Note Investing on the REL Freedom Podcast with Mike Swenson

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Welcome to the Real Freedom Podcast where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson.

Let's get some real freedom together.

Welcome everybody to another episode of the Real Freedom podcast where we talk about building time and financial freedom through opportunities in real estate. And today we're gonna talk a little bit about a few different things. So number one, we're gonna be talking about notes and note investing. But in addition to that, we're also gonna be talking about the lens of deciding how to choose investments, investment spaces, kind of narrowing your search cause there's so much stuff that's out there. And then addition to that too, being able to market and grow your Persona and be able to kind of grow your influence. And so today's guest is a master at all of these things. And so we've got SC here, Scott, if you haven't heard of him, have probably known him as the note guy in some relation to notes. So he's been in mortgage finance and banking since 2001 and an active real estate investor since 2002, buying notes on commercial properties, residential properties. He is the CEO and founder of the Austin, Texas based real estate company We Close Notes. Host of the Note Closer show podcast, Note Night in America, featured speaker, trainer, coach. And then another cool thing is a couple of cool things almost maxed out at 30,000 LinkedIn connections and 7,000 plus subscribers on YouTube. So you also have a large social media following and over 1700 videos on your YouTube channel. And that's amazing stuff. And then another cool stat has bought over $1 billion in distressed debt in your career. So Scott, you've been around for a long time in the real estate and the real estate investing space. So welcome to the show.

Well, Mike, honored to be here with your audience today. Yeah, I guess you could. You can't really tell, but the gray hair is starting to fill in where the blonde used to be for the most part.

So the cap hides it.

The cap definitely hides it. And keep my hair cut short, makes it look a lot better than versus the salt pepper that's popping up. But yeah, honored to be here today and just looking forward to giving to your audience and thank you for having me today.

So why don't we get started and just share a little bit about your background, how you got into the real estate space and then Obviously the last 20 plus years in the real estate space and where we're at today.

Yeah, no problem. So I was like many people My first foray into real estate was buying my first house in 2002. I'd been married. College sweetheart, out of college. I get a business management degree. I was in finance, making good money. Bought our first house. This is going back to 2002, so you could, if you could fog a mirror, a lot of times a good credit, you get us stuff. So the realtor was a friend of ours, like, hey, you know, you guys got great credit. You thought about being a real estate investor. And I was like, yeah, we like those fictional TV shows on hg, you know, flip this house and stuff like that. And I grew up in a small town and my dad owned the local hardware store. So it's not anything I haven't worked on in my house. So I felt very calm. I was like, oh yeah, I'd love to be a landlord. How do we do that? Well, you can get financing. 100. I'm like, let's do it. So we bought two more investment properties roughly relatively quickly. 100 financing. Put a couple renters in there who were working at Dell Computers. We were feeling like, hey, this is going to be great. Well, three months into this, I show up my in my office and they're literally closing my office location. They're literally shutting down the whole branch. I'm like, oh, shit, okay. I'm like, okay, we'll figure something out. I'm kind of marketable. Well, then I go home and we're trying to figure things out. And within a matter of a week or two, both my tenants got laid off from their job at Dell Computer. And I'm like, and so this is the time there was going a lot of layoffs here in Austin, Texas. Market was still hot, but I went from being a excited investor landlord to being a deadbeat bar not being able to make six mortgage payments because my wife at the time, now ex wife, she was a private school teacher only making like 35, 36 grand a year. And so we are really in a difficult tight spot like a lot of folks do. Well, we were able to get rid of the two investment properties. Thank God. We did a loan mod on my primary residence. And for a couple years I just licked my wounds. You know, I'm like, this is. I got kicked in the teeth. I don't want to do this again. This is not what the show's promised. You know what I mean? But I still want to do it. So I got back into finance. He was a banker, mortgage banker for Bank One. And then JP Morgan Chase was one of the top Bankers and still was interested in. I said I like what I was doing was making good money as a banker, but it wasn't ultimately what I wanted to do. And a buddy of mine that I worked with was starting a mortgage company and he came to me and said, hey Scott, I'm really, I need some help. I'm getting, went overwhelmed. I'm going to these different investment seminars with a couple of these investors here in Austin, all across the country. I'd like, you know, if you, you want, I'd love to. I was like, maybe. So I went to lunch and these two investors that were flipping properties and creating notes and teaching note investing and speaking on the, the circuit across the country in front of thousands every other week, I was like, okay, this is what I want to do. And after we got our assets out of a sling this couple years, we were kind of back to par, back to normal. And I went home and told my wife at the time, she's like, well you know what, you can always go back to banking, so let's do it. So made a jump. Two weeks later I was in LA at the LA Marriott, basically pitching mortgages to investors. A room of 1500. And that was basically 2004. From 2004 to 2008, I ran a mortgage company. We did a lot of loans and I also got a lot of education on investing the right way. Not the traditional go about and buy for a property, but learn creative financing, you know, owner financing, how to raise private capital. I also had a, a guy who was a marketing, he still is a marketing genius. I got to spend a couple years with as a mentor. And in 2008 when everything was, you know, going crazy and then in this time frame I've been taking, you know, doing bought some more rentals, was doing some rehabs, raising some capital, doing some subject to deals or wholesaling deals. I basically, you know, left the mortgage industry, sold my part of it for a buck to my buddy Boyd, and became a full time, 100% full time real estate investor at the time and started buying notes because that's what one of my mentors are teaching me and the people that I learned from taught it. And that's basically all that I focused on the last, hardly 16, 17 years now is just buying distressed debt from banks. And when I say buy notes, I'm literally buying the mortgage debt on residential commercial properties, often at a big discount because it's where the borrowers aren't paying. I call it. I'm, I'm my own version of the big short a little bit. If you like movies out there, I'm the Christian Bale character looking at spreadsheets all day and then sending people out to look at property. But that's what I bought. You know, I bought over a billion dollars in debt closed on thousands of first mortgages on residential, commercial properties, apartments, hotels, single family homes, condos, office space, you know, any type of asset class. We basically bought the debt on it and been very busy with that. And we've leveraged like you mentioned a little bit before. One of the things that's helped me along that way is that we really embrace the marketing side of social media and email blasts and video along the way and podcasts and stuff like that. That's really helped me carve out a niche and be very, very focused on what I do today. That's why I'm called the note guy, because that's all I really focus on. So that's the, that's the, the quarter answer to your nickel question.

