement, honestly, before all of this happened, I never heard the term forbearance. I was like, what? What is. What is that? So can you explain forbearance and also explain, is that the same thing as a loan mod or is it different?

That's a good question. Forbearance agreement is just when the borrower works out a situation with a bank to delay payments for a period of time. So a forbearance agreement is they may delay the payments for six months, and then they may require all six months to do at that time, or they may take six months of payments and put it on the face amount of the loan and just extend the term by an additional six months. It varies. It's not really. It's not adjusting the interest rate. It's not adjusting the balance or reducing or anything. It's just extending the terms out a little bit. Okay, so that is kind of forbearance. Now, a loan modification you often hear initially called like a tpp, a trial payment plan. That's usually like, we'll do a lot of trial payment plans when we buy more loans where somebody hasn't paid in a while. We'll say, hey, can you start making your existing payment again? I know you've been paid in a year or whatever, but can you start making existing payments? And sometimes it can. Okay, Greg, can you make anything extra? Yes. Or in a situation where maybe the values of the property has dropped dramatically, maybe they owe 150 and the property values have dropped to 100, we'll do a trial payment plan before we do a loan modification. Because if they won't fall through in that first 12 months, then we're not going to forgive any debt or reduce the interest rates. We'll go ahead and start the legal process on the original amount. But that's a period of time like trial. Hey, let's give you a trial. It's kind of like dating the borrower, you know, like jazz, jasmine. You probably dated Joseph there a little bit like, okay, let's see if you're gonna perform. Are you gonna dress nice? Are you gonna smell nice? You can take me to some nice place, you know what I mean, before we go to that next level, you know what I mean? So that's kind of the thing with the trial payment plan. When we buy, we're trying to kind of date that borrower back again. So listen, let's get you back on track some sort of fashion, something that makes Sense. I mean, the fact that we usually buy at $0.50 of what's owed or value gives us a lot of flexibility to work with the borrowers, you know, to then adjust the payment or give them a trial payment of $500, maybe a month and their normal payments 800, and try to get them paying on time for 12 months. Then after 12 months where they've shown good values, they've been on time, then we would do a loan modification where that's kind of a restructuring alone. That could be a variety of things. That could be taking it from 30 years to 20 years or 15 years, or taking it to 40 years or dropping the interest rate a couple points or what happened a lot years ago is that banks dropped the interest rate to like 1 or 2%, and then they would stair step it up. So every year it went up by a point. You know, year two, it's 3%, year three, it's four. So there's a lot of great things that we can do. We will forgive debt. If they're way upside down. Like in the numbers I gave you, if a borrower came to us and their house, they owed 150, but it was only worth 100, we would probably buy that mortgage somewhere around 50 grand. Oh, wow. Work with the homeowner if they got on track. And then at 12 months, what we would do is reevaluate the loan at that point, hopefully the value creeped up a little bit. So then we would only forgive like 30 or 40 grand versus another 50 grand. I mean, it's. That extra forgiveness really doesn't help us in any form or fashion. It's a carrot in front of the bar. Like, listen, you signed on the docs. You owe 50 grand above where your house is. If you do these steps, then we'll forgive you of that debt and then make it a. Turn that nightmare back into a dream for the most part.

Absolutely.

It's really cool.

So, you know, it's. Every day is a country western song. Jasmine. I'll tell you that sometimes we've got great borrowers that are like, oh, my God, we just need a second chance. You know, we went through a hiccup, we went through a big D. You know, divorce, death distraught. You know, they got laid off. You know, grandma got run over by a reindeer. You know, we hear that a couple times. You know, but the thing is nice, then you've also got people that really just try to take advantage. So it's always hit and miss. I would love to say that we were able to help all the borrowers that we deal with about 50, 60% of the time we can, but then you still got about 30, 40% that just have their head in the sand or are trying to, you know, take a mile when you give them an inch and go from there. So it's. It is. We do a lot of the same stuff day in, day out, but it's always an interesting story when we find, when we come across things.

Oh, I bet that keeps it interesting.

Yes, it does. Never a dull day in the debt game.

Well, I guess that's good. Kind of.

That sounds really cool.

