Investing In Notes: An Effective Way To Diversify Your Portfolio With Scott Slackter

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Close Nodes, Scott Carson.

Hey, guys, I'm Scott Slacker. I'm a host on the Remarketing podcast. On this episode of the Note Closer Show, I share with Scott my experience with buying mom and pop seller finance notes as well as one of the biggest mistakes I made in this industry. So stay tuned, I know you're going to love it.

Good morning, good afternoon, good evening, everybody. Welcome to this episode of the no Closure show. As always, Scott Carson here. Jacked up, excited to have you. And we got a fellow Scott on the podcast today, another Note investor who's taking a different approach to note investing. Not chasing institutional debt, but started off as his note investing career, chasing owner finance notes. And we want to add anybody on to talk about that. We talked that. I've had Kristen Gerst, a few others talk about it. Great. Some owner finance notes and buying that stuff. We had Will Henning from Fanac USA on a while back, but I wanted to bring on somebody who's is targeted. That's been one of their main focuses and talk about that strategy because we get a lot of questions from students about, hey, if I want to target owner finance notes, what's the best way to go about it? And I was fortunate enough that actually Scott reached out to me to have me on his podcast a few weeks ago. We had a great time. I think what, 45 minutes turned into like an hour and a half. So, Scott, we are, we're honored to have you here on the podcast today.

Well, thank you for having me. I really appreciate you inviting me on and I love to have you on my podcast. I really appreciate you showing up, man. The conversation we had, the information we talked about was pure gold. Telling you, man, I'm happy to be here. I'm super excited.

Sure, sure. Well, let's tell us about yourself. Share your investing journey and why you kind of settled on, you know, targeting on our finances. Let's start there first. Give our audience a bit of a feel for where you're from. You've got a different background than a lot of real estate investors do and I want you to share that a little bit. I think it's, I think it's actually an asset for you.

Yeah. So I actually started working when in behavioral health. So I worked in a field that's called aba, which stands for Applied Behavior Analysis. And so essentially I was working one on one with autistic children and young adults and utilizing a science called behavior analysis, which has a lot of parallels to the investing world because we track data, we implement some type of change, and then we track the change and we graph it. And my job was becoming too stressful for me. I was working 12 hours a week, four days a week, and I was getting burned out. So I said I need to find some other job. And one of the things I found was passive income. And passive income always leads you back to real estate. So I started off my investment journey learning everything I could about real estate. And so the first thing I found was wholesaling. And what I found was when I was trying to wholesale, I was really working two jobs. I wasn't working like a job in your part time. The way it's advertised is it's kind of like flipping houses without flipping houses. And you can do this in your spare time. And if you want to do it right, no you can't. And if you want to replace your full time income, no you can't because there's a lot of competition out there. But in my real estate education, I came across a book called, called Simple Man's Guide to Real Estate. And anyone listening, anyone I've ever talked to, I recommend that book 100%. It's only $100. $100. You get a free mentor for life through email. If you spend a little bit more, you actually get to talk to the CEO. And the organization itself is a nonprofit organization, so they do charity and a nonprofit Christian organization. Anyways, that book had so many different types of real estate deals and different ways that you could buy real estate that I had to read it multiple times just to understand where the money was going and how the investor was profiting and how the seller was benefiting and moving on with their life. And one of the strategies that popped up was using a note to buy a house. I'm like, well, what's a note? And he actually has a section covered in on how to buy notes. And it's not anywhere as near as sophisticated as the things that we're doing now. But I thought to myself, I said, well, what if I buy a note? Then whoever note that is, you know, whoever's mortgage debt is, they have to pay me. Like, so why am I trying to go from wholesaling the flipping to being a landlord? To collect rent and finally get passive income when I can just go look for someone's notes if they're being for sale. And sure enough, I joined my local ria.

Where's hope for you? Where's hope for you?

I'm from New Jersey. South Jersey. So not like what people think. It's not near New York. There's not a big cities. Like, I'm surrounded by farmland and horses.

It's not like Jersey Shore, yo.

No. And in fact, New Jersey. New Jersey is like night and day. North Jersey is almost like New York City. South Jersey is almost like Bumpkinville.

I mean, you're just a boy from Bumpkinville.

Yeah, it's night and day here. People meet me and they go, you're from Jersey. You don't have a Jersey accent.

You don't have enough gel in your hair. Right?

No. Right. I definitely don't speak with a Jersey accent. That's pretty.

Insert Sopranos joke. You know, not wearing a tracksuit.