Now for people that are wanting to know a little bit more about kind of that note side, I get the idea of buying debt. So why looking to move that and then what's the opportunity for you? So I think part of where we're going to go here is, is talking about as an investor, somebody that wants to get into investing. There's so many different vehicles that you can invest in and obviously you, you've seen value in the note. So what is it here that is appealing to you and how can you take that and make money off of it?

Great, great question. The reason banks would be glad to sell notes off now, not every bank is going to sell guy to guy from California. Call me this morning about 30 minutes before we got on here. Hey, I got a note with bank of America I want to call and see about doing a short pay. I'm like bank of America is not going to sell you a one off note. They're too big, it's not worth their time. If you can write a $50 million check then, then they would talk to you. But this point, bank of America, Chase City, that you're not going to buy from the, the top five or ten banks. Just not going to happen. Maybe a commercial note, yes, but a single family residential note, no. But here's what you have to realize. Every bank out there has bad paper or notes where people are not paying. They're more likely month banks are more likely to sell off a commercial note than a residential note because there's not a lot of government insurance and backing on a commercial debt. But every state has a different foreclosure time frame or redemption period. Like here in Texas where I'm at, it's the fastest foreclosure state in the country. I foreclose. If somebody's 90 days late on a mortgage, the bank can foreclose in 21 days and take it auction and take the property back of the bar doesn't file foreclosure. Now up in Minnesota where you're at takes a little bit longer and then there's a one year redemption period after foreclosure that drags things out further. So a bank would may not give me a bigger discount here in on a note in Texas, in Austin, Texas, but if it's in Austin, Minnesota, where my mom is originally from, they would give me a bigger discount because it's a longer time frame. So with banks it's all about the velocity of capital. Banks don't actually want to own real estate. They want to get money in and get your dollar in the bank and then lend that out 15 to 50 times to other lenders. And if they've got a hundred thousand dollar mortgage sitting there that's not producing income, it literally costs them eight to 10 times in that in fees and what they can't produce. And also for every dollar amount that they have in bad, bad debt, they've got to hold a bunch of money back in reserves that they can't lend out as well. So bank would rather sell me a note at 50, 60 cents on the dollar, get that capital to them, go out, lend it, let give me a discount and give that gives me the opportunity then either reach out to the homeowner and try something different, you know, cash for keys, modify the loan or maybe the bank wouldn't have done it begin with because I'm a fresh, fresh voice, fresh face to the ballroom. I mean there's not a lot of emotion with it. And then the bank and if the bar won't play ball then I, I don't mind buying, you know, taking your foreclosure and selling it or taking it back and keeping if I want to because I got it at a discount that makes, helps incentivize me to hold it for a period of time. Does that make sense?

Yeah. So essentially you're kind of taking on the bank's problems and problem solving through that, whereas the bank's not going to want to take the time or spend the money to be able to figure that out. You're able to do that on a smaller Basis.

Yeah, exactly. I mean the fact that I know different markets and we've got vendors and every state's a little bit different, you know, we've got different investors and teams and stuff like that across the country, evaluated stuff. And banks don't want to rehab property. That's not their, they're not, that's not their cup of tea. They don't want to own a rental property even though some of them are starting to get in that foray like Chase is looking at buying rental portfolios these days. But for the most part a, a property is a non performing asset to them that's not doing anything, just really a liability. More so they want to own mortgage debt that they want to understand the leverage power of, you know, borrowing people's money at 0.01% in savings account, lending it out at 6 to 8% mortgages or 18 credit card debt, stuff like that. And they've got the stuff that like I can go in and cherry pick, you know, I may get a listing of 100 notes, I'll make offer on 50, I'll probably settle at 10 after I, I perform my due diligence period and then go from there. But it's, that's, it's really creating a win win because they do get rid of their problem children and I can turn those lemons into lemonade by working out with.

Well, and too just for people that don't understand this, it's a message I've tried to communicate to my databases. Yeah, when you go put your money in the bank, you may view real estate as being too risky of an investment opportunity, but you go put your money in the bank, the banks turn around and putting it into real estate. So they're doing that. And so what if you thought about taking the middleman out of it, which is the bank, and go invest in real estate yourself now you're still going to help, you know, banks still going to take on some of that mortgage for you. Not going to pay cash. I mean you can pay cash, but that's what they're doing. And, and so in this case you're just kind of picking off, you know, some of the bad apples here and working your way through that. But, but that's why real estate investing is such a good opportunity because it's what banks do all day long. They invest in real estate. And so why not open up your eyes a little bit and consider investing in real estate too?