Okay, so you can invest in like any kind of note, correct? Because we mentioned like all the different types of real estate. But what about maybe like car loans and maybe like other little like miscellaneous loans?

Yeah, they've got all sorts of stuff. I mean, there are some funds out there that invest just in auto debt. You'll often see at car lots where it's like the pay as you go aspect or pay your payment here they've owner financed it. And a lot of those companies will have debt buyers that will come and pay like 80, 85 cents of the dollar for their new originated loan. You know, so you have that. You could buy credit card debt, but that's not really a substantial way to invest these days because the government's put some stipulations on credit card debt. You could buy medical debt. Yeah, you can invest. You just got to find the right people that are investing that stuff and dive into it. Now you also look at, there's some crowdfunding websites or other websites out there that do like micro loans like that will lend money, loan money to small entrepreneurs or things like that as well too that you can also invest in.

That's really awesome. And you mentioned a couple times the term of buying debt at a lower value of what it's actually worth. How do people actually go about valuing like debt? How do you value that? Because I mean with real estate I have comps, if it's commercial, I have cap rates, which is kind of like comps based off income and all other different types of assets. You have these kind of ways to evaluate the asset that you're investing in. But I feel like every time I hear about somebody valuing debt, I know it's possible, but it sounds extremely abstract. So how do you actually go about doing that?

So you hit the nail on the head there. It's just similar. I mean, you have to realize that paper, worst case usually has collateral behind it by a property all right? And that property has value and you're going to pull the value of that property with comps or cap rates or figured out with realtors or market values, and then you're going to buy a percentage of the debt off of that market value. Okay, so let's use that same value that we talked about beforehand. If we're buying a non performing note where somebody's paid in 12 months, they owe 150, the house is worth 100. You know, we would bid at 50, I wouldn't bid it above 70 cents on the dollar. Cause then I could just probably buy an REO at a cheaper price without having to go through the legal side of things. So we have a variety of stretchers. So I look at, there's other due diligence. We look at the borrower, we look at the payment history. You know, we look at the state that it's in. What's the foreclosure time frame? Has the bank already started the foreclosure process? You know, so is that time shrunk down? Is the borrower file bankruptcy, which is a good thing in our place. Whereas a lot of investors like, oh, bankruptcy, I can't do the deal now. So we make actually the most amount of money by actually keeping people in their homes and get them back on time. Because we bought it at a discount. Say we bought it at 50 cents on the dollar of this scenario. So 50 grand on $100,000 valued asset, but that person's mortgage payment on $150,000, let's say that is, let's say it's $900 a month. Okay, so $900 a month or is it 6% interest rate? Well, I bought the loan immediately at 50 cents on the dollar. That's like a 12% return on investment almost immediately, if not greater than.

Okay, yeah, that's really cool.

Yeah, 6% on $150,000 loan and it's only worth 100. But if I paid it at 50, I paid a third of what was owed. So technically if I get them to start paying on time again, that's an 18% cash and cash return to me. If you figure the numbers immediately like that, that's pretty good, right?

Yeah, that's really good.

It's really good. And I got 50 grand of equity above what I paid for the note too. So if they don't pay, then I can foreclose, then take the property back and then sell it off at the auction or sell it on the MLS or turn in a rental or owner Finance the property or do cash out refi after I take the property back. So you still have to look at the exit strategies. You have to look at where the legal is. There's more due diligence going, oh, it looks like this, yeah, five grand, paint and carpet, I'm good to go. No, no, no, no. The way we look at this is one of the big mistakes that a lot of fix and flippers or landlords or as a fix and floppers or lazy lords get into it, they start evaluating notes like they do a traditional piece of property. That's not what we're in. We're in the paper game. So you've got to go through, okay, what happens if the borrower starts paying on time, which is we hope for. And there are specific things we look at. Is the mortgage, is the rent rate higher than what the mortgage payment is on the similar house, which most of the time it is, you know, so, you know, have they paid anything? Have they communicated with the servicer? You know, they've been asking for a loan mod or a short sale, or they tell the person calling from the previous bank to go, you know, pound sand or go F off. You know, those are stimulations or things that we look at in our due diligence period. Say, okay, this is likely to get reperforming or this is likely to go the legal route where you gotta foreclose and then our bid is made appropriately. Longer foreclosure states, we bid cheaper because we've got to drag it on a little bit longer. Faster foreclosure states like Texas or Georgia, you're going to pay a little bit more because the banks can do most of the heavy lifting in a faster timeframe.