Nobody's entering cement shoes here.

That's right.

With a shotgun. But.

So joined your local Ria. Sorry to take you off track, but I couldn't help it.

Yeah. And so they had a. No training. And then there's a guy in our space that you're familiar with, Eddie Speed. So I hooked up with him in his group and learned notes through him. So he was mentoring me for a while. He's the one who taught me everything I know. I've since moved on to another mentor. That's where I initially learned about brokering notes from finance notes. And I believe it or not, I'm not sure if familiar with Serena Harris, but she's the one who wrote the curriculum for that.

I know Serena very well. Yes. So she's no longer there at Colonial now.

Yeah, no, no, no. She's got her own thing going on, but she technically taught me to broker. Now.

Serena's great. Serena's great. She's also got her own podcast. I don't know if she's active with it or not, but one of the. It's a story about kind of her journey too, as well. Too. So, yeah, so let's talk about that. So you kind of learn this stuff. Let's. For those that are thinking about getting into that aspect, let's talk about kind of your day and day activities. Now, did you find that was another job on top of your 48 hours working with autistic children? Because I know that's stressful, as my ex wife was constantly doing that. She would get bit. You know, punch scratched, the kids were tip taller. She was a little itty bitty person. But is it stressful? Are you adding you're still working full time in ABA or you've been able to transition?

What's going on? Actually I've actually since been able to transition and I'm looking at doing different strategies in the notes space like hypothecating, which is something that I wanted to do for a while now, but actually talking with you, sharing me some of your resources and thank you for very much for that, given me like some sources to go to where that that can be possible. You know, there's no shortage of notes out there and that was one of the things I saw as I was brokering was that there's really no shortage. What I have a shortage of is capital. So there's all these people with their self directed IRAs and they have money to invest but they're not making the returns they want. I mean maybe they're doing some real estate, maybe they have a tie it up in the stock market. Stock market fluctuates like crazy. And you know, when you put your money in real property, especially in a note that has much more long term income, it's stable, it's stable past market fluctuations. And when markets do fluctuate like we have huge recessions in the non performing space, we have a lot more flexibility of what we can do to recover note or to still profit from it.

So let's break it down a little bit. So you're looking for investors that basically money sitting on the sidelines. Your what ask what kind of. You put them in performing notes, non performing notes. What are you doing? What kind of strategy?

If I'm hypothecating, I want to put it in a performing note. So like a passive investor, I usually say I give them between 6 or 8%. Usually they're thrilled with that. They haven't been seeing that. And so that's going to be long term, that's not going to change. So you know when interest rates drop, you're still getting 6 to 8% annually.

So they're usually fluctuate like we see. Yeah, definitely. Especially when you consider the fact that so many people have money sitting in accounts making 0 or 0.01% with you know, Wells Fargo Chase, America's given and then servicing fee makes the negative return in a lot of cases. So you're going out and finding performing notes at above 6 to 8%. How are you finding those deals?

So I have been, I've had A relationship with a family of capital funds. So I've utilized their inventory for brokering out to them and you have to stay on top of it because they're flying. There's a lot of brokers associated with this space. There's other capital funds you can reach out to. I haven't reached out to them yet. I was doing work with Condor Capital was another source I was using. It's pretty familiar in this space. And I would find those notes that made sense for them. Once I figured out their investment goals and how much money they had to deploy, I would go and I would find the notes, would go through the tape and source them out for them. And the way I ran my business or the way I tend to run it when I have people investing, I don't have any in the moment in the pipeline, but when I do, I always tell them I pay for everything. I always tell them like there is a closing cost associated. I paid for that. I'm like, there is a boarding fee with the servicer. I pay for that. I'll set up the boarding for you. All you have to do is enter your bank information. So when I work with past investors, I always tell them like it's a one stop shop, like I'll bring you a couple notes that I think fit your criteria and all you have to do is pick one and after that we're done. You sign the purchase and sell contract and we're ready to go.

Now you're making your money on the spread. Basically, if it's a Note at say 10% and somebody wants is happy making six, you're adjusting the sales price of that note so that you're cutting, they're getting a 6% annualized return, you're getting your space for putting the deal together, setting servicing up, setting them all this up and you're walking away. Are you kind of sitting there hanging out, getting a monthly portion of the payment or just kind of say hey, see you later.

You know, once it's set up, I always check up with them to make sure the payments are coming in. And if I tell them at any time, if there's an issue, if it turns non performing all of a sudden, reach out to me. Like I will get you resources and a lot of times servicers will, but I will guide them through like hey, here's what you need to say to your servicer. Here's the.

