E67 – How to build a thriving business after LOSING $40k on one event, We Close Notes Scott Carson

How would you leverage a $40,000 loss? Are you kidding? Scott Carson of We Close Notes joins us today to talk about leveraging talent, skill, ability, and shifting all of that online. Join us today. Knucklehead Podcast. Choose not to live in a world of filters. Realize your mistakes. Set the foundation for your success. Get some wins. Knucklehead Podcast. Well, welcome to another edition of Knucklehead Podcast. You got with you today, the Knucklehead Stephen. And I'm excited about having a gregarious, boisterous personality on the other end of the line. This is Scott Carson from We Close Notes. Scott, welcome to the show, buddy. How are you?

I am doing great, man. Thanks for having me. Really honored to be here.

Yeah, absolutely. Absolutely. Well, as honored as you can be, let's be honest, being on a show called Knucklehead. So it's the whole point of. The whole point of Knucklehead, really, for those of you who are listening, is where we're able to give business owners like Scott people who understand that as they go out there and accrue more throughout their career, they're accruing experiences and failures and hiccups and mistakes that are actually learning lessons. For those of you who are interested in pressing in and pressing forward in business ownership, I'm excited about Scott's kind of embracing of that philosophy. One, just because he led this call off with something that quite frankly, would have sent somebody spiraling down this negative thought pattern of. And they would not have been able to recreate the success ever again. But Scott's been able to parlay that failure into something really cool. Scott, appreciate you taking some time today, buddy. Tell people a little bit about you.

Yeah. So I call Austin, Texas, home. I grew up in South Texas, you know, got a business degree out of college, got in the workforce previous mortgage banker. And Corpus Christi, Texas, actually to be south little small town of Ingleside, Texas. 3,500 people. Dad owned the local hardware store. I grew up being the slave labor for anybody that was trying to put shit together or, you know, I dug ditches to, you know, thread pipe and did everything else in between. So that kind of led me into later on in life. When I graduated from college and got married, I figured out that I, hey, I wanted to be a real estate investor because the time was good. And we bought our first house out of college, 2004, some investment properties, and then the market went south here in Austin. So I became a deadbeat borrower, you know, trying to make six mortgage payments on a private school teacher salary, 3/1 3/2 was not a good thing. Fortunate for me, I worked my ass off. We were able to get the investment property sold, you know, just walk away from them and kept our primary residence. Flash forward a few years later. You know, I was running a mortgage company after being a bank of Virgin P. Morgan Chase for a while and was starting to travel the country with some other investors that I had learned the real kind of creative real estate side of things, started buying property and started fixing, flipping and doing some of that stuff. And then in 2008 when everything hit the fan and the financial meltdown, I stopped on the origination side and then I jumped over the other side where I'm at now, fast forward, golly, over 10 years now where I'm buying distressed debt. And that's my company. We close notes. Our primary focus is that we're buying distressed mortgages from the banks and hedge funds. And our goal isn't to like to take the property back a lot of times and we still do a chunk of the time because the borrowers won't work with us. But our biggest goal is to rehab the borrower, try to get them to stay in the house, get it for cash flow and then hold onto the portfolio for a while. But we still end up foreclosing. But the last 11 years I really hacked out this industry. It used to be for people that had 5 million or $10 million to buy distressed debt with. And when I started doing this, there's only, I would still say to this day there's only maybe about 5,000 true distressed note investors out there that are doing what we do. And over the last 10 years I've done a really good job of marketing and making a name for myself and really helping teach other real estate investors how to dive into this niche. And we want to be business owners in the real estate notes side. But I've made my fair share that I've learned a lot from as well. So love the show. By the way, if you're listening, you better have subscribed and already left a five star review now. All right, go ahead, do that now while you're listening.

I appreciate he did the plug on the whole review and five star, but let's be honest here, come on. I mean at best three and a half on most cases. It depends on the guest Today show five star listen, they're stuck with me as their host. So anyway, as far as, as far as, as far as taking that next step, I, I want to go back to where you Started because you had mentioned and almost glossed over. And I think just for lack of time, we may not necessarily be able to hone in on all of this, but there was a period of time from 2004 to 2008 where it seems like you were able to kind of cut your teeth and get a full, kind of a full understanding of how the market works in general. And then when something happened where when things went south, you were able to kind of leverage that experience. And plus, you're willing to work your tail off, too. But both of those common denominators, between working your tail off and seeing the market, you made a decision strategically to go to the other side. I'm curious, 2004 to 2008, what was your biggest learning experience?

