How to Find, Fund and Flip Non-Performing Real Estate Notes with Guest Scott Carson from Kim Hughes

Welcome to the Unstoppable Real Estate Agents podcast. I'm your host and real estate productivity expert, Kim Hughes. Join me as we focus on real strategies and implement real solutions designed for you to achieve major success in your business and life while getting you organized. All right, here we go. Okay, Scott, thank you. Thank you so much for joining me today on the Unstoppable Real Estate podcast. And what I'd like to do is have you kind of introduce yourself because you're going to have a lot of detail to share with us, but just to kind of let people know that this is Scott Carson. He is the owner of We Close Notes. He is also known as the note Guy. And what he is going to share with us is his years of experience as he niched in the real estate industry working with distressed mortgage notes. Did I get that right?

You got it. You hit the nail right ahead. That 16 penny nail is flush with the.

Okay, let's do this. So I am very interested in this because I think this is just an awesome way for agents that have clients that are investors. I think you can share a lot of great info here, but but also for those that are just interested in investing, you know, so I'm going to just open it up and let you talk because this to me is a very fascinating topic. So you've got the floor.

All right. Well, I'll just kind of share how I kind of got into this. I'm a previous banker with JPMorgan Chase and a buddy of mine started a mortgage company back in 2004 and for basically four years we were traveling the country originating mortgages for investors, you know, home buyers, all sorts of people. And during that four year period, I was able to kind of learn from an active investor who was doing fix and flips, but who'd also owned a mortgage company during the 80s during the savings and loan scandal and had, you know, had some paper, you know, mortgage in their books that they had to sell off and other things. And I really had a really nice four year apprenticeship not only on the origination side of working with so many investors and learning real estate investing that way, but also the creative way, you know, how to create mortgages or how to own or finance a property over how to take over a property subject to the existing financing without, you know, the traditional way of putting a down payment down and getting qualified from the bank. And so when everything hit the fan in 2008 with the great Recession, you know, the big short, I stopped originating mortgages and just started calling banks to buy their paper, to pie, to buy their distressed debt. You know, the mortgage. The first liens from the, you know, on residential commercial properties were borrowers that stopped paying because they couldn't pay and started buying all that debt at a substantial discount. We. We saw a lot of values drop across the country. I'm in Austin, Texas, but I buy 99 of my stuff outside of the Lone Star State, actually.

Really?