We also know that not all servicers are created equal to some like to talk and others don't want to talk to you right yeah.

You need to tell them so like if they need to do some type of loan modification or if they need to do some type of like debt forgiveness and then recast the loan. If they need to do cash for keys, I'll tell them. Here's what you need to tell your servicer and make sure they know what they need to do.

Good. Now, so before you got into buying some of these notes and hypothesis of these notes out from the different funds, were you ever sending out or targeting, you know, mom and pop owner finance notes? And because we get a lot of questions about that, can you share a little bit kind of your strategy for that and why that worked or why that didn't work or why you think still reliable strategy.

It's still a good strategy. I think it's just a different process. So the central process looks like this. You would have already a relationship with a hedge fund or a capital fund that allow you to do one off. You are ready to buy from brokers and you want to make sure you have a very good relationship with them and that they can handle their end of it. But essentially what you do is there's public lists you can buy of people who have seller finance their homes within any number of years. You can define, say they did it within the last year or five years ago or whatever. And you'll get all the information on the list based off of when the note was originated, what the interest rate is, the estimated unpaid balance. You'll get all that information and then what you do is you go through a mail service and you target those people, give the current address and you'll send it to a mail service and you'll have a mailer design to flip everything together and make sure it looks nice and there's good ad copy in there. I liked an idea you shared with me before about maybe having a link to a video put in there. My mentor shared with me putting something heavy that falls out, but something that sort of just breaks the psychology of them opening and throwing away mailers. Because typically direct mail gets like a 3% response rate. It's so ridiculously small. You'll send out a thousand, you might get 30. My first run, I sent out a thousand. I got three.

Ouch.

That was it. Yeah, that was it. That's not my fault. That's the fault of A.D. yeah. The other mail itself, which means you have to go back to the drawing board, which we'll hit. We'll touch on this in a minute. But that's why I stopped doing it this is when I was first beginning and I don't know how to close a note seller to save my life. So if you're spending $1,000 and three people call you, but your closing skills suck so bad, you lose all three, you're out $1,000, you know, at least if you had the skills to close one. And this was an early mistake of myself too. My first list were in areas that the majority of seller finance notes were originated by other real estate professionals or people related to real estate, which is like sharks trying to buy from sharks.

And that's, that's true. That's so the truth, man.

It's not what you want to do. If Eddie taught me something was you want to set up a situation where you dictate the terms of the sell to the seller. You want a mom and pop seller. You want someone who is real estate agent. The property was about to be an expired listing and the agent prior to that said, hey, why don't you try owner financing and offering owner financing. And they had no idea what refinancing is, so they went ahead and did it. And so when you come out and you talk to them and say, hey, you're getting these payments, they don't understand that notes are bought at a discount, but that rate's negotiable and stuff like that. They don't understand you have to explain it to them first. And it's much easier to close the sale that way. Whereas real estate based people, they're more of the the thing as here's what I want and that's all I'm taking.

That's one thing a lot of people struggle with is when you're dealing with a onesie twosie investor, they sold it. They don't want to take a big discount, especially if they're getting payments and happen a lot. Not always. Sometimes they will because we all know situations change, people want to cash out. But that's the thing was I would love to know what the results were. The responses were like, well, we'll give you 80 cents of the dollar, 70 cents the dollar. People like no or yes or what was kind of your experience on it.

Well, what's really confusing is when people look at the discount, they get this big sticker shock. So my first call from my direct mail was a roofer from Erie, Pennsylvania, which is just outside of Pittsburgh, but it's got like a population of a thousand. And so I was the broker here. I sent all the information on to the capital fund for their trade desk guy who went Ahead and evaluated it. And he sent it back. I think there were 70,000 left on it. He said, we'll buy it for 40. So a $30,000 discount, not bad. Especially given the fact that one, it's on a land contract, two, it's in a low populated area. So if you had a recap, capture the property, the chances of you holding it for a while is pretty high. And he said, I can't do that. And I was new, so I was like, well, okay. And I let him go. I said, you ever, you know, want to sell again, you know, we'll reevaluate it. We'll get you a new quote. No big deal. And the entire year later, he calls me back asking again for a price. And this time it was still about the same thing, was about like $43,000. This time I had a little more experience. He still said, no, but I said, you see a $30,000 discount. We don't earn that today. We earn that over the next 240 payments. If you do the math, the per month discount we're really asking you for is $83. We're only asking you for an $83 discount a month. We're not trying to steal from you, but we got to earn our profit too. And that's been my experience. Is that the sticker shock value of having it to educate mom and pop sellers because they don't understand other people will?

