How To Invest In Real Estate Without Owning Property With Scott Carson From Money Tips For Financial Grownups With Bobbi Rebell

Hey grown up friends. A big thank you to so many of you that have already bought my new book, Launching Financial Live youe Richest Life by Helping your Almost Adult Kids become Everyday money smart. This book was not easy to write because I had to get honest with myself about what was working with my teen and young adult kids and what was not working. And I also had to be prepared to share it with all of you. So first of all, thank you for your support and your wonderful responses to it. There's definitely some things in there that you may not have been expecting to hear. By the way, I got a lot of help from my money expert friends and also financial therapists and parenting experts. I am really happy with how Launching Financial Grownups came out, even though it really was hard to be like I said that honest and it was a lot of work. But I really love doing it and I'm really happy with how it came out. On that note, if you have not already, please pick up a copy of Launching Financial Grownups Today. After you do, please share it on social media. Please leave a review on Amazon. Those reviews are super important because the algorithm picks up on them and that can make the book a lot more visible to more people. So I truly appreciate it and I really also appreciate all of your support.

You have many people that walk away, especially in a recession. You have people that just, you bought a house, got laid off, so they just left. Well, if they've got a really low interest rate on their mortgage, it's a great way for you to take over property without ever having to qualify for financing.

You're listening to Money Tips for Financial Grownups with me, certified financial planner Bobbi Rebelle, author of Launching Financial Grownups. Because you know what? Grown up life is really hard. But together we got this. Are you guys watching the stock market and getting a little nervous again? Maybe thinking it's time to actually look, to diversify and look into new places to invest your money. Places where it may not be as liquid, it may be a little bit more risky, but you at least have, as I mentioned, a little more diversification and maybe, maybe can see some upside to the economic troubles that some people are calling a recession. Well, this episode is going to be very interesting for you. We are going to be talking about an area of investing that I frankly don't know that much about. It is a way to invest in real estate without actually taking possession of and buying real estate. In other words, you aren't buying the property to live in or to renovate the property to Renovate and then flip it or be a landlord, an active landlord for years, managing it, hands on the ground or paying a company to manage it. You're just using financial resources, money to get some of the benefits of real estate. As an investor, I have a fantastic guest to explain to us how it works and this is important, the red flags because while there is clearly opportunity, you have to know what you are doing. This is not for amateurs, but it is for anyone willing to put the time into it who has the right risk profile and, and is interested in diversification. It's really interesting. I was fascinated. So my guest is Scott Carson. He is an entrepreneur. His company is called We Close Notes and he also has a podcast called the Note Closers. And no, this is not the kind of note that you wrote on a post it note. I was fascinated by it all. It's all going to be explained to you. It's going to make a lot of sense and then you can decide if it's right for you. And we're going to have some resources where you can get more information if you do want to proceed. But this is really interesting stuff that, that I wanted to know about and I really wanted you guys all to know about just as an option and potentially an opportunity for profit. Here is We Close Notes. Scott Carson. Scott Carson, you're a financial grownup. Welcome to the podcast.

I'm honored to be here today to share our knowledge and just give to your audience out there all the financial grownups that were listed today.

Well, I recruited you for this episode because the stock market has been a little bit scary and I want people to know that there are other ways to invest, especially ways that you can still have some liquidity in different amounts. But the stock market is not the only game in town and it doesn't necessarily mean you have to buy a property. We're going to start. I will explain more about that going forward or something where it's not liquid. There are a lot of interesting ways that people can get more bang for their buck in terms of investing and also maybe a little bit more with interest rates rising. That creates a different opportunity in some ways. So your company is called We Close Notes. Before we get into the opportunities, I want you to just explain where you're coming from and your perspective and your experience.

