Note Investing With Scott Carson From Do You Cash Flow Podcast With Luke Barber & Kyle Ballif

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Welcome back to do youo Cash Flow. Today we have our good friend Scott Carson with us. He's been a note investor for over 20 years. So you're going to talk about that with us today. So Scott, tell us a little bit of who you are and what your business is.

Yeah, guys, thanks for having me on today. I'm known across the country as the note guy. And what I specialize in is buying performing and non performing notes where I actually buy the debt from banks and lean institutions on residential and commercial properties with the still goal not really to take the property back, although that does happen from time to time. Our biggest goal is to actually work with the borrowers, work with the homeowners and try to keep them in their house by modifying the loan or set them up on a payment plan, stuff like that. We all know plenty of property owners, commercial or residential right now, that have been struggling for the last few years. So we're pretty excited about what the year holds. But Ben, you know, I bought notes from anywhere from 7 bucks up to, you know, $1.1 million on an individual note, anywhere from a individual note on a property, all the way up to a portfolio of over 200 loans from a bank. So our biggest goal is not to take the property back, but it is to, as I like to say, rehab the borrower. And we like to turn problem properties into profitable solutions. And then some people will probably get a kick out of this. We are making America great again. One defaulted borrower at a time.

Yes, yes. Love it. For our conservative listeners out there.

Hey, you know what, our, our political message is all screwed up. But you know, Ronald Reagan used that quote 20 years ago before every Trump got around to use it. And I've been using it for a long time.

Yes.

As well. So yeah, you know, people, people need to help out. I don't care what, you know, what, how you vote, what color you are, what sex, what you go by. You know, we don't, we don't do that. What we, we like to look at is we get these lists of non performing notes from banks and our biggest goal is, hey, how can we help the borrower? I mean, we're buying it at a cheap enough price. It gives us a lot of flexibility to get the borrower back on track, paying or, you know, modifying the loan if we need to, or let them walk away. I mean, I'm negotiating a deepalie right now with a bar where they're going to walk away, we're going to forgive them of 100 grand in debt because they just can't afford the house anymore.

Yeah.

And it's going to be a good deal for me because they owe over 120. The house is worth about 100. We're buying the note for 50,000. So it's going to be a good payday when we sell that asset.

Yes.

You know, I would have modified it, but they just, they can't afford it.

So can't do it.

You know, that's. We're kind of. If anybody's a big fan of movies out there, I'm kind of like Christian Bale character in the big shorts, you know, the guy jamming on his drums and looking at these lists and list and list of mortgages and subprime mortgages.

Yes.

That's kind of me in a nutshell. But we look at subprime, we look at a paper stuff, and I get a bigger tick instead of having to take a property back. I get a bigger tick when the borrower gets back on track. And then they call me in a couple years and they're refinancing their house or they're selling the house. And we were able to save that house from being a foreclosure and keeping the values up in the neighborhood, stuff like that. That's what I really think about. But that's what I've been doing for the last 15 years.

So your main goal is to actually help the borrower. You're not just buying the note to foreclose them and sell the property. You really actually care to help the person that's struggling with the note you bought, Correct?

Usually, yeah. I mean, yeah, I want to help people, but there are. Sometimes we buy deals where the borrowers are just deadbeat, no offense. You know what I mean?

Yeah.

They haven't paid in three years. And then the lender or the bank had started the legal process to foreclose. And, you know, one of the great things that we get to see is actually all the, like the servicing notes where the borrower called in and talked to the banker or the banker called the borrower. So we see if the borrower's like told the bank to go F off, you know.

Yeah.

Or they're aggressive or they want help. So we get to see all the notes and the documents and hardship litters. And so look, I'm glad to help people. I mean, we haven't. Everybody goes through financial hiccups and we've had a wallop of a one over the last couple years. And so we're glad to help them get back on track. But I'm also. Somebody's going to try to take advantage and try to live for free. Look, I don't, I don't own. I don't, I don't. I'm not a charity. God helps those that help themselves. And if you're mortgage and you can afford to pay your mortgage payment, you're back to work. Hey, let's, let's create a win win here. But I don't give a free lunch if you're not going to work with me and meet me halfway. Yeah. Then we are going to foreclose and we will win because we're, we're buying the first lien position in foreclosure. I got a deal right now. Guy lives in, in Florida. Million dollar property. He hasn't paid his mortgage in four years. Oh, man. Hadn't paid for his way before COVID so I don't feel sorry for the guy.