Yeah, exactly. Now, are you following or is it part of the policy as well to follow back up, send new mailers out, new postcards out to that thousand list on a regular basis?

I guess it just wasn't painful enough. And again too, he was tied to real estate because he was a roofer. So he kind of understood. Probably. He was probably in a Pittsburgh Rias is my vet, so he knows guys, and I knew guys that were. They were taking on passive investors. Like, they would buy the note and sell them very similar to brokering in the opposite direction. And he would sell them at parents. And I'm like, but you're making them lose money. Like, you can only profit from a note if you buy it at a little bit of a discount. Otherwise you're not even beating inflation. Like, but how are you selling these things? That park had a bunch of notes that baffled me. I was like, I did the math, which is one of my strong suits is it just doesn't make sense. Taking money.

You have that happening kind of day. You have a lot of hard money. Lenders that are selling stuff they want to Sell at a premium. So nose written at 12, but they sell it or they're seeing a 14% return. I'm like, I'm not going to pay above the face value for a note. You know, that doesn't make any sense right now. If I had money sitting on the sidelines. But if you're going to bring some people in, okay, great. But selling it a premium, that just doesn't make sense. Selling at par. Okay? And that's the thing that you run into a lot of mom pas. They're self servicing the note, add in the cost of service. I mean, performing that will cost you 15 to 25 bucks a month to service, but it's still that transfer. Then getting the buyer, whoever's in the property, the borrower on track to start paying via ACH or via check instead of money order. That's. There's always a hiccup in there, is people don't always pay on time. And depending on what the price, amount of the loan is, or the value of the education, they're just not the most savvy, savvy people. You know what I mean?

Yeah. And then there's compliance issues sometimes have to be taken care of. So I always tell people on the real estate space, please never self service a note ever. Never just board it with a servicer. Eat the cost. It's like 15, 20 bucks if you want to go super expensive. Security national is like one of the most expensive I've seen, which was my first note that I bought and was based in Rockford, Illinois, I think was paying like 80 bucks a month.

Ouch. For performing notes. For performing notes servicing.

Oof. Yeah. I mean, he was a rolling 30. They were calling them every month. Hey, you got that extra payment? Hey, you got extra payment. Like you get the service, you get what you pay for. So most servicers, though, are good for, you know, 15 to 20 bucks. They'll accept the payments, they'll send out the invoices.

Like do all that Dodd Frank compliance. Let's talk a little about that. Because you're chasing owner finance notes, was that an extra step in the process of having to go making sure that the note was Dodd Frank compliant? If it was, what Is originated after 2014, you have to worry about that, right?

Yeah, absolutely. And that's where you go to the attorneys for that.

Call the underwriter or whatever it is.

Call the underwriter. He'll help you look that up. Especially when you're doing your origination. That's another one that I find real estate investors don't use often enough are RMLOs which call the underwriter. He is an RMLO. He's not that expensive. I think he does it for $500. And he will tell you with their Dot Frank compliant they're ready to go for cfpb. But if you're buying a note some I know it's prior to 2014, sometimes it doesn't hurt to send it over and see if you'll look at it. Or some other real estate attorneys familiar with Dodd Frank.

Yeah, you want to make sure it's also available to foreclose on make sure everything's written up properly of the disclosure. So you have the right to foreclose. Now, I've seen some crazy stuff written on a single piece of paper. You've always heard the story about the note written on a napkin, you know.

And people think they got property when they don't and they're making the rules tighter. That's the other thing. I have a colleague of mine right now, he's getting involved in politics and lobbying and stuff like that so that politicians don't restrict the things we can do in real estate and the note space and I know we have the seller Finance Coalition very similar to that. They're trying to make sure that it's still a viable option because like in recessions that we have now where people can't afford a home, there are still some people working that they just can't bank qualify. And so how else do they get into a house where you have to do owner financing? Like I don't know how to. How else to solve it?

Well, that's the thing too is there's a pushback. I know Elizabeth Warren is not a fan of owner financing and it was one of the big targets of the seller Finance coalition because I'm a part of that. Been donating to that every year since they started that to lobby against it. And then you have the states like Pennsylvania, the attorney general in Pennsylvania is cracking down on contract for deeds written over like 9%. They want you to go back and modify it to the bars to 6%. And I'm like, wait a second, that doesn't make any sense. You're dictating to me my terms of selling the property when something was in a contract for deed, albeit maybe it was Harbor Portfolio back in the day, but they didn't have to offer financing, you know, they didn't have to do. They checked off all the terms. And if it was pre Dodd Frank, hey, you know, borrower buyer beware. And that stuff, I saw it best stated, Congress is a bunch of old mentally retarded people thinking that they own stuff and can tell us what to do. Yeah, they don't have a lot of common sense.

