Creating Win-Win-Win Scenarios With Notes With Scott Carson From The Smart Real Estate Coach Podcast With Chris Prefontaine

Welcome to another episode of the Smart Real Estate Coach Podcast. Your source for actionable real life examples and advice to help you move to the next level of investing. Each week we help you make a quantum leap in your business, your finances and or your life. We want to help you take back control, help you thrive during chaos, and lead you through the current crisis to a better tomorrow. For more resources, check out smartrealestatecoach.com and be sure to give us a rating and review on your favorite platform.

Good morning and welcome Wicked Smart listeners. This is Chris Prefontaine and today my son in law, Zack beach and partner is with me with Smart Real Estate Coach and follow along with our mission to help people actually get stuff done instead of go out and get caught up with all the shiny objects. Our focus with these shows is to get you some real experience in front of some real people that have been around, not just in theory and not just as great marketers. In addition to that, we love giving stuff away weekly in our raffle, as you probably know, and if you're new to this, all you got to do is rate and review us. You take a screenshot of it, we want your feedback. Send that to podcastmartrealestatecoach.com and we're going to stick in raffle for a free gift. This week's review, randomly selected. As always, I'm going to read it a must. Listen, I just wanted to take a moment and say thank you for creating such an impactful podcast. I believe that we all have a voice that deserves to be heard. Thank you for putting this into the world. Well, that was a pretty broad statement. I really appreciate that. All right, I've got a wicked cool announcement coming up, guys. We have for the first time back live, the Wicked Smart Summit. As many of you know, many of you attended. We had an amazing QLS Live event 22, which was the first time back in the ballroom for that event and it was a game changer for so many people. Lives are being changed right in front of our eyes. You can be next. We want to have you at that event and as such, as a Wicked Smart listener, we want to have you at the Wicked Smart smart summit on March 29th and 30th and we want to offer you a 50% off ticket that's for you for this week, for the podcast listener only, you're going to go to smartrealestatecoach.com summit50. That's going to get you into the Wicked Smart Summit on March 29 and 30 for 50% off. With that as a backdrop, buckle in here while we bring you the next dualcast with Zach and myself. And today we're going to spend some time and hang out with the note master buying and selling notes, Mr. Scott Carson. I'm not to get too caught up in his bio, guys. He's an expert. He was on episode number 323. And as part of this series we're doing to run up to the Wicked Smart Summit virtual event that I invite every single one of you to be at. And I might have some special ways for you to do that towards the end of the show, actually. But as a result of our thinking through how can we impact you the most at the Wicked Smart Summit, we're bringing Scott Carson for the first time to the event. If I said to you come see Scott only come learn how he can engineer deals using paper and bring creativity to a whole new level, that alone is worth you coming. Scott's been in the mortgage and finance and banking industry since 2001. He's an active real estate investor. That helps. He's been doing that since 2002. He's been actively buying notes on residential and commercial properties since 2005. I could go on and on. Guys, I want you to dive in here with us. All right, Scott, So welcome back to our awesome conversational piece here. It was good to hang out with you and I wanted you back.

Hey, man, we had a great time and when you have like minded individuals, it's a fun, fun time. We could spend the whole day talking real estate and marketing, all that great stuff. So honored to be here.

Awesome.

Yeah, don't worry, this one will be even better because I'm here as well. That's right.

I knew something was going to come out. I just didn't know when it was going to come out.

All right, is he the wicked smart ass?

Yeah, that's why he has the hat on today, Scott. So if you watch, if you listen to this on the podcast, you guys, you might want to go to the video. Might be entertaining today. Scott, this is what Zach and I always say with the note world and I know you and I may have talked about this and we can give these guys something to look forward to to come see with the event because you're just awesome in the space and an awesome speaker in general. So that's the Wicked Smart Summit event for the listeners we are always careful with. Okay, look, there's the entire note business that Scott knows how to crush and then there's the deals that we do on terms. And you can do a whole bunch more when you understand Scott's world. And so with that as some context, maybe you can talk a little bit about what we might see at the event. And then Zach.