So I've been an active real estate investor for over 20 years, previously a financial advisor with a little company called Smith Barney and Chase bank back in the day and got into mortgages and originating back in really 2004 but literally have been buying notes, performing and non performing notes for the last 15 plus years, since 2008. So when the last recession hit, I went from the origination side of the business, I guess to the de origination side and started buying mortgages direct from banks and hedge funds where people were not paying their mortgage. And we make our money by buying that debt at a discount and then working it out with the homeowners to try to keep them in their houses of some sort. They can without taking the property back. That's our preferred strategy is actually just to come back on track, back, paying on time. It turns into a really good return for us, does good for the community, does good for the borrowers. And as I like to say, we're making America great again, one defaulted mortgage at a time.

We're going to go through five ways to invest in real estate without owning property in just a minute. But I want to take a step back and have you explain first of all, what do you mean by origination and what exactly is a note?

Yep, good question. Origination. We'll start first with that is, is where you're creating mortgages or you're getting somebody approved for a mortgage. So when you go to buy a house, you usually need to get approved for a mortgage. What that means is that a mortgage broker will evaluate your financials to see what you qualify for. And so they are going out originating mortgages to Chase or Wells Fargo or any other 5,000 plus loan companies out there is basically originating mortgages that way. A note is basically, it's an iou. If you have credit cards, student loan debt, auto, car payment, mortgage, owe your brother Bubba five bucks, you're in the mortgage space. It's an IOU basically. And I mean that's a note space, right? I like to buy notes that are secured by real estate, which is basically mortgages. And I primarily buy mortgages in the first lien or senior lien position. There are seconds or juniors and other things, lines of credit people may have against their houses and stuff like that. But I buy first lien mortgages backed by residential commercial real estate. Does that make sense?

Yes. And that is not the same as a Treasury note. Correct. Because we think of 10 year notes as treasury notes. This is not what we're talking about here exactly.

We're talking about the mortgages on the actual properties.

Okay, so let's get into our five ways to invest in real estate without owning property. The first way is wholesaling. Tell us about that.

Wholesaling is the process of finding a deal, finding a property or a note, finding something below value, getting it under contract, and then flipping the paper or flipping that contract to another investor for commission. Let's say I'm driving around my neighborhood, which is a common way for investors. I see an ugly property, somebody that needs some work that, you know, knock on the door, they know the owner, and the owner just wants to get away from the property. They're like, I don't, I can't rehab it. I can fix it. I just want to be done with it. So they may put it under contract. Let's say the house, maybe this work is worth 150, but they get under contract for 60 because that's what all the, you know, the homeowner wants. And they're able to say, hey, Scott, do you want to buy this property from me? And I'll flip you the paper. I've got under contract for 60. You can buy my contract for 70 grand and make. And I'll make 10 grand as the wholesaler.

So you're not necessarily putting your own money out there.

Exactly. You're basically just getting under contract and flipping a contract to another end buyer who's willing to pay you commission. And we've, we've gotten wholesale fees from anywhere from 500 bucks all the way up to 100 grand before. Right.

Tricky to find though. Right.

It just got. It's a lot of work. It's a lot of either direct mail or driving neighborhoods knocking on doors. You've got to be really good and be a bird dog for a lot of people out there buying, and you can make a great money money like that. But I don't really consider that truly investing because you're just flipping the paper, you're constantly working. There's not really anything coming in long term from it, but it's a great way. Most investors in the real estate side, that's how they get started as wholesaling and figuring out what's going in their markets and then either flipping paper or flipping property that way.

Yeah. And if you know a market well, it is something that can make sense for you because you have a sense of what things are really worth versus what people in a certain situation are, are willing to take to get out of a precarious situation. Okay. Number two, buying a note, your specialty.

