Investing and Profiting from Real Estate Notes – Scott Carson on The Mary Goulet Show

Foreign show cultivating a rich interior. Now here's Mary.

Welcome to the program. I'm Mary Goulet, your host. And this episode, these next four are going to be about what I do for a living. Real estate, but in a different angle. And my guests today are Scott Carson and stephanie goodman from weclosenotes.com so if you're checking this out, go to their website so you can kind of browse around while you listen to what we're talking about. I find it fascinating. Welcome, Scott and Stephanie.

Good morning. We're excited to be here. Thanks for having us, Barry.

Yep. I'm thrilled. Okay, full disclosure, we met at the fabulous New Media Summit.

Fabulous doesn't say anything, right?

It is four in. How many have you been to?

Just two. Just two.

Are you gonna come back in September?

Oh, yeah. Steph's already booked the hotel.

Right on. Okay. So listening to this, go to newmediasummit.net and become an attendee. Because I loved listening to Caleb Coombs, who let the teens out. That's his podcast. He's 16, and he attended the New Media Summit. And on the last day, I passed him by and I said, hey, nice to meet you. You did a fabulous pitch. How did you like the summit? He goes, I've been to a lot of conferences. This one is my favorite because of the interaction. You get to meet the 40 icons, 150 attendees, almost 200 people there, and the staff, the team. Everybody's so great. No one is unapproachable.

I like to use the term coopetition.

Coopetition.

Coopetition. We use it in our neck of the woods, but it's an event where everybody is cooperating together. We're all very competitive. We all have our own shows or want to get booked, but it's all coopetition. We all are giving best points. And that's the beautiful thing about your show and everybody else's shows. Everybody's got a different little angle. And it's a great way for us to kind of truly meld the minds together of our experiences. Whether you're new or seasoned, I took some nuggets, great nuggets, away from people that are brand new that I was like, oh, I didn't even think about that. And then, of course, talking to other people that are experienced, too, you get a lot of great knowledge and experience that really can add to your show and your podcast.

Yeah, it's so awesome because we can shape our show any way we want it to be. You know, I'm on a Clock here, but I'm starting a new series of podcasts tomorrow that are going to be five minutes. So content's four and a half. So anyone can make it up as however they want to do it.

That's right.

Okay, so you're here because I think you're awesome, both of you. We close notes dot com. Just give me a little bit of an overview of what this is about.

Yeah. Because there's a lot of stuff there. I am the CEO of. We're a real estate investment and education company based out of Austin, Texas. And what we focus on is buying distressed debt. So we buy mortgages where the borrowers have stopped making payments or are behind on payments. We buy these mortgages directly from thousands of different banks and hedge funds across the country on a regular basis. And our goal, when we buy the debt, we buy it at such a substantial discount because the borrower hasn't paid in 12 months or 24 months or sometimes 6 years. We buy that debt at a huge discount. With the goal being in mind, Mary, that we don't want to really take the property back. We want to buy the debt. And then we like to reach out to the homeowners and try, as I coined the term, rehab the borrower if we can. You know, let's try to come to some sort of payment plan. What happened? I mean, I don't care what your country western song was, because everybody has one. Let's just figure out a true win win situation solution for keep them in the property. Because I would much rather keep them in the property than having to foreclose and take the property back.

Okay, so these are bank owned reo?

No, not reo.

What are they?

When it's an reo, the bank's already gone through foreclosure. So it's actually the mortgage. So you have a mortgage on your house.

Correct.

If you stop paying the mortgage, the banks just start calling you on a regular basis. Right. Hey, pay me, pay me, pay me. Well, after you stop paying for a while, whether it's three months or six months or 12 months, the bank is looking to sell the debt. Not the house, the debt, the servicing, the mortgage itself. The mortgage. The servicing is included with the mortgage, but we become the bank. We literally will buy that mortgage. Say here in California. Here, say mortgage is half a million. House is worth 450. We'll buy the debt, usually around 50 cents on the dollar of value or less. Because now we take on that bank's burden. Exactly. We become the bank and then we make our Money by reaching to the homeowner and trying to work some sort of payment plan. Either get them back on on time, do some sort of loan modification. If they can't come to any type of situation or payment plan, then we offer cash for keys or let them turn around, sell the property on a short sale. And then worst case, if they just tell us to go pound sand and they don't want to deal with us, then we'll. We'll start the foreclosure and litigation process.

Okay. You must have a team.

Oh, yeah, yeah. No, it's just. It's not just me and Steph here. Steph's my VP of operations, does a great job keeping me in line. But I have a team of people across the country that I have a. You know, I have an asset manager that used to work for a major servicing company out of New Jersey. She's handling our borrower outreach along with working with our servicing company, which is Madison Management out of New Jersey. And they're the ones that are reaching out on a regular basis to our borrowers, trying to get some sort of, you know, resolution.