No, it's a million dollar property.

Well, yeah, not a million dollar property. He's been shady as part of my French, but he's delayed. Delayed. Now he wants to modify the loan. I'm like, no, we are not accepting a modification. We're too far gone into this now. We've owned the note for a year. It's like, no, we're gonna foreclose because that's, you should have, you know, showed up and paid. And I think he actually owner financed the property to somebody. So he's been collecting like five grand a month in rent or mortgage payment himself.

Wow.

And you know, Robin from Peter, that's, you know, that's fine, but the piper's got to get paid. And we're getting paid here in the next month or so when we foreclose and sell it at auction for probably 900 to 950 when we're into the note at like 450,000. Wow. So that'll be a nice payday.

Yeah.

Isn't that illegal though? For if they have a mortgage on the property, they cannot own or finance that, can they?

Technically, it would have violated the due on sale clause. Yes. And that's one thing that we are basically saying. It's one of our defenses that our attorneys used at the foreclosure process. Like, listen, he violated the Due on sale clause along the way with all, you know, he's behind. And so it, it's ruling in our favor. The judge is just looking at the guy said, okay, you're, you know, he, you were collecting money. You haven't been out of work. You violated the due on sale clause. Check, check, check. Okay, here's the foreclosure date. And so I don't care if somebody owner finance the property. I mean, we've, we've allowed borrowers to do that. I'm totally fine with it as long as we get paid on the underlying mortgage. You know what I mean? For investors out there, one of the things that we all target, like subject to deals, we can't buy the note, but we get the borrower to sign the property over to us and we start making that mortgage payment and do a wraparound mortgage on the property with somebody at a higher interest rate, with a down payment where the mortgage payment's higher than the underlying mortgage, it will cash flow return our rental that way. But you know, due on sale clause, it only comes in if the bank doesn't get paid. And if we're not getting paid, we're sure it's not going to enforce that.

Yeah.

Okay, so Scott, walk me through this a little bit as somebody who knows a little, very little about node investing for our listeners who have no background in this whatsoever. Walk me through this. So you, you scour a list. You said you look at a list of, of notes that are underperforming. For example, let's say, for example, they are residential homes.

Yep.

And so you would look through what are you looking for? So I have lots of questions, but first of all, my question is what are you, what are you looking for when you're looking at that list? Are you looking for one that's say half the value? Are you looking like, I'm sure you have a bunch of criteria. Probably. But give us an idea of what maybe like one or two things that you're really focused on to select a property first and then I'll ask my additional questions.

No problem. So we get these lists, kind of called tapes, which is basically their Excel spreadsheet. From bank.

From a bank.

And we get these from a bank. And it's not, you're not going to walk into your local bank and say, hey, give me your list of notes. It's usually an internal department called like the special assets or secondary marketing department, somebody like that. So it's not reo and we're buying notes, we're not buying Property. I just want to make that clarification because people will. Oh, hey, you buy the note, you own the property. No, that's not a case. There's a borrower that owns the property. You're buying the note, becoming the bank. Okay, so we get these list in. When we get these listings, we first look at first, how far behind are they?

Okay.

And we prefer somebody who's at least six months behind and not really further than six months or six years behind.

Right?

Okay.

Yeah.

And then we look at. Okay, so we take and look at what, what do they owe? What's your unpaid balance? And then what's the payoff balance? Okay. You know, the payoff is going to be the principal balance plus all the back payments and late fees and anything else that the bank has advanced, like taxes or insurance.

Okay.

And we want. We prefer to buy notes where the borrower owes a lot more than the property's worth or owes more than the property's worth. Where there's zero equity or negative equity.

Okay.

Okay. If there is equity in marginal, we'll take a look at that too. But we've always found it. Then when a borrower has a ton of equity, they're going to fight you for that property. They're going to try to file and delay things and stuff like that, which I would do the same thing if I was in their shoes.

Sure, if you had a brain.

Yeah, exactly. If I only had a brain, anyway.

That's right.

But if there's no equity or they're upside down, there's that less. There's that one less hurdle you got to go through because then it becomes. Hey, listen. Hey, Steve, Luke, whatever your name is. I understand you've gone through a financial hiccup. What happened? Did grandma get run over by a reindeer? Did your dog die? Did your coaches. A big Dean don't mean Dallas. Whatever.

Yeah.

What's the situation? Do you want to stay or do you want to go?

Okay.