Because I. I'm buying. I do, yeah. And I'm wrong. I've got some stuff in Houston and other places, parts of Texas as well, stuff. But I haven't bought anything in Austin in over a decade because I get a bigger bang for my buck by investing in this distressed debt in other parts of the country, like Ohio, Michigan, God's waiting room, Florida. I buy a lot down there, the Carolinas. And my goal when I'm buying this debt and I'm not really buying a mortgage to own the real estate. I'll talk about that in a second. I'm approaching this of a property owner. I'm approaching it to be basically the lender to become the bank. And what we do is when we. These banks that I'm connected with, these mortgage companies, you know, we've built relationship where they'll send me lists of these notes where people haven't paid anywhere from 60 days to over, sometimes six years or 10 years, and we can buy that debt, buy that mortgage at a huge discount. And that's. That's one of the great things, I think, that most people don't realize is there's this niche of investing that's existed for, you know, decades and decades and decades that most people don't know about. Most people know about, hey, I'm gonna buy a property and go to bank to get a mortgage. Then they get a letter from the mortgage company 30 days after they close that their mortgage has been sold to somebody else. And now they got to pay this other company. Well, that's. That's kind of the niche that I'm in, except I'm dealing with. With borrowers who, who can't pay for a variety of reasons. Maybe they've lost their job or gotten sick or gone through divorce or, you know, had Covid, you know, been laid off for a while. You know, we're buying that debt at a huge discount now. The borrower still owes what they owe, Kim. But since we buy that debt as a substantial discount, we're able to reach back out to the homeowner. The borrower said, listen, I know you haven't been Able to pay in a while. The previous bank wants you to pay the whole thing in full or bring the full 12 months or 24 months of back payments to the table to get back on track. What can you pay or what kind of terms are you looking for? If you want to stay in a house, what can you pay? Because if you can't pay, you can't stay. But if you want to stay, let's figure something out that's a. A win. A couple examples for folks out there that like, kind of real numbers, so, like, bought this mortgage, actually, let's say outside of Houston, borrowed 200 and $235,000 on this house. The house is worth about 200, as it says. So they're upside down by, you know, 35 grand, hadn't paid in over a year. But we, the fund, the lender that held this paper, along with a bunch of other stuff, they sent me the list and we saw this one. So, okay, what do you want for this note? They haven't paid in a couple years. I'm like, well, we'll. We'll let it go for 109. I'm like, okay. I'm like, that's pretty good. So I buy the mortgage for 109. We reach out to the borrowers. They don't. They're not even living the house anymore. It's a vacant house. They don't want. They, you know, they don't want to make payments. They can't afford to start making extra payments, stuff like that. I said, well, would you. You know, we'll work with it. Do you want to sign the property over to us and we'll forgive you of the debt? Well, they couldn't come to the table. They were fighting. It was like three. Three kids fighting amongst themselves. So I said, well, if you can't come to an agreement, we'll just foreclose. And so that's what we did. We ended up foreclosing. Even though we offered them even cash for keys to forgive them of this $235,000 in debt, they didn't want to play ball. So we, since we bought the note, we became the bank. We foreclosed and, you know, now we've basically taken that property back, and now we own this property and then fixed it up and sold it on the MLS, you know, in the 200 range. So we made somewhere around 50 grand after repairs and stuff on that. That happens a chunk of the time. But what we really prefer to do, and we even offer this to them and said, listen, Your monthly payments on this mortgage are about 900 bucks a month. You know, if you want, if you, if you want to stay, we're not going to require you to bring the two years of back payments to the table. Can you bring four months? Can you bring 3,600 bucks? Can you start paying a little bit extra each month? Because our goal, if we're buying it at the 109 and they start paying monthly payments to us, it's about a 12% cash and cash return right off the bat. That's a pretty good. Now, if they can pay a little bit extra or we hold that for cash flow for 12 months. Now, after the borrower has been paying on time for 12 months, it's now considered or reclassified as a reperforming note. Now, I could take that mortgage and sell it back to Wall street or back to other note companies as a performing note at 85, 95 cents of value without having to do any legal, without having to do any repairs, just basically starting to collect payments through a servicing company that we hired to kind of do the borrower outreach. So that's actually what we prefer to do, is not to actually own the real estate, but actually work to keep people in their houses. As I like to say, we, we turn problem properties into profitable solutions by really trying to get to give that bar or a leg back into the game. And we're able to do that about 65, 70 of the time. The other 30 is either they just can't do it or the bar is passed away, or they just don't want to play ball and want to, you know, hide their head in the sand and not communicate. And then we're forced to, you know, go the route of legal. When we buy that debt, we are literally becoming the lender and we have all the same rights that the bank does when they come to foreclose or modify or working well. So over the last 16 plus years, we bought over a billion dollars in debt on residential and commercial properties. And you know, obviously, you know, it's been big over the last couple years here, but people are, you know, not paying their mortgage and we still have a, a really great low default rate compared to like we did back in 2008, you know, where it was up to 10%, but there's still, you figure, at a 3% default rate and we have 80 million mortgages in the country that's still, you know, 2.4 to 2.8 million borrowers in trouble that can't pay their mortgage. And with inflation Going up and costs of goods and stuff like that, People are either having to make a decision, do I, you know, do I put bacon on the table to feed my kids or I pay the mortgage? Well, I'm going to, I'm going to feed my kids and keep the power on versus pay my mortgage. And so that's, that's what we do. We buy debt in about 30 different states on, you know, anywhere from a $50,000 property and say, you know, outside of Toledo, Ohio, all the way up to like a, you know, million dollar property in, in, you know, south Florida.

Well, that's, to me it's very interesting because back in the 0809 era, if any agent lived through that, it was a, it was an eye opener, it was a very interesting time. But it was one of those that agents were asking me, oh my God, what do I do? I don't know how to, how to maneuver through this world of real estate now. And you know, my biggest thing was telling them that, you know, if you can help somebody, you know, regardless of what you know, you're helping them with a short sale, foreclosure or whatever that may be, you know, and put them before you because of course there's no money being made. It will come back to you, you know, and these people that are in distress now, they're going to remember that you were there to help them. And then when the market shifts, they're going to remember that and they're going to come back to you. And that's what they saw. You know, those agents that really were care, you know, they cared and you know, they might have had a little more money in the bank to help them through this than maybe another agent. But agents in within five years said that was the best thing they ever did was help their community. And so with you, you know, doing what you're doing, you're giving them that option, you know, but at the same time, kind of talk to me about, you know, if I wanted to get into this business of distress notes and everything. I know you have a course, so kind of walk me through if I wanted to do this like Scott does it, what would you recommend? And then would that, how does that course appeal to me?