So how did you create something like this that has so many layers and levels and inherent risk?

I've been doing this for over a decade now. So if you think back a decade ago, when everything was hitting the fan in 2008.

Perfect timing.

Exactly. I used to be a mortgage broker.

Okay. Now I'm trying to piece it together here.

Previous mortgage broker. When everything started hitting the fan, I stopped on the origination side and jumped over and started just calling the same banks that I was originating for. And they would send me lists of borrowers and mortgages that were in default. The bar wasn't paying, and I could cherry pick those lists. I can still cherry pick those lists today.

That's what I was going to ask you. Are you buying a pool or are you buying only? Oh, I like this one. I like that one. And they'll let you do that?

Both.

Okay.

Now some banks. Now let's make a big clarification. If you've got a mortgage with like Chase or Citibank or Wells Fargo, any of the big five or six, they're not gonna let you cherry pick. They want you to buy like $50 million worth at a time, right? And it's.

That's Wall Street.

Yeah, exactly. I'm more Main Street. So we deal with a lot of regional banks that have, you know, they're lending in 3, 4, 5, 10 states, they've got a couple hundred branches. They send us lists that we can cherry pick or we can buy a portfolio as well. It just varies on what the bank has on their books that they're looking to get rid of.

Very interesting. I used to work on Wall street institutional bonds and mortgage backed securities.

So, I mean, we were speaking the same language here.

Yeah, now we are. Yeah, now we are. But it just seems so complicated that you, you're almost, you're looking at your books every week, every month to see if anything's falling through the cracks or.

That's why we have to. You have to have a team. I mean, we've got our. I've got a great team that works for me that handles looking at my portfolio constantly on a monthly basis. They're working hand in hand with our servicing department, our servicing company, Madison Management. Now we also, if a borrower stops paying, isn't paying, or won't work out with us, then we have our attorneys actually here in Southern California that handle most of the foreclosure process for us.

What's the percentage that actually go to foreclosures?

National average. If you buy 10 notes, you probably get two to three that'll reinstate with some sort of payment plan for you two to three that will accept like a deed loo or cash for keys where you can pay them to walk away. And then the other 50% you're going to probably foreclose.

So those cash for keys that walk away, let me know and I'll go and.

Exactly right.

Fix it up and sell it for you.

That's right. I wish I was buying stuff here in California.

There's nothing affordable.

Nothing affordable. The stuff that we see here is still pretty expensive, even in distressed debt. I buy a lot in places where we get a lot bigger bang for our buck as far as roi, like Michigan, Indiana, Missouri, the Carolinas. I bought a lot in God's waiting room, as I like to call Florida.

Right. It totally is. That is Palm Desert.

That's exactly. I have bottle. I've bought stuff here in California years. I've bought here in San Diego, Louisiana. 29 Palms, Palm Springs.

So the ones that you could do that in California with are the people that are had no idea that there were options for them.

That's correct.

Because the equity rise here, it's pretty solid. So my house I've had for 29 years, it's never gone down, but it's maybe stagnated in value, you know, because I'm closer to the beach.

Right.

But there are parts in, you know, Alpine, Hamul, Hemet, and the quantity of units in Palm Desert, Palm Springs, all those areas, Indio, that is, there's like a glut on the market place and there's a lot of second homes there. So anyway, fascinating to me because I love real estate and I love getting in on that. And I talked to you about Michigan, Detroit.

Yep.

Okay. So we have about a minute and a half a distressed property is what you just described. So people lose their job, they lose.

Their enthusiasm, they get sick, get laid off, they go through a divorce, some sort of financial hiccup where they just can't pay their mortgage anymore.

And you miss one. It's downhill from there for the most part.

Yeah. 85% of Americans today are still one missed paycheck away from being in default. Actually, the national average is we're still at about a 3 and a half, 4% default rate across the country for even new originations. But one out of 10Americans is a month behind their mortgage already.

Oh, brother.

I know it's not good and it's only going to get worse. I mean, we keep talking about a market correction. I don't think we're going to see as extreme here in California as we did 10 years ago, but there's still a lot of places that have just risen up crazy. And we're starting to see that in like Dallas and Houston and some of the other places Miami's going through that. Some of these places have rebounded really strong. They're starting to see a dip in the market. And people have been excited to get in the market, have overpaid. And if the market turns south, there's a lot of people that are underwater. 10, 20, 30%.

Okay. But the one thing that will at least has been a saving grace is that the regulations for getting a loan after 2008 were so restrictive. It really stopped new loans for a long time.

It did for a while. But subprime is back. They got now caught.

Bam. Stated income bank loan statements.

Non prime is what they call it now. I'm seeing banks and hedge funds and private lending institutions doing like 100% financing with a 520 FICO.

Crazy. Okay. We're gonna cover a lot more content in the next three segments. So stay with us on the Mary Goulet Show. We will be right back.