While, you know, man, I took short term.

Was it long term?

It was. I very lucky that basically for four years I almost had like an apprenticeship and I left a great job at JP Morgan Chase where I was making six figures. And that was kind of scary when you get kicked in the teeth and then you're almost broke and you have to bring, you know, pull your assets out of a sling and, you know, I had to go get a job and get interviewed and started working my way up the ladder. I mean, I was doing great@chase. Six figures for most people, that's great as a young kid, but it was always something like, I want it. You know, I had that real estate bug and I failed. And I knew what I did wrong. And then I was very fortunate, like I said, to get introduced to these people. And then I was like, that's what I want to do. I want to be a real estate investor, but I want to learn how to do it the right way, the creative way, where I don't use my own capital. So for four years, while I was running the mortgage business, we were traveling and speaking to real estate investors at all these big exposing conferences. When I wasn't in the back working with a client, I was in the room listening, trying to take as much information as I could and just trying to soak it all in. And then one of the biggest things my dad instilled in me early on, if you learn something new, try to implement it in the first 24 to 48 hours. If you don't implement something and you wait for the perfect time, you're never going to see the perfect time and it'll pass you up. And so that's what I did for four years. I just, I did a lot of mortgages. I mean, we Were doing a lot of, you know, working with a lot of investors. We did. We were doing stuff in 30 different states. And then when the music stopped like it did, I can remember, it's like straight up a scene out of the Big Short when the music stopped with things. I had a couple mentors that taught me along. They're like, hey, this is the time. It's the time to now make that jump. This is a once in a lifetime time. They're like, this is what we went through in the RTC days in the 80s. And I was like, okay, all right. You know, well, should I, should I? And I said, okay, let me do it. Made the jump. That wasn't always easy because a lot of times I'm just dialing for dollars, trying to track down sources, these banks that are going out of business or these asset managers. And I carve a close, ideal deal. Made 35 grand on another one, made a thousand bucks on another one, made six. And I just kind of pieced it together to get the momentum going. I mean, I sliced expenses. I'd gotten divorced in 2008, unfortunately, and was on my own. So I really, I carved back expenses. You know, I was living on peanut butter and jelly sandwiches for like two weeks. You know, sold the house, was living in a. Right, in a room from a friend. Because I was so focused on this. I mean, I was making money, but I was like, I gotta be. I don't know what my next paycheck is. And really dove into it. And so two years went by that I did really, really well on getting stuff together. And so I said, you know what? I gotta get outside of Austin if I really want to do this big. I gotta get out and start making connections across the country. Because I was getting stuff from different places. So I planned out what I thought would be like a 30 week trip around the country, going to the major league baseball parks and talking. And then that turned into a three year nonstop trip of speaking to investors in front of investment clubs and in front of bankers, going in front of their offices and meeting with them and seeing what they had. And it absolutely revolutionized my business and really kind of built a name for it, as now I'm called the note guy. In my little niche of real estate.

Investing across the country.