Pretty much. Pretty much. I might get in trouble for saying this, but like, I knew a guy on YouTube who would run government simulators and he had this like Sim City program. And the AI was pretty sophisticated and he was trying different government systems. You know, democracy Republic, Democratic Republic, you know, he combined them all together and he wanted to go real wild. He was like, you know what? I'm going to try a pure anarchy. I'm not advocating for this, by the way. I don't want to go to prison. But what we found on the video surprised them. The government was broke, but they had more billionaires per square mile than ever. And he goes, it looks like when government gets out of the way, people kind of start making some money.

Well, they start grabbing. They get a little aggressive and grabbing. That's how all the Russian oligarchs came around with the Soviet Union. People grabbed in specific resources or industries and took it over very aggressively. The Russians allowed them to do that. Now obviously we know what's going on with Ukraine and stuff like that too. But yeah, yeah, he can be a little crazy.

He wasn't able to build roads fast enough for the people who wanted to come in. And I was like, I just watched. And that's why I remember it. I'm not advocating for anarchy, but I was pretty interesting, I will say that. Like, for example, with seller finance, you know, Elizabeth Warren's not a fan of it, but the common person, seller finances every day. They don't know they're doing it. You know, I have a PS5 cost 1500 dollars and I go to Johnny and Johnny wants it, he doesn't have fifteen hundred dollars. And I go, hey Johnny, how about you give me like 20 bucks a month until you pay it off? So seller financing is what's.

I mean, commercial real estate. We have so much stuff that's done in commercial real estate on terms and owner finance, stuff like that. You know, I'm not the biggest fan of using owner financing as an exit strategy unless it's the last strategy for you. I think it's when you look at numbers, I think it makes more sense to sell the asset off, bring in the profit and go from there. But you know, if you could use a deferred sales trust as a type of owner financing and opposite of a 1031 exchange, don't have the big tax burden. Obviously you should always check with Your accountants or CPAs on what exits for you. But it's a strategy and it's a great thing to do. I mean me being a technically the lender and you being the lender buying notes. We are offering financing to folks that are into properties and either a by modifying their terms or doing trial payment plans, buying or working on a property that we don't want to rehab, we don't want to do the big fixes. We offer a land contractor and as is aspect.

You know what I like about it too? For like the mom and pops that I want to sell and owner financing. Like you have an option to give them the opportunity to buy their, you know, to sell their debt out so they don't have to sell all of it. But if they come into a situation where they need a down payment for a new car, you know, they can go ahead and sell some transpayments to someone else and get that lump sum of cash and get that new car. So I like the flexibility that it offers sellers.

You're talking about like a partial doing a partial sale on it where.

Yeah, exactly.

Selling a year or two years of payments for like our buddy Tom Henderson, you know, we're always offer. I'll give you 10 months for 12 months of payments equates out to roughly a 20% return investment for if you start doing the numbers for it which is. Yeah, it makes sense. That's a great thing. You know. You know you won't be able to buy a partial from a bank. A bank usually is not going to sell but an owner finance. Yeah, I know definitely somebody could do that.

Or if you bought investor or.

Exactly.

Yep. Or from investor. From investor or from investor to mom and pop holder. It makes a lot of sense too. What I really love about it is that you sell a partial to someone, take that lump sum of cash, go buy another note or use cycle going.

Using your small balances in your IRA accounts to go buy a partial. You know, you get a pretty good return for a period of time and then do the same thing all over again. It's a smart strategy, especially small balances on stuff like that now with what you're doing now and when you're reaching out and hypothecating. What are some of the questions that you're hearing from people about investing in notes? What are their fears? Do they think they've got to be in the deal for 30 years or they struggle with the idea of a note? Do I own the Property. What are some of the things that you're hearing from folks that you're talking about that you're raising capital from?

