How To Get Into Note Investing With Scott Carson From The Real Estate Raw Show With Joe Mendoza

Hi, Joe Mendoza, real estate broker, investor, entrepreneur here in sunny San Diego. Welcome to my show today guys, I've got a really, really special guest. He is known as the foremost expert in buying notes across the world. I'm known as Scott for a few years and he's doing great business. He's a stand up guy. Ladies and gentlemen, from Austin, Texas, Mr. Scott Carson. Welcome to our show.

Glad to be here. Glad to be here. Thank you for that warm introduction, that nice round of applause there. Joe, I do have a sound gag here, so we're.

Awesome. I got to get me one of those, man, those are really cool.

Send your address, I'll ship you one out. How's that sound?

I will, I will. No doubt, no doubt. So Scott, you've been doing this a while. When I look back on your biography, you started jumping in around 2005 when the market was actually kind of going like this almost, right?

Well, I got into the Note business really 2004, 5, 6, initially teaching people how to owner financing wraparound mortgages and stuff like that. And I was also owned a mortgage company and from 2004 to 2007, 2008, it was prime time and we were doing a lot of crazy stuff in the mortgage industry and then everything turned on a dime for the most part there in 2008, the music didn't slow down, it just got cut off immediately. It was kind of a crazy. I can remember one specific day I was set to close on a couple million dollars in loans on a Friday with that sent with one lender and they pushed all the closings to Monday. Well, on Monday morning at 8 o' clock, the bank filed bankruptcy. You know, the lender filed bankruptcy. So I call that my own Black Monday of trying to coordinate with the buyers, the sellers, the realtors, the title company, everybody to get that thing done. That was not fun. But very soon after that, you guys are familiar with the big short and that kind of stuff started hitting the fan. And so I left the mortgage industry and just flopped on the other side of the business and started buying distressed debt in 2000. Yeah, middle of 2008. And that's basically all that we've been focused on since then for the last 10 years.

So explain to my listeners out there, some of them have no clue what we're talking about when we're talking about buying notes. What exactly is that?

So that's a great question. So everybody is in the note game. Everybody's paying somebody on some sort of factor. Either you're paying on a mortgage A car payment, credit card, student loans, whatever. We're all making payments out. And what I do is we target banks and real estate hedge funds that have mortgages where the borrowers aren't paying. They stopped paying for a variety of reasons. They've lost their job, they've gotten sick, they went through the big D. And we don't mean Dallas, you know, they've had some sort of financial hiccup along the way, and they just stopped paying. Not that they're deadbeat borrowers, some of them are, but some people just stopped paying for a variety of reasons. Well, the longer that the mortgage is not paid by the borrower, the bigger discount that the banks are looking to take to sell those mortgages off to investors like me. And so we step in, we target banks and hedge funds. We've got a list of over 8,000 that we've been dealing with over the last decade. And we reach out to them on a regular basis, and they send us lists and spreadsheets, or as we call them, tapes in the industry. They send us these lists that we can cherry pick from or buy in bulk. And that's what we do. We buy the mortgages at a substantial discount. We then become the bank. And then we reach out to the homeowners and say, listen, hey, what happened? You know, do you want to stay or do you want to go? You know, if you want to stay, you got to pay. So let's work out some sort of arrangement. Either through a trial payment plan modification, a short sale, cashier keys, Deedal new Let's try to work something that is a true win win. Unfortunately, we do end up foreclosing about 45, 50% of the time on the borrowers because they just don't want to work with us or they're long gone. But that's what we do when we buy distressed debt. We buy the mortgages at a discount on what's owed. The borrower still owes the full amount. A lot of times they owe more than what the property was worth. But that gives us the flexibility to really kind of work our magic with the numbers and see if we can't get something and massage them to make something that makes sense for the borrower and it also makes sense for us and our investors, too.

That sounds great. So are you targeting mainly first, second thirds? What kind of positions are you targeting?