So the first thing I'm going to tell you, some people have to think like, do I need like $1 million or $5 million to do this? No business. And the answer to that, it helps, but no, you don't need to have $5 million like you would have needed earlier on. There's a Lot of lenders out there, banks that will sell you an individual note. Now you're not going to buy a one off note like bank of America, Chase or Citibank, but there are other, plenty of other lenders and lending institutions out there. So the biggest thing is that we are not like targeting the homeowners. Honestly, what we do is we target banks. It's a little bit different model. I, I have people that come to me, hey, I've got a distressed borrower, I'm like, well, who's their bank? I'm like, oh, it's, you know, it's previously the country, right? Now bank of America's like, I'm sorry, I can't help you. I can't, I can't, like I can't buy a one off note from bank of America. They're just not going to play ball or anything that small. Right. But what happens is we get these lists from different lenders and stuff like that that might have one note, might have like a thousand notes. And we approach it from the point of a banking mindset versus owning the property mindset and we always approach it too. How can we get this bar reperforming for cash flow? Because when you've got cash flow coming and you ain't got to work so hard, you know, your commission's based like a lot of mortgage brokers, realtors out there. You're using, hey, I got to make my three points, you know, I gotta make my three points 3% or 2% if it's a short sale and everybody buddy bleeds, you know what I mean? There's one of the great things is the, when you're buying a note that you could do all this due diligence, it's not the same thing. Hey, I gotta put it under contract. I don't, I have to put some earnest money now. No, no. I just got 31 offers accepted two days ago. About a million and a half amount funding amount, zero earnest money. And I have 35 days to perform my due diligence. If something pops up that the taxes are too much or the collateral file isn't good, or the property value doesn't come back what we expect to be, I can cancel any of those bids for any number of reasons and filter it down to 12 or 20, whatever, it finally comes down to another thing is people like, well, you know, Kim or Scott, I don't have money sitting in the bank for that amount. That's fine. You have to realize too that every, everybody you come in contact with, if You're a great realtor. You're probably a really great networker, right? You're out networking, talking with people. People love talking real estate. But you got to realize that a lot of people, when they think investing, they think you got to have this huge amount of money, right? We have a lot of our students that are buying individual notes that are like 25 grand or 50 grand or 100 grand, and they're able to buy one or two notes and get the ball rolling and get that borrower back on track. So it's returning in, you know, 300, 500, a thousand dollars in monthly cash flow to them. They don't own the property, they're just a bank. And they're making a great ROI because they're borrowing money from other investors out there at 6 to 8%, which is really good for somebody who's got money sitting on the sidelines, not doing anything right. In turn, you're making, making 12 to 20% on these deals. So you're able to, you know, pay your investors a great return and still make money without having any of your own money in the deal. Right?

So if you were to have investors to go in with you and you're that way, you're not using your own money, you're using the investors. And let's say the deal goes south, what happens to that investor's money?

Talk about the ways that. It's a great question. I love it. But here's, here's the things that protect you. These are like the six things I always say that protect us. The first thing is that we're only buying a first lien. Okay?

Okay.

We're only going to buy a senior lien. The only thing that can wipe us out will be God in taxes. Well, you're going to check your taxes to make sure that they're not. You're not going to lose it to tax. So that's part of your due diligence. If it, if it, if it's a huge amount of taxes, you're going to reduce your bid by the taxes owed amount so that you're buying it a good percentage. The second thing is you're going to buy at 70% of value or less. All right? So you're getting a 30% discount or more. Most of the time it's 40, sometimes 50%, sometimes even like 70% discount, depending on where that asset is located. So if the bar doesn't perform like that's the whole goal, you buy the note a big discount. You reach out to the bar. If they can't play ball. Then you go the route to foreclose and start that foreclosure process. Now that'll vary on a state by state basis. Here in Texas, we've got the, you know, we've got fast highways, fast foreclosures and fast executions. You know, you know, we can foreclose in 21 days. So if the bar doesn't play ball with you, it doesn't get back on track and come to the table in 60 days, you start that foreclosure process and get that thing sold in 60 days. Sometimes you can sell it at auction. Auction. If you can't sell at the auction, then you take it back, you finish the eviction and then you, you know, fix it up and sell it on the open market as an reo if, and that's a great thing. If you put insurance on the property in case the borrower is not paying insurance and like you're talking, you got a tornado that touches down in your front yard and takes the roof off, you're covered. Another thing is you, we don't, we're not doing, you're not the one going out and foreclosing on the property yourself or trying to collect. We use professionals. We use servicing companies who have thousands and thousands of these deals that they, they work through. They're, they're professionals that have fair debt collection practice licenses and certifications to call the borrower to, to work out, you know, a strategy of one of the different 10x strategies with the borrower. You're not the one foreclosing. So we use attorneys to verify everything to handle the foreclosure process. So it's not me having to show up and try to foreclose. And that's why, you know, we're buying this stuff at a discount. So it gives us plenty of options in case the borrower drags us out or they file bankruptcy. That's fine. We now have an attorney to talk to. Attorney can either be a payment plan or we're going to take the property back. So that's one of the great things that I like is one of the biggest mistakes new investors make is they think they're going to get into the, you know, the flip this house thing from hgtv. You know, they like the idea of picking up paint colors and carpet and then they over rehab a property than what they should or they overpay for it because they're so earnest to do a deal. And that's what we tell our students. Listen and do not do a skinny Deal. Yeah, if you do a skinny deal, you're going to be trouble. So make sure that a, that the numbers make sense, that if you can for what you're buying it and the three grand or five grand in expenses you're going to cover in a non judicial state or the three grand to seven grand expenses you're going to see in a judicial foreclosure state, making sure that what you pay for the note plus those costs, if you get the bar back on track, that is at least a double digit return and cash flow wise. So if you're paying your investor six, you're still seeing six. If you've got a foreclose, making sure it's still going to be roughly about a 20%, you know, annualized return. So you're paying your investor a decent return and you're still, you know, still making money and going from there. So there's, there's due diligence not just on the actual property, but you're also doing due diligence on the borrower. And then of course we're doing due diligence on the, on the collateral file. Because this is really what you're buying is this loan file is that piece of paper. Right. Which, this piece of paper is what controls the property. Hold it, in this case, the pen is mightier than the sword or the hammer if you're a rehabber, you know what I mean?