I think the biggest fear is what do they stop paying? Like, what are the payments stop coming in? And so a lot of my conversations with them have to center around putting them at ease and letting them know, like, just because they stopped paying doesn't mean the investment's over. Like, we still have a lot of steps to go. And yes, they're not paying now. We do have options. And so I try to go through the different options of what we can do in terms of modifying a loan or changing the interest rate, lowering the principal balance. And so we bought at a discount, you know, modifying the loan completely and rewarding or recasting it basically until it's a monthly payment that the homeowner can stand with. And a lot of times through that mediation, because we're dealing one on one, we have a pretty good success rate. I don't want to say it's 100%. We have a pretty good success rate of going up to people and being able to say to them, you know, homeowners, we can say, so what's going on? Give me the story. Like, you were paying fine before, you're not paying now. You know, how can we help? You know, if I lower the interest rate to this and your payments this now, can you afford that? And we can go ahead and have those conversations. And so it's not as scary a mom and pop, self directed IRA investor might be thinking. And I always remind them, I said, at the end of the day, the investment is still supported by the property. So at the very least, at the very end of the day, you can gain possession of the property and then you can turn around and sell it for a profit. Since we did our work ahead of time, make all of your money back and more, and then we could turn around and look for a better opportunity.

I love it. Well, that's the thing. People don't realize they I've got to be the person to go do it. Because they see all these HGTV folks where they're out there doing the rehab and the physical work and they like, I don't want to do that. Like, well, that's the great thing about note investing. If you have to rehab a property, it's not what you should have focused on. And that's why the buying, the discount, buying the occupied assets, somebody's usually taking care of the property. I think I saw Bruce Norris, our good friend Bruce Norris. Out of California, who's been owner financing homes for years back, a few years ago, testified in front of Congress that with the thousands of notes that he's originated and held his portfolios less than a 3% default rate. That's a pretty good case study for owner financing if you think about that.

You know, that's crazy. I didn't know it was at home.

Yeah, it's pretty good. I was pretty blown away. It was like half of what the normal one was at the time. Now, Scott, tell us about a Sapien Real Estate Solutions. We see the logo there. Tell us a little about your podcast. What are you talking about? What are you doing on there? So those are listings.

Me and a bunch of colleagues, we have come together and we have formed a podcast called the Remarketing Podcast, where we invite real estate professionals on to talk about themselves, their business, and really showcase what they're doing in this market to ask them a variety of questions. You were on an earlier podcast, Sapien Real Estate Solutions itself. That's my note investing business. That site, I have a couple sites, but that site is specifically for if you have notes to sell and you want to buy, we can give you a quote and we can go talk about buying your note from you and cashing that out even. Sometimes we could do a partial. And then I have sapientres.com where I have a course that I've put together and some materials there that will teach just the very beginnings of the note business. So it's not getting crazy in the detail, but it gives you a really good bird's eye view of what it means to invest in a note. A lot of times that I've talked with note investors, I found that they think, I mean, that I'm a lender, and then other people think that they can buy their mortgage.

Yep.

So, like, I found, like, I got to put something together that just explains everything and breaks everything down into its simplest terms so everyone understands. And then if you want to get deeper into it, you know, I offer consultations and coaching and stuff like that. And then I have Scott slacker.com which just has basic information about me and ways of reaching out to me. But the podcast is the big thing. We've gotten a lot of really good names on so far, and we're hoping to get. I'm hoping to get Serena Harris on. Like I said, it's just been. It's blown up fast.

Well, that's the thing. Podcasting is a great way to get out when you're in people's ears connecting with people. And it's a great way for you to add some great folks on that. You can pick their brain. I mean, we had Dean Graziosi on our podcast last year. That was a fun half hour. And then some other big names. The Steve Sims, Greg Reed, Mark Victor Hansen, Chicken Soup for the Soul. You know, we've had some. Some other folks on there that just. I mean, we like to focus on note investors primarily and vendors there. But it's fun to mix in that stuff for marketing and mindset because I think that's one of the biggest things about being a real estate investor. You got to have a strong mindset, right, Scott?

Oh, yeah. Oh, yeah. I know. I got my first. So. So I got into a. A wire fraud scam.

We gotta hear about this here.

So a private lender reached out to me on LinkedIn, and at first, everything seemed above board. And so we went ahead and drafted up the promissory note. I was going to pledge the note as collateral for the loan. So I was going to hypothecate, and everything seemed okay. And then things shifted to bitcoin. And I go, this doesn't look cool. And a weird offshore bank. Now, I have an IT security background before getting into working with the kids. So I went and tracked everything. We tracked it back to, like, South America somewhere, and they were faking a bank in the UK and, you know, $31,000 later, like 31,000 gone. Some of it credit. And so I've had to keep strong to continue going and running the business.