Yeah, I will tell you this. I'm a non polygamist when it comes to lean. Okay? I only target firsts. And yes, you have people out there that go after Some seconds. And I will tell you this, you should only buy a second lien behind a performing first, okay? Otherwise you risk losing your whole investment. And then thirds are very risky. I would not recommend that unless it's a lot of equity. But we only target first liens out there. Non performing first liens we target. Here's my little picture. We target most of the major markets across the country. We're looking at Property values between 30 and 40,000 all the way up to quarter million to half a million. We don't usually go above a half a million in value. And unfortunately we don't buy a lot stuff out in California just because the fact that everything's so expensive out there and the banks know what they have and it doesn't make sense, but we do buy a lot in. Here's a football in the Big ten country, the Southeast Conference, part of the United States or the Big 12 area. So those are the states that we're usually targeting defined assets. And we find a lot of the great stuff out in those neck of the woods.

Fantastic. Now Scott, is there a better time of the year or season to buy notes or is it year round?

That's a very good question. You can buy notes year round. I'm not gonna lie. We buy in just about almost every month. We're closing on a trade. We'll end up averaging right at or above one note closed per day this year. So 300 plus deals, we've done that for the last four years. But as we get into the fourth quarter, that's always when the banks start to loosen up their purse strings. They start looking at their books and realizing, okay, this stuff is not performing, we need to get off our books. So we're coming into the fourth quarter, we get pretty excited and salivated, start salivating at the stuff that we start seeing because stuff that the banks wouldn't sell a few months ago, they're now more motivated because the borrower is now in further default. But they also come into the end of their fiscal year so they have to look at getting stuff off by December 27th. So it's fourth quarter is always great, but we still buy stuff year round.

Wow, that's fantastic. And you've been buying since around 2004 or 5.

You were saying we've been doing note deals since 2004, but 100% non performing institutional debt from banks and hedge funds since 2008. So we celebrated my decade in the true non performing note business a few months ago.

Congratulations. Congratulations. Now, could a random person just Go up to the bank and say, hey, show me your bad debt, I want to buy them.

Yes and no. Let's start with a yes. Yes. We have plenty of students all across the country that are contacting asset managers and banks to buy debt. Now you're not going to go into your local Chase or Wells Fargo branch or the evil Empire bank of America and say let me see your bad debt. They'll shoo you out really fast or call the cops. Okay? One thing is that the people inside the banks that handle their distressed debt sales, they go by a couple names. And this is one thing, if you get anything out of the call today or out of this podcast episode is the names of the people inside the banks. You don't call customer service, okay. You don't call REO department. You're going to call either the special assets department, special asset manager or the special asset managers or the secondary marketing department. Those are the two major names of the asset. The people inside the banks that manage the non performing debt, they look at the portfolio closely, see what they have in performing. And for every dollar that a bank has a non performing debt, it costs them 10 times that in fees that they could be collecting or by leveraging that stuff. So you're not going to go down the local bank for the most part. There are websites where you can find contact information for these. A lot of times your local branches, the department that handles is in a different building or different state or all the way across the country sometimes.

Now would community banks also have this kind of bad debt?

Yes and no. There's always two sides of community banks will have every bank has bad debt but the smaller the bank, the more conservative they are on their underwriting. So they only really like a paper loans. They're not going to do some of this non prime stuff or the alt a stuff that they do that you see on bigger banks or regional banks. So they'll have some stuff in the community banks also stuff. But oftentimes they can't take a discount because they're such a smaller bank. So they've got to take the property all the way through the foreclosure timeframe to sell it off saying that. And then I've got a student that just bought 32 notes from a small community bank in San Antonio who was getting rid of a lending program and they didn't want to be the bad guy foreclosing on the borrowers that were non prime borrowers for the most part. So if you go, you know, don't go after Credit unions, they don't have a lot of mortgages on their banks. Community, small community banks. If they've got less than 5 branches, honestly I probably wouldn't waste my time. But if you start looking at all the banks across the country that have at least five branches or more, there's over 1700 bank lending institutions and there's also a lot of real estate hedge funds that have gotten to the debt game from buying from Fannie and Freddie. And there's still a tremendous amount of loans and borrowers that are still underwater even now. And we look at work 10 years later after the worst time.