Exactly. Everybody's. Everybody's in the note game. Everybody is already. If you've got a mortgage, a car payment, credit card, student loans, whatever, you're just making payments on the wrong direction. They're going out of your pocket into somebody else's. With me buying residential and commercial mortgages. We're buying stuff that somebody hasn't paid on in six months, 12 months, you know, 36 months. They're heavily defaulted and often owe more on their property than what their property is worth. Especially back a decade ago, most people owed two, three times what it was worth with everything hit the fan. So we would buy that debt at substantial discounts, like 10, 15, 20 cents of value. And then how we make money is by then reaching out to the homeowner and say okay, do you want to stay? You do? Let's try to create some sort of pay payment plan because that asset still has a value and that's how we make our money is get them on reperforming or if they won't foreclose, if they won't work with us, if they will work with us, we'll give them cash for keys and that's how we kind of make our money. And everybody loves the whole hgtv, Flip this house or Flip and Flop, that kind of stuff, all that stuff. Fiction. Oh totally, totally. But that's the thing is there wasn't really in this in the first few years I was doing it. There wasn't really anybody teaching for the most part of what this is because it's such a brand new industry. You know, most of the buyers of debt was bigger banks or institutions. Well when everything hit the fan a lot of those companies went away and it left a lot of opportunity for a small guy like me to come in and reach out to a bank. And I'll give you an example. In one three week period I was dialing, I was calling Capital One bank, alright, calling on, calling, got transferred, hung up on how many times I got transferred to Pakistan, I don't know. But finally get ahold the right person and she sends me a list and she's. I'm like oh, I can't buy the whole thing. It was 33 page PDF with all these assets in 6 point font. I mean hundreds and hundreds. I'm like I can't buy. She's like no, buy something, please buy anything, buy something. We have to get this off our books. And I'm like okay, great. So you know, that was a million dollar relationship for me over the next few years because we were buying one offs here and there. And then I started marketing and sharing what I did across social media back when it was before it was big and then helped build a name for me to help raise capital and I was just sharing what I was doing. And that led to a lot of great connections, people reaching out to me to come and talk with them.

So my question had more to do with. Whenever you're on the phone with Capital One, all right, you're looking at a PDF of line item after line item after line item of somebody's just problems that they've swept under the rug. At what point in time did you have to go? I think people call it an imposter syndrome, but at what point in time did you have to go? Where do I fit into this mix? There's all of these people who are, I mean, have sophisticated businesses that have matured beyond any, you know, realm of comprehension. And here you are just trying to carve something out and make the most of an opportunity. Did you ever have to struggle with, what am I even doing here?

Yeah, like, how to make lemonade out of lemons is the way I made it. You know, that's the way I looked at it. Like, I get a bank here who's got a mortgage that they value at 30 cents of value, but I look at the underlying asset. I'm like, well, it's worth 700,000 just because they owe a million bucks on it. And then I'm like, talking with the asset. What are you looking for? They tell me, oh, we're willing to take like, 375 grand for. I'm like, okay, you want 375 for a $700,000 asset? Okay, let me work my magic and go find. I was at Missing Link because the banks are so big that they didn't have somebody to go out there and find local investors. And that's what I did. I found my little niche in there. And then I just worked my ass off with, you're gonna crack it. But it's like posting to Craigslist or going out and just emailing, mass emailing a list of people. Investor. Hey, do you know anybody that's interested in this? And three or four people respond. And then I would just, okay, who's serious? Let's take the real information. And I just put them in the middle. You know, make 35 or 10 grand or 100 grand by just bringing people together. And that's, you know, I just found my spot. Their biggest thing was buyers. They didn't have anybody could take that, and I could go find those people. And that's what I literally would just do, is spend days of reaching out and trying to do. I call it like guerrilla marketing. It's one of my favorite books is guerrilla marketing to put the people together and replace the buyers of the stuff.

That they had lost. So the, the, the interesting thing about what it is that you're saying is, well, there's, there's multiple interesting things there, but one in particular is the, the emergence of these education systems around how to, how to replicate this process. And I've heard it said before, and I've heard it. One of my buddies, he's a copywriter and he was talking about how these systems end up making it seem as if anybody can go out and do this. And I'm sure that anybody could. However, the odds are if somebody's willing to pay 20,000, but there's no strings attached in terms of how they're going to be able to guarantee those results. And yet they've been able to. I mean, a broken watch is right twice a day. So when you're, when you're marketing these education systems, how much of that do you feel like is kind of clouding people's ability to make a proper decision as to what's a worthwhile investment? Is it an education deficiency or is it a I'm not willing to go work deficiency? Is it an up market opportunity? Where's the rub there? And how come there's so many different education systems about it?