So what happened with that is that they wired money bitcoin in and purchased the note, or what happened? Talk about that.

They asked me, oh, there's this fee. There's that fee. So went from regular wirings to we needed you to turn it into bitcoin and send it to this wallet to.

Buy the note from them, or what?

So this is my first time hypothecating.

Okay.

And so I'm like, you know what? Wealthy investors have offshore accounts. Sure, why not? I go, wealthy investors are probably involved in bitcoin. Sure, why not? And I mean, I was scared the whole time because this was looking fishy to me. Like, I knew I should have trusted my gut is what happens. I should have trusted my gut instinct. And by that time, it was too late. So, I mean, I turned them into the feds, but the chances of getting my money back are zero.

So let's talk about that transaction as an educational experience here. So you're buying a note from somebody or you had a note from a fund.

Yep, I was buying a note from a capital fund. And. Okay, three of them put together that I was going to buy.

Okay. And so that amount was what, 31,000 that you're going to buy those notes for, Is that right, roughly, or what?

It was about 105.

105. Okay. And you had a private investor that said they wanted to buy the notes or wanted to fund or how did that work?

The one they said he wanted to fund it, he was going to lend me the money to go ahead and buy.

Okay.

Gave me good rates. I think it was like a 6% rate.

One of these things that we see online a lot. Oh, I can lend on anything or I'm willing to lend on these loans. Something like that.

Yeah, something like that. You know, when he first reached out to me, most of the people on LinkedIn that reached out, I said, listen, I buy notes. Are you willing to have that conversation? They say no.

Yeah.

He was the only one to say yes. So I was willing to entertain the conversation.

Okay, you sign an agreement with him for 6% on the whole 105 or 31 or what was that for?

31 ends up being in fees. It was a one like a. Basically 100% finance. It was like. But it's a 5,000 processing fee, and it's this fee. And then what happens once they send it overseas? They're like, oh, we got a transfer fee. Now this is not making sense. And I'm smarter than that. But I was, you know, it was the gradual process. Everything seems legitimate. And now it's going slightly off that you. You hang in there a little bit longer, thinking, okay, maybe this is just some rich dude who does things weird. I don't know. I'm like, why can't you just wire the money into my business account and then we're done with it.

Well, you know that, first of all, kudos to you for keeping going. That would have actually kicked a lot of people in the teeth and they would never done anything. And this happened a while back. Said your first deal a couple years ago.

This is my first time hypothecating. So this happened about a year and a half or so ago.

Okay, hey, that happens, man. You know, and you're doing more deals and. Okay, I know not to do that now. Let me keep rocking and rolling along the path. Right, right.

You'll recover. And I mean, that's the one thing that happens in this business, is that you'll lose a lot sometimes, but then you'll make it back is very similar to the stock market, too. You know, the stock market will take a dip, and you get these emotional sellers and they sell out because their stock is now worth nothing. And then like 10 years later, it's worth like a gajillion dollars. And that's why there's this quote by Warren Buffett that says the stock market is nothing more than a tool that takes money out of the hands of the inpatient and places them in the hands of the patient.

Yeah, amen to that. Yeah, that's one of my favorite.

You gotta hold on there. You know, there's more opportunities coming down the way. You know you'll pay that back. It sucks, but as long as you take it as a learning experience instead of being caved by it. Like some. Like I said, a lot of that debt. Money was debt. Some of it was my own money. And I have to pay all that back now. And I'm working on doing that. So you just keep working on it. Chiseling away.

So the 31 is just pure fee. End up buying those 33 notes or no at all?

No.

Okay.

They didn't have the capital without the loan.

That makes sense. Okay. All right.

Still up and says, I have it. It's so funny. The website has not been shut down.

You know, that's the thing about Bitcoin. There's ups and downs. There's still a lot of stuff that can happen. You know, there are a lot of advanced schemes out there. We had a student who got a phone call from the IRS that he needed to go and wire him $2,400 to avoid the cops showing up. So he ran down to Western Union and so the $2500, and it was just a scam. And I'm like, did you do anything illegal that you think the cops would show up? Well, no. The IRS called me. Like, the IRS is in call and shake you down like that.

Well, they play on your emotions so you have an emotional response.

Exactly.

They want you to get scared.