Yeah, I mean with 2021 being another crazy year and with everything that's happened the last two years, we know that the subject to deals, you have a ton of people out there that are struggling to pay their mortgage, being laid off or they haven't paid in two years. And now some of the banks are wanting to get caught back up. That's the world that we live in basically as a note investor, being the bank. Yes. You have the origination side of creating notes. When you guys do such an amazing job with wraparounds and assignments and stuff like that. We as a note investor, we see deals usually 6 to 12 months before most people ever do. We're often picking up deals before the borrower and the bank have come to some sort of resolution. Usually what we're seeing is buying deals, buying notes where the borrower hasn't paid in at least six months. I mean I just got a tape in from one fund with 250 different non performing notes where they haven't paid in at least six months, sometimes six years.

Wow.

It gives you an idea. And these funds, you know, they don't want to foreclose or they started the foreclosure process with the pools. But so, so it leads to a lot of opportunity where we're picking up deals, you know, at 50 cents on the dollar of value or whatsoever is less. And that gives us a lot of flexibility. Structure payments with the borrower to keep them in their house. If they want to walk away, great. Well, we'll let them walk away. If they want to let somebody come over and assume the mortgage will let them do that too. Well, so what we'll be talking about is just a whole different way to, I guess you can go up the food chain, up the river a little bit to direct to the banks and how the banks have a lot of the stuff causing troubles, causing problems on their portfolio, whether it's both residential or commercial assets as well. So we'll show you how to find these deals. We'll talk about what to say, what not to say and how literally it is one of the smallest niches in the real estate industry. It's been around forever. I mean if you ever watched a big short, you have a bit of an idea about it. But when it comes to what I'll be talking About I'll show you how you get these banks to call you with deals. We don't do any direct mail, it's all via LinkedIn or email blasts and just touching base with these bankers on a regular basis so they become a repeat deal source every month or every quarter.

Can you talk about like another little piece of this whole thing is in my opinion and like you inside the comment on this. Once you understand just a little bit about your world you do tend to. I know I did operate a little differently conference wise in deal structure creativity when you're talking to sellers. Right. Can you guys just maybe comment on that and Zach might have a question and then I'll be quiet.

Yeah, Zach, do you have a question on that or you want me to hop in there first?

But no, you go in there, you're the.

Okay. So I would tell you right now if you're listening to this, you need to get over and watch the video because Zach's jacket is freaking awesome, man. It reminds me of the movie American Gangster. It's not quite chinchilla but is looking very pimpish man. That's a wicked smart. Nice.

You can take my mother in law for that.

Oh, good stuff. So yeah when you, when you get into the note business it does make you think differently like what Chris mentioned about because we approach buying the debt differently than buying the real estate. Now you've got to be a real estate investor to understand the value of the property and what's going on the market days on market stuff like that. But approaching as a bank, we don't get scared on bankruptcy deals like a lot of investors do. A lot of traditional investors, if the borrower files bankruptcy, they step away from evaluating the deal and going forward. We love bankruptcy deals because now it gives us an attorney to talk to and we can still create either a payment stream in a BK13 or take the property back in chapter seven. So the structuring aspect of it, you're looking at the debt and you're entitled to what the bank is owed because you're the bank. So as we all know, the bank always gets paid one way or another. And one of the great things of being in the note business is that we do have multiple exit strategies, multiple ways to part of the term proverbially skin the cat to make things happen versus just taking over the property. It's actually making money keeping people in their houses as well, which is, it's a different mindset. I mean it was one mindset that I struggled with the first two Years of the note business because I came from the fix and flip and I want to own their property. No, I don't want to modify the loan. I don't want to keep the borrower on the property. But in the note business we actually make a lot of money. Really the best ROI for us is actually when we do actually keep people in their houses by modifying the loans or tweaking the loans and as I say, make America great again, one default to borrower at a time.