Right.

So you know, and we look through those things, there's people, vendors that help you look through that stuff, make sure everything's clean, all the documents there. So you have the right to foreclose. So like I said, something pops along the way. Value bar looks like they're too big. Pain in the ass. The foreclosure doesn't look like it's, there's something wrong with the foreclosure, something like that, you can cancel the bid and walk away scot free. Yeah.

Okay, well that's very interesting. So when you said earlier that you work with other, you work, you find properties in other states. So obviously you're working with, you know, anything outside of Texas as well. So how does, so what do you do? Do you just get a list of the homes that are, let's say, let's just say Oklahoma. There's a home in Oklahoma City that you find that's, you know, the, the lender has and then does it, is it a similar process for each state or do you have to have an agent in that state? How does that work?

Great question. So like I got this tape in a 292 non performing first liens anywhere from 6 months to 10 years where they hadn't paid. And it was in like 25 different states. Well, I whittled it down to 62 properties or 62 notes, I should say in 20 states. And we made offers on the 62. And I just pulled quick Zillow values. We know Zillia's way off, but we just still initially on the front end it got an idea of value and run some numbers. Now they came back and approved 31 of them. So now we are working with agents in each of those cities to you know, pull comps or you know, depending on what the, the condition of the online photos that we can find, how recent they look and what we can see at the county. We may have a realtor jump online and pull a real property report, you know, an narrpr.com report to give us a quick evaluation. We'll always send somebody out to view the actual property to make sure it's still standing and not a shanty or a shack or just a slab like a lot of properties in New Orleans might be in some cases. Oh yeah, we work with agents. We work with agents. You know, there are eyes and ears. If you don't have an agent, there's a third party service that we use that will send out an agent or a broker, price opinion, a BPO agent, pull comps for us, take photos. We're not getting interior access to the properties because somebody's living it. So. Right, part of why part of that goes in, that's why we buy at a big discount. Because if somebody is living in it, most of the time it's in pretty decent shape. And I actually prefer occupied asset. It's vacant. It's been vacant for six months or longer. It's probably had somebody break in or you know, the air conditioner may have gone on a vacation on its own. You know, it's during the winter months up in like Michigan or something like that. You might have an indoor ice skating rink if somebody pulled the cop. But in case something like that, that's why you pay for force place insurance. So it's in case something like that happens that you can't see you're covered and taken care of.

Okay. It's very interesting to me, I mean I was telling my husband, I said, you know, if I had, I wish I had done this back in the day. So if, you know, the way I look at it, you know, everybody in today's world is talking about, you know, Have a second income, have a passive income, etc, and so I look at this when you and I first starting, I thought, you know, this for anybody, you don't have to be a real estate agent to do this. But, you know, as a real estate agent, and that's the majority of the audience that I'm talking to, you know, if you have investors, you know, this is a good way to, you know, reach out to Scott and talk to him. But also as a real estate agent, to start having your own portfolio, you know, and build up that income and that rental property. And I just think it's great. You know, one of the things that I wish I had done is when our sons went to college, you know, I said, we should just buy a house in that town and then that we could put him in that house and rent it. And then, of course, friends looked at us and said, do you realize what they would do to the house? And I went, oh, that's true. You know, but, you know, my son, my oldest son, when he went off to college, you know, once he got out of that second year of, you know, having to be in the dorms and he could live off the campus, he rented. He and four of his rugby buddies rented a house and they took care of it, you know, now I don't know what went on, but every time I went over there, you know, it was, it was, it was. It was decent, you know, for four guys who played rugby, you know, and everything. But, you know, these are things that I look at that I'm like, you know, I'm learning from what I wish I had done. And then I want to share that with the next generation because this is something I think is going to be big. But people that are, you know, of course, I'm quite a bit older than you, but I think, you know, you could start doing this at any age, you know.