Now, Scott, there's a couple other people out there teaching this stuff. Any words of caution, what they should.

Look for, you always want to deal with and this is by far, this is any type of real estate education. Okay. You want to look to see that the people you're learning from are actually closing deals. Alright. In today's market, that is the probably the most important thing. If somebody's teaching you how to do something, they haven't done it in two years or five years, but the market's changing on a monthly, quarterly basis. So that's my advice across the board for anybody that's looking to become a real estate investor. I think coaches are great. I have coaches in my business or what I do and things like that. I've had some great mentors along the way. But you always want to learn from people that are doing the business day in, day out, not somebody who's couldn't make it so they decided to start teaching. You know, we have been teaching classes, but we've been teaching since 2010. And our classes that we try to do is more so for raising capital, helping people become buyers for the assets that we're buying.

Awesome. So it sounds like you're even partnering up with some of your students.

Sometimes we'll do. Yeah. I had a guy call me up just now, he's like, hey, I've been through your class. You know, I'm retired, I don't want to do all the work. Can I just write you a check? And I'm like, I'm gladly take your money and put it to work and help fund some deals for you on different things like that. We're particular. We're kind of particular. I don't partner with anybody just because I like saying no sometimes. And I will tell anybody out there who's raising capital, trust your gut. If you get a good feeling talking with a person, great. But still do some research. If you've got a bad feeling. And I know a lot of investors start partnering with people because they get desperate. They're not used to raising capital. If your gut's telling you something bad, just say no and move on. Crack kills everybody.

Now you've been doing this a long time so you make it look really, really easy. How about the folks getting started? What's the hardest thing about your business?

So this is hardest thing about my business is you have to realize you're more of a manager, a general manager in this business. Okay, people, you can buy 20 notes and handle everything yourself from handle from talking to the servicing company or handling all the paperwork, the files, stuff like that. But once you get above 20 assets, there's a lot of little things that happen. And so I always tell people, listen, don't be a control freak. Learn to delegate. Learn to have good vendors. They will save you time, they will save you money because they'll do it right. A lot of people get in there like I want to touch you, I want to feel it, I want to do the work myself. I want to call the borrowers myself and negotiate with them. And my big answer is no, you don't want to do that. It's not a good use of your time. Okay, so most investors, the best use of time when it comes to buying distressed debts is going out and finding the assets and raising the capital and then handling and working on the marketing, the loan workouts, the borrow outreach. You want to leave that to the professionals at your servicing companies or attorneys. Let them do their job and they'll make you a lot more money than if you try to do a lot of the stuff. And you'll be saving pennies. I mean you'll be stepping over dollars to save pennies is the way it looks at it. So there are a lot of moving parts with, you know, workouts and things like that. It's not a 60 day deal. It's more you have to look at an asset as like a 12 month process to get it to where you need to be. Some, some assets work out really fast where the borrower responds with a letter in the first 30 days and they get re performing. Others it's, you got to drag out the foreclosure and you have to be careful which state you're investing in because every state has a little bit different foreclosure time frame.

So that's a great point. Now Scott, so are you seeing that some states are easier than others?

Yeah, there are some states that are easier. Texas, we ever do we do everything fast here. You know, we have fast foreclosure laws, 21 days, fast highways and fast executions. You know, we're dying. I've got to get me one of those. I've got to give you my address. And then you have like Georgia's fast foreclosure. The non judicial states are always the fastest foreclosure. Now think about non judicial states, fast foreclosure. But that also means if you're cherry picking, you're going to pay a premium for those assets. Okay. You're going to pay a little bit more than you would if you're buying, say in Ohio, which takes six to nine months to foreclose, or South Carolina, which takes 12 months. So each state's a little bit different on that stuff. You just have to kind of figure that out in your timeline because the longer it takes to foreclose, the more you're going to pay an attorney fees. Whereas I could do a foreclosure on a property here in Texas for like 800 bucks. It would cost you like 5 grand to foreclose in Florida. Okay. That goes into your pricing, obviously, if you want to consider that in your discount when you're offering up a bid from a bank or hedge fund.