Now I can tell you that the first time I was exposed to the note world and I spent two, Chris, myself and Nick spent two days down in Texas. It definitely clicked in my head a couple of different things. Number one was there were a lot of buyers out there that had large, larger, non refundable deposits that wanted to be buyers than we had previously thought. So that was like one light bulb that went off in our head. And then secondly, Chris and I automatically began structuring, especially installment sales and taking the taking title more often than we did before, specifically from lease options that we already had under wraps. And we just went right back to the seller and said, hey, if we give you a little bit of money now or can we create a couple installments in order to take title now? So that way we could then structure longer term deals. And that's certainly where our head is at now, especially with the uncertainty in the market is longer term deals. Taking title is a major piece to our strategic decisions right now. So just that in general when I stepped into the note world, although it may not have anything to do with buying notes, just changed the perspective. So if you're just coming for this, coming to our event and Scott tells you one or two different nuggets that just change the way you view these deals, it's absolutely worth doing it. So that has been a huge change in our business. Cause you talked about sub twos and people not being able to pay their their loans right now. And that's a some that we're screaming from the rooftops inside our community is to start looking for these deals because people need help. People need a lot of help right now. Which leads me down this path because I was on your website before we came on here because I'm like, who the heck is this Scott guy? You're right. And he has a great video and he was talking about my clothes. You should go watch his video. And his college shirt has lots of fun colors on his right nearest risk. Trust me, it's totally worth it. But you have this slogan in There it says win win scenarios or creating win win for those involved. And a lot of people wouldn't think that in the note business. And you kind of allude that to earlier. So maybe talk about how you're able to maybe a little bit more depth, create a win win scenario. Because that is something and that's a philosophy that we embrace as well when it comes to these terms deals.

Yeah. Glad to man. It is one of the biggest things that we, I'd say it's one of our key components, key virtues is really to create win win win scenarios for everybody involved. It's a win actually scenario. Start off with a bank because they're moving this bad debt off their books. It's a win. Most importantly for the homeowner, we're able to keep them in their house and then either restructure the by keeping their house by either age, just giving them an opportunity to get back on track. I mean everybody goes through financial hiccups at some point, you know, you know, Chris has talked about, you guys talked about what happened back in the 2008 timeframe and I went through difficulties there. And then also earlier on when I first got into real estate, like many people do, doing stuff the wrong way. So we love to give people that opportunity. Hey, if you want to stay, great. Let's work out numbers that make sense for both parties. You know, pay, you know, stay. But let's create something. I know you're a year or two behind. Let's take that year payments and put it in the back amount or if you, every extra payment you make will forgive two payments or like one lady, we had her make 12 on time payments and she'd been trying to do a loan MoD for four years. After four years we ended up buying that note. And then after a year her making on time payments to us, bringing a little to the table. We dropped her interest rate to zero. So every penny she paid went to the principal. So she paid off her house. Instead of 33 years in six years and we still came out smelling really good with great roi. So there's some great ways to structure deals like that. And then of course it's a win for us and our investors because we're usually making above average returns by taking stuff down at bigger discounts without having to do a lot of the overhead, a lot of the marketing with upfront cost of marketing is very, very simple. Evergreen market, as we like to do. But that's the three win process. Win win win. If it's not a win across the way for all three parties. It's not really a deal. If it's not a win for the borrower, they're going to default again. Then we've got to go the foreclosure route, which we don't like. If it's not a win for us as investors, that's not a good deal. But it's not a win for the bank to get off their books at a price that makes sense. It's not a win for them that clogs up their their books as well. So that's why we really believe in that win, win, win philosophy. And we always approach it too, is a little bit different mindset. We don't approach it necessarily as a real estate investor. Oh yeah, don't get me wrong. We get excited about some of the deals we do. But it's also, okay, what's going on with that borrower? What's the issue with it? Can we help them in some sort of fashion? It's gonna be riskable. You don't wanna give them an inch or they'll take a mile. There's all. But here's the thing. Most people think that a lot of the people that have lost their jobs aren't paying their payments over the last two years are bad people. That is not the case. 95% of people out there want that dream of homeownership. They just have had a bad rap or something bad happen to them. And we make our money by working out those nightmares and turning that nightmare back into a dream of homeownership.