This is my specialty. And most people think when you say buying the note, does that mean you're buying the property? No, you're buying the debt and becoming technically the bank. Now, the beautiful thing about this is you control the real estate without actually owning it. You know what I mean by when I buy a note? I literally buy the mortgage from a bank. I'm usually buying at a big discount, 50, 60 cents on the dollar. But the borrower still owes that money. They still owe what they owe. So let's use some simple math. Let's say the borrower owes. They bought a house, they get laid off of work, the house was worth a hundred, they financed a hundred. Well, they haven't paid in six months to a year and then said Maybe they owe 110 now with back payments, well, they haven't paid in a year. That bank will often be looking to sell that mortgage or that non performing note off to investors like me. And so I could come in, offer the bank, let's just say 50 grand on a hundred thousand dollars house. Well, I buy the note, I now become the bank, the lender, and I make my money by then negotiating with the homeowner. Say listen Mr. Homeowner, I know you're behind. You had Covid or laid off work, you owe 110. I know the previous bank wanted you to pay the full year back payments or six months. You can't afford it, what can you afford? Let's work out a payment plan and get you back on track. So if their interest rate, let's say was 5% and I bought that note at $0.50 of the dollar, if I get them back on track, that's technically a 10% annualized return to me, which is a pretty good ROI to me. If they keep paying for 12 months to me, then I could technically turn around and sell that note to Wall street or other investors at 85, 90, 95 cents on the dollar. And if I paid 50 and sell it at 85, I just made a 35% profit plus cash flow along the way. So I like that aspect. I don't want to own real estate. I mean I've been an investor. But buying the note allows for you to control the real estate, work with the homeowners to keep them in their properties if they can. If they don't pay, then we go the route to foreclose because we have the same rights as a bank does.

So the next one is a little bit of a gray area to be fair, because we did say not owning property. So it's taking over property subject to current financing. So explain that. This is sort of a blend.

It is a bit of a blend. You have many people out there who live in a property and then can either a no longer Afford to sell their property because they can't afford to pay the commissions. You know, they owe more than the property's worth and they just want to walk away from it. We've dealt with subject to deals like this is what we call them a subject to deal where we will step in, take over the mortgage payments of the property subject to the existing financing and either a pay the homeowners to walk make up their rearranges of whether they're behind on pay up the taxes. People will walk away from assets all the time. And why this is an advantage to the borrower versus them just walking away is it keeps a foreclosure off their record which will ruin their credit for seven years. We set these subject to deals basically about three years. It gives us time to make payments on behalf of the bar. What we will do is either put a render in the property that's paying above what the full mortgage payment is or will owner finance the property to somebody else. In a wraparound mortgage you should always consult your have an attorney to help you out with this title companies and professionals out there on the paperwork to make sure everything is disclosed properly and making sure you're not violating any state rules or laws or anything like that. That. But you have many people that walk away, especially in a recession. You have people that just you bought a house, got laid off so they just left. Well, if they've got a really low interest rate on their mortgage, it's a great way for you to take over property without ever having to qualify for financing. One of the great things people don't know is most mortgages were completely assumable prior to 1985. And then VA loans were basically the only ones that were small. But me being the bank, if somebody wants to take over the loan on a note that I own, I'm always willing to do that as long as I get paid. And most banks won't care. I mean they do have what's called a due on sale clause. And if you're doing a subject to deal and transferring it looks like a sale. But most of the time the banks aren't going to enforce that as long as they start getting paid on time. A bank would rather hold a note that's now reperforming versus going through all the problem before close and then take the property back. Especially if it's in a estate has a long foreclosure timeframe.

So interesting especially because by some definitions we are in a recession right now. So that is an opportunity for. For somebody you also Number four is become a private lender. Tricky. You really have to have capital so that, that's, I'm a little, I mean for the real, how realistic is that?

It's actually very realistic. If you've got a 401k from a previous company of some sort and you move it into a self directed IRA of some sort, you can often lend money out to other investors at above average rate return 6, 7, 8, 10, 12% to investors who are looking to buy real estate or need money to flip. A great way to find people that are looking for these type of investor loans is attending like your local real estate investor clubs or networks. There's a whole, whole, you know, secondary market of investors that are lending money out, you know, 25, 50 grand on fix and flips and other things out there. So yeah, you don't have to have a lot of people think like if I live in California, I need 100, you know, $1 million to buy a property. Well no, there's plenty of people that have bought property but they need a, a little bit of help with repairs to fix up the property to sell it off on the secondary market. So yeah, we've actually helped a lot of our students get started as private investors. If they've got 25, 50 grand, just get the ball rolling.