Perfect. Scott, now you're talking about pricing and money. What are like some startup fees and maybe ongoing monthly fees for somebody that wants to get into this kind of business?

Well, the beautiful thing is you don't need an office. You would literally, you can do this from your laptop or your cell phone. We have people, clients, students of mine that do this while they travel full time. I have closed assets when I was over in Italy or over in France this summer from doing deals. I've got people that have bought portfolios while they're traveling. That's a beautiful thing. That's nice. So cell phone bill, Internet. I think marketing is probably the biggest thing that most people forget about when you come to raising capital. A lot of people want to use their own funds and that's great. But if you're using your own funds, at some point your own funds are going to run out and you're going to be kind of stagnant. So I always tell people, and actually this is not just telling, it's seen those that people that have less capital to begin with often do a better job in the long run because they've learned how to market for money, how to market their assets to social media and put some of those things in place with their email service provider, whether they're Using infusionsoft or mailchimp. There are some overhead costs that we all have in business. It's just a part of doing business. But when you're buying notes, you have costs associated with servicing costs or the servicer. You're going to have due diligence costs. You're paying for BPOs, a broker price opinion, or getting a title update or what you call it, an owning report, an ownership and commerce report. That's 85, 90 bucks a file. So you're gonna have some due diligence costs on your assets on the front end. You just gotta figure that in with adding a little bit extra to what's being funded on the cost of the note so you can get those costs covered back by your investors.

Got it? Got it. Now Scott, any special licenses that somebody would need?

That's a very good question. And it varies by states. In most states, if you have a licensed servicer who's got a debt collector's license in that state, that usually covers you for the most part. But Illinois wants you to have an individual debt collector's license. That's like 700, 750 a year to have there. Washington state, Oregon, Georgia. Let's see what else Maryland used to have required, but not anymore. Some states are requiring be a licensed mortgage broker in that state to be able to buy debt. California has a, if you're buying California notes and then selling them to California investors, they want you to be a licensed mortgage broker out there as well. But if you're in California buying notes outside of the state of California and selling other people, you don't need a license then at that point. But so like I say, as long as you're buying, I don't buy much in Washington, Oregon, there's overpriced, okay, I don't buy that much stuff. Georgia, because it's, it's overpriced as well because it's a 30 day foreclosure process. So the beautiful thing that I said, if you get a licensed servicer who's licensed in that state to do business, that'll usually cya, that'll cover your assets. Okay?

Perfect. Perfect. Okay guys, hey, we're gonna take a quick break and a word from our sponsors. I hope you're taking a lot of notes guys, because this is like really incredible information that man, I don't know where you're gonna find it. But Scott's a pro guys, so let's take a quick break. Okay? We're gonna take a quick break guys and we're gonna hear a word from our sponsors. So hang on just a second. We'll be right back.

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Hey guys, welcome back to the show. We have Scott Carson here from Austin, Texas. We close notes, guys. Okay. So what we're talking about is buying notes instead of fixing and flipping. None of this, you know, tenants toilets and what do they say, headaches or whatever, trash outs. There you go.

And termites.

Exactly, exactly. So Scott, tell us maybe a really good story about what kind of dollars numbers are involved, what kind of ROIs. Give us a sample deal.