Exactly. And that's so I'm so glad you said that too because honestly, Jesus Saves. Everybody else has to invest. Okay, if you're putting money in a bank, you're never going to hit your numbers that you need to do it because you're not going to get the type of returns. You've got to educate yourself and find a avenue, real estate investing or some sort of investment that you're comfortable with that meets your risk parameters and experience level, knowledge level, to go out and make it. And making. When I was a banker, here's the biggest thing going from a banker to an investor mindset. Your eyes are wide open, like, oh my God, we were all scammed. You know what I mean? The bank scammed us all and they've done it for century saying, you know, 1 to 4%, say, you know, 4 to 8%, that's moderate. 8 to 12, that's risky. Anything above 12 is risky. Well, banks, they do that to brainwash us and to understand that, oh, we'll just give you the money and get 1%. And they're like sitting there like lending it out. It's 8% a mortgage. Well, they're not, they're not making 7% difference in the arbitrage, they're making 700% difference in the arbitrage. And that's the great thing. What I love about you doing the real freedom too is that you're teaching people like, hey, you know, give me the money at 6 to 8%, I'll give you an above average return. It's actually won't say it's safe because we don't say those words are guaranteed, but secured by a property that I'm picking up at a discount or a note that I'm at 50 cents on the dollar is going to return a cash flow. And if the borrower doesn't perform, then we foreclose and it's is we take the asset back. So that's what I love you, but you just gotta, you know, yeah, you gotta learn be educated on what you're doing because the banks will just take you and give you as little as possible to take in so that they can, you know, put arbitrage and the power of above, you know, the power of 72 in their wheelhouse, not in yours.

Well, and I mean, a lot of times people look at a stock market as maybe a stock market's safer than real estate or something like that. But you're one, one bad story, one bad news story, one bad apple in that company away from something happening. Stock prices drop too. And so there is, there is a lot of risk with that as well, whereas a mortgage is backed by real estate. And so you at least have like even in your case, Right, Yeah. If the person stops paying, you still got the property and you've got some options of what you can do with it. So talk about maybe an example or two that you have of you picked up a note. What goes through your mind then in terms of, you know, you'd mentioned kind of cash for keys, something like that. Fix it up, think about kind of that lens that you're, you're thinking through of how do I recover this asset or how do I turn this into something that's distressed to. Now we're good. Maybe give an example or two of how you work through that process.

Great, great, great question, Mike. So whenever I get a listing of notes, they call it a tape. Basically just a spreadsheet that gives me the address, the borrower's name, their payment history. Sometimes I'll even get their Social Security number, all the numbers on this, you know, all the details of the note, interest rate, payment history. Sometimes I'll even see notes on there from the actual servicing company, the lender of. Hey, the borrower is trying to do this, they lost their job. Yeah, whatever. I literally get to see beneath the kimono. It gives you a bit of an idea. So I'll look at and see. Okay. First thing I look at is, is the asset occupied or is it vacant? That's one of my first big parameters. I also, there's states I don't buy in, I just get rid of it because it takes forever to foreclose. If I have to take it to foreclosures like New York, New Jersey, I don't buy in because it's long. It's two to three years to foreclose in those states. I don't buy in Chicago, Illinois because it's a very long time to foreclose. And don't get me started on Crook county over there. It's difficult if you don't live there. Okay. But I get rid of a few states that don't buy in. I get a few, get rid of a few states where the taxes are through the roof. They make it hard to make money to take a property back. So then after we narrow that list down to like our 30 favorite states, then we'll look at occupancy. Because if I'm buying a non performing note, my biggest bang for buck, my biggest ROI isn't actually to take the property back most of the time if the, if the interest rate's at a decent interest Rate and I could get that borrower back on track and making payments for 12 months. That's the best ROI I'm often going to see. And I don't have to put any work into the property. I don't to put any attorney fees into it. I literally pay a servicing company, they reach out the bar, the bar can start paying on time again. We'll do a forbearance agreement, move their payments to, you know, they're 12 months, they're behind over to the face amount. And now our goal is to hold that note for at least 12 months. And after 12 months of on time payments, then we could turn around and sell that note at, we bought it at 50 cents on the dollar, which is pretty normal. We can then turn around and sell it at 80, 85 cents, maybe even 90 cents on the dollar, back to Wall street or other investors. And I don't have to do any rehab or any property management.

Okay, so just to clarify on that, for, for the average person kind of following you here, you get this because they've been behind, you're saying, okay, let's just focus on today, start paying on time. You're kind of just recouping that and saying, okay, now we're showing consistent payments moving forward. Let's forget about the past a little bit. You're now paying consistently. Okay, now you've essentially kind of shined that up a little bit and, and sell it for more than what you bought it for.

Exactly. Instead of rehabbing the property, I rehabbed the borrower without having to send them to the board. Betty Ford Clinic. You know what I mean? You know, like kind of, you know, what was a financial hiccup. You know what happens, you lose your job, you get sick, get divorced, go through Covid, you know, you know, a lot of things happen because a lot.

Of the times the people want to stay there.

Right. They don't have to move.

So it's, it's in their best interest to stay. And if you're willing to work with them on it, they're appreciative of that.