So it's multiple of those. There's a couple things. Because a lot of people want to write a check and have something done for them. They don't want to do the work. Our work, man, our work ethic in America here has gotten a lot lazier and lazier along with our patients. And I think a lot of it comes from our attention span. I mean, a goldfish has a 9 second attention span, whereas we average 8 second attention span. All right, so you've got to really, there are plenty of great educators out there who are doing it and buying and really providing nuggets. There's a lot of those fix and flippers that are more market centric. You know, like it works in San Antonio. Well, what works in San Antonio may not work in Dallas, may not work in Columbus, Ohio. And you have to understand that unfortunately a lot of people see the money. You know, people, oh, I'm just gonna put it on a credit card. And 90% of people don't do anything anyway, which is unfortunate.

So you say, I'm gonna put it on a credit card and not do anything. Do you have a story of somebody.

Oh my gosh, I, I've paid for stuff that I never ended up doing. I went to conferences and signed up and didn't do it. And that's a big, big thing of me, is that I'm telling people all the time, like, listen, if you're listening to a webinar of mine or you're going through a workshop, if you're not going to take action, and you are one of these repetitive signer uppers and never do anything, please log off. Please go away. I had a conference call with a guy a few minutes ago. He was like, oh, I really want to do this. Well, what's your background? You know, before you spend a sizable chunk of money with me, I think you need to take a smaller class and see if it's a fit for you. Because what you're telling me doesn't make sense with what you want to do, with what we teach. Because what I do is not for everybody. I'm the first person to tell people that. And I've had some of those big companies that come to me, oh, we'd love to promote your workshops. I'm like, yeah, no, I don't need to sell every Tom, Dick, and Harry, because this is not for every Tom, Dick and Harry. And I'm a. I have a little bit different mentality than a lot of the gurus out there. I believe in coopetition, a thing where if you work with people and everybody's working together, they're cooperating together, right? We're going to come and go. But there's also. All of us as entrepreneurs are very competitive in nature. And I'm a big believer that my little nature of what we do is a very good thing. With coopetition. We work together, but we're all out for our own investment. But it's really one of the true things where people working together, you can buy a portfolio from a bank, whereas instead of me buying five or 10, if I got two or three people that are buying five or 10, now we're buying 20 or 30 together, we get a bigger discount and go from there. Not every person is like that out there in the education period. A lot of it's like, hey, how much can I upsell you? How much can I upcharge you? And then it's on you to deliver. And I don't like that. I'm like, if somebody's gonna drop 20 grand, not do anything, I'd rather have them use that 20 grand to donate it to a charity or something else. But I. Unfortunately, not every guru is like that. Unfortunately. That makes sense.

Yeah. No, no, it makes perfect sense. And I like the delineation that you used about the, with the willingness to go take action after the fact. Right. But people, people who are in a situation where they're desperate or they want to go out and they want to make a change because they're so tired of things going the way that they have been, it's not necessarily the most advantageous to make a life altering or, or pattern changing type decision. And so I appreciate the sensitivity that you have towards making sure that it's a right fit prior to the hard close, so to speak. So in your experience, can you tell us about a time when potentially you had to walk somebody through being in debt and help them understand that it's not a bad thing or like help people, help people who have an aversion to debt, I guess be a little bit better equipped to navigate that obstacle.

So here comes, you're making me go back into my financial advisor days and mortgage broker days and things like that. And a lot of people are big fans of the Dave Ramsey thing. Hey, let's pay everything off, save. And I think a big chunk of that, especially with the envelopes and the saving, I think that's a great thing. Or the debt stacking to pay off your debt. I don't think having a mortgage is necessarily a bad deal because it allows, especially if you're buying it cheap. You know, you're getting a 4, 5, 6% interest rate. That's pretty cheap money out there. Still to this day, what a lot of people will do, they're looking at, oh, I'm gonna pay off my house. Well, okay, you paid off your house. What's your house worth? 200 grand. Great. Is that an asset? And some people say yes, it's an asset. And I kind of different. Well, what would you have to do to tap into that 200 grand? Do you need to go to a bank? Do you need a loan? What's that timeframe? 3, 30, 45, 60 days. They're gonna check your credit, they're gonna do these other things. I don't necessarily, I think you could be doing better by having a mortgage on your place. And if you had that 200 cashed out, you could go put that money to work and making 8, 10, 12% doing other things out there. Now if you're not gonna do that, then pay off your mortgage, save your 6%. But if you are gonna take action and you're gonna go out and buy their investment properties or do a little private lending the side, great, go do that. Make you the difference. We know what your mortgage is at and what you're lending out at, that's profit. But if your money's all sitting in the house, you can't really tap into that. So that's, that's kind of the way I look to hey, you know, what are you doing your side hustle? Are you really going to do something on the side, you know, between 7:00pm and 2:00am? Right. If you're not, hey, saving your 401k then. Because if they're getting matched dollar for dollar, that's gonna be the best bang for your buck. And be smart about it, alright? Get financially educated, learn. I mean we still have so much information out there. Take the time. But also be smart. Before you sign up for anybody's $20,000 program or anything like that, make sure the person you're buying from is actually doing deals. And check online. I mean there's great websites like rip off reports and things like that that people have posted if somebody's ripped them off or not delivered on, on their product. And that's the biggest thing in society today. You can check just about anything on anybody and really get a true tale of both sides of the payment. If that makes sense.