So with us buying distressed debt, we often buy where the borrower owes more on the property than what the property's currently worth. And we buy off of as is value, not arv, no after repair values as is. So I'll give you an example. We've got an asset the borrower owed 120 grand on their note. They hadn't paid in 18 months from a major bank. Property is probably worth about 195 to 100,000 as it sat is without doing a little bit of work to it. We bought the debt at 45 grand. All right. Bought it roughly just under 50 cents on the dollar. It took us about a year to foreclose because this was actually in Florida asset. Okay. We offer the borrower a loan mod. Their mortgage payment was about $800 a month. If they would have reinstated which we would allow them to do to start paying again. And we got about 800 bucks a month. 800 times 12 is 9,600 bucks. 9,600 on a $45,000 investment's about a 20% ROI on the mod. Right. We would have had them bring a little bit extra to the table since they hadn't paid in 18 months. But that's what we try to shoot for. If we can reinstate it, it can turn out somewhere between an 18 and 25% ROI on the mortgage payments. Well, this borrower didn't want to do that. So we went to foreclosure. Took us right, 12 months to foreclose. But in that timeframe, the Property appreciated from 100 to. To $160,000. Okay. And the bar and pay. So they owed actually more than 120 owed close to like 140,000 and stuff like that. Well, we took the property back at auction. No, actually I take that back. We actually sold this at auction for like right at 140. We didn't have to do any work to it. We sold it at 140 minus the taxes owed. And so it was a pretty good investment. Made about $92,000 on the deal after everything was said and done. So it was about a 200% return on the deal because we were in for roughly right around 50. We have another one borrower. This just happened today, actually. This is on a contract for deed in Indiana. The borrower owed 62,000 roughly. Hadn't paid in six months. House was worth about 50 as it sat. We picked the debt up for eight grand. No way. Yeah, eight grand. And one of the thing is we knew that the house was occupied. So we knew they were still living in it because we had a realtor drive by, take photos. I called the utilities department. Power was still on. Power was current. Taxes were pretty much paid up to date. They were still behind for the last six months, but that's still okay. So we knew that somebody that wanted to stay in the house. And if you look at one of the things that we like to do too, is compare what their existing payment is to market rent. And if the rent's a lot higher, it leads to us usually being able to negotiate a good rent reinstatement or modification. Okay. If it's the other way around, when the mortgage payment is higher than rent, then we know we're gonna have to drop the payment down some to try to hit rent. So we bought the note, sent a letter out to the borrower. We just bought this four weeks ago. Four or five weeks ago. And so even the collateral has not showed up here yet. Cause it usually takes about 30 days for the actual loan filebook here. But we sent a letter out a week after we funded. Bar called, immediately, wants to stay in the house. And she'd been trying to work out something with a bank, and they weren't responding. They were just being asses. And we're like, listen, if you want to stay, can you start making your existing payment? She's like, yes. I'm like, okay, great. Existing payment was like 340amonth principal and interest amount. So can you bring anything extra to the table? She's like, yeah, I got five grand to get caught back up on my payments. I'm like, let's get you started, you know? So now I have basically a reit. She paid all her eight months, I guess six to eight months of payments like that. Put a little bit extra in, paid her taxes too. So now we have a performing loan. I told her if she paid on time for 12 months, we'll forgive her balance, and I mean, sorry, reduce what she owed because she owes more than the property's worth. So after 12 months, we'll evaluate the property, pull appraisal, and we'll drop her balance down from maybe 50 down to 40, and forgive her 10 grand off it. But I got a reperforming note. I'm happy. $340 a month times 12 alone is a good yield on 8 grand investment. You know what I mean?

Nice, Nice. Okay, well, how about some tough stories where I used to work with the bank and I used to go door to door taking over houses as an REO representing the bank. And some of these guys, they wouldn't believe that, hey, the bank took over. I'm the agent now. I got to sell it. These tenants, what do you say to them, you know, aren't believing you.

We just wrapped up one of my worst deals. Well, not quite wrapped up with it, but it's taken. This is a Chicago, Illinois. Bought a note from a bank. It had a tenant in place. So we started the foreclosure process and the borrower would just drag stuff out. Took us over 18 months to foreclose. And then we go to evict the borrower in crook County. Okay. Crook County, Chirac, Illinois. It's taken us over a year to evict this guy. Wow. Cause it takes forever to get a docket. And then the judge assigns it to the sheriff. The sheriff gets around to it eventually. We offered to let the guy stay, you know, turn out, hey, let's have you start paying your rent on time. Oh, no. He threw. He pulled a gun on my process server. I'm pretty sure you probably had that done before. Oh, yeah.