And the advantage to that is that if you can pair up with somebody who knows what they're doing in terms of flipping a house or something, the other person might have the expertise and you have the financing. So not everyone has both. You may not have the expertise and know where to begin with that they may know what they're doing and maybe they just need more money to get the properties that they intend to flip and they have the market expertise to do it. The fifth one is taking over payments and then owner financing to another buyer investor. That's. That sounds complicated. A little bit intimidating.

It seems like it, but it isn't. But look, we talked previously about taking over a property subject to. I know a lot of people don't want to be into the three T's, toilets, tenants and trash outs. They don't want to do that. But if you, but if you've got, if you take over property subject to and it's got a low interest rate, let's just say 3, 4%. Many people that are looking to buy a property that can't qualify traditionally and I'd be happy to pay a higher interest rate of 8 or 9% that can bring a sizable down payment down and have you carry the terms of that mortgage for two years, three years while they work to get their credit back on track. And then they can refinance you out for a period of time. But as always, you always want to have an attorney help you with the paperwork and close at a title company and structure, create the paperwork so it's dot frank compliant and there's plenty of RMLOs out there that can help you. Great debt.

I'm going to throw a bonus question at you and we have not discussed this in advance but can you talk to us? Another way to invest in real estate without owning property hands on is REITs. Can you talk about what a REIT is and the opportunities there?

Yeah. A real estate investments trust is a company has a provide is a variety of real estate investments in there. It's a, it's a fund and you know, they jump through the hoops of the SEC to be able to lie and they're bringing in these most of the time. It's usually a lot of larger commercial properties in a REIT in a lot of cases. And you can buy a share and invest in that as a small part of the overall portfolio. And they will usually be paying back an annual return on investment with maybe often, sometimes maybe get a little share of the profit of the back end too as well. But usually it's just like an investment stock but it's individual stocks of a company. You're buying a share of one commercial property or a portfolio of properties as well.

And finally in this rising rate environment because we do expect the Fed to continue to raise rates and that in turn impacting the housing market. Talk about how that affects this whole idea of investing, this whole strategy of investing.

Well, you've got to make sure that your money's not losing value every day. I mean with inflation, stuff like that, our buying power is reducing dramatically in a lot of cases and that you want to be buying and something that's going to fix that to be returning a solid return to you. So that's why buying you know, cash flowing, real estate, buying a rental properties cash flowing or investing in a note because notes do really, really well and maintain the ROIs as they as far as continue to pay. It's a lot of opportunity for you got to take advantage of me putting money into things like that as a part of your portfolio. As always, you want to make sure it's balanced. Make sure you're investing in something you have knowledge in or learning to learn knowledge and always seek your professionals out there. The biggest mistake you can make an investor is invest in something you have no clue about or you just listen to a podcast. Go listen to the professionals, talk to people who are doing. There's plenty of professionals around you to do that to help you guide your way and hold your hand along the way.

Absolutely. But you can learn a lot from a podcast, including yours, which has over a million downloads. So quickly tell us about that and where people can be in touch with you.

We have the number one podcast in the note investing industry called the Note Closure show. Like I said, 700 plus episodes. It's a mixture of me teaching specific nuggets about note investing and then also bringing on great guests. Experts like Bobby will be on here shortly. Vendors and other investors in the industry to help you learn firsthand experience what their journey has been, their tips or tools and strategies to help them maximize and turn problem properties into profitable solutions. And you can always find the episodes on any of your podcast platforms, but you also check it out the website weclosenotes.com, it's we close notes.com and if you're listening, make sure you're listening to this podcast. Make sure you hit that subscribe button and leave Bobby a five star review. We as podcasters love to hear from our audience. So do Bobby a favor and hit subscribe and leave a message.