Absolutely, that makes sense. So when it comes to valuing these notes, you're not only just looking at the collateral, but you're also looking at the person who's supposed to be paying that note as well.

Oh, yeah, we do. I mean, that's a beautiful thing is when we're buying the notes, we get the full loan collateral. So we'll see a lot of times the loan application when they file for the loan a few years back. So we can see where they were working at, what type of resources they had. We'll also get to see their payment stream, their payment history. We can also see their kind of conversation history with the servicers. So this is one of the biggest things when you're calling your bank, don't be rude to the person on the other end. I can tell. Okay. And then we also then in today's world, we'll do skip tracing. You know, we'll jump online and see that what they're doing on their social media profiles. I had one lady who is a kind of a funny story, but with Disneyland, she was like, oh, am I going to pay my. Pay for my mortgage this month or go to Disneyland? I'm going to Disneyland with my kids. I'm like, yeah, you're probably not going to reinstate them. You know, we had another guy who was a professor at the University of Missouri and saw that his department had been eliminated. And so we understood why he was not able to make a payment. And so we were like, okay, great. We saw another one, they'd been laid off. So we're like, okay, that's fine. We'll work with you. And. But they were trying to actually go out and working. So there's a lot of things that we, that people put out there that we can find. So social sleuthing, you know, not stalking our borrowers, but we do. And look, I'm willing to work with somebody if somebody comes to the table, says, listen, I. I'm in a bad situation right now, here's what I can afford, I'll work with that person in some sort of fashion as long as it's going to make sense, you know, I'll give you example. There's a lady in Jacksonville, Florida, 85, living basic on Social Security, okay? She can't make her mortgage payment. She doesn't have any income, doesn't mean family to step in and help her. So I was like, listen, instead of us foreclosing on you, look, just stay in the house, pay the taxes every year, and then whenever you do pass, we'll just take the property back at that point, but we'll let you stay there as long as you want, as long as you're alive. You know, it's not worth much, the house worth like, I think 35, 40 grand. A few years ago, if she were to sell it and it was more than she'd owed, great, she'd make some profit. But, you know, she doesn't have any family. And we're like, I don't want to evict, you know, grandma in her wheelchair. You know, that's not good news. That's. That's bad karma up there.

That is bad karma. Yeah.

And she was like, she was overjoyed where she's staying in her house. She gets to live where she's lived for 20 years and, you know, trying to help, trying to help People have bad situations. We try to do, yeah.

And it, and it's really cool because I feel like, I feel like there's so many niches in real estate, whether it's residential, commercial and now you have notes. And I feel like being a landlord and being a note buyer, it kind of almost seems like they're at opposite ends of the spectrum sometimes just because for the simple fact, if, you know, if somebody's like maybe renting a property and for whatever reason they stopped paying rent is like the landlord's probably trying to figure out how to get them out of there as soon as possible. So like they could get somebody who's going to pay rent. But the note buyer is kind of like, hey, okay, I'll reduce this amount for you, like what can you actually do on a month to month basis? And I feel like if you are a buy and hold investor, I truly believe that this is some diversification that you can add to your portfolio. I mean, to be able to have a part of your portfolio that has notes and you don't have to worry about the toilets, tenants and termites. That's a great little hedge against the part where you do have to worry about the toilets, the tenants and termites.

Yeah, let's not forget about trash outs because we all had those if we're a rental investor as well too. So yeah, I agree with what you're saying with us as a note investor, we're further up the food chain, we're closer to the source. The bank always wins for the most part.

Absolutely.

Nobody calls the land, nobody calls the bank to come unclog a toilet at 2 o' clock in the morning, nobody calls the bank at 8 o' clock at night when the air conditioner went out in July. You know what I mean?

Yeah.