Oh, yeah.

When the process server came back with the police, the guy threw an envelope and said, oh, I denounced the United States as a solemn country of Allah in my thing. He sued me in federal court, which the Jeff. I mean the judges laughed at out of federal court. But these are all things that extend the thing three years of the deal. We finally got the guy out last week. You know, this is. You don't ever expect to take three years. I sure as hell I budgeted 18 months. So I'm gonna lose some money on this deal. Well, I take it back, I'll probably break even and make a little bit of money on it. But it's just I don't want my deals being tied up for three years like that. I look at it as loss velocity of capital because I like to try to flip our capital every 12 to 18 months with notes if possible. This one has just been the biggest pain in the ass. And you know, I've been. I've had been shot at twice, walking out looking at some my assets in the houses. I was been shot at twice in Gary, Indiana. You know, I'm walking down to the neighbor's house, knocking over, hey, what do you know about the here? You know, you know, we're trying to help the neighborhood, you know, and they get all mad and what else have I done? We took over a house one time where the guy is in Dayton, Ohio, and I guess he'd been in the house, the bar had died in the house. He'd hung himself in a closet. Wow. With it being close to October, here's a horror story for you, my real we did the finished. The foreclosure realtor came in to secure the property, opened the closet, but the skeleton falls. You know, it's down at the bottom there scared her to death. She went running out. Lily ran over the locksmith. They're changing a lot. But the guy had been in the house probably at least three years.

No way.

Nobody knew about it because I look back in the servicing history I'd gotten from the previous bank when it was the last time somebody heard from him. And yeah, I mean, it's unfortunate. A lot of people are going through bad situations, have gone through that, and the banks don't want to help them. We got one borrower who tried to do a loan modification for four years and the banks wouldn't help her. And we finally got ahold of the note and she cried at the closing table when she showed up at my attorney's office to sign off on loan paperwork. So she's been paying on time for two years now. So we always like to make the joke that we don't. We're not rehabbing the properties, we like to rehab the borrowers, you know, and we believe that we are making America great again, one mortgage at a time.

So the market is shifting, as I've been noticing, where inventory is staying a little bit longer than it should. Prices are coming down. What kind of impact is that having in this business?

Not much on the note side of things, because what we look at is default rates. And default rates have kind of bottomed out and they started to creep up a little bit. Florida, Texas are the top two states as far as foreclosure and defaults now, which is. We call that the hurricane effect from a year ago.

Okay.

You also look at states along the Gulf coast, Alabama, Louisiana, Mississippi, Georgia, Tennessee, they're starting to have increased default rates too. And I believe that's because there's a lot of, you know, blue blooded, blue collar or no collar Americans whose jobs are kind of getting squeezed, they're getting laid off. The tariffs are kind of affecting some different things. You start seeing some plants up in Indiana starting to close, that's affecting the fault rates up in that neck of the woods too. So I think we're gonna see a market correction. We've already started to see with days on market and properties lagging, especially in California, then anything over half a million is really starting to lag, or actually probably more close 3/4 of a million starting to lag in different areas. Correct. That's a sign we look for, because if somebody's trying to sell and they can't sell it, then they got to look at all their. All alternatives. And we've talked to several short sale agents. They've seen an uptick in their short sale offerings which means stuff's defaulted and we're looking forward. I'm looking at my shops and what things we've been committed to the last six months is really honing in some great stuff to raise capital so that we believe there's going to be a bigger downturn next year and we want to be prepared for that like we were. I don't think it'll be as bad, nearly as bad as it was a decade ago. But I think those states that recover the fastest, those markets have been the most overpriced, are the ones that be impacted the most.

Fantastic. Now are you also, I think I read on your website, are you also looking at commercial opportunities?