Yeah, well, we have. I have students anywhere from like 18 up to 80, you know, and what. What attracts it is. It's not. You don't own the actual property. It's not turning into a rental. You're turning. You're literally becoming the bank. And they're paying you that monthly mortgage payment. So the way I always say is, like, a lot of renters, if they can. A lot of landlords, if they can get 250amonth, positive cash flow above their expenses, stuff like that, that's kind of the number or more, depending on the market, we'll just say that that's okay. I got 250 coming. That's great. But what if you could get at least that number or more without having to deal with toilets, tenants and trash outs without having to deal with a fix it where it was the actual owner of the property's responsibility to pay the taxes to. When little Timmy flushes his rubber ducky down the toilet, you're not getting called at 2 o' clock at night. Nobody calls the bank to come and clog the toilet. It's the owner's responsibility. So that's the thing that we look at is that three advantages I love so much is that we're buying these at bigger discounts. We're getting these deals sent to us direct from banks and lenders on a monthly basis. We don't have to spend any. You don't have to spend thousands of dollars in direct mail mailing like the foreclosures or stuff like that. Literally the banks will send us their problem children and we can cherry pick and go from there. And then thirdly, since we're buying them at a bigger discount and we have a lot more flexibility and kind of how we approach these, we're making above average returns without having to deal with the, the fix and flip side of things. Now you're still going to take some property back and if you want to keep that as a rental portfolio, you can. And we meet. I had a good buddy who's up out of Boston asked me yesterday. So, Scott, do you have a lot of rental properties? Like. No, no, no. Because if I own rental property in 20 different states, it'd be a management nightmare in a lot of cases. But I have notes in different states and then I have one servicing company or actually have to. So every 5th and 15th I get a report sending me who's paid or hasn't paid. And if they haven't paid, they're starting to outreach and I have to worry about, you know, if the AC stop working, you know, now they leave the property, then I go in and protect my property, protect the asset. I don't want that, you know, I don't want to deal with, oh, you know, the powers out or the plumbing's not working. Well, that's one of the property to maintain that. And that's kind of why like in regards to your son's situation, he was an owner, he didn't, he. They took decent care of the property because they had to live in. It's different if you're just going to sign a lease for six months and leave.

Exactly. Yeah.

You know, I mean, and that's the thing Is that we do a lot of good by keeping people in their houses and giving people an opportunity to get back on track. And if I have to take a property back, we do, but, you know, there's nothing. I'll give you a great example here. I got this portfolio a few years back, and it had this one property in South Illinois. And I don't usually like to buy in Illinois because it's kind of a funky state to foreclose in for over a year. Especially don't buy in Chicago. That's a. It's a rough area. But this was in South Belo, Illinois. The family, the husband and wife had lived in this house for over 18 years. They raised their three daughters in it. And I get this. This list, and the house was only maybe worth 35,000 on about a half acre. They owed over 60. They're upside down because they refinanced. Took a little cash out when the boom went up, and then the value started dropping. Well, husband had a heart attack and been out of work for a couple years. And when I see this list, I'm like, okay, it's worth 35 as it sits. They owe 60. And I'm like, asking the hedge fund, what do you want for it? Say, well, we'll take 12. I'm like, okay, 12. That's not. So I'll take $0.33 on the dollar of value, or 1 or $0.20 of the dollar was owed. And I start looking at the. The notes from the ballroom. I can see I literally sent me a huge file scan file. And I'm flipping through it, and I see this bar has been trying to do this loan mod for four years. And she send in letters trying to do the loan mod. And then the mortgage was sold to somebody else. And so she resends in her refaxes in her W2s and her tax returns and her hardship letters. And I see this happen, like, four times because I see it from every time the mortgage is sold. I'm like, why haven't they modified or reached out and talked to the homeowner? So I'm like, I'll buy it at 12. Because I know. She says. She's like, I can start paying my existing payment, which is originally like 450. I'm like, that's nothing big. So, like, buy the note. Servicing gets transferred. We make a phone call out to Sheila is her name. I say, sheila, this is Scott Carson, and you may have gotten a letter that your mortgage is. So she's like, yeah. And she just. She's like, down. It's like, don't be upset, Sheila. This is a good day. She's like, what do you mean? I was like, I've seen all your notes. I've seen your hardship letters. I know you want to stay in the house. Is your husband doing better? I see in one of your letters, he said he had artists. Like, oh, yeah, he's actually back to work now. I said, well, I'm like, that's good. I said, so you got a few income. I said, and is it. Are you still able to pay the existing like 450amonth? She's like, yeah. I said, can you pay anything extra? She's like, we could. I said, could you bring like five grand to the table? She's like, no, no, I can't bring five grand, but I gotta bring 2,500. I'm like, okay, okay, let's have you bring 2,500. Tell you we'll do this. You bring $2,500 to the table, and you go meet with my attorney, who's about an hour away from me in Illinois. There, you bring a $2,500 cashier's check. You start making your $450 a month payment. Can you pay $200 extra? And she's like, yes, we could do that. I was like, okay, great. So I'm thinking, my mind, she's not going to bring 505,000 people, but she will bring 5,000 over the first year, right? She starts making her payment, you start adding this up. She basically paid 10 grand in the first 12 months towards what I paid for that mortgage at 12,000.

Oh, wow.