Do you want to get out from underneath of this? And then we kind of go to negotiation. We're obviously asking the bank what they're looking for as far as pricing. We don't like to pay over 70% of value or unpaid balance, depending on whichever is less. We usually get it somewhere in the 50s to 60s range. So we're getting usually pretty good pricing on this stuff. That gives us the flexibility then if we need to modify. So let's go through a number, some simple math for everybody.

Okay?

I'm looking at a deal right now. Like I said, Borrows 120House is worth only 100. They haven't paid in two years. Interest rate is like 6% on it. Well, we have a bid into the bank right now to buy that mortgage, buy the balance at $50,000.

Okay.

Okay. And we think the borrower will reinstate with us. They'll start back paying because they're back to work, they've been out of work and the bank wanted all 18 months of payments and they couldn't bring 18 months of payments to the table.

Okay.

So we bought at 50 the 6% interest rates on it. So basically the bank would have did $6,000 a year in payments. Well, if we buy it at 50 and we get the bar just to start making their existing payments, well that 6% return really is a 12% return to us because we bought it at $0.50 on the dollar. So 6,000 divided into our investment of 50 is like I said, a 12% return. Now we're not going to do it without asking the bar to bring some money or some skins to the table. Whether it's, you know, we usually like to get four months of payments on the front end and with people doing their taxes or other things, we don't really care where that money comes from. Whether they get it from their friend or you know, cash in their 401k or crackrock, I don't care. Yeah, I don't necessarily want them to lose their knees to, you know, Guido. But.

Right.

Don't care where that. And we'll even ask them to pay a little bit extra each month. Let's just say we get them to pay, you know, four, four months of payments extra on the front end. So that's, they're paying 6,000 a year, that's what, five, what is it? You know, roughly about five something a month. So we get them to pay a little bit extra. Now our return goes from like a 12% cash and cash return to an 18, 20% cash and cash.

Okay.

And if we get them paying on time for 12 months which were collected through a third party servicing company and they're doing the outreach and collecting and then depositing after 12 months of on time payments, that note's no longer non performing. It's now a reperforming note and the value is a lot higher now. Now I could turn around and sell that note to Wall street, to IRA investors at 80, 85, 90 cents on the dollar of the value of the.

Property which you bought for 50 to 60.

Exactly. So I just netted another 30 to 40%. After 12 to 18 months.

Okay.

Do you, do you make some off of the payments too? Like when those payments are coming in?

Oh, yeah, exactly. Yeah. Because we're usually using other people's money. I mean, we're buying a note and we're using other people's money. So if we're borrowing $50,000 at a 6% interest rate or 7% interest rate from our investors and we're making 18% based on the first year of cash flow, that's a pretty good arbitrage and that's an infinite return on investment for us because it's on our own money. Now if the borrower doesn't pay, let's say they make three months of payments, then fall off the cliff again. Well then we can start the foreclosure process. If they won't play ball with us, then we'll just go to the foreclosure and sell it at the auction at 80, 90 cents on the dollar and let somebody can work them and buy an Ariel from us at 85 to 90,000. And we still made, you know, 30, 40,000 or 30, 40% profit by having the foreclose. But it's a little bit different. Each state has a different foreclosure time frame. Some are faster.

Yep.

You know, others like, others you don't want to buy in, like New York, New Jersey. No offense to our friends up there. Well, Shyrak is a rough place. Yes. Crook, Crook county is one of the worst counties to foreclose. And if you don't live there.

Yeah.

Now if you live there and you invest there, the judges, oh, you're a voter, we'll side with you. But if you're out of state, investor.

Yeah.

And they know that they will like it. They'll give the 10. Oh, they'll delay, delay, delay. I've lost my ass in Chicago and I mean, I love deep dish pizza, but I don't like the foreclosure process there at all.

Yeah. Real estate investing, Chicago. No, no. Wouldn't even touch it with a ten foot pole.

Nope. Yeah, yeah. Unless you live with your pole. Yep.

Yeah, right.

Yes, exactly.

That's right.

But, but, but that's, there's a, there's a variety of different things that we do. I mean, we, our biggest goal is getting back on track. Worst case is the foreclose.

Yeah.

There's different things in the middle. You know, modifying forbearance plans. We can let somebody assume the mortgage, take over the mortgage payments of their friend or family member or we'll do cash for keys. You know, let them walk, do a deal.

Yep.