Oh, I cut my. That's where I cut my teeth initially was on commercial notes. That's what I first got out of the book. I was getting lists from Capital One and Wells Fargo and just a bevy of big banks were sending me the commercial stuff that we were buying brokering out. And yeah, we do commercials, we see stuff all the time. A lot of the banks still value that are overvaluing that stuff right now. We expect to wait another six to 12 months. It's unfortunate. In the real estate industry what's been hot the last couple years is obviously apartment complexes, right. Every once in apartment complex and they're expecting the normal play for apartments. And I only say this because I've been involved in a lot of apartment deals as well in the past is that you buy something distressed or below value, you fix it up, add a little value to it, get it regentrified, get the rents raised and in three years after ownership you go get a traditional loan to refinance out your investors and utilize the asset. Right. Well you look at that same philosophy was what was going place years ago and what happens when the market goes south and the banks aren't going to give you 100% financing on your apartment. What's going to happen when you've got to bring 20% to the table as a down payment to get a loan and you don't have that 20% down or the value is not there anymore versus what you borrowed. So you just got to be careful out there. We foresee a lot of opportunities in self storage mid to medium sized apartment complexes. And I'm not talking a paper or A class, I'm talking like B and C class apartments because we bought a lot of that stuff years ago from some of the big gurus out there. We bought it at a big Discount and made some good money on that. But we helped a lot of people out too.

So is there a preference, Scott, on asset class? Storage apartments, shopping centers, single family. What's your preference on asset class?

What pays the bills? I like to look at the biggest pool of buyers. Single family homes are always going to be substantial asset class. You know, everybody's gonna need a place to live and so we've always, we've made our money. Our bread and butter is on single family. You get rich on the commercial side of things. Those are your home run deals. They're not as prevalent as the single family homes, but. And they take more time, they take more due diligence. You got to put more money into the front end to make sure that a commercial deal makes sense. It's also different on comps. Commercial is all about cash flow. You know, noi cap rates. And so many people get so many realtors getting bogged down with the value, the market value. Well, when you have tenants in there, your cap rate can be adjusted by what your net noi is. So you gotta be very careful when the commercial stuff comes that it makes sense. Now I'm not a big fan of strip malls or big box stores. I think those are, unless you're getting those really cheap and you can regentrify them with putting either re branding them or reclassifying them up or redoing like some people are doing here with Walmart or grocery stores, treating them as like executive suites or executive workplaces. I think there's opportunity with that. I think there's a lot of opportunity putting, you know, senior housing in as well. If you can find an apartment complex or an old hospital and get it reclassified as senior housing, there's some opportunity for that in smaller markets. I just think it pays to know your numbers and it pays to market more than anything else. So many real estate investors get excited about the real estate, you know that the touchy feely that you go out and touch it and kiss it and pick out paint colors and carpet. I hate that shit. I want, I want to know the cash flow. I want cash flow coming in. It's all about that coming in. But you got to look at what your market is. You know, if you know how to market a deal, it doesn't matter what type of asset class you find, the numbers make sense and you know how to market. You'll find a buyer. Because I think we all agree a good deal finds money. Money doesn't, doesn't necessarily find deals.

Got it? Got it. Now, Scott, Is it really hard to negotiate with the bank, say, hey, they had something for 100,000. Yeah, I'll buy that for 50,000. Is it that simple? Or how much more negotiations is involved?

It's actually. Most people, it's easier than they expect. It's usually done via email. Back and forth. We'll get a list of assets in, we'll give a bid per asset, we submit the spreadsheet into them. A couple days later, they send an email back and either accept it or counter deny it or decline it. And it's just a matter of going back and forth like that. One of the funniest things is not everything gets accepted. And so most people, when they get in the game, they make a few bids on the idea that everything's gonna be accepted. And that's not the case. I'll make an offer on 100 notes in five minutes, knowing that probably half of them aren't gonna get accepted. And those that are, they may be sold off. Some of them, they've sold them off already. So I don't like to waste my time doing due diligence on a big chunk of assets that probably 20, 30% aren't there anymore. So I make a big offer across the board, and then they come back with a number. Whether either they accept my offer or they counter it, that's when we dive in and really spend more time on the due diligence side. But that helps us control more assets. And either if we make an offer on 100, we get 60 approved. Now we can really dive into 60, because an asset manager rather sell 60 notes to one person versus 60 notes to 60 people. So I always tell people, play bigger. It's a great time. The only regrets you'll ever have is that you didn't buy more.

