EP 414 – What I Love About Note Investing

This is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property for pennies on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now, here's your host, CEO of We Close Notes, Scott Carson.

Good morning, good afternoon, good evening, everybody. Welcome to this episode of the Note Closure Show. As always, I hope you are rocking and rolling, but I just thought I'd take a second to share a little bit with you guys here at the end of the day. Some things that I love about the note business, but I titled this what's Love Got to Do With It? You can love real estate, you can love note investing, but there are some specific things you have to keep in mind when it comes to where the market's at to make sure you don't fall out of love really fast. Notes can be a jaded evil sometimes that can really stab you in the back if you don't watch out. Now, what you have to realize too is the industry's changed quite a bit over the last 10 years. So if you took a workshop five years ago or 10 years ago, or even really two years ago, there's been quite a few changes to it. But this still comes back to three things. Three things that I love about note investing. One is we see deals that nobody else sees. We're seeing deals six to 12 months before the reos, the fix and flippers, all those people fighting each other for scraps, the foreclosure auctions or trying to buy off the MLS. They never see our deals. We see stuff six or 12 months ahead of time. That's the first thing I love. Second thing I love about the no business is we get better pricing. We're getting a lot better pricing than what those people are paying out there as well. If they're paying retail or paying above 85% or greater, you're overpaying in some cases just to try to do a deal, try to put some capital work. All right, so those are two things. And the third thing is the multiple exit strategies we have. I mean, we've got a variety of exit strategies, especially buying non performing notes that you can make money out of performing, get it re performing, you can modify, you can do a trial payment plan, you can wholesale it, you can buy it and then sell it really fast. You need to make things. You could do a short sale, you do a loan assumption. There's a whole variety of Things that you can make work here. But I am just seeing some things out there in the world that I want to make sure and share with you because yeah, I love note investing, everybody. Oh, I love being the lean lord. What's love got to do if there are specific things happening in the market that are going to stab you in the back? Like I'm seeing people talk about, oh, you've got to make sure you're buying performing notes at 85% or greater. I'm like, why? Why is that? If you want to buy and use them for your own funds, great. But there are people out there teaching that, oh yeah, you can't buy performing funds. Not for me Anyway. Less than 85%. We're working on a portfolio right now well below 85% of some performing notes. I mean there's deals out there if you'll go to work. That's one of the biggest things that I dislike. There's a lot of people out there that have popped up as educators who don't know their elbow from their. They've never lived through a downturn. All they've ever seen is their asset values go up, go up, go up. If you're going to really love something, you got to be ready to prepare if the market goes up or goes down. Making sure that you're leveraged properly, making sure that you haven't over encumbered the property, making sure you haven't had more. Overfunded the deal and I mean overfunded the deal, over invested in the deal. And now if it does take a turn or it drags on that you're not going to lose money on things. So I joke about this a little bit and that's why the whole title of the team what's Love Got to Do With It? Which is a story talking about how she was beat up by her ex husband and things like that. You guys can get beat up pretty good in notes. I've been beat up pretty good notes from time to time. I mean, I still love this industry but it drives me batty. Some of the stupid I see out there. There's a fund out there selling some stuff off at like 80% of UPB. Non performing stuff. And I'm like, yes, there's a lot of equity things but that still doesn't make sense. You start running some numbers, it just doesn't make sense. Or you're seeing some funds that are moving assets. It's just all their bottom of the barrel stuff. We're seeing that with condor. Condors. Oh, yeah, we got a bunch of stuff like, dude, I don't even want to waste my time with that because the fact is it's so nasty, so much nasty stuff. And you're not going to sell it at a price that makes sense. You're hoping that is what is happening out there. There are a lot of funds. There's a lot of people trying to sell you stuff that isn't gonna make good. They're selling you a box of chocolate, which is a box of sh. All right, everybody. So you're watching this. Share this. I would love it if you're sharing. If you're watching this live, you're listening to this, you're gonna want to take some notes here really fast because there are things that are happening in this market. I'm getting more phone calls from banks in the last 30 days than I have in the last, really, the last nine months when I'm going to a networking event in Dallas. And commercial brokers who have notes are walking by there to find some stuff that should tell you some stuff. Once they tell me banks and stuff on their books are looking to get rid of. I mean, I've got a deal that we're working on through in Alabama right now that we just got the paperwork on, and we're going to another stuff on a bit of a greener industry out in California right now on a couple deals that we're looking at. The thing you got to