So those are great things. We all want passive income. It's one of the beautiful things about real estate investors that we all want to try to find a way where we've got passive income so we can truly be financial independent. And the beautiful thing about notes is we're not waiting on rent checks. It's usually the banks getting paid all the time. ACH is automatic debt. You know, we're in a position that oftentimes, let's, let's look at it this way. Everything going on with so many forbearance agreements and rents not being paid, we're still in a good position being in a bank position because oftentimes that mortgage is quite a bit less than when a rent pay a rent rate is so Oftentimes, the bank's notes are still getting paid because people want to keep the property. They don't go the legal route, and they do run into big hiccups. There's often a way to kind of resolve that peacefully if they're just willing to talk with their bank.

Yeah, yeah.

So if somebody wanted to say or wanted to start getting into notes today, I mean, I feel like there's quite a bit of education that they should probably look into before they actually do. But what does that. I guess that first step after you get educated. I always tell people, it's like I love taking courses on, like, literally every freaking thing that I could get my hands on. But after I take the course, there's usually something I have to actionably do.

Take action.

Otherwise Jasmine would get upset with me because I spent money on a course and I didn't use anything.

Now, Jasmine, does he have shiny object squirrel syndrome? Oh.

Oh, yes, he does.

Love it.

Here's what you've got to do. You've got to pull the gun out and you've got to kill that squirrel. Okay. You've got to kill the shiny object squirrel. You know, squirrel, squirrel. Okay. When it comes to note investing, here's the biggest thing that I teach people. You got to get educated. And we've got thousands of videos, there's a free ebook and courses and stuff like that at our website. You can listen to the podcast, the Note Closure show, which we spend a lot of time going on. But you've got to take action. I mean, that's the thing with anything. You know, I like going to workshops that make sense for what I'm trying to do. You know, whether it's marketing or real estate or asset protection or legal stuff, it's good to get knowledge, but you've got to apply it within really 48 hours. And so one of the biggest things that we see people having success with is start reaching out to banks, start reaching out to, on LinkedIn, to special asset managers. Because these the guys and gals that sell debt aren't the local bankers. Down at Chase, where you're deposit making your deposit every day, they're not your local branches. You go in there and say, I want to buy your debt. They're like, what? Okay, call the cops. Okay, Right. So there are special. The departments that handle the note sales and banks and lending institutions. They're often in different states, different, you know, buildings they go by, like the special assets department, the secondary marketing department, the whole loan sales trading desk. There are also some different Exchanges or online portals that will sell loans. So for somebody to kind of start getting their feet wet, start reaching out to banks. On LinkedIn, you have a free account, you can reach out to these people, hey, what do you have on your books that you're looking to get rid of? You know, every bank is going to have debt that they're moving here at the end of the year. I will tell you that right now. We know it's going to happen. We see it's going to be hurting very badly with the number of layoffs, number of small businesses closing, People find unemployment and then the forbearance or defaults we're going to see is another tsunami hit. I think the commercial lending space is going to hit sooner than the residential space. But start reaching out and start looking at stuff, start pulling value, start running through the different exit strategies that are available to you that we kind of teach. You just gotta get in and start making those practice shots. It's nice to watch Kobe Bryant, you know, play in the NBA, God rest his soul. But to even get to the point, you gotta put the sweats on, tighten up the shorts, dribble out there and shoot up a few bricks. You know, you're gonna learn more from buying your first asset than theory. And that's one of the biggest things I tell people. Get in the habit of listening, hey, let's buy something. Doesn't have to be huge. You don't need a lot of your own money to get in the notes space. There's a lot of private money out there. I mean, my cheapest deal, I bought a note in Detroit for 500 bucks and sold it for scrap metal for 1500 dollars. Two days later, okay, I bought a note in Jacksonville, Florida for four grand and I wholesaled it for $10,000 profit to another investor, you know, for 14 grand. A week later. You know, I had a bank send me a list of notes on one was an apartment complex in San Diego, eight units that I got under contract for 375, and I wholesaled it for 415 within 30 days. So for those that are out there, like wholesalers, you can wholesale notes. You just need to know what you're looking at. It's not the same thing as a residential because there's strategies and foreclosures. But you know, you can do this with little to none of your own money. We don't care what your credit is because we're not. The bank's not pulling credit on the buyers. All that the banks care about, you guys is that they get a wire in for the full amount of the note sale, whatever. It's a one off or a book portfolio, whatever. They don't care. They just don't want a nightmare. And that's the beautiful thing. You don't have to be the guy that goes out and fixes the property up and knocks on the door. The note space is a vendor driven business. You got servicing companies, you've got realtors, you have attorneys to handle this stuff. You're more of a general manager for the most part. And I know that's kind of a little difficult because most real estate investors and entrepreneurs are control freaks. We want to have our thumb in all the pies, right?