Pretty good ROI. So here's what I did for. I said, sheila, if you pay on time for 12 months, pay a little bit extra. What I'll do at the end of the 12 months is we'll modify the loan, we'll pull evaluation, and whatever the value of your property is will reduce the low amount to exactly what the properties were. So if it stays at 35, we'll drop the balance from 60 down to 35. We'll forgive it 25,000. And then what I'll do. And this is what got her. She actually started crying on the phone. So what I'll do is I'll drop your interest rate. I see it's like at 8 and a half percent now. I said, I'll drop it from 8 and a half down to 0%. So that every dime, every nickel, every penny you pay gorge towards the principal of the house. And you'll now have your house paid off in roughly six years versus 32 years. And she's like, she's like, shut up. I'm like, I'm serious. I'll have all this in my attorney. So two days later she showed up with her husband and they brought their cashier's check. They signed the trial payment plan agreements. We had it set up in servicing. We gave them 60 days for their first pay to make. She paid on time. Anytime. She'd be like a daylight. She's like calling me, you know, you ain't got to call me. Sheila, you're good. Call the servicer. But you've got a seven day window. So she did this and this is in June, July. Well, in Christmas time, I get a Christmas card in the mail. It's a family instead of five of Sheila, William and their three kids. Now their eldest daughter had a child and they had named the child Carson after me. Oh, helping them stay in this house. And yeah, I mean, I'm like, I'm like, you know, but you know, the great thing is, is they lived in the house. They paid their mortgage off in exactly like four and a half years because they started paying a little bit extra. They, you know, there was this such a huge relief. And that's what she said. She was like, scott, I've been trying to, we, we've lived in this house for 18 years. We basically repaired it, we kept it up. You know, I have all our memories tied into this. We can't move somewhere and afford something new or couldn't qualify because this was sitting on our credit. I'm like, well, if you pay on time, I'm not, you know, I'm not going to report any bad payments to credit. You just start paying on time. If you want to refi, you can. But who, who wants to refi.0% interest. You know what I mean?

Right, right.

And so it's those kind of stories, you know, I like getting. We love helping people on the other side. We've got people that taking 18 months to foreclose, another six months to evict, you know.

But as I like, I just think it's great, especially when you can help people, you know, and people want, you know, people that are, you know, down on their luck, they want the help. And you know, this is something I will ask you is when people are down on their luck, they. That seems to open the door for people to take advantage of them because they're so desperate to find a way to make that happen. So when you reach out to them you know, how do, how do you approach them so that they don't think, oh, this is another person after my, my, my house, or it's a scam and I'm going to lose everything, you know, so how do you overcome that with them?

So the great. This is what's important about servicing companies. So the. When you have a mortgage, you're probably paying into a servicing company, your monthly payments, that's tracking everything. So when we buy a note, that servicing company, if we're going to keep it with a servicing company, then it's the same. They're still making payments to the same spot. So our rep at the servicing company is now reaching out and say, hey, the mortgage has now been sold, but we're retaining servicing. They're willing to offer you some sort of modification. You know what I mean? Or. And we'll do that. A lot of times when we buy a note, we'll send a letter out immediately, say, listen, hey, your loan number is this. We know you're this far behind. We know your existing servicing company is this. You should have gotten a letter saying that your loan has been sold to us. Do you want to stay or do you want to go? If you want to stay, please reach out to us. We'll try to work a modification of some sort. No cash is necessary for the phone call. So that's the big thing, is that we're not having them wire money to us or send us money, Right. We're like, listen, if we put this in place, you're going to pay the servicing company. This is going to be. You're paying the third party that you've either been paying or that, you know, you should be paying now because you received letters in the mail or you've gotten a letter from our attorney saying, hey, you need to do this. So that's a big thing. I mean, when you talked about 2008 and there was a lot of unscrupulous people out there saying, oh, yeah, for five grand, I can modify your loan.

Yeah.

And you people just taking the five grand and running with it, or same thing, hey, pay me three grand and I'll get a short sale. Well, you can't guarantee a short sale, right? And then you saw states like Maryland and others out there that started putting legislation in place that if you were the realtor, you couldn't handle the short sale or the modification and stuff like that. But that's why, I mean, that's why I always tell people, like, listen, a lot of times all we're doing is Educating borrowers on what their options are. Like, listen, if you want to do this, then you have to do this. If you don't want to do this, this is your other option. If you can't do that, then this is your third option. Right now. If you can't pay or don't have, somebody can come and make payments, then you got to look to, we got to look to you to get you out of the house. We'll give you some cash for keys to walk if you don't want to play ball like that. I mean, I don't run a charity here.

Right.

Willing to work with it, but you got to meet me halfway.

Right. I love that. Yeah. You know, I mean, it just takes you back to 2008 when we have these conversations, because I could tell you one story after another of people and it would just. At the end of the day, I would just be in tears, you know, but then, you know, then you would have people that just didn't care, you know, and then they would destroy the house, you know, because they, they defaulted on it. And you tried to help them, but they didn't want the help or they didn't trust you enough. And then they trashed the place before they left. And so it was, you know, I hope we never see that again, that kind of real estate again.

But, you know, you know, so there's, there's something I got to share with you on that. Yeah, People that deal with. I don't say deadbeat tenants, but we'll just say deadbeat tenants. People that trash the property. Boss. You know, a lot of people will go to the courts and get a deficiency judgment and then try to collect through that. I'm not a fan of that. Yes, I think you need to go and have that report say in the credit. But I don't start going after for divisions of it. What I recommend people do is at the end of the year, just send them a 1099 for all the repairs and the lost rent, and then they get taxed on it as income. And you can write that off your profits much faster than trying to collect a deficiency judgment most of the time.