Exactly. Buying that debt at a discount doesn't eliminate what they owe. They still owe the full amount, you know, and back payments. But I have now have flexibility because I'm into it at 50 cents of the dollar. I didn't write the note like the bank did at full, full value. So that gives me some flexible. Now if it's, if it's, if it's not, if it's vacant, then I'm obviously probably not going to get the borrower back on time. You know, I may then have to look at, okay, what's the foreclosure time frame? How has the bank or the lender already started the foreclosure process? Where is it along the path is the borrower, can he be he or she be rich? Could be maybe negotiate a cash for key situation or a deed in lieu of foreclosure. Do they want to sell it? Because I'm willing to let them sell it off or even do a short sale to a third party if it's in decent shape and then they won't respond, then we've got to go. The right to hire an attorney to foreclose if we need to. So there's different things that I look at, but I've got, I got specific parameters that for my bids to come in to be accepted, I get to hit my numbers if my. And that's the great thing is I'm not having to. I'm basing a lot of stuff off just a spreadsheet on online due diligence initially because a bank, you know, they might send me a list. It's a hundred or a thousand or somewhere in between there different notes. They know I'm not going to drive out and look at all the assets on the front end. I'm gonna make some initial offers and they'll look at them. If we're in the ballpark, they may accept them. Then we go to a much, you know, a one week, two week, or, you know, one month due diligence period, depending how many I'm buying. And then I'm. Then I'm spending money on sending out and getting BPOs broker price opinions. Then we're, you know, pulling title to see what's on the property and making sure, you know, looking at the collateral file because I'm literally really not buying the property. I'm literally buying the loan file. The right to collect is the bank. This is what I'm buying. And then looking at that and seeing, okay, if everything checks out, then we're wiring funds and now we're. Now we're the lender. There's a letter that goes out and says, hey, thanks for not paying me, Mike. Now you're supposed to pay Scott now instead of us. And then that's where we make our money is like, okay, like you said, don't care what happened. The past, I get it. Bad things happen. I'm your get out of jail card right now. Do you want to stay or do you want to go? If you want to stay, you got to pay something. If you can't pay, then let's go. An alternative, a solution that's going to be a win win here. Let you walk away because a foreclosure will affect a borrower for seven years. Late pays are only reflect 24 months. And so we've helped and what's great is about 60 to 70% of the time we're able to keep people in their houses by modifying and that's really great. It doesn't affect the community. And a foreclosure, it keeps them in the house. It's a beautiful thing. The other 30% we're having to foreclose or take the asset back of some sort. Most of the time it's kind of friendly. Sometimes every once in a while we have that one that they want to fight you and drag out and wind up winning because the bank always wins and we always double check and talk with our attorneys. Hey, if we have to foreclose, are we going to win this? This case is everything there documented to make sure that we're a.

Okay thinking about this. You know, I share my story. So I, I got into real estate a little bit after you right? As the, as the. We were coming down the roller coaster down the hill and I was super excited because we bought our first property for $2,000 less than was a brand new construction con or townhouse complex. They bought it in 2004, we bought it in 2006 for 2,000 less. It appraised for 7,000 over. And I'm like hey, we got a great deal, right? This is Mike right out of college, not really understanding how real estate works. We got a good deal and then I watched all my neighbors short sale and foreclose as the values went to half of what we bought it for and we decided to stick it out and make payments. That's how we got into investing is kind of accidental landlords now we chose to rent it out versus staying there ourselves because we wanted to go. But then we went and bought a short sale on the flip side. So we got a good deal on the short sale on the flip side allowed us to rent. But I think about all my neighbors that left. I remember I was really good friends with my next door neighbor and he basically was like yep, can't make the payments anymore. Just going to stick it out until eventually I'm gone and took off and never talked to him again. But we talked all the time when we were there and now this. You know the foreclosure happened and he's gone. And so that's, you know, but he, he would have loved to stay. You know it was a two year old, three year old complex, beautiful units would have loved to say but because the value is so low and I think he lost his job to just took off, you know.

And that happened to a lot of people there. I mean we had so many. With 15 million homeowners underwater at the peak in 2010. 15 million now people ask me all the time are we going to see those numbers again? No, I don't think we'll hit 15 million. We'll probably get closer to that 4 to 5 somewhere about halfway or quarter way there. If we get to eight it'll be the worst. But it's the commercial debt now that's really affecting more things than the residential debt. Kind of a flip flop of that. And commercial affects residential because of people, stuff like that too. But yeah, short sales during that time that was, that was a big. I actually was, we're doing negotiating short sales in like 30 different states for realtors and investors back at the time to helping them out because we knew the ins and outs of dealing with these ass managers. We were actually, I was negotiating a short sale with the, the head of Loss Mitigation Forever Home bank and her name was Rachel, I'll tell you last name. She sound like she's smoking three packs a day, stressed out and we get her on the phone, we negotiate and I said well Rachel, thank you so much. She's like is this all you do? You just do short sales? I'm like yeah, we help, we've doing a lot. She's well hang on a second. And she came back on and she goes I need your help. I got a house that I'm behind and upside down on and all my team members are in the same book I am. Can you help all of us? They're all with Wells Fargo Mortgage. So we end up doing 12 short sales in that one department for everybody in every home banks, loss mitigation and still talk to every once in a while. It's kind of funny but a lot of people were hurting there and, and it was good. I mean it's great that you were able to make the payments. Probably the value of that property has probably come back and is worth more now. And same same thing here. It was going on in the United States. People that bought say a year ago, they might be underwater now. The values have dropped down in some places. Like I live in Austin, Texas, one of the most Expensive markets out there for the most. I don't buy a lot here in Austin. I buy in a lot of other places because it's more affordable and I get a better bang for my buck. But like, my neighbor across the street, he paid the peak, but he was happy because he finally got something. It took him two years to finally find something that he could win. His value's down 56 grand, but he got such a low interest rate, he's like, well, I'm not. My, my time frame is not just to flip this property. You know, I was gonna plan on being here for seven or eight years. I'm like, well, then just. You can afford the payments. Just write it out. That value will come back in two, three years, and in. In 10 years, it'll probably double again. When it's what it's worth today, you've just got to understand the timing of the market and how everything is. Things go up, things go down, things go back up. And in real estate, they may drop down, but they'll always go back up further than what they did before in most cases.

So for somebody that's considering investing in notes, what are some tips, kind of how to get started, maybe how to even research this a little bit more. And then two, the benefit that you see from that, you know, like what, what, what was exciting about you choosing this as kind of your niche that you're going to focus on?