Yeah, for sure.

I want to talk to the borrowers. I know you don't. There's consumer finance protection barrier. You're not licensing that. Your service will do it for 90 bucks a month, you know, or that one. So you just got to understand, you got to, you've got to retrain your mind from the fix and flip and arv, you know, oh, we're going to go off arv. ARV is, doesn't, doesn't exist in the notes space. Okay, that makes sense.

Yeah, yeah, it does make sense. And I appreciate you giving us that kind of, that kind of mindset shift because I do think there's a mindset shift that needs to happen before somebody actually gets into the notes space coming, especially coming from real estate. You could correct me if I'm wrong, but it almost seems like somebody who like doesn't even have a real estate investing background, they will probably have a simpler time getting into notes than probably a real estate investor actually would.

Yeah, you know, that's a really good question. And it varies a little bit. It's always great to have some sort of knowledge base so that somebody's saying an reo, they're like, what's that? A cookie, you know, an Oreo.

Is that a cookie Oreo?

Yeah, exactly. No, no. What's an npn? Is that a disc or something like that? You know, so it's good to know the lingo and have some knowledge and stuff. And there are books and plenty of things out there. But yeah, I mean if you will say a comp, you want to know that's a comparable, you know, a cap rate. What's that? Is that the rate that you put a hat on or is that actually. You get it. But it's also. Here's the thing too is you got to build some systems. So the people that struggle in the notes space are those that don't put systems in place. They try to do it all themselves. Engineers actually kind of struggle with the note space because they overanalyze as we. It's not the same thing as like, I'm a buy it, fix it up and then sell it for this amount. We've got multiple ways that deals can happen. So a lot of people that overanalyze will think of the worst possible case. And that's not always the case. You know, there's a lot of times things happen pretty much in the middle. You sometimes have some extremes, the left and the right, like anything else. But yeah, you just, you've got to have some knowledge. And then we all know that school of hard knocks is the best way to learn. You just want to try to find a mentor or coach or somebody who's actually doing it, has done a lot of it, and he's willing to share those mistakes, those potholes that he or she has stepped into so that you don't make those same type of mistakes. I mean, it's like with anything else you got, you've got a few people that have been this business for a long time that are doing great things and really sharing some things, and you got others that are brand new to bought one note and they're like, oh, let's teach a class on the one note I bought. Like, it doesn't work that way. There's so many different scenarios. I mean, there's times I'll do a podcast webinar. We just recorded episode 610 the other day and I shared something and they're like, oh my God, that was amazing. I'm like, well, that's one strategy. I mean, I've never, I don't think I've ever said that before. So it's just, there's a lot to learn. But just get out there and start taking action. Go buy a note, work through it. You know, a lot of investors will buy one and they'll buy two, then three, then they'll go to 10 because they get bigger discounts at bigger at bulk prices and they'll get up and running from there. So that's the best thing I can tell you in a long winded answer, if it makes sense.

Absolutely.

And then a question I just thought of is like, what do like the systems look like when someone wants to have like an actual note business and not just invest maybe in just one or two?