Or list the property for short sale. We can approve that, do a reduced settlement. You know, hey, they owe 70 grand. They can only come up with 50. Okay, we bought it for 25. We'll take it for 50 and move on and be done with it. You know, there's about 10, 11 different exit strategies.

Sure.

So with you, it sounds to me like there's a lot of. First of all, it sounds like there's a lot of contacting. You'd be contacting the person on the list. And then there's a lot of negotiating. Well, contacting and then determining kind of where they're at, what. What their situation is, figuring out, you know, if they can be helped, if they want to be helped and what you might be able to do. And then once. Once you find somebody who's willing to. So it sounds to me like you spend a lot of time trying to find people who want to, which I would assume most people would, but who want to keep their house or whatever. And so you're kind of just trying to negotiate the terms of what that looks like to them. Correct.

Pretty much. After you buy, you cannot contact the borrower. It's a violation of consumer finance prior to. Prior to owning the note.

I see.

So. So. But this is what the great thing is that we. We're not only just evaluating the property, but we are getting a loan file from the seller.

Yeah.

We're seeing all the servicing notes. So we. We can see if the. Like I said, the borrower has been friendly.

Yes.

Like, I got. I had one. One deal with the bar. Been trying to modify the loan for five years, and her loan had been sold like six times. Times.

Wow.

And when we got. Got the copy of the. The PDF, it was so long, but I could see she'd written five, like, hardship letters, and she'd been trying to alone mod for five years. I'm like. I'm like, this is a slam dunk. We know what you want.

Yeah.

She's trying to work with us.

Hey. Yeah, I don't know why the. The current lender hasn't helped her. They're just idiots, you know, okay, we'll take it. We'll take that slam dunk deal. And then you've got people that you think will modify that. Just go dark that. You're like, okay, yeah, I'm just gonna, you know, won't deal with us. You know, okay, we'll go foreclose. But yeah, I mean, it's. I hate to Say this, but I think it's a lot of you kind of have a feel if you buy an occupied assets, you have a much higher hit rate for somebody to get back on track. If it's a vacant asset, it's going to be a foreclosure or dealer cash for keys. And you're probably going to have to replace some sort of major thing like the roof, the A.C. you know, it's probably going on a vacation. And the copper goblins showed up. Yeah, it probably needs a lot more rehab versus somebody who's living in the property, keeping the heat on. They may not be paying their mortgage.

Right.

That's okay that at least. And you can tell a lot about a property. We'll send somebody to look at the property externally because you're not going to interior access. But you can tell if they've got, you know, if they take some pride of ownership, you know, they got kids toys or plants. You know, when I see that, that's usually a sure sign that that borrower wants to stay and it's gonna work with you in some sort of fashion.

Right.

Okay, so basically what you're doing is you're. Excuse me, help me understand. You're basically wholesaling notes. Like instead of wholesaling real estate, you're basically wholesaling the notes and I'm assuming you keep a lot of them as well, correct?

Yeah, so we, yeah, when we get portfolios in, we can wholesale note like a wholesale piece of property we get in our contract and flip it for a higher price. But we actually prefer to buy. I mean wholesaling, we do a little bit of that but for the most part we're literally buying for our own portfolio first and foremost because I'll usually wholesale some other investors or students of ours. But for the most part we make a lot more money using other people's money to take down that asset. Either get it re performing for cash flow or go to legal route to foreclose. And what I've always found is that wholesalers that are looking for deals, if you can show them, like listen, if you're making, you're taking this property back as a rental and you're making less than 10% to do all this work and deal with toilet paints and trash outs. Why don't you just partner with me? Be my money partner and, and make that same amount on, on autopilot for 12 or 24 months or longer without you having to do any work. And so we get a lot of those, you know, those fix and flippers that can't find deals or those tired landlords that come into the nook space and like I don't, I don't want to deal with another friggin clogged toilet, you know what I mean? I don't want to deal with a phone call on my weekend off with my family on my vacation that the property manager supposed to handle it. So that's, that's the beautiful thing. Nobody ever calls bank of America when little to me shits in the toilet and clogged it up, you know what I mean? Nobody calls the bank. And that's the beautiful thing about being the bank.

Okay, right.

You just, you're just collecting their monthly payment.