Oh, now see, there you go. Okay.

Yeah. And another thing too. For those of you that don't have investors and you sit there like, well, I don't know, investors. I just. A traditional realtor, you can go to every, just about every appraisal, district, county, appraisal, district, and if you search for self directed IRA companies, these are companies out there that allow people to have a Roth or traditional IRA that can invest, invest in real estate, like you know, buying a rental or investing in a note. Whereas you're like a Charles Schwab and AGA where they're going, unless you invest, invest in the funds or money market accounts that they have, they don't do real estate. But if you go to your county appraisal district and do a search for like Equity Trust Co. Or Quest IRA or Quest Trust Co. It will pull up a list of people who have used their self directed IRAs to buy a property. Or if you look at the county records, the same search and look for, you'll see somebody who have lent money out of their ira. And you can literally find these people, hundreds of investors that have money. They've pulled the trigger and guess what? They're looking for deals to invest in. And so we one of the things that we teach, like listen, target IRA investors, you don't have to educate them on the power of real estate investing. They've got money, they're looking for more deals. It's a really great match made in heaven when you find a deal and it's a good deal. It's pretty easy to raise capital if the numbers make sense in your due diligence.

Oh, I love that tip. Okay, well now let's talk about this course because I'm very interested in how this works. So if I'm ready and say, you know what, I want to either learn how to do this and, and share it with my investors or I want to do it on my own. What do we need to do, Scott?

So we have two different choices for you. We have a three day class that we teach like once a quarter called Note Buying for Dummies. It's about a thousand bucks. We go through the how to find fund and flip. Three days of intensive me teaching you how to find these deals from banks, what to say, what not to say, how to raise capital, how to market these deals and then how to make money with them. But I've got a one day class that is every third Saturday of the month we record it. It's usually 99 bucks. I'm going to give that to your audience for free. We call that Note weekend. And if they go to noteweekend.com noteweekend.com noweekin.com and they'll ask, it'll ask them to, you know, click here to rsvp. Click on it last for their information. It'll take them to a checkout thing when they'll still ask them for the credit card make sure the real number. But if you put the code Kim in K I M, Capital Kim, he'll give you the class for free. If you can't make it on a Saturday, it's fine. We'll send you the replays, the most recent one, so you can watch those. And that's a good way for you to dip your toes in the note deep end to see if this is something for you if you want to take it to the next step.

Oh, that's fabulous. I love that. I might do that myself. So, okay, so it's note n O-T-E weekend.com and use the code Kim at the checkout. And it's complimentary. That's great.

It'll. You'll still. It'll drop it down to zero, but you still need to put your credit card info in there. Not that we're pulling anything just to verify that your actual individual.

That's all right. Right. Okay. Now tell us a little bit about your podcast because you, this is what you do. So if somebody wanted to tune into their. To your podcast, what can they expect?

Yeah, we've. I've been podcasting about six years. It's called like a show called the Note Closer show podcast. It's the number one podcast out there for note investors out there. We've got 745 episodes, a couple million downloads. We've also got the number one YouTube channel with all sorts of videos and training. You know, that's the. If you go to Weclosenotes TV, they'll take you directly to our YouTube channel. But it's me teaching most of the time. Some niche, some facets we do bring on guests that are experts in a niche that helps our students out there. But yeah, I mean, if you, if you like the movie the Big Short, Note investing is a lot like the Big Short.

Okay.

I'm like the Christian Bale character in, in that movie, banging on the drums and jamming out your rock and roll music during my office, looking at spreadsheets all day.

But, oh, how funny.

You know, that may not sound attractive, but the returns are sexy. And that's what we call it, is a sexy side of real estate.

You know, I mean, it's what gets you excited is what happens, you know, And I just think this is a great opportunity for so many right now. And then after what we've all been through with real estate over the last two years, you know, I think with the market kind of leveraging out and some things are fixing to happen. I mean, I'm not going to, you know, give my prediction, but, you know, I do see a huge shift coming, and I think this would be a great opportunity for a lot of investors to get in on or just individuals like you. And, well, you, not you, like you because you're out there. But people like me that, you know, want to do something more than what we're already doing, you know, and it doesn't sound like it would be that big of an effort and everything to understand. It's just learning the process is basically what we're doing. So I think that's great.

It's totally. I'll tell you this. I believe that we're seeing, we're already seeing reductions or, you know, markets starting to soften or get a little bit more distressed just because of everything going on. You don't have a lot of common sense that understand that middle America is really being squeezed more than anything else out there. And when I get to start getting phone calls or emails or I start seeing more product come from me to me, I. I see stuff six to 12 months ahead of it hitting the MLS or hitting the foreclosure markets.

Right.