That's a really good question, Jasmine. You have to put a team around you and so you're gonna have a servicing company first and foremost that's gonna be servicing the notes. You know, they're the ones that are making the phone calls out to the borrowers, they're the one collecting payments, they're checking taxes. You know, that's after you buy. You obviously still have to have some systems on the front end for pulling comps and you still need to talk with Realtors and talking with the sellers to pull values and know what that market looks like as far as valuation. But you gotta have a servicer. You're need to have a real estate attorney that can foreclose in every state you're investing in. And then you got to know what your strategy is, what's your bread and butter, you know, where are you investing? Some people, and I highly recommend that you do it in most of the major cities versus rural areas. That doesn't mean you can't make money in a rural, depending on what you pay for the note. It's just that if you're buying a mobile home on an acre with a rural route address, there's probably lesser people that will buy that property. Realtors aren't going to be willing to drive out for. It's going to take more money to get people out there to fix it. So you kind of have to put your systems in places right now with it being chaotic, there's a lot of people like, let's pull back and wait. And I'm like, well, they're still a lot of great opportunities to buy out there right now because while the market's taking a dip, we all know it's gonna come back at some point. And so you gotta, you know, you gotta put your system in place and don't look for the perfect deal. I think that's one of the most biggest mistakes. A lot I'm waiting for the perfect deal. Well, while you're doing that, I'm gonna buy 20 deals. I might have one deal go bad in 20, but I'm gonna make up for more than the other 19.

Absolutely. I love that you say that. I don't think I've heard many people say that on the podcast, but I think that is so key. A lot of entrepreneurs at heart, it probably even engineer engineers, honestly, are like perfectionists. Like, we want, we want to bring a product or service to the market and we just want to dominate it. We want to be like the next Amazon. You can't even, like, you can't, you can't do anything. Yeah, you can't do anything to like Basically compete with us or something like that. And I think the most important thing is to get out there and actually do deals. And I just believe that to be something that's super true even for us because, I mean, if we would have been waiting for the perfect deal, we wouldn't have done anything.

Actually, if we waited for the perfect equipment for this podcast, we wouldn't have started it.

Oh, yeah, that's the same thing. I started doing the Facebook lives, my cell phone back four years ago, you know, with a podcast. But you look at Amazon, Jeff Bezos didn't start off with a trillion dollars. He started off in a one room, one room office with some bad, ugly Amazon FedEx Kinko sign that was hanging off the wall. And he still had some hair. You know, it wasn't very exciting hair. Yeah, it was a little narrow on the top, but yeah, look at him now. The reason he got to where he is and this is what any type of expert goes through. You got to remember Amazon for like the first couple years was negative.

Yeah.

You know, they weren't doing well and they, he, you know, invested, invested, invested. Kept going into it. Going into where it's at today now is the, you know, he's the one trillionaire in the world for the most part.

Yeah.

You're not going to start off being perfect. You're going to make mistakes. I mean, I've bought over half a billion dollars in debt. I bought thousands of thousands of mortgages. And we've had good ones. We've had ones that knocked it out of the park. We've got other ones that were just. We cashed out as fast as we had and then we went in and all right, let's make it up. Doing some more deals and you know, that's the biggest thing is you can't be. You got to leave your ego at the door if you're going to be successful. You got to learn to ask questions. What I like about the note space and most real estate, especially the successful people, the people that don't have an ego, they're the most giving of their time and resources. They're the ones that will share with you. Hey, here's why this didn't work. Or no, here, do this. Oh, you're doing that now. This didn't work. That didn't work for me. Maybe you need to tweak it this way. Yeah, we all need coaches, you know, we all need people to guide us. I've got coaches in my business, you know, we all should. And that's what I found the most successful people are the ones that have the most coaches. Whether it's for their passions or their side ventures or their hobbies or their fitness or their health, they've got personal coaches to make things happen. So for those that are listening, no matter what you're in, whether it's a business of some sort selling tiddlywinks or in the note space or fix and flips, get you somebody who's actually doing it today and who's willing to share this stuff, there's too many people out there that try to keep that secret. They kind of, that, I don't want to say blow smoke, but they give you a little bit to upsell you and that's into today's world. With YouTube and video and podcasts, you can get a lot of your education and information at a substantial discount than what it used to be years ago. And you know, there's people that are spending 20 and 40 grand for coaching programs. I've never pulled the trigger on anything. That's just a big waste of money for the most part.

Tell me about it.

I don't think those are going to be around in the next couple of years.