Thank you so much.

Thanks for having me. Bobby.

There is something I don't talk about publicly that I have decided to start sharing even though it can be a bit embarrassing. I get digital overload and it stresses me out for good reason. Because when you have so much junk on your computer because you're not as organized as you should be, because you get caught up in all the things that you have to do if you don't deal with it, all that stuff on your computer starts to really slow things down and can become a total drag on your productivity. For me, there is nothing worse than finally motivating to get stuff done only to be derailed by a sluggish computer that is just not cooperating. A little while ago I decided I was going to stop just kind of hoping that things would get better and I was going to deal with it. I downloaded something called Clean My Mac. It's from a company called MacPaw. I was skeptical, but I took a deep breath and I tried it. Long story short, it totally worked. I loved how I could see it work through my files. With clear and easy to understand graphics. I could see what was messing things up and Clean My Mac would ask me for my okay before deleting files so that something I did need to keep didn't go bye bye. That was one of my biggest fears. I recently reached out to the company and they are offering 10% off to my financial grownup listeners who want to also get Clean my Mac. To get that 10% off clean my Mac you do need to go to my link. It is bobby rebel.com cleanmymac b o b B I R E B E L L C O M cleanmymac and that is all one word. I promise you you will be so happy. I want you guys to be in touch with me, let me know how it goes. You deserve to lower the stress of data overload. Trust me. So worth it. Okay my friends, that was a lot but really good stuff. I encourage everyone to to go to my website just my Name Bobby rebel.com b o b B I R E B E L L where a transcript is available so you can review all that information if you are interested. And of course there's a summary via the Show Notes as well right there for you. And absolutely feel free to be in touch with Scott through his website at weclosenotes. Com. His podcast the Note Closers has over a million downloads so that is another great resource for a ton of information to get you started. And I do want to remind everyone you need to know what you are doing if you want to do this kind of investing but lots of interesting stuff there and potentially lots of opportunity. I want to do more episodes on investing and opportunities for you so please be in touch and let me know the topics you want me to cover. What do you want to learn more about? You can be in touch by dming me on instagram @bobby rebel1 that's number one or on Twitter at Bobby Rebel. I am also including money tips and investing information in my newsletter so you can sign up for that right on my website. Super easy. Just my name bobbierebel. Com and Scott and I by the way connected through a conference where I spoke and I would love to get out there and help more people with their money and with investing and just knowing more about parenting kids and teaching kids about money. So please be in touch through my website just bobby rebelle.com forward/speaking if you would like me to go come and speak to your group. And of course big thanks to Scott Carson of WeCloseNotes.com for his help in helping us all be financial grownups. Money Tips for Financial Grownups is a production of BRK Media llc. Editing and production by Steve Stewart Guest Coordination Content Creation Social Media Support and Show Notes by Ashley Wahl. You can find the podcast Show Notes, which include links to resources mentioned in the show as well as show transcripts. By going to my website bobby rebel.com you can also find an incredible library of hundreds of previous episodes to help you on your journey as a financial grownup. The podcast and tons of complimentary resources associated with the podcast is brought to you for free, but I need to have your support in return. Here's how you can do that. First, connect with me on social media @bobby rebel1 on Instagram and bobby Rebel on both Twitter and on Clubhouse where you can join my Money Tips for Grownups Club. Second, share this podcast on social media and tag me so I can. Thank you. You can also leave a review on Apple Podcasts. Reading each one means the world to me and you know what? It really motivates others to subscribe. You can also support our merch shop grownupgear.com by picking up fun gifts for your grown up friends and treating yourself as well. And most of all, help your friends on their journey to being financial grownups by encouraging them to subscribe to the podcast together. We got this. Thank you for your time and for the kind words so many of you send my way.

Thank you.

See you next time. And thank you for supporting Money Tips for Financial Grownups.