Scotty, I want the Wicked Smile listener to hear that win win thing again. Because I'm not saying there's anything bad about people that just go out and do transactions. It's not me to choose. But I do know that in our community, for whatever reason, we attract that. And so it's no surprise that you and I have had. Now this is our third conversation on a show and that you're coming to the event because we share the same philosophy. Really? I just want to point that out for the Wicked Smile listener because you're in the right hands. I go on shows and I say. They say, what should someone do? Well, go find someone you can kind of relate to and that you can morally and ethically get behind. That's what you got when you come to the Wicked Smart Summit event. So it's going to be cool. I got a question. You said Covid drove a lot of this craziness, right? And people defaulting sadly. What about what's your opinion because that's all it is at this point, I guess, is the interest rate situation going on right now. We're going to be seeing these guys on March 31st and April 1st. Who knows what it'll be? But what's your thought right now on the rising interest rates? Because for us, it's going to drive more business as they flush buyers out of the market. What are your thoughts?

It's the same exact thing. It's going to flush a lot more business out for us as well. We're excited about that. And here's the thing, though. We're not really buying a lot of the newly originated stuff where people are going out and financing new homes. Most of our stuff's, you know, at least a year old or longer in a lot of cases. So it's all back. So. So while the interest rates are going to affect a lot of things, I think inflation is having a bigger impact on our business because I think if you're sitting on the sidelines and you've got money in an IRA or a certificate of disappointment or something like that, it's not making anything. You've got to really do something now to take action to have your money keep up with inflation. So we're actually seeing more of an impact of investors like, hey, I got to do something. I got to put money to work. So it's actually. You're going to laugh about it. It's reducing our cost of capital because Instead of paying 10 or 12%, we're literally being more competitive with like the banks are paying 0.01% in accounts. We'll give you a 5,6% to borrow your money long term and give you 10 times. The bank is offering to go out there and do something without you having to do a lot of work. So that's, that's the thing that we see on impact. Interest rates will rise, it'll get rid of buyers out there. But on the term side, I think it's going to make it more important, especially if you're offering terms. There are a lot of borrowers out there that have money and want to get some, but they may not qualify now or other things like that. It's a huge opportunity for taking on assets and doing like, what you guys are doing with the subject to or wraparounds and finance the property. We're excited about what 20, 21 and beyond has to offer for us.

Cool.

Yeah. And as we go wrapping up here, we're big believers in having a business model which I'm going to guess you're going to say is the same as yours where it can withstand all storms. Right. We have Covid. We're also a lot of people talking this top of the market, things might go down. How does your business model, how does it pan out? Going through different levels and cycles in.

The market, it's done really well. We did have some borrowers that asked for forbearance agreements during the beginning of COVID but most of them came back on track. The beautiful thing is that with us buying debt, we're usually leveraged across a bunch of assets. So if something dips, it's not that big a deal. There's some opportunities to go back to that bar and say, okay, what's going on? Let's get you caught back up. The fact that we're buying assets usually at a significant discount, not usually near. We're not paying really over 70% of market value for these things. So that gives us some flexibility. If we've ever got to dump an asset or sell an asset off, we can still move it to other investors or sell the asset outright to other people at a discount. That's still a win win. So if we need to dump something, we can.

Awesome.

I love that. I love that. So as you guys can see, come Joy. Enjoy the event. The combination of the two different niches here can create a very sustainable long term business that can help you through any cycle market cycle. So I'm super excited to spend some more time with you, Scott and appreciate you coming by.

Hey man, looking forward to it. You're gonna have to bust out that jacket or I might have to bust out a Robert Graham or two just for the heck of his act.

Okay. Hey Scott, we do these guys a disservice. I'm thinking we got a month left before we jump here. We got a month left before the event. Five weeks. So why don't we let these guys, if it fits their schedule and if not, they can do it later. Get to one of your note weekends. I'll give you them the link, but why don't you explain it briefly. And the link is smartrealestatecoach.com noteweekend we'll put it in the show notes, but just give them an overview because if they do that first, if it fits their schedule, they'll come to that event and get so much more out of it. Right. So fire away.