No, you would think so. You know, we've got a higher end coaching program, but it's literally people are paying to come hanging with me for a couple days. You know, it's not via phone call or a group chat. It's literally you come in and I pour my heart and soul into you for two days and then you're wanting to kick me out of the room when you leave there in the second day for stuff. But there's too many times people are still being sold a bag of crap or on a strategy that worked two years ago or three years ago that's not working in this current market or worked in this one city, one state because of the one strategy goes on state, but it doesn't work in California or doesn't work in Austin. Yeah. What I like about the note business, you can do this business from anywhere you live with an Internet and a cell phone. You know, we've closed note deals. Whether I was here in Austin or I was overseas in Barcelona on vacation or in the middle of a cruise ship or, you know, I'm buying stuff in 30 different states on average for the most part. And rarely do I jump on a plane and go out and take a look at the property unless it's. We always use lenders and the power of leveraging other people, other vendors, other sources, other money. It's one of the most valuable tools you can learn. And learning to delegate is not always easy as an entrepreneur, but it becomes a very profitable one because you don't see Jerry Jones going out there selling Miller Lite or dogs at the Cowboys games. He's got a whole team that's doing that.

Right, right, Absolutely. We tried to explain that to somebody the other day and they didn't really get it.

But, you know, in Texas we have a saying, bless their heart. Bless their heart.

Absolutely uncoachable.

And unfortunately, some of us have to go through and get our teeth kicked in before we open up to being coachable on things, you know? Yeah, that's why I said ego is important. Show me. Show me an investor that's never had a bad deal, and I'll tell you somebody who's never really made any offers. You know, everybody's gone through some things. We've had, you know, we've had a lot of great deals, made a lot of money. We had some deals that went south and we just like crap, let's just keep working through. And it's a law of averages, more so than anything else. If you're afraid to make mistakes, real estate should not be something for you. Go work for the government, get your flat salary. Nothing wrong with that. If that's what you're happy and content with, by all means, good for you. Bless your. Bless your heart.

Exactly. So you've given us so much valuable information about the note space, and it was absolutely spectacular having you on a podcast. But before you go, the main question we like to ask everybody that comes onto the Abundant Culture podcast is whether it's in your business, whether it's in your personal life, your, you know, your social realm, or even your spirituality, how do you, on a daily basis, or on a weekly or monthly basis, how do you like to spread abundance?

Oh, man, I think that's what started with some of the things that we do. I like to. When I think back in 2010 and coming from that second closing where I had to write a big check and I can remember saying to God, God, you got me through this. And I know that you don't give, you haven't given me anything that I can't handle. Even some of the bad times, you know, we all like God. Why do you put this on me? Because it's here to make us stronger. And I was very fortunate for that four year period to really have this amazing apprenticeship of being able to learn the note business. So I've always been big on delivering valuable Tools and actions and literally giving the information out to people and students on our webinars, on our podcast. I'm proud of the fact that people say that nobody delivers as much information as we do in the note industry. It's not me. I hear it over and over again. We've got thousands of videos and content for everybody. So that's one thing I like to give in abundance. You know, we've donated a lot of money to different charities. Make a Wish, Toys for Tots, you know, donate over half a million dollars to a charity in San Diego that works with kids who have birth defects to make them give them a smile, you know, fresh starts called, you know, that's. We like to try to give back at some sort of hack. We're very passionate, my spouse and I are very passionate about animals. So she's, she's like Dr. Dolittle and the horse Whisper all mixed in one. She's got like pigeons like eating out of her hand. Squirrels come up to her personally. It's just, you know, cat rescue, animal rescue, that's a big thing because we don't have, I don't have any kids that I know of anyway, I got the four legged guy. So we like to try to help back in that way. And that's the thing. Spiritual likewise, you know, I think you've got to be spiritual in some sort. You got to have faith. I think life is too amazing with the gifts that God bestows on us or Allah or Buddha, whoever. It's the same spirit for the most part, whether it's Muhammad or whatever it is. And we have, what's unfortunately is that we like to divide ourselves by that verse to realize that we all have that same spirituality coming together now. So my dad was an ordained minister. He went to seminary school and was never a minister. He was always a deacon in church. But when he passed a decade ago, I got ordained online. You know, one of those Church of the roads stuff like that. So I've performed about 20 different funerals, I mean weddings for people for the last few years. And so that's a great way. But it's just things like sometimes spirituality you just got to be astounding more for people like they just need to be able to talk to somebody. So I'm pride, I'm very proud of the fact that I'm the guy answering my emails. I'm the guy answers my phone. I put my cell phone and email out there so people can reach out to me all the time. Because you just want it when you Have a question or really need something you want to hear from somebody. And in this world of social media, it's easy to send a message or a freaking Facebook bot, whoopee do. It's nice just to get on the phone or get on a video like we are doing today and just share and pardon my french, but if you're an entrepreneur, shit should roll upstairs, not downstairs.