Welcome to the Mary Goulet Show. Cultivating a rich interior. Now here's Mary.

Welcome back to the program. This is a real estate segment. Very cool. We have Scott Carson and Stephanie Goodman from weclosenotes.com Check it out. Okay. In the prior segment we talked about one, how you came up with the idea, what is the overall picture of what you do? And this one, how do you make money? What's your highest performing? Because you have so many variables that you're not in control of because you're dealing with other people who are in distress with their property.

Totally correct. Every deal is a different story. Some people you want to help out, other people are just using the system, trying to drag things out. But the, the biggest bang for our buck actually is when we buy this distressed debt is actually to keep the people in their houses. If we can't, they're willing to work with us. Now, they're not going to help themselves. They want lie to us, not work with us. Then we foreclose and then just either sell the property at the foreclosure auction or take the property back and list it with an agent and sell it me. Exactly. So that's, that's really kind of, you know, it's worth 500. We bought it 250. Great. We sell it at 90 cents on the dollar. You know, that's $150,000 in profit, roughly. That's a pretty good deal for us. Unless it's a dragged out longer process.

Or evictions and all that kind of stuff is a hassle.

Exactly. Then you've got attorney fees, eviction fees, rehab costs. That's all gonna be cutting your bottom line. And I don't like rehabbing properties from across the country.

Right.

I like Austin. Now the biggest bang for our buck, like I said, is to actually keep the homeowner in the property. So let's run our numbers. Half a million. Let's do it.

Half a million dollar house and the mortgage is.

Let's just say it's 550. They're a few months behind. Okay, about a year behind. So they owe 550. We bought that at 250 at 50 cents of value.

So the bank takes the loss, they.

Write off that loss off their books.

Okay.

Because they can now take that 250 and rinse and repeat that with originations and start making their fees back or leverage it 10 times. 10 to 15 times. Way we make money is okay, we bought the note at 250. We send out a letter, we start calling the borrower and say, hey, what happened? Let's, you know, let's try to work a win win here. Can you start paying on time again?

And are they paying at the 500 level or they're paying at the 2.

They still owe to. They still owe 500. I bought that receivable. Okay, they still owe 500.

So their mortgage is staying the same. Their payment is staying the same.

They owe 550. So I'm going to say, okay, if you can start paying on time again, I don't care that you're a year behind. Start paying your existing payment on time again after 12 months, I'll forgive the back payments. Or if you pay $100 extra or $200, every dollar extra you pay, I'll match that and forgive that. All right, so there's a lot of creative things that we do. You're at a 7, 8% interest rate. Hey, pay on time for six to 12 months, we'll drop the interest rate down. You owe 550. Pay on time for 12 months, we'll drop it to 500. But the way we make our money is to get them start paying on time. If their mortgage payment on that is what we figure was 2,500 on a half million dollar, normal balance, right, they start paying on time. 2500 times 12 is 30 grand. 30 grand in income over a quarter million dollar investment is a 12% return. It's not bad.

It's not bad.

But the big kicker is on the back end. Okay, now they've paid on time for six or 12 months. It's now a reperforming note or a performing note. I can sell that note back to Wall street or other investment firms at 80, 85, 90 cents on the dollar of the value. So now I bought it at 250, got 12 months of payments. A year goes by, I can sell that note at 400. Somewhere between, somewhere between 400 and 480.

No way.

Yeah, so we add another 150 to $200,000 on the back end, and that's the we do. We make money on the front end along the payment side and then the back end sometimes, you know, we always like to try to get the borrower to bring a little skin to the game.

Right?

You know, we're not going to say, oh, you got to bring the full 12 months. Hey, can you bring four months of payments? You know, can you bring two months of payments? Can you bring something, maybe pay a little bit extra each month? And that's a great way that we make it. Now this has been going around for years. I mean, every bank buys and sells notes on a regular basis. That's where they make the most amount of their money, is in the payment streams. They don't like taking the property Back. They want the cash flow. And that's what we look to do is buy this debt, work to get cash flow coming in. So it's a lot less work. I don't have to pay attorneys to start foreclosure. The borrower stays in the property. They're taking care of it. The air conditioner doesn't walk off in the middle of the night.

Right.

The copper goblins don't show up and strip it out to the electrical, which happens.

No, it does. Absolutely.

Yeah. And so that's. We actually like occupied assets, occupied notes. A lot of people that come from the real estate game, they want, oh, I want the. I want the vacant property. I want to buy it and rehab it and flip it. That's great if it's in your backyard. But I'm in Austin, Texas, you know, I don't want to work that hard. I'm buying stuff across the country. So we like going after occupied assets because it gives us the most amount of exit strategies to make money. Do we foreclose? Yes, we foreclose in a big chunk of our assets, roughly about $0.40, 40% of what we buy. But our biggest goal is, like I said, just get the bar re performing and really let them have some dignity. Right, Stephanie?