Awesome. Awesome. So, Scott, one last question. If somebody wanted to learn more about you, they took your camp, they loved it, and then now they want to invest. What's like the minimum buy in? Is there a minimum buy in?

So we, first and foremost, I always say, let's have a conversation. What are your goals? What do you want to accomplish? We might be a fit, we might not be a fit. And that's fair. I had an investor who was excited today, and I had another one I turned down because we just weren't a fit for what they were looking for. I'm always gonna ask somebody's experience and what are they looking? You know, what have they done in the past? Are they realistic? Some guy called me, well, I want to make 30% on my money I'm like well that's great, I'm not the guy for you, go find somebody else. Alright. But if they're interested it's really easy. Just pick up the phone, drop me an email Scott at we close notes so we can get on a conversation. I will always tell people education is so critical because it'll. We're so big in education that's why we do so much free stuff. We've got our no closure show podcast, we've got thousands plus videos online. It's really easy if you want to get some good information. All you've got to do is text the word notes N O t e s to 702007 two triple zero and that'll come in our system. We'll send you a link back to watch over 80 hours of videos presentation or two so you can kind of get your feet wet and that's something that excites you. Then hey, give me a phone call, drop me an email. We'll jump on, jump on a conference call. But Scott@weclose notes websites weclosenotes.com there's a such a bevy a wealth of information on there case studies, deals, webinars that we do. We believe that education one of the most critical aspects of things and we'd like to give a lot of it away.

Thank you. Thank you. And how much is usually, I'm sorry how long would somebody like maybe deposit their money kind of like a CD or, or how much we tell people.

Expect 12 to 18 months on a deal.

12 to 18 months, okay.

Yeah, I mean we've got you know one of the things we're working on, we've got a fund that we're working on with the SEC that'll be a three year buy in. But for the most part a lot of note investors are doing individual joint venture deals. It's 12 to 18 months. We tell people that's not bad, it's not bad. You know, you know there's some things, there's some things in there. We try to work before 12 months but there's just a bunch of different factors that happen. You can have a delay where maybe the selling company doesn't deliver the collateral for 45 to 60 days, that's two months there. Or the servicing doesn't happen in the first servicing transfer from the seller servicer to your servicer taking 30 to 60 days. So there's a lot of moving parts that can delay things a little bit. And then of course depending on what kind of notices you've got to give people in the foreclosure process. So that's why we just tell people, hey, expect 12 to 18 months. Perfect.

Perfect. Any last comments, words of advice?

I will tell people. It's like I said on the beginning, everybody's in the note business. Most people are on the wrong end of the payments. And I will tell you this, the pen is truly mightier than the sword or the hammer out there. If you are a REO refugee or a lazy landlord or you're a fix and flopper. You know, everybody loves cash flow. That's why the banks are always the biggest and nicest buildings, because they're in the cash flow business. They're not in the real estate game. They're in the mortgage and the note business. And I will tell you this, I love the note business. I've done a lot of fix and flips. I've done a lot of rentals and stuff like that in my real estate career. I love what I do. Every day is different. Every day is exciting. Never a dull day in the note business.

Outstanding. Well, thanks again, Scott. We really, really appreciate you spending your time here on the show, sharing your words of wisdom. Thank you so much.

Hey man, thanks for having me. Honored to be here. So excited. Just once again, thank you so much, Joe. Love what you're doing. Love listening to the show. You're doing a very good service to your listeners. You're just a great content man. That's what it's all critical about. It's sharing nuggets and truth and just love. I'm very honored that you would have me on your show. Thank you so much.

We are honored as well. So thank you so much, Scott. Great, great job. We'll talk to you soon.

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