We've seen more product in the last six months than we had seen previous in the last probably four years. And so if you like residential, great. But also another huge avenue which we haven't even talked about is small balance, commercial debt. You know, anything under 5 million. There's a lot of distressed commercial real estate out there that you can pick up for a song and a dime.

Oh, okay. So you could do commercial and residential and I mean, I guess any type of real estate then. Yeah, yeah.

I mean, we, we see assets on hotels. We, we see assets on apartments. I mean, apartments are a little overpriced right now, but we're starting to, since interest rates have gone up, we're starting to see a lot of these people that bought apartment complexes, you know, two, three, four years ago that had the exit strategy to recalibrate and then refinance out. That refinance strategy is no longer around because interest rates are so high and banks are starting to go to these smaller operators and say, listen, hey, now you need to bring 10 or 20 grand or 10 to 20% cash to reduce your loan LTV because we don't want to be above 70% and a lot of operators don't have that extra cash or can't go to their investors to raise that to stay in the property. So we're seeing actually performing apartment loans that are defaulting because of this interest rate. Hike in some things. And it's not a surprise because we saw that happen back in 2008 and 2000 as well.

Oh, yeah. Let me tell you, 2008 was an interesting. Well, it was real. Yeah, 2008 was an interesting year professionally and personally. So we were in the middle of. So, yeah, so, okay, so if you were going to give a tip to it, you know, to anybody that's listening right now on the first thing that they probably should do is what first.

Thing you should do. If you're going to be in any type, if you're going to be an investor, you're going to realize that you're going to market yourself. This is the number one thing anybody can make money in an increasing market. It's when the market starts to shift and change that you have to get off your keister and really get out and start marketing. I mean, we see this happen every, every time in Austin, we have 15, 20,000 realtors, the market changes, it gets reduced to 6,000. You know, I mean, you got to understand that you've got to market. And that's the thing I'm a big, big advocate. Advocate of, is that you got to get your word out, you got to network with people. You got to start touching base with your audience on really a weekly basis. Not though, hey, do you know somebody who's buying or selling a property? I would share that. Hey, I'm an actual investor too. I'm not just a realtor. I'm, you know, I'm just, I'm actually buying real estate for my own portfolio or I'm also an investor as well. You've known me as a, a realtor for five years or five months. But I'm taking advantage of what the market has given us to buy real estate. And if you've got lazy assets, you've got a CD that's now a certificate of disappointment, or you got a 401k that's now a 101k. Let's talk. Because if you're not getting above average return, we can help you get that and truly create a win win for you. And you just gotta approach it. Look, you don't have to have the capital yourself. Get out and market. If you find a good deal, there's plenty of great capital on the sidelines for you.

That sounds great. Well, thank you so much for doing this with me. We met. I just want to share with our listeners the power of the Internet and social media is. We met through LinkedIn. And so, you know, so I'm Constantly telling my clients, yeah, you can be on Facebook and Twitter and Instagram and all that, but to do business, you need to be on LinkedIn. And that's where you and I met. So I would highly recommend that anybody listening make sure you're out there on LinkedIn and your in, your profile is updated. People know how to read you and what you do because that's how Scott and I connected. So I just think it's great, you know, and everything. And of course, I'm just starting out with the podcasting. So, you know, having you to help me with some things is great.

You're doing a great job. And those of you that are listening to this, make sure you do Kim a favor. We as podcasters love to hear from our audience. So if you love this episode or you'll love any episodes Kim has done, hit that subscribe button and then also hit that five star review and leave Kim a five star review. We love to see that stuff. Kim will appreciate it. We just forget to ask. So make sure you subscribe and leave a five star review. We'd love to see you.

You know, that's something I just don't ask, you know, because I'm still trying to maneuver my way through. You know, I tell people I don't mind telling you that I'm still kind of green because everybody started in the same spot, spot. And so, you know, anything we can help each other out I think is great. So I appreciate that as well. So Scott, how can people reach out to you Besides going to noteweekend.com?

Yeah, it's real easy. You know, you can go to we close notes dot com. That's our main website. That's the mothership that houses, you know, our classes, our blogs, our podcast. You can see all that we do there. I'm also on most social media handles as one Scott Carson out there as well. But yeah, go to weclosenotes.com Feel free to shoot me. You can always, if you want to pick my brain, you can always go to my calendar and go to talkwithscottcarson.com that'll book a pull up my calendar. You can schedule 30 minute phone call to pick my brain, ask me questions and then go from there.

Oh, that's great. Everybody needs to do that. Be prepared. All right, Scott, well listen, thank you so much. I hope we can have you back again soon. And to everybody out there, I hope that you picked up some tips from this and you go to his website and take advantage of the free course that he's offering y' all today. So thanks again Scott and we will talk to you soon.

Sounds good. Take care.

Kim, thank you so much for tuning in. And if you know someone, and I bet you do, who would appreciate this podcast, please share it with them. As a reminder, this podcast can be delivered directly to your favorite device by using the subscribe links you can find in the show notes below or over@unstoppablerealestateagents.com Remember, it takes as much energy to wish as it does to plan. Have a great day.