Exactly.

So keeping the property, they don't have to worry about moving out, uprooting the kids, paying deposits.

So is it somewhat of a loan mod?

It is. That's what we do. We do a lot of loan modifications.

But you're not doing it just on paper. You're actively. Because I've heard people getting loan modifications and they just keep trying to call the bank to see where their paperwork is or what they're doing. But you seem to be more hands on, really trying to create a solution.

We do create a solution. I've got a very good team and they know exactly what they do. And we're not going to drag stuff out. I mean, the problem with bigger banks that are trying to do loan mods is that they've got an hourly employee who doesn't really care.

Exactly.

You know, there's no emotion into it. They getting paid, they're 18, 20 bucks an hour. They got 100 files. If something's not right in the file, they put it to the bottom and they go to the next one.

Exactly.

Yeah. We're not.

That's what I'm kind of explaining.

Exactly. It's a process. I, you know, we bought loans where the borrowers were trying to do a loan amount for five years. I mean, literally, I Got the whole file. It was about 2 foot tall with all their hardship letters. And we call the borrower once we closed on the note and said, hey, what's the situation? I said, your notes been sold? And they started crying. I was like, whoa, chill out. It's a good day.

Nice.

I'm ready to approve you right now for a loan mod. Let's get this done. I can have you talking with my attorney in your neck of the woods in 48 hours and we can get you signed and get start paying on the path back to recovery.

Oh my gosh, what a relief. I mean, it's a game changer for people who got hit sideways in life. Yeah, sometimes we do it to ourselves, but we all deserve a second chance.

That's correct. And there's a lot of people that things have happened to them. It's been outside their control. I mean, they were still going to work on time, they were still doing what they needed to do. And then the market changed on them. They had five foreclosures on their block. So now their property's underwater.

But that does not limit their ability to pay.

That's correct.

It's what they're doing. Did they buy a boat? You know, seriously?

No, you're exactly right, because we had that. You know, everybody was cashing out their equity on buying toys. And then for a few years it was a garage sale economy where they were selling those toys off trying to pay their mortgage again.

Exactly. Okay, so there is money in it. And I just go to your website for a second because I see a lot of training events. What is. Because that's. I have a three legged stool. Real estate, vacation rentals and podcasting, books, all that. Do you have a three legged stool over here?

I've got a three legged stool. I've been actually buying distressed debt since 2008. And then I started teaching people how to do it because people are like, what the heck is a distressed note? You know, I want to learn. Where are you finding these deals? And so I was like, well, I can't buy all the stuff that's on the, on all the books out there. I mean, there's 15 million homeowners underwater at the peak in 2010. There's still about 4 million homeowners underwater still to this day. So I started teaching investors because they came to me, hey, can you teach me how to do this? And so that's what we do. We start, we teach courses, we've got some online training, we've got a specific mastermind where people get together three to four times a year. We really work on each other's businesses. We buy together. You know, I mentioned coopetition in the first segment.

Right.

Big believer in that because there's so, I mean we get lists in there, 400 to a thousand different properties. I can't buy them all.

So then people pool their money into the investment fund.

No, no, no, that's. We don't do that. But we'll do separate carve outs. Like I'll give you Steph started as an investor with me. She'd buy two or three. You know, we have another investor, say Darrell Isaacs, who will buy 25, or Jeffrey Wolf who will buy 10. And so we kind of co bid together. I'll buy 50 and then we all will kind of pour our bids. Even though she's only buying those. He's only buying those. And so we get. I call it buying at Sam's versus Walmart. We get a bulk discount.

Right.

Cheaper discount. It's four different contracts. But the hedge fund doesn't care who's buying what or the bank doesn't care. They just want to see some money coming in and then go from there.

Okay. Because I get texts as being an agent, I'll get a random text. Hey, this is Pearl. Do you have any flips or off market deals? I'm like, dude, I'm in the market. If I do, I'm taking it.

Right.

So they do not understand what you're doing. They're still trying to find that house, the unicorn that they can put lipstick on a pig.

Yeah, that's correct.

And sell it. And a margin of 15 grand here. You, California, San Diego, especially in LA probably there are pockets.

Yep.

But we're all vultures here. So we know what's going on in our hoods.

Darn buzzards. Yeah.

So you really do have to go to like I have a friend who would flip in Arizona a lot. Made a fortune. But he called me a couple months ago. He's like, it's getting too hard. There's. There's no margin, man. There's nothing. 1. All the properties are drying up.

Yeah.

So I'm going to give him your website because he's got the money. He's just, he lives part time, Arizona and San Diego.

What do you have to realize is the note game, it's different than a fix and flip because you do become a bank and you have to really look at is you've got. It's not just a lot of. We get a lot of fix and flippers into the note game. They overpay for assets because they're not considering the foreclosure time frames and the foreclosure.