Now, here's the thing. A few months ago, Barbara Corcoran, one of the sharks, you know, the big real estate investor, short hair agent, that's been on there for years. She got defrauded out of $400,000 on a deal. Somebody emailed her with a logo from the title company that are closing on business. Emailed. Her assistant said, hey, here's the wiring instructions for you to wire the funds over for the closing on this. And it's just like, oh, yeah, we're buying A property, about that much. Okay, so they wired over $400,000 to this fake account that was only open for a while. Yeah, that'll make you chip. Yeah. So here's why it's always important to double check. You know, stick with your gut, follow through things and ask people to everybody, is this normal?

Yes.

Is this normal?

I know for a fact, yeah, I was working with Eddie at the time. If I reached out to Eddie and said, hey, Eddie, what do you think about this situation? He probably would have had the red alert going off right away and he would have been like, here's what you ask him. This is something that I'll share with your listeners because it's gold. Anybody who wants to do business with you, he. You just simply ask them, can you do me a favor? You know, I'm interested in doing business. That would be great. Do me a favor, you know, go back to your office, send me an example of the last three deals you did. You know, give me an example. You know, how much money did you land? What kind of property was it? Is it. Because if they really did the deals, it'll come out like that. They're recording them, didn't do the deals, then they're kicking your tires.

Well, that's the same thing with proof of funds is asking, you know, investors, hey, if you want to invest with this, great, just send me a pledge letter, a bank statement that shows your stuff and your id. You know, if it's with an IRA account, it's not hard to verify if it's a. You know, we want to make sure that it's really you. I mean, now if you know the person, that's a different story. But I still ask for pledge letters all the time from people that reach out. How much are you looking to invest? Let's jump on the phone and talk. Let's do it via Zoom, you know, and always have the money coming. Is the money in the account? Money goes to an escrow account. You know, you need to get that if it's coming from a separate IRA accounts, not a self directed. Hey, you need to set up the accounts and get rock and roll. Because that's really one of the filters is, you know, getting that phone call from the IRA companies. Like, you have the account set up, money's there because they're looking at your documents to fund with that. You know, fund or buy or sell, whatever like that. That's a helpful thing. So kudos for you sharing that story, Scott.

That's very welcome anytime. If my mistakes can turn into someone else's lessons and prevent that from the future. Oh, my God, I don't wish that on my worst enemy.

No. You know, and that's the thing is things happen. Even on perfectly normal deals, things can happen in different cases. Deals with a drag on longer, you know, you get foreclosed on or you're foreclosing on a borrower, dragging stuff out, you know, act of God. You know, I had a. A guy that bought a property, I mean, bought a note in Florida and didn't ever check is the insurance costs. And the insurance is on the water. So it was 10 times what he normally expected. And yeah, and it's taking longer to foreclose. So it's basically the insurance costs and the time of money is eating up all his profits. And I'm like, that's one phone call you got to make before you ever close is know what your insurance costs are. So, Scott, what's the best way for people to reach out to you, to connect with you?

They can reach out to me@sapienresgmail.com a shorter than my business one, but you can put it on there, which is S slackerapianrealestate solutions.com you see why I use the Gmail you can find.

I love the name. I love the last name, buddy. I think it's great. I think you need to leverage that.

It was horrible in high school, man. It was horrible in high school.

Well, what doesn't kill you makes you stronger, my friend.

You go to scottslachter.com to get more information. If you want to learn more about notes, you're thinking about dipping your toes in the water. You can go to sapientres.com and check that out. As always, go over, check out the podcast we did on the remarketing podcast.com where Scott Carson was on there having a good time with me shooting it up. Phone number, you can reach me. I 609-321-3348.

Yeah, we'll have all that. We'll have all that in the description of the podcast. Stuff like that for you. And this has been fun. Scott, thank you for coming. Hanging out in the notebook. Show thinking your experience and then sharing some insight for folks in the nick of facing things. And then also, hey, if something stinks, ask.

Yes, yes, yes. Thank you again. It's been a pleasure and a blast to be on here. I mean, I look forward to getting it so I can put it up on my social media talk again in the future for sure.

Sounds good. All right, everybody, that's going to wrap it up for this episode of the no Closer show. Check it out. Listen to what Scott scared. He shared some insights. Not being scared of making mistakes. We're all going to make mistakes out there at some time, especially when you get started. But don't be afraid to reach out and ask and also understand what's going on in the niche. What do you have to do for marketing? What's the return on investment? What's your success rate going to be? And it's one of the most important things that you ask. Don't just take the advice of somebody. Ask somebody, figure out what's going on. And that can often be the difference between success, failure, being excited about a strategy or not being excited about a strategy as well. So go out, take some action, buddy, and we'll see you on top, everybody. Bye.