Yep. We try to set up on cash, you know, automate payment, ach, working out with them and then yeah on. And then hopefully we can hold it for a long term. Most people think when you're investing in notes you're basically just dealing owner finance notes. And we do buy some of those but most of the stuff that we're buying is direct from institutions. And you know what's great is it's, we're seeing deals six to 12 months ahead of time of most other people because you're not going to go to the MLS to find a note deal. If you go to, you know, foreclosure list, those are distressed notes but those are you know, at the tail end of it. We're seeing stuff from banks on a regular basis without having to do any direct mail campaigns or door knocking. You know, we do dial for dollars, you know, by contacting banks and asset managers and using LinkedIn to leverage our time. I'm actually teaching a class today and spent this morning from 9:30 to right before I jumped on to you guys. And we contacted roughly about 30 different banks and you know, dialing for dollars and, and we've got a couple lists that are coming in anywhere from like 5 to 15 notes that will be in from these different banks and the banks are motivated to sell them. Don't know pricing yet on them, but it's a different type of way to, you know, as I always say, market, market. Like it's 20, 21st century, you know, I'm giving her all she's got, Captain. And Scotty's here to beat me up into the 21st century.

Right, right.

So have you seen an increase in, obviously you're seeing them six months in advance. So have you seen an increase in notes that the bank are trying to sell you because of their non performing.

Yeah, so we have seen actually Quite a bit of an increase in the last 12 months, actually. Obviously, the market's been great in real estate all across the country. Price is going up, so prices get a little bit more steeper as there's less of it. But with all the programs that are ending with the bailouts or the unemployment resources running out, we're starting to see an influx now. We've seen an influx of notes on the commercial side for over a year now. As you see an increase in hotel debt, that's distressed restaurants, other strip malls, malls, apartments, stuff like that. We've seen an increase in that distress debt quite a bit for the last 12 plus months. But on the residential side, yeah, we're seeing an increase. You always can tell when you, when there's going to be a change when your phone starts ringing, for when bankers calling you back. Most of the time they won't call you back. But a lot of times when they start calling you, you know, you've got a hot one and they've got stuff that's killing their books that they want to get off their books. And so, I mean, with the national default rates roughly about just under 5%, 4.65 or 4.75. And if you looked at, in total, there's about 81 million loans out there, that leaves about 3.7, 3.8 million mortgages. Homeowners who are in default, you know, they owe more than three months or greater on their mortgage who are struggling. Wow. A lot of opportunity. That number's doubled what it has in the last 12 months. So.

I'm sorry, in 2008, what was that number?

The default rate was like 8%. Okay, okay. We go back to 2008. It was, it was high. And we hit that matter. We matched that number in February of March of 2021. It was at 8.22%, you know, one in. But here's the thing. Most people don't know this, that before COVID 1 in 11, 1 out of 11 or 10 borrowers are still already 90 days behind.

Wow.

And in places like California, 1 out of 3 borrowers is at least 30 days late already. So Covid was just basically kicked things off in a worse way. The government had to come in and stop foreclosures and, you know, give Freddie, Fannie and Freddie and Jenny, man, the opportunity that, hey, don't foreclose. Otherwise we're gonna see a black gaping hole what the housing market used to be, Right. And, you know, we're seeing defaults, you know, with interest rates rising, with inflation Rising. A lot of people are looking to put some stuff in and if you can put it into a property is a great thing. But if you can put it into a performing note, that's going to be a solid return for you each month, each quarter, each year. It's a great investment Right now for you.

How big is your team? Seems like you'd have.

No, I got a million people. And no, honestly, the beautiful thing about what we do is it's such a vendor driven business. So like we have a servicing company out of Reno, Nevada and another one out of San Antonio, Texas that we use. Their teams are the ones that are doing the borrower outreach. You know, we're paying them 90 bucks a month per loan. That's non performing or somewhere between 15 and 25 for the performing notes for them just to send out the letters and the campaigns and collect.

Okay.

So it's not, it's pretty inexpensive. Now I've got a full time staff member that works out of New Jersey who used to work for a servicing company. So I'm a little bit more advanced because she works, she does a lot of the borrower negotiations.

Okay.

But most people, you just, you just hire a servicing company to help you with that negotiations and that outreach and then they'll come back to you and say, hey, here's what the borrower can pay or can't pay. What do you want to do? Okay, if they can't pay, great, then you hire an attorney to handle the foreclosure process. So you know, you're buying in multiple states, you're not going to jump on Southwest Airlines and go look at one property and there's vendors that will go, do, you know, property inspections and drive by, take photos.

Okay.