realize, everybody is, if anything, if there'd never been more important, make sure you stick to your numbers, make sure you walk through, make sure the deal that you're bidding on is common sense. Underwriting it makes sense. All right. You have to realize there are some institutions out there that don't really give a rat's about you. There's some educators out there don't give a rat about you. You have to realize that there are people out there that just want your money. They just want your money, and they'll take it and say, screw you. And that's what you have to realize as a note investor. It's a buyer beware area. It's a total buyer. Nobody's gonna give you your money back if you don't do the work that you need to do. I had somebody who bought a couple assets. Not from me. They bought it from one of our sources. Then they never reached out to the asset manager. They never reached out to the servicing company. I never reached out to the collateral company. Six months go by, then they're like, hey, where did any of my Stuff go. I'm like, hello. You're supposed to reach out to these things. These are things we taught you. Call this person. Call this person. What did you tell? You told literally, the lender to send the stuff here, and then you didn't reach out to the person that you're having it send it to, and then they send the stuff back and they can't find it. That's not on anybody. That's on you. That is on you solely. And you have to realize everybody, just because you love the idea of being a note investor, there's some of you that aren't cut out to be a note investor. There's some people out there that are doing things that I'm just like, what are you doing? It's a different world these days than it was a couple years back, because you are. There is pricing that's gone up a little bit. I told a bank today, hey, you're smoking a lot of crack on some stuff that's been defaulted for over a year now. Two years. I'm like, you want 80 cents on the dollar? No, sir. No, thank you. I appreciate that, but I'll pass. Be smart. These days, if you're seeing tapes floating around or our buddy Chris Sevigne posted in one of his groups talking about, hey, it was funny. Saw a joker broker talking about deals and then seen the people that opt into that or posted that all these joker brokers that we all know are starting to opt into the same thing, hey, send me a list so I can send it all around. I just have to laugh. You know, there's some joker brokers. Oh, yeah. If you get an approved bid, you're Gonna put a 10% nonrefundable deposit down and closed in 72 hours. What kind of smoke are you freaking smoking out there? So I'm trying to shout out to you guys, because the thing I have gotten. And I had a conversation with three people last night, called me up. I had a couple of people I had conversations with, and I, you know, we were at the booth at the DFW REI meetup on Tuesday night. Great meetup. You know, several hundred people there. And the lady comes up to me, oh, I'm a note investor. Oh, really? What are you doing? Well, I'm originating notes. I'm like, okay, tell me about what you're doing. Well, I bought a house and I rehabbed it up, and I'm gonna offer a note on it so I can create cash flow. I'm like, wait a second, how much of your own Money do you have in the deal? She goes, I got quite a bit. I funded the whole thing. I'm like, so you got all this profit, you're gonna tie up in the notes for another 10 years? Well, it's gonna get cash. Yeah, but wouldn't it make more sense for you to take that, sell it traditionally, take the capital back and now go buy two deals and then would it make more sense to take those two deals and turn them into four deals and turn those four deals into 16 deals or eight deals? And she just looked at me blank. I'm like, people are not running the numbers. They fall in love with an idea of owner financing. And I think it's a great exit strategy. If you can't sell the property traditionally, if you're over encumbered or if it's got some title issues. Look, I'm not bashing owner financing. What I'm bashing is the jack out there that aren't sharing all the information. And if you're an investor, you're based off of a number. And if you borrow money from people, you don't have the flexibility to own or finance a property a lot of times, because if the deal is at 12% or 8% or 6%, but it's a 12 month deal or 18 month or 24 month deal and you owner finance it, you're screwed because it's going to drag stuff out, you're not going to realize the profit. Oh, I'm going to get $800 a month for the next 12 to 24 months. Oh, I could sell a partial off. Who wants a partial? I don't want to work all my off just to have somebody else take advantage of my deal. So be careful out there on who you're learning from. Be careful out there and to listen to what they say because there's always two sides. Look, non performing notes is not for everybody. I'm the first one to tell you, hey, a lot of people just need to focus on performing notes. A lot of people just need to focus on a flat pass of return. If you're not going to do the work, no offense, you probably just need a passive return. If you want to be a little more aggressive, okay, fine. We have to realize there's risks involved with that. With a 12 or 24 month deal. There's risks involved with foreclosing, there's some of that stuff that's going to happen, but you want to make sure you're still priced right. So if the market does drop south, you're still Sitting where you can liquidate that asset, sell that asset off and still be sitting aces high. But I seen three or four people last event and just, just really bothered because I'm literally like, really? You're going to go do all this work, borrow other people's money or family's money, rehab the property up and then turn around and offer owner financing without even offering up for traditional sale? That makes no numbers. It makes no sense. Number wise. I'm like, could you sell it? Oh yeah, I could sell it for. I probably net 90, but this way I can sell it at 110%. I'm like, no, great, go ahead, try it. The numbers still don't make sense. Learn to run your numbers on your calculator. Learn to look at things. Even if you took a 5% hand, sold it at 95% or even 90 cents of the dollar value right now, and you're into it at 60, that 30% is basically a 50% return. 