So let me, let me answer that question first, and then it'll lead into the answer to the first question. So with me, I think one of the biggest expenses that investors or realtors or anything is leads, right? It's all about lead gen. I need to get somebody a buyer or a seller. Well, if you're an investor, you're looking for deals, right? And many investors are out putting out bandit signs or they're doing direct mail, where they're mailing out thousands of mail pieces, you know, and those have a very low ROI, you know, 1 to 2% for direct mail bandit signs. If the. They get a few phone calls before the zoning department picks them up or whatever, they, you know, that's a lot of money. And most of the time you're getting one borrower who's in trouble, and they have one house, right? So every month, you've got to revamp to try to get this. Well, what I liked about note investing immediately is that I didn't have to spend any money on direct mail or any. My marketing costs were dramatically reduced 90% because I'm not mailing out Postcards or letters. I'm literally contacting banks and I'm contacting internal departments of banks and when I get the right department, they send me a list of their problem children. It might be one note, it might be a thousand notes that I can cherry pick from. And this happens every month, every quarter, depending on the lending institution, how often they sell. So that was one thing I loved. I was like, I mean I can do this for my computer. I don't have to go out and knock on doors. And I've been shot at twice knocking on doors. For people who are, you know, facing foreclosure or you know, in the 120 degree heat of Hades here in Austin in the middle of summer, I can stay in the AC and do this from a variety of places. That was the first thing that really excited me about notes. Second thing is the discounts were often a whole lot less. People were just blown away that we could pick up something Even today at 30, 35, 40 discount, you know, because market, you know, real estate's so expensive, a lot of cases like, well, we're still getting a big discount because we are having to take on that, that problem child and have to foreclose and make it that thing which when you buy at a bigger discount, when you're in a hot market that leads to great ROIs. We don't do skinny deals. You know, we're definitely when we're going to take a note back, we want to see at least a double digit return, 1012 to us after our money costs. If we have to take a property back that we have to foreclose or deal with, maybe put a little bit of rehab into or something like that. We want to see closer to 20 annualized return on a lot of stuff or greater. Just depends on the market and days on market and that time and stuff. So those are the, the three biggest things that I like about it. Every state's different. That's one thing that you got to be careful of buying in California, what you'd buy one asset in San Diego, I could buy a whole block in St. Louis, Missouri, you know what I mean? So you got to know states are different. You some have a judicial foreclosure time frame which is a longer court system foreclosure. Others are non judicial that are faster. Like here in Texas it could be 30 to 90 days. You got to do some research. That can be overwhelming for people. I've seen realtors and investors, they get a list of 400 notes and literally almost have a breakdown because they like, ah, you know, all these are deals. I'm like, no, no, no. They're not all deals. Know your parameters. Let's run some basic numbers on here, you know, Occupied. Okay, let's take 12 months of P and I times 12 and divide that by what you, you know, 60% of the balance or the value and see what kind of roi. That's a quick number to take a look at. Looking at property taxes, you want to avoid states that have usually higher property taxes if you're going to hold it for cash flow long term. I, I don't necessarily want to own rentals. That turns things into another job. I mean, we've had some, and we're, it will take some stuff back occasionally that we turn into wrinkles just because the market's a little bit different depending on what rents. Right? I mean, when I was buying notes back in, when I first started, I was buying like condos in South Florida for five, ten grand a pop. You know, I, I, I didn't mind renting them out at 1500-2000 bucks a month because I was only paying like 10 to 30 grand for these things. I'm like, it worked for a while and hey, the, the bar was gone. So we'll put a renter in there temporarily while we, it takes us 18 months to foreclose, you know, and do that kind of stuff. So that's, that's the important thing.

You don't have to worry about your, your neighbor listing with a different realtor and being frustrated and upset about that.

Yeah, that's, that's, that, that is so true. And look, I've, I'm not a realtor. I've toyed with the idea of getting my license because we, one of the things that we do get a lot of sometimes from banks is different foreclosure or REOs. And if I say, okay, we take a property back, we'll give you the listing, make it, make it a little bit. But I'm like, I don't instantly want the extra, the extra work. I don't, I love, I love working with realtors. There are some investors or educators out there that will sit there and preach. You don't need a realtor. You can do it all yourself. And I'm like, that's the stupidest thing you could say, because a jack of all trades is a master of none. Let the professionals handle it. Your time is not worth going into an open house or trying to rehab it and sell it at the same time. I mean, realtors are worth their weight in gold because they've got the connections, they've got access to mls, which is one of the greatest gold mines of deal flow is having access to MLS and all the things that you can pull from there. You just got to know how to use that tool properly and approach it from a little bit different of investor mindset. I love realtors, but Realtors that are right out of school, they're the inside the box. Anything that doesn't sound like inside the box is oh, it's illegal, you can't do that. There's a lot of things you can do creatively that are outside the box that are completely legal to make things happen. And you just gotta, you learn that from experience. You learn that from working with other investors or learning, you know, like subject to investing or wholesaling or doing wraparound mortgages. There's, there's a whole variety of things. There's a golden lane of opportunity right now, no matter what, what's going on with the market, whether it's up or.

Down, and, and what for, for thinking about opportunity here. So if I'm somebody who's, you know, I'm looking at investing in real estate or I'm looking at long term rentals, short term rentals, whatever, what can you share just in terms of capital needed, kind of how, kind of getting started. And obviously there's much more to this and you do a great job training on classes and how to get started and all that. But kind of what, what can they expect in terms of kind of the capital, maybe the cash flow kind of stuff like what does that look like to where it continues to build and grow over time.