Yeah. So look, you're not gonna learn note investing in a three day class. There's a lot to cover. But this is why we give. We have our Note weekend classes, Chris. It's a one day kind of the Cliff Notes version of note investing. We show you how we find fun and flip a lot of these deals as the higher level aspect of it. And it's a great starting point. It's a great way to learn the terms because it's a little bit different terms and what we focus on a little bit different mindset being the bank. And so yeah, we teach this class monthly, usually the third Saturday if you get uses Chris's link there, it'll get you in at no cost. You'll get the replays even if you can't make it live to the class before you can catch the replays. Watch that stuff and be ready to rock and roll and understand more at the at the event.

Love it. Thanks for the share, buddy. Everybody go to wicked smart summit.com Zach and I and Scott will see you on the 31st and the 1st. Make it a great week. All right, Wicked Smart listeners. That wraps up another dual cast with Zach and I and I hope to pull some nuggets out of this episode and I hope, I hope you're going to be joining us. Go To Wicked Smart Summit.com I tell you what I'm going to do. I just thought of this. As I was saying, I'll give you something special at the end. I'm going to say this to the entire Wicked Smart listeners database. I'm going to give away 10, 10 virtual tickets to Wicked Smart Summit. I've never done it on a podcast. You can go back 300 plus episodes. I've never done it. I want you to be there. I want you to experience what Scott's going to bring to this event. Here's what we're going to do. This will be timestamped so the first ten of you that get an email to podcastmartrealestatecoach.com podcastmartrealestatecoach.Com and in the subject line you put Scott Carson free Wicked Smart Summit ticket. Scott Carson free Wicked Smart Summit ticket. You're going to get a free ticket. I've never done that before. So if you yanked an idea or a 10 out of this, don't forget to rate and review it and send a Screenshot over to podcastmartrealestatecoach.com we're going to enter you into the raffle this week. Our drawing winner from the review I read earlier in the show is from Robert Woodrw. Robert Woodrw. Robert, I'm gonna do something different for you too. We already gave a free Ticket away to the event. So what I invite you to do is go to wickedsmartgear.com pick out three items. It can be the Wicked Smart T shirt, it can be the Wicked Smart hat, whatever you want on there. There's some other gear. Go ahead and email podcastmartrealestatecoach.com Pick three items and we'll go ahead and arrange that for you. We'll let you know how Wicked Smart listeners, we appreciate you and we want the best view as always. And what we've learned over the past several years is the way to do that is to immerse yourself with us as much as possible. As much as possible. And I just gave away 10 free tickets to wicked smart summit.com just email us, we want you there. But all of you that didn't get the chance to do that, maybe you heard this episode a little late because at the time of this release it was about five weeks to the event. Go ahead and go to wicked smartsummit.com I guarantee you you'll consider it time well spent. I guarantee it so much. When you attend the two day event on March 30 and March 31. If you can honestly say that it wasn't the absolute best spent of your best spend. Excuse me, of your time, I will refund your massive ticket price. Only kidding. It's ridiculous. It's less than a few hundred bucks. I will refund it for you though, because I am 100% certain that you will get the most out of that event by being immoral with us for two days. Worst case, you can't make all the sessions. You're still going to get the complete recording of the event just because you have a ticket. With that as a backdrop, go off it, make it an outstanding few weeks and we'll see you @Wicked Smart Summit.com now, just a brief thank you to our sponsors, Paul Dion, our tax specialist and CPA who can service all states for all your accounting needs. You can find Paul in the sponsors section of smartrealestatecoachpodcast.com as well as the show notes.

Thanks for listening to the Smart Real Estate Coach podcast. If you're ready to invest in yourself and take your investing to the next level, check out our 90 day jumpstart program by going to smartrealestatecoach.com jump. That's smartrealestatecoach.com Jump because now is the time to act boldly in this unprecedented market shift. Sam.