But that's why you educate people.

Aim into that. Exactly.

You know, and also the price point is less because here we're what, our median income is over 500,000 or something crazy like that in San Diego used to be two something. Okay, go ahead.

I'm going to say what you buy in one property here, I could buy a block other places.

That's what I'm saying. All right. We'll be right back on the Mary Goulet show.

Welcome to the Mary Goulet Show, Cultivating a rich interior. Now here's Mary.

Welcome back to the program. Okay. This is our real estate segment, third one in a group of four with Scott Carson and Stephanie Goodman from weclosenotes.com you have not listened to the first two. You want to go back so you understand the context within which you're talking. And now we're getting to some juicy stuff because we're in San Diego right now in San Diego, California, remote areas might be a good option. But someone like me who wants to have another investment vehicle, how would that work with this program?

So that's a really good question. We get it quite a bit in Austin. It's very similar to San Diego. I haven't bought anything in Austin over a decade. I'm going where I find deals, where I can find a good return on investment roi, but also rot return on time. It's important to us. All right, Because a lot of fix and flippers, they get in and they spend a lot of time, a lot of money. At the end of the day, when they figure out their hourly wage, they're working for less than minimum wage a.

Lot of time and they're exhausted.

Exactly. It gets burnt out real fast. So our big thing is to get cash flow going. And we've helped a lot of people. We've got a lot of great students who've sat down with our plan of action, said, okay, let's figure out what you need to be making. What do you need to do if you want to leave your job or you want to bring in five grand a month in cash flow? Well, if you're buying, you want to want five grand a month in cash flow coming in. Let's figure that out. If you're buying assets that are worth 50 grand in say, St. Louis or Kansas City or Columbus, Ohio is a really hot market.

So wait, what are the price points.

It'S a lot cheaper than it is here. Like I said, you buy one note here in San Diego, you buy a whole block in other parts of the.

Country, that's something else.

So that's the thing. If it's worth 50 and they probably owe 60, 70, you're probably picking it up for 20 to 25,000 the debt. And if you get the person to start paying on time at their $700 a month, that's a good cash flow. Yes. Seriously. We've helped rocket scientists leave their job. We've helped, you know, he's making six figures, 150, 200 grand a year leave his job because he worked the plan, he bought assets and over 12 to 18 month period of time, he replaces income with cash flowing notes because he bought them non performing, bought them cheap, actually used other people's money like their retirement accounts, their 401ks or savings. And it was giving his investors a good return on investment and he was keeping the difference and able to leave his job.

Okay, so let's say I buy four or five of those.

Yep.

I don't see any money for 12 months to 18 months.

No, that's not always the case because if you get it re performing, they start paying in 60 to 90 days. So now you start having cash flow come in.

Okay, that makes sense. I'm sorry, I had to go over in my brain.

I saw the numbers being calculated here above your head. But that's, that's the whole goal. If you buy performing or buying occupied assets, you work with a homeowner and very aggressive with our vendors, we don't do it all ourselves. Our vendors do a really 90% of it. Get the homeowner to have some sort of resolution. Hey, are you going to start paying, you know, pay, you know, stay. All right, no soup for you. If they don't pay, then we start the foreclosure process. And if you foreclose, you're going to see some bigger checks because you take the property back, you sell it off. A lot of times the foreclosure auction, those are big lump checks. But the performing notes say hey, it's $500,000 a month. Depends on the payment coming in. You just start figuring out how much you have to. How many deals do you need to close or have performing to help replace your monthly income?

Yeah, it's a numbers game. Pretty much everything comes down to being a numbers game.

Amen to that. And you know, this is not. If people are over analytical, this is not really a great aspect form because there's so many different options that can happen with a borrower. You know, we.

That's what I'm saying. The variables are.

There's a lot of variables. Exactly. So you got to know, kind of got to go with the flow. If you try to always foreclose. I mean, that was one of the biggest mistakes I made in the business when I got in my first two years. I'm just going to foreclose on everything. I want to foreclose, foreclose, foreclose. Well, I left a lot of money on the table. I could have helped a lot of people initially. And I had cash flow coming in versus waiting 6 to 12 months when I foreclosed. And then I had a rehab then list on the market to sell it.

Okay, so how much? What is like a minimum amount of money to make it start to scale? If it's, you know, I love your price point of 50, 60, 70,000. Where the hell is that?