No, no, no, it makes sense. So both sides of the equation. So I have some experience in the wholesale market as it relates to food. Right. And so everybody's got to eat, everybody's making 27 diet decisions times 330 million Americans, times how many ever people are in the, you know, in the planet. You can do the math, right. So there's inefficiencies in production and that's where there's opportunities in some cases. Right. It's just being able to be prepared and less reactive and just more proactive so you're not making a bad decision or steering yourself off course. That's why we, that's why we term this show Knucklehead. Because quite frankly there's times when you've made short term decisions. I know I have. And, and it's not necessarily been the best thing for my family or best thing for me or best thing professionally. But unless you're willing to go out there and screw up and get your head kicked in or get your knee bloodied or nose bloodied or whatever the case may be. You got to go out there and be willing to screw up from time to time. Otherwise you're not going to learn. You're just not going to learn.

Yeah, it's impossible not to go forward by falling on your face. It's impossible. I mean you're gonna learn more from Your mistakes, whether it is short term or long term stuff, I mean every entrepreneur out there, great, they get praised for all being on top and being the best of what they do. But what most people don't see is that the two years or the three years or like Daymond John says his overnight success was eight years in the making with fubu, you don't see the things that people are doing to do and you're gonna make mistakes. You have to. Perfection is impossible to attain. And for those control freaks out there, because we all have them in a bit of aspect on this, especially delivering a product or you're working on a service delivered is always better than perfect. I mean a simple thing. You look at Apple, iPhones, how many software versions or software updates has Apple gone through? A ton. Right? They didn't wait till they get the perfect software before they launched it. They would never been in business. You know, and that's, that's an analogy that I always look at. Hey, you know, is that extra 5 or 10% of what we're doing gonna make a big about a difference or can we get it to the market first and then go back and fix that?

5 or 10%. Yep, yep, that's exactly right. That's exactly right. Well, and you're in my case too. I mean if, if somebody's gonna be from Corpus Christi or somebody's gonna grow up and actually spend some time in Nebraska, we've already got things working against us. You know what I'm saying? Or at least me maybe you had the advantage for being Corpus Christi. I know I spent some time in Nebraska so my Midwest folks can throw, throw oranges at me later. Keep the corn in the husks, folks.

I think it's a good thing because I think you have to learn, know where you're from and understand it. The thing is, do you start pretending something you're not? Not only will the people that you're from throw corn and tomatoes at you, the people you're trying to sell to or reach out will can identify that smoke blowing pretty relatively easily and not want to deal with you anyway either too. So the more you can be genuine, embrace where you're from. We all do a couple things. We almost always put our pants on one leg at a time. We all wipe our ass and we all brush our teeth. Hopefully people are brushing their teeth most of the time. But we're all just human beings making mistakes. And the best thing, like I said before, hey, make mistakes and be honest about, hey, I screwed up here, here's what. How can I learn from it? And oftentimes if you've screwed up, the people that may have been screwed up with you or been involved are glad to help you out as well too because they realize we're all got to start somewhere.

That's exactly right. That's exactly right. Well, we started this, we started the show. You had referenced an event that's coming up or you had made reference to it. So is that something that you're okay with sharing a little bit of about what people can find out more information, how can they do that or how can they take action against what you're talking about?