30 grand profit divided by 60,000, what you invested in, invested in rehab, stuff like that, that's a 50% return. And if you did that in less than a year, great, you go and do it another time. But if you tie it up, you tie it up for a while, you're not gonna see 30 grand come back. You're only gonna see $800 or $900, whatever that monthly payment is. And that's the most frustrating thing, the most frustrating thing that I see out there. I see people talking about subject to's and taking over properties. Subject to right now, like, this is the worst time to be taking over subject to properties. Now, unless it's, let me make a caveat, unless you're getting something that's got a very low interest rate, a ton of equity, that's different. But if you're taking over an asset that is full value right now, full value, and the market is starting to dip south, you're just gonna get stuck on the hook for, yeah, maybe it's in somebody else's name, but you can't do anything with that for the most part. You have to understand, I talked to somebody the other day, like, oh, I'm doing this deal. I'm like, okay, what are you making on? Nothing. Like, why are you doing it then? Well, I wanna provide a service. A service that you're just minimize your value and you gave yourself a negative value. Not just zero, but negative. Cause you're doing all this work for free. That's not smart investing. That's not something you should be bragging about. Though. Oh, I'm gonna work for free. Screw that. We're investors, Entrepreneurs. Maybe you should be. Called yourself a fakepreneur. Not a douchepreneur, but a fakepreneur. And I'm a little fired up today just because I have talked with so many people that have been brainwashed on some things. I'm like, wait a second, have you run the numbers on that deal? No, I'm like, run the numbers. Let's work through this really fast. See why this doesn't make sense for you. Unfortunately, not everybody gets it. Not everybody gets it. And while yes, it's great, love to be a note investor, I love being a note investor. I love it because there's deals that make sense and there's deals that don't make sense. Not every deal makes sense right now. And if you're trying to put a round peg in a square hole because you're trying to go to your tool belt for something, do yourself a favor and don't bother listening to this podcast anymore. Go on to something else. This is focused on the note space, direct note space. And I was going to do a podcast just on sub twos and things like that. I'll do an episode probably next week on it. But you have to realize, everybody out there, please do not drink the Kool Aid. Please run the numbers. Please ask, well, what about this happens? Don't be afraid. Especially if you're in a workshop somewhere, don't be afraid to ask, well, what if this happens? What if this happens? Well, then you go this route, then you go that route. What you will find is oftentimes things won't always be the same. And sometimes, especially some people out there won't like that you're actually rocking a boat by providing truth. So be careful out there, everybody. I love the note business. I love what we do. I love helping you guys make things happen. But be smart, don't be stupid. Use some common sense. Make some bids. Look at your bids you're making. Make sure they make sense number wise. Don't just throw them on the board or, you know, throw them against the wall and see what sticks. Be smart in what you're doing and be focused on things. I see. Hey, Laura Blanc, good to see you out there. Jeffrey Wolfe, Wolfman Are bank seen a downturn in the market? Yeah, they've been seeing some stuff down. I think Jason Bible posted something just recently about that. A huge amount of United States is already three months behind their car payments. If you start thinking about that, that's going to affect mortgage default rates. It's going to affect some things. I think a lot of people are way too optimistic about the market. I mean, I may be the Debbie Downer, but I'm just trying to prepare you guys out there when something does happen, which it will, that you're a okay and ready to go. All right, everybody. That's what I'm trying to do. That's what I'm trying to do. You know, I'm not perfect by any means. You know, I'm far from perfect. And we have our plenty of peaks and valleys like anybody else does. But you always know that I'm going to shoot you straight. Be careful out there. Don't drink the Kool Aid that everybody's running around. This is the best thing since sliced bread. Notes can be great if you know how to do it right, but if you don't do it right, you're gonna get screwed, and you don't want to get screwed at all. All right, everybody. So I leave you with that. I know. Am I just a Debbie Downer myself here? Not really. I just want to see success from everybody. I just want to see people that are really doing good things, and people have worked so hard to be able to put their money to work and really help them get above and beyond where they need to be. So go out, make something happen, everybody. Enjoy your Valentine's Day. Obviously, this is. You're going to hear this afterwards. Hopefully, you had a great time. Enjoy your week, and we'll see you all at the top, everybody. Bye. It.