You're not here. You think about that just because, you know, when you think about like a $50,000 property here is like a doghouse, right? A garage door. In some places it's not even a garage. Yeah, exactly. It's a lean to. It's a tiny house, It's a dog house. Exactly 10 square feet. But those are great properties in different areas of the country. Indianapolis, a great market you can evict in 14 days as well. In Indianapolis. Oh, it's very nice. Plus, it's also pretty fast to foreclose there. Columbus, Ohio, while it might be a lot colder there, it's a very booming economy with the Ohio State University and a lot of the growth going on there. Detroit. Oh my gosh, Detroit. I once bought a house for fifteen hundred dollars and then sold it for scrap metal the next day for three grand. This is eight years ago. But we can buy properties, 20, 30 grand there that would pay $800 a month in rent. You know, that's ridiculous on that. You know, you buy it for 5, $10,000 and you get a payment of $500 a month coming into it.

Okay. Because I met at the new media summit where you and I met, three of us met one of the last presenters. She's the real estate gal. She goes to Atlanta and she. I think she's doing buy and hold.

Yeah.

Did you have a conversation with her?

She did. She's doing buy and hold. Yes.

And then we had a guest on Reinvention radio and she was the one that said, yes, I. I have real estate. Different pockets of investments and One of them is Detroit. I'll go and buy a house for two grand here, two grand there. What is the best strategy for that? If they're, I mean, just, they're vacant homes, you just buy it and fix it up and rent it out for 500 bucks a month.

You could do that. I mean, we see a lot of that. I mean, we've driven around and been there. But there's a lot of these banks that we get these lists from. I had one bank send me a list of 500 asset, 500 plus, and half of them were in Michigan. You know, Detroit, Flint, Bay City, Ann Arbor, Lansing.

That doesn't make sense.

It totally does. It doesn't. Because you're used to the real estate side of things. Yes, but the banks have these portfolios that they never said. There's no MLS for a note list. So it's dealing with specific departments inside of the bank called the Special assets and the secondary marketing department. These are the two departments inside the banks that have these lists available. And it's not. You're not gonna walk down the local bank and say, hey, I want to buy your nuts. You've got to get to somebody inside of these departments either. On Wall street, do they just not.

Trust what you would do with them or they don't trust you won't perform? I don't understand why it's so secretive.

Well, because it's just not. Most people don't have the patience to call 50 banks to get a bank to say, yes, I have something. Or, you know, the last thing the banks want is a bad PR thing where you buy a note and don't know what the heck you're doing with it. You know?

Exactly.

And so that's why you've got to speak their language. There's a whole lingo that goes along with talking to these asset managers to get on their lists. And they send them out once a month or once a quarter. And then you pick what you want to buy as long as your money ends up in their account and what you negotiate. Hey, you're now the bank.

See ya.

Yeah, exactly. Not our problem anymore. You get to deal with Joe and Mary Smith. But the fact that we bought it at a discount or buy it very cheap gives us a lot of flexibility to really create a win win solution. It's not always get them rate performance, not always take the property back, you've got to be a little flexible. But it's all numbers based. You know, what's the best ROI in.

Our time so you can't I mean, how much information can you get from the bank before you choose? Choose which ones you're going to.

Scary.

Yeah.

I mean, name Social Security number, last 12, 24 months of payment stream. And then of course we do a lot of social sleuthing.

That's. I was just going to say you got to find out, did they just get back from Europe?

Well, we've had some interesting stories. Like we saw we're getting ready to buy a note on a property, Orlando. And then we jumped online and the homeowner said, well, I haven't made my mortgage payment six months. Do I go to Disneyland or do I make the mortgage payment? We're like, well, we know what you're going to do. We had another guy that was going through a bit of a transition. He was wanting to, he was using what he would be paying for his mortgage to pay for his implants.

Oh my goodness, yes.

Not quite Kyle Jenner, but anyway.

So people seriously do that?

Oh yeah. They put all sorts of stuff online. We can find out where they work at. You know, if I see somebody's a part time manager at Dollar General in Indiana, I can google what their salary would be and find out what they can roughly afford on a monthly basis. I can find out, I do a Name search on LinkedIn to see if they're working. You know, they've got a profile. One interesting thing on I bought a note in Columbus and I found out by googling the borrower that she ran a house cleaning business in Columbus, Ohio. And so I had other properties in Columbus, Ohio. So I called her up to hire her to go clean my other houses, which she did. She was great, did a great job. I paid her for her time. And then I called her up again. She's like, oh Scott, so good to hear you have another house for me to go clean. I'm like, yeah, we have to have a little bit of conversation. Do you know what I do? And I told her what I did. I said, and there's some good news. I actually just bought your mortgage. I'm now your bank. And she's like, huh? What? I say, I know you haven't paid in 12 months. I know you're a hard worker though, based on what you've done for me. So let's figure this out really fast.

What happened?

Oh, she's been on time. If she's even more than a day late, she calls the servicing company. I'm sorry, I'm. She's great. And every property we buy in Columbus, she's the person I call to go clean out.

That's hilarious. Well, you're Mr. Do Gooder.

We try to, you know, but then we still have our fair share of people that cuss us up a storm.