So that's a, that's a really great question. Each niche of real estate investing will have different capital requirements. You know, you're buying a multifamily and apartment complex much more capital intensive than taking over something that's subject to the existing financing. We finance most of our purchase about 95% with other people's money, you know, using IRA. People that have a self directed IRA or borrowing people who have retirement accounts using that money to fund our purchases. So those, that's one of the most important things you can do if you're going to be a real estate investor is understand how to raise private capital and realize that there is trillions of money sitting on the sidelines. You know, one of the things that I think we met originally back in the day off of the thing is I was sitting there showing people how to go to the county records to pull up people that have an IRA account that have used it to buy a rental property, lend money from it and how you know in five to ten minutes you can find several hundred IRA investors who want to invest, are looking for deals to invest. Right. And that's mind blowing for a lot of people because they don't teach that anywhere. So that's something. And some like wholesaling doesn't really require any money. If you just want to flip paper, flip contracts, you can do that. Make sure you double check with your local state because some cities out there get a little nasty about that subject tos are a great opportunity right now which takes a little bit of capital if you've got to. And what a subject to deal is just for as if you've got a borrower who's maybe gone through a divorce or having to move because of job and they've got a mortgage with a a low rate that wants to walk away from the property but they can't sell it for maybe they owe more than the property worth a little bit more. They can't necessarily sell it because they can't bring the money. We're able to will step and say hey, we'll start making your mortgage payment. You're a couple of months behind, we'll pay that. You just deed the property over to us with your existing financing still in place. So we take over the property subject to the existing debt. And the way to make money on that is if it's at a low interest rate you could probably either a turn around and offer it owner financing to somebody. So if it's a mortgage is at 2%, you offered somebody at 6%. So you're making the different spread in the middle. Or you could turn it if you know for mortgage payment PITI is 1500 dollars a month and market rents 2400. Guess what, you turn around and rent it out to somebody at 2400, you're making a $900 difference. So that's subject to investing. That's a great time right now which we hadn't seen that a great time for that in the past a few years. But down with interest rates and some defaults, that's a great thing. That's not a lot of capital. But if you're going to go like you want to go rehab property that's going to take capital, you know, not because you can use hard money lenders or third party financing a lot of times that will lend on the property and the project honestly on your your FICO score, but they'll only land at 70 or 60, 60 to 70% of the value of the property. So if you're buying it at 65%, you need 20 grand or another 10% for repairs. You're going to have to finance that or go borrow money from somebody else out there. So really research and understand the strategy. One of my best bits of vice is join your local real estate club, meaning there's all sorts of real estate clubs and associations across the country in every different city. But go talk to the experts who are doing deals. And if you want to find the experts and the old investors been around for a market cycle, go to the event, go to the club and look at the people in the back row, usually the back right hand corner. Okay? When I was speaking and when I was traveling country speaking at rea clubs, that's who I would focus on. When I would wait for everything, I would go and look at the back two rows because if I could win those guys over, I could win. I already went over the entire audience, you know what I mean? But those people, they value their time. They're going to show up if it's going to buy, evaluate time, they're going to stay and listen. If it's not there any, skedaddle out of that room. But talk to the local investor club association president who's, hey, who's doing this strategy? Because there are strategies that work, but they don't always work for every market, you know, and there's a lot of education companies out there that, oh, this will work in your market, you know, buy foreclosures in Austin, Texas. Well, we have the lowest foreclosure rate in Texas here in Travis County. That's not going to work. And so just educate yourself on the market. What's working in today's world isn't necessarily what was working two years, three years ago. And that's, that's really the important thing. And if you're going to take counsel or advice from somebody, ask them, how many deals have you done lately in the last year? How many deals have you done in the last two years? And, or how. How have you adjusted your investing, your, your marketing strategies to find deals with the market changing like it is? Those are some questions you really need to ask. And then, then, you know, make your choice. Some people want to do rehabs, other people don't. Some people want to be landlords, other people don't want the job of dealing with people. I like buying notes because I'm not actually dealing with the borrowers. I have a third Party servicing company and attorneys that handle that so I don't have to deal with that drama.

Awesome. So just real quick then, talk about kind of switching from investing in notes here to building a company and building a brand, because that's something that you've really rolled around. Note investing, you're the note guy, right? So kind of talk about what's been successful in your business or what you've done that's been successful in growing your brand and becoming that note guy as you've gone throughout the past 20 years.