Yeah, I mean I've got. We do a couple online conventions actually. One, one big thing that we do twice a year is something called Note Camp. And it's a three and a half day event that we bring on like 30 to 40 different speakers, educators, investors or vendors in our niche of note investing and real estate investing. It's a phenomenal event. We bring on marketers, we deliver it online. So it's all done via zoom. We usually have two rooms, virtual rooms for people to take advantage of. We record the whole thing to. So yeah, it's a ticket that usually goes anywhere from like 297 to 599 for it. Anybody that's listening to this, if they're interested, just drop me an email at scotteeclosed notes&talk about Knucklehead. I'm glad to comp you into it for the event. So it's a. We'll get somewhere between, you know, 300. It was the lowest one we've ever done, but we had 1100 plus people on it before. A lot of people say it's the biggest bang for the buck in the real estate industry because we just deliver a ton of content. And Note Camp is what we called for. Camp stands for a couple things. Content, actions, marketing and profits.

Wow, that sounds incredible. And somebody who's unfamiliar with that entire business and understanding that, I mean the wholesale business or the middle of the market and being able to understand it applies to so many different industries. It's always fascinating to me to talk to people like you who've been able to, who've been in it for, for as long as you have, doing what it is that you do. So for those of you who are listening, I'm take Scott up to it or take Scott up on that. On that offer. So for the knuckle draggers out there like myself, is Scott spelled with one T or two t's?

It's two T's. Yes. Scottclose notes dot com. If you just type in Scott Carson or the note guy, I'm all over the Internet. It's hard not to find me. I am not, I'll tell you this, I am not the goalkeeper for an English Premier League person. But everything else, when it comes to real estate or not, I'm the main guy that shows up.

That's fantastic. That's fantastic. Well, thank you for clearing that up. I'm sure that. I'm sure that at least one of our audience members may run into that. Well, I appreciate you taking some time, Scott. Thank you very much for sharing some of the struggles, some of the mistakes, and some of the mishaps. I mean, leveraging that loss actually created. It sounds like an incredible opportunity. Not just for you, right? I mean, obviously you've been able to change your business and your life, but really, the people who attend these online conferences, the people who actually are able to go out there and take action, that mishap actually has helped change and influence their life. And that's the whole point of those mistakes. You got to be able to share those and just pass that lesson forward. So any closing thoughts? Anything else that you want to share with these folks?

Yeah, I'm just a big believer in servant leadership. If I can help anybody else rise to the top. When you raise the boats, running the rising tide raises all ships, I guess is the correct comment. I'm not the smartest person out there, and I never want to be the smartest person. When I'm standing in the room, I always want to be one of the dumber ones. But for those that are looking to do something, no matter what it is, it didn't matter if it's wholesaling food or notes or whatever, do yourself a favor. Make 2019 the year you take action. Go out, do something. You'll learn more about it. You'll feel better about yourself. Because the biggest thing you want to have at the end of your days is regret that you didn't take more action. And that's what it all comes down is. Take steps. It wouldn't matter. It's a baby step or something. Take step and it'll build momentum and you'll be happier with yourself and prouder and sold with the family around you as well as they see you take.

The steps and learn and grow. That can get lost pretty quickly if people don't stay disciplined to that advice. I appreciate that. How can people find you, Scott, other than Googling Scott Carson at we close notes. So you got some Instagram, some social media pages.

Yeah you can find me on most of the social media networks at one. Scott Carson. I'm all over the place our YouTube channel as well. We closely got thousands of videos out there for people to learn. You know we've got the little, little podcast called the no Closer show as.

Well what we talk about as well too.

But yeah just, just look weclosenotes.com is the best. Our website, everything's there and always glad to help out anybody out there.

That's fantastic. We appreciate you taking some time guys for those of you who like Knucklehead we come out with a new episode every Tuesday. You can find us on Instagram, Facebook, LinkedIn, Twitter and on on YouTube. We've got some videos there too. So we appreciate you Scott. Thank you very much for taking the time and for everybody else we'll see you soon. Take care.