And they're just afraid. They're backed up against the wall. They don't realize that there's an option for them. They're doing fight or flight or they're just being a dick.

In some cases they do. I get it. And we're. I'm glad to talk with them about that, but there's people that have forged documents with the city. And, you know, we've tried to do something. You send them out a payment plan and then you don't get it. But we send it certified so we know that they got it. Or they'll, you know, go online and make an A payment, electronic payment, but they use a fraudulent account. There's. People try to play games.

You're gonna. It's a numbers game.

It's a numbers game. We know we're gonna have at least 10 to 20% of our borrowers are gonna try to play some sort of game. If that's the case, that's okay. We'll deal the other 70 to 80.

But your research, your social research before you can kind of go, eh, these guys could. They're. Let's give an honest person an honest chance to prove that's correct.

Because the bank, the selling bank will give us the whole loan file so we can see what their loan application was, what they were making, where they were working at. We get all the call notes from the previous servicing company, finding out what's going on. I mean, we get a lot of great information that really allows us to really beat Sherlock Holmes.

That's cool. All right, one more segment. Let's do it. We'll be right back on the Mary Belay Show. Stay with us.

Welcome to the Mary Goulet Show. Cultivating a rich interior. Now here's Mary.

Welcome back to the program. This is our fourth season segment on real estate. So this will be on my site, marygoulet.net under the Real estate tab. I will post these podcasts or MP3s. So I have Scott Carson and Stephanie Goodman from weclose notes.com now, we've talked about how you started in this. What was the genesis of it, how much, what are the numbers of it? Let's go to your website because you have training. Does a person have to be a real estate professional?

No, you do not. You don't have to have a Real estate license to do this. Now, in some states, like Georgia, they want you to be a licensed mortgage broker. Other states want you to have your servicer licensed in that state as a debt collector. But for most part, you don't need to have licenses to do this, which is great. It's just the fact that, hey, you just got to know what's going on in each state. Each state's a little bit different. Foreclosure, time frame. That's why we always tell people, listen. That's actually why we started teaching, was that there's so many different moving parts to it. So we like to teach people that.

Okay, so what was the impetus for you to, I mean, do people look at you and go, what are you doing? I want to learn about that. Like I did.

Yeah, well, they, it started actually kind of funny. I was doing deals and I'd post to Facebook and I had some group call me up, some big real estate seminar, ask me to come in and talk about the deals that I was closing. You know, I flipped a, a seven unit apartment complex here in San Diego, made 70 grand in 24 hours. And I flipped a 16 unit in LA and made 100 grand on a wholesale fee in like 30 minutes. And they were like, how are you doing this? Where are you getting these deals from? And so I went and spoke on stage and I got bombarded at the back of the room. Once I got off stage, Teach me, teach me. I was like, okay, yeah, I got a course that was over, that was 2010. And I was excited. We do a really good job with it. I was actually the educator of the year a couple times in my little niche. And we do, you know, we believe in providing real tools to our students. I'm not one of these guys that likes to blow a lot of smoke and you see that there's a lot of snake oil salesmen out there in the real estate education industry. We're a big believer that if we give you the tools and we show you exactly how we do, you're either going to run with it or. And do it or you're not going to do it. And that's normal across the board.

Now, do you have competition?

Oh, yeah, there's about, about three or four other people that teach this niche of real estate investing.

Well, even just doing it because some people teach, but they really don't know how to. They can't do it.

Yeah, exactly. Now we do this. That's why we call the company we Close Notes because instead of, we teach notes all Right.

We try to close notes.

Yeah, I've bought and sold over a billion dollars in distressed debt in the last 10 years. Residential and commercial deals. We've got a couple hundred assets on our portfolio right now that we own that we're working through, constantly buying, constantly looking at assets. I'm actually looking at a portfolio of 64 performing notes from a bank that we're probably not buying like 23 of them. So we're. I walk the walk, I don't just talk it.

Do you ever have investors come through and say, I like what this is, I want to keep it?

Yeah, yeah, we do that. And we just basically figure out, okay, what's the buyout clause on that individual asset?

Then what would be an example of a buyout clause?

So, well, let's say we bought it at 35 cents and then our normal sales price would be 85. So we would just figure, okay, what's the split in that? And they just write me a check for the difference. So Maybe it's a 40% check between the 30 and then the, you know, the 80, 85 or figuring out what the return is. You know, if it's been performing, I like it as well, then we'll just do a split of the cash flow. So there's a different ways to structure it depending on what they're looking for.

Yeah. So you caught my ear when you said apartment buildings. I've always wanted to have fourplexes.

Well, I look at apartments as being something that's more than five units. A fourplex is great, a five plex is great. And you still see a lot of that stuff. That's actually, you still see a lot because those are low valued assets to consider to a bank for the most part. A bank like single family homes or commercial property, they actually really prefer mortgages on commercial properties that are a million or greater. Anything that's below a million dollars in value, yeah, they still have it in their portfolio, but it still costs them just as much to do that little smaller asset as a bigger asset. They just don't make as much. So we see a lot of their.