So I didn't coin the note guy, all right? It was given to me four nights in a row, okay. So I was, I went, I got asked to speak in San Antonio at a real estate investment club. I got asked the next night to speak in Austin, Texas. I went to two back to back nights. I was, I'm speaking for an hour on investing and I walk in and one thing that I've been doing was I would do videos, video, video, video. You know, the little Dell flip cam, I probably got it around here, I still have it, but I would just do short videos or if I, you know, get an asset in, I would write it up on the dry erase board and you know, talk about that deal and just share what I was doing. Because people liked it, but they didn't understand it. So I had to educate people to understand this niche of note investing to get them comfortable to invest with me. And so I walked into San Antonio and some guy in the back goes, hey, you're that note guy. Aren't you on YouTube? I'm like, yes, I am. Austin, Texas. Hey, aren't you that note guy? I'm like, yes, I am. Night off, I fly out to la, I'm speaking in San Diego. One night in la, the next same thing happened. Hey, you're that note guy. I'm like, I guess I must start calling myself the note guy. Because, you know, I was doing other things, doing some wholesaling stuff, but that's what really stuck out. And so I was like, okay. So I just said, I gotta, I gotta share my journey. I gotta start sharing on a regular basis because you got to be in front of people. I mean, we have such a. Humans have just low attention spans of 8 seconds. A goldfish has a 9 second attention span. And with social media where eyes and ears are being distracted on a regular basis with a podcast, videos, TikTok, you know, Twitter, whatever out there, you've got to share what you're doing. And the way it came to me, the Smartest marketing mind I ever met is a mentor of mine. His name is Roland Frazier out of San Diego. And I got to work with him a couple years. He's like, scott, are you going to be doing this for just a year? I'm like, no. He goes, two years. I'm like, no, I'm planning on probably being an investor for the rest of my life. You know, investors never retire. We just get smarter. You know what I mean? And he goes, you have to keep that in mind, that every video, every marketing piece, every post out there, that's a seed for the long term. You never know who's going to see it. You never know when somebody's going to come across it. It's going to hatch an opportunity of somebody either reaching out to you to get more information or to invest with you or to send you a deal. And so you've got to understand that. So that's the thing that I took was like, okay, I'm gonna share on a regular basis. I'm just gonna start sharing videos, sharing deal flow. When Facebook Live came out and Gary Vee made that famous by doing the Gary Ask Gary Vee show, I started doing video every day, Facebook Live every day about what I was doing. And when I did that, I really saw a skyrocket approach of followers as social media was really taken off then. And that led into us creating the Note Closure show, which now has 761 episodes. And we were doing a, a Monday night webinar with students and investors out there talking about deals. I started as a conference call, you know, a party line basically back 13 years ago. It evolved into the Monday Note, which was a webinar and we rebranded it to Note Night in America. And we've been doing that Monday night 7pm call Zoom webinar now for 13 years straight. And that's helped brand and just sharing it, putting all on YouTube so everybody can see it. And we've embraced podcasting. But we were big into the YouTube video side, first off, because video, it's 24 hour a day, seven day a week, advertising. And another, I think the biggest thing is people understand that I'm just me. I might not be the smartest guy in the shed, but I'm going to shoot you the truth. And I'm not everybody's cup of tea. I screw up, I make mistakes. I'm. I'm always glad I screwed up there in this one. Crap. We missed something. Let's get this fixed, you know, or this deal didn't turn out. We had Something happen, let's go through how we fixed it and how we solved it, or hey, don't do that. That's, that doesn't work. That worked three years ago. This doesn't work like it is today. So I'm not afraid to ruffle some feathers. I'm not afraid to poke fun at myself. And I think people really appreciate that because, you know, everything I do is in the note business. You know, green and black, you know, those are two brands. Everything we see is green. Everything is black. I mean, had email blast that we send out monthly to asset managers come back. So I was looking for the green email because I know I've got a note that you've, I've been, you've been emailing me for six years now. I got something on my desk that I can send you now. And that's, that's just the consistency. I have a, a realtor friend of mine who's one of the best REO agents in Atlanta. She just recently retired to Florida, but she was working with me and I said, hey, this is this a few years back when Google was around. Google obviously is gone. I said, you know, this great little article shared on Google plus, you got to share it everywhere. It's like casting online or making your net bigger, sharing it everywhere. And she's like, okay, whatever. Well, she did it, of course. What did she do? She never posted a game to Google plus. A year and a half goes by. She's in Austin and we're doing like the social media surveys. Like pull up your accounts and take a look at it. So she pulled up her Google plus account. Here's this one post from two years ago, but it's got 1800 views on it. And she's like, oh my God. I'm like, imagine if you've been posting the entire time, how many more views you would have and how many more leads you had gotten by just sharing it where other people aren't. And that's the biggest thing about building the brand is just you just got to be consistent, realize it's a long game, it's not a short game and just keep sharing. And you know, some people are very tighten it about their best stuff. I'm like, give away your best stuff because that's when people will realize, hey, this guy or gal, if they give this away for free now I really want to work with them because if I've got to pay for something, I know I'm gonna get better service or better quality stuff, whether it's they're my listing agent or my selling agent or I'm gonna invest with them. I, I, you know, that's, that's one of the biggest things that we get is people say, I've been stalking you for six months, you know, or I've been listening to you. I'm, I'm, they don't call me to just ask questions a lot of times. I mean, they do, but it's all like, hey, I've been following you. I'm ready to sign up for some coaching, or I'm ready to sign up for a class, or, hey, I got a hundred grand to invest. Let's, can I put it with you? And I'm like, yeah, maybe, you know, go from there. But that's just consistency and sharing, consistent in sharing. Just one of the biggest things you can do to find success long term.

Couple of things that you mentioned that stuck with me is, you know, talking about note night in America. Thirteen years, you know, I've worked with a lot of real estate agents and a lot of people in real estate where it's like, I'm going to try this for a month or I'm going to try this for a couple months. You've been doing that for 13 years. And then the other thing that you shared that's, that's really wise is you said, just because this worked three or four years ago, it doesn't work now. So that means you have to be doing something for three or four years or trying something a certain for three, four years before you decide it doesn't work. And I think so many people are so impatient because they do one or two things. You know, I've, I've worked before with an agent that did a mailing for three months, didn't see the results, so they stopped doing the mailing. Well, then about three months later is when they got a hand raise from that. And it's like, oh, wait a second. Like, I just stopped that three months ago. But if I would have continued with it. And so that makes sense. And to all the video, you, the video content you put out, like the 1700 YouTube videos, people can watch that when you're sleeping, People can watch that when you're on vacation. People can watch that when you're sitting watching a football game and you're helping to prime the pump. For six months I've been stalking you, or 12 months I've been watching your stuff, and now I'm ready. You've got to have 12 months of stuff for people to watch to then.