Absolutely.

You know what I mean? We, as entrepreneurs, we deal with things. It's not a 40 hour week, Punch in, punch out, you know, work for 40 years and retire 40. It's a difference. It's a full combat like 80 hour week thing. And good and bad things happen. And our spouses, our families often take the worst brunt of coming home. You know what I mean? We all know that, right? I'm sure Joseph has had those bad days where Jasmine just came home or vice versa. Right. We all do. We're all moody and in quarantine, we're even a little bit moodier.

Yeah, it's even worse.

It is even worse. You know what I mean? So that's when I tell people, it's like, let's don't be afraid to pick up the phone. If you just need to vent, you just need to talk, give me a phone call. I got a strong faith. I've got strong thick skin on things. And so I have people that call me just once a month, like Scott. I'm just having a rough time with work or other things. Okay, great, tell me about it. Yeah, if I can solve it or give you some counsel, I'm glad to do that. If I can't, I'll put you in the direction of somebody you can. And I think that's important.

Yeah, yeah, it really is important these days, especially with, you know, people struggling with different, you know, depression and suicidal thoughts and stuff like that. I think people underestimate how powerful it is to just listen to somebody and care about their problem, even if you don't totally understand it. Just the attempt to try can be enough for a lot of people sometimes. So.

And that's such a thing. I think this country needs to have more so than is the ability to have a conversation, you know, and the ability to agree to disagree these days, you know what I mean? It's like, oh, I disagree with you. Unsubscribe, unfollow, you're a bad person. What? Come on now.

Yeah, that's crazy.

Yeah, yeah. The world is so crazy nowadays.

It needs more care than ever, for sure. So if somebody wants to either interview you for a podcast because you interview very, very well or they want to learn more about notes or they just want to network with you for some reason. How would they either get in contact with you or your team?

Really easy. They can just go to our website, weclozenotes.com that's the main mothership for everything we do for our podcasts and our education things. So yeah, weclosenotes.com my email address is just scottclosenotes.com if you'd like to talk with me, you can very easily. If you just go to talkwithscottcarson.com you can book a 30 minute phone call or coaching call with me. Notes just to pick my brain. I give everybody 30 minutes to pick my brain on whenever they want to talk about podcasting or raising capital or notes. We're here for it. If you'd like to. I do have a book that I like to give away. It's an ebook you can download 73 pages on the note business. If you go to noteblueprint.com free, free book. That's noteblueprint.com Freebook you can download. It doesn't cost you anything. And people really love it because I kind of, I don't want to say dumb it down. I just put it in layman's terms about the note business. Trying to make it simple and understandable for everybody.

Love it.

Yes, absolutely love it. And we'll put those links in the show, notes and all that, you know, so people can see.

Awesome.

So thank you, Scott, so much for the wealth of knowledge and the great conversation that you gave us for not only our listeners, but for ourselves as well. So thank you so much for being a guest on the Abundant Culture podcast.

Thank you and honored to be here. You guys are doing such a great job. Keep it up, keep up the great work and you're definitely helping make everybody bund it by just sharing your knowledge and bringing other speakers on here to help out. So honored to be a guest, guys.

Thank you.

So that's all we have for today, folks. I hope you got as much value out of this as we did. Keep in mind, the only way we can improve is through constructive feedback. So remember to rate and review this episode. Also, you are not the only person that needs to know this super valuable information, so be sure to subscribe and share as well. Stay tuned for the next episode and remember to always spread abundance, peace.