Risk would not pay off as much.

That's correct. That's correct. And so we still see a lot of that stuff hit the books now. Don't call me, hey, I want to buy apartment, you know, 100 unit apartment complex, no offense, that's the most overpriced asset right now in the market.

Isn't that funny?

It is. And I'm just like waiting because a decade ago that's What I was basically buying most of the time was a small 20, 30 unit apartment complexes from Capital One or Wells Fargo Financial back in the day. But now, I mean we bought a lot of residential. I'm actually, this is a funny story since we're in California. I'm looking at a distressed mortgage on a dispensary and a grow house actually from a bank right now.

Where is it located?

Louisiana.

Really?

Yes. The bank wants it off its books because they didn't realize it was a dispensary.

We'll talk after.

That's another type of cash flowing green asset.

Yeah, I'm curious about that.

Yeah.

But it's vacant.

No, they're both occupied. Just the bar is continuously late so the bank wants to get it off their books at a discount.

Wow, this just makes me so excited. I love this. I mean I'm not on a huge scale, but I mean at four to six unit apartment, that's great.

We have a lot of people that love that. I mean we see that stuff all the time. It may not be here in San Diego, but there's great places and there's property managers everywhere. Is what we try to teach Iowa IO? Well, yeah, if you like it that cold.

Well, no, because my niece lives there.

Oh, okay. Yeah.

And we've been trying to figure out a way to do deals. She's a project manager for huge commercial jobs.

Oh, okay. Nice.

She's pretty high up.

Oh yeah, yeah, definitely.

But once you get the bug, you get the bug. Yeah. So is the training affordable? What if somebody goes through it and they're like, I don't got, I don't got it, I can't do it.

Yeah. So there's, there's our trainings. Verb. We have an online training platform is our no buying blueprints. Like a thousand bucks, 30 modules. Plus they get involved in our large online community as well. So they can network with other investors, they can raise capital. We're very hands on. And following up with our students, there's a message board that they get like get my email, cell phone number. Like I was answering a text message on the way over from a student buying a deal in Tampa, Florida actually just recently. And so we're very interactive. And then the beautiful thing is our community just is really good. I mean we've got a private Facebook group where everybody's working together like I talked about earlier on and believing in coopetition. And it's a, it's a much smaller niche. The note investing side is Maybe there's maybe 10,000 total note investors in the country that do what we do.

That seems like a lot.

It seems like a lot, but it's small when you look at like the half million fix and flippers or the million plus Landlor out there. So it's a very small niche when you look at it that way. And the thing is, we've also got our podcast, the Note Closure show too, where we go through a lot of information. A lot of vendors and students and investors that are come on that show and we spent a lot of time going through education.

So your vendors are not just strictly corporate vendors?

That's correct. They're servicers. There's people that are there to work with our investors. They're working there with our students on a regular basis. Where it's like Pro Title usa, which will help you pull O and E reports or title reports. Or it's Madison Management who'll help you with the servicing side. Or it's the Singer Law Group out of Irvine here that'll help you with their foreclosures, help you find an attorney to foreclose. Or it's the Franco Burrill law firm out of Columbus, Ohio will help you foreclose in Ohio, Michigan or Indiana. So when we talk about vendors, it's not just, hey, they're, you know, here for a promotional thing. There are actually people that we talk to on a regular basis that are working on our behalf to help us close more deals.

Okay, so with the last minute of the show, is there anything we don't know, we don't know that you want to share or one nugget of advice if somebody is intrigued about this, so.

They'Re intrigued about it, just go check us out online. We've got tons, I mean, literally about a thousand plus videos on YouTube of different webinars.

Under We Close Notes.

Under we close notes. YouTube.com weclosenotes is our homepage for the videos. Or you can just go to weclose notes.com, links to all our social media, links to hundreds and hundreds of webinars on specific subjects, case studies. You can also check us out online or just look for Scott the note Guy.

Scott the Note guy. Scott A.

That's right. A for a. We're on radio live. I can't say what I was gonna say.

I think I got the word. It's been so wonderful having you both here.

Hey, Mary, thank you so much for having us. Honored to be here and glad to help anybody out there. You have a question? Go online, drop an email. We're glad to help answer any way we can.

Yeah, it seems like it's another option for someone who doesn't have, you know, $5 million to invest, but they can find something across America, try it out.

And that's the thing. Over a decade ago, you had to have 5 million to really kind of get in this game. But with everything that happened in 8, 9 and 10, it's opened up a lot of opportunity for smaller investors.

Well, thank you guys so much for being here. All right. This is the Mary Goulet Show. Check us out on marygoulet.net Sam.