Be ready to raise their hand right away. So I'm so glad you brought that up. So, like no night in America, we do that via Zoom. And it's, we made it. We try to make it simple. We go to notenight in America.com it takes you to resume to register. So we try to buy this custom URLs that are easy. But that's changed, that's evolved. I mean, we'd have 200 to 700 people live in a webinar. Well, the one I did Monday night, it's dwindled down. People are tired of Zoom. It's dwindled down to 30 to 50 people live. But I live stream to YouTube so we get views on there too. And then we take that video and put it rebroadcast on YouTube the next day and that gets more replays. And we take the video and restream it across our LinkedIn and all our other social media. So that gets several hundred views. We turn, take it into a podcast and turn it into an audio podcast. It'll get on average 200 to 500 views in the first month. So if I just did like most people always only got 13 people tonight, they stopped doing it. I'm like, it's that our investment. I'm going to record something. And that while 13 people, I'm very, very grateful for those 13 people that show up live and I send them an email and I follow up with them. But it's also, it's just the tip of the wave. Like, I know that most of the views are going to come afterwards and if I stop doing it, then I'm really losing out on all that afterwards.

And the other thing to think about too, because I know on YouTube as an example, views tend to be low for some people, as probably especially people getting started of those couple of views, they click on something and go to your website and then they're going on website and looking at stuff too. So it's, it's like fishing. You've got thousands of lines in the water, thousands of lures under the water that eventually something's going to catch a fish. And so if you're just focused on, oh, I only had five people watch that video, you might add five people watch it on YouTube. But if you're also posting it in all these other places, that stuff starts to add up. And it's doing that for 13 years, like you said.

Yeah. So let me give you a bit of an example. Like, and this is, this is one of the things from Gary Vaynerchuk that stuck with me, you only need to have one view to make it worthwhile. Just one view. Not it go viral. But if you, if you take a look at my channel, like in, right, we hit 1750 videos in May 2, so it's over. We'll just say if you take 3, 350,000 views, that's what was another milestone we hit and divide that by 1700 videos. That's an average of 205, 206 views per video. Okay, not huge. Now I have something like 25,000, 10,000, 15,000, stuff like that. What's funny is this is my second YouTube channel. The first one had 800 videos and got shut down a few years back, so I had to rebuild it to it. But those 205 views a day, it. That leads to roughly three to four subscribers per day that come back and watch. And so we average about 6000, 6000, 7000 views a month on that. And that's the thing. It's like, that's one of my best legions is just dumping content. Somebody will come from it. Somebody will comment. And like you said, Now I've got 1700 hooks in the water versus one or two hooks. You never know what somebody's searching for and what you'll be found for. And it's, it's, it's. The most important thing is, is to be consistent and try to be narrow. I can't, I can't say that enough to find your one or two niches and stick to that, those niches if you try to. And this is one of the biggest mistakes we see with like real estate podcasters or real estate educators. They try to be a master of every strategy. And you can't be the master of every strategy because everyone's got different timing and marketing and stuff like that. And investors, they, they sign up for all these classes, but they never have time to implement the strategy of the marketing for one strategy because they're busy going to another class, another workshop. You know what I mean? So pick one or two niches and just focus on that. Just stick to that. Give that six months, nine months a year. You know, make sure, make sure it's working in the market you're in or what you were focused on, but focus on that. You got to give time for people to see because 80 of sales are made after the fifth contact, the fifth view, the sixth view, six times. Somebody's seen you to take notice. And that's why we tried to speed things up by sharing it everywhere. So at some point maybe they'll see it once or twice in a day, maybe see it three or four. Like okay, this note guy I need to spend some more time on because he finally said something that makes sense to me and I'll reach out to him and go from there.

Real Estate Agents, are you tired of letting the busyness of life get in your way from achieving your real estate investing goals? I'm super excited to announce we've created the Real Freedom Investor Agent Tribe. It's a place for you to come get educated and network with others so that you can make sure that you're hitting your real estate investment goals. So find out more on our website realfreedom.com, click on the store link. We've got a member membership, we've got a mastermind group and some private coaching as well. Check it out. I've priced it super low. The goal is to get you and not have price be a determining factor to keep you from your goals. So come check it out, schedule a call with me and we're happy to see where your real estate journey is going to take you. So Scott, for people that want to reach out to you and learn more, how can they do that or where can they find you?

Really easy. You can go to our website. We close notes.com we close notes.com we got our podcast on there video training. If you want to learn more about note investing, I have classes on there, but I'd love to give your audience. We have a one day class that we teach called Note Weekend. We teach it usually the third Saturday of the month it's recorded so you got to take a Saturday, usually 99 bucks. But since you're listening to Mike's podcast and you're smart because you're listening to its podcast and intelligent and the best looking and most intelligent people out there listen to Mike's podcast here. Real Freedom. Okay, you can use the code podcast. Go to noteweekend.com, use the code podcast and it'll give you the class for free. No cost. You can watch it every time and go from there. So really easy. Noteweeknd.com code podcast all caps. You get it for free. And if you have any questions, you can always reach out to me on any of my socials. I'm one. Scott Carson Yes, Mike said I've got just south of 30,000 followers connections on LinkedIn too. So it's a great place to connect with me on there too.

Awesome. Well, thank you Scott for coming on, kind of sharing your story. Why notes are a good investment vehicle for you and kind of how people can find process through choosing an investment lane and then to just, yeah. Talking about growing your business through social media. So thank you so much for coming on and sharing.

Hey, honored to be here. One last thing, everybody. Make sure you do this. This is the most important thing you get out of this whole episode. We as podcasters love to hear from our audience. You're listening to the podcast here right now. Make sure you hit the subscribe button and then go on over and leave a five star review for Mike. We as podcasters love to hear from our listeners. And you can do that. Mike's kicking ass, taking names on the podcast, just delivering amazing wealth. You can take a minute or two to do that for Mike as well.

Because I know how to choose good guests.

Right? That's right, baby. That's right. The best guest.

Awesome. Well, thank you, Scott, for coming on.

I appreciate it.