You know, realtors that will pull CMAs or you can pay a BPO company to give you a broker price opinion and yeah. During your due diligence process. So if you have Internet and a cell phone, you can do this business from just about anywhere. I've closed deals when I was here in Austin, Texas or in, you know, Columbus, Ohio or freaking over in Naples, Italy on vacation. We've been able to close things via email and cell phone, stuff like that. So that's what I love about it.

Yeah.

So, yeah, yeah. So then you're, you're pretty lean then. It's not like you've got a bunch of people on payroll or anything like that.

It's.

You just have, you just know the right people to get information that you need and to make the decisions that you make and of course your brain.

Exactly.

And experience.

Exactly. And exactly. So with like email, like having you have a CRM feel like we use keep, you know, formally infusion soft. So we send an email out once a month.

Yep.

To our banks and asset managers. They send us a list. Okay. Then we'll dive in and take a look at it. We'll use a VA to pull online information, values, rent rates. Then we'll make an offering. If they come back, the bank accepts it. Then we do a deeper dive. Okay. Now we're paying for a BPO and a title report and looking at those and if we get like a listen of 100, we may make an offer on 50 knowing that okay, probably we'll only get accepted at like 20, 25 and we'll probably end up killing half of those through a deeper dive. Due diligence. Okay. Now this borrowers, you know, there's a lot more taxes or the property value isn't 100, it's, it's 50,000. Well that's a shithole. We don't want to buy crap hole property, you know what I mean? So you know, and so we end up with 10. Well great, that's 10 deals that we'll take down and we get a better price because we're buying kind of in a bulk purchase. And the banks like dealing with people more offers because it's one person they're dealing with versus trying to chase 60 cats, you know, I mean 60 people buy 60 assets, do it and they might get a higher price but oftentimes, well we'll deal with one person, you know, who's going to buy 60 because okay, they've done their numbers and, and you know, it makes it easier for everybody.

Sure.

So yeah, you like to buy basically buy tapes, as many as you possibly can. But when you do look at these types of deals, is there what would turn you off? Is there certain states? I mean it's Florida. Florida takes a while to foreclose, doesn't it?

Florida used to. I mean I love God's waiting room. I mean it is a great place, man. It's always sunny down there. All right. And there's been a lot of debt down there, but yeah, it used to take 18 months to foreclose. But when you take 18 months, you used to get debt at a lot cheaper price, like 30 cents on the dollar. Now it's only about nine to 12 months before close which is still good but you're still getting at a pretty these counts. Look, everybody loves the sun, you know, not you don't want to. I don't buy New York, New Jersey because it is takes two to three years to foreclose there. I don't buy in Kentucky because they want you to have an extra a million dollar personal bond and that's expensive. And of course we just, we discussed our favorite city, Chicago, why you don't buy there. Yeah, but you know, we, you know, I live in Texas. Austin's a hot market. I haven't bought anything in Austin or Texas really for 10 years because it's a fast foreclosure process of 21 days here. So the banks and note sellers will want to sell it at a premium because it is a faster foreclosure state, you know.

Yeah.

So you know, people like to chase notes just in non judicial and like that's okay but you're going to pay a premium because it is a faster foreclosure state. So I, I don't mind Ohio which takes nine months because I can usually modify, get the bar back on track well before nine months if I got to foreclose. Okay, foreclose. But you know, Michigan's a fast foreclosure state that people avoid. I don't know why because there's plenty of great areas besides downtown Detroit. It's a great city, great state. Indiana is a pretty good state that you can evict in 14 days there, which is fast. It's about a six month process to foreclose. Missouri takes 90 days to foreclose. So you have to know the states are a little bit different. I always tell people start with three to five states and let's go from there. If you're in California, I, you know, sorry. It's the land of fruit nuts out there with the drought. It's just all nuts. Yeah, it's overpriced. The banks don't want anything in a big discount there. So we just, you know, we buy like I said Midwest Rust belt, if you're, you're NCAA March Madness fans is like the Big Ten, the Southeast Conference and the Big 12 conferences is kind of where we buy them all.

Okay. So the south, you like the south is what you're saying too.

Don't wrong. I like up, you know, Indiana, Ohio, Michigan. Don't call them from the South. They'll. That's true.

They will fight you.

They will fight you. Exactly.

Nice.

We're in Florida, so we know what you're talking about here.

Yep.

So you're in Florida with an 801 number originally from Salt Lake City or Where.

Yep, born and raised in Salt Lake area and I've been, I've been in Panama City Beach, Florida for over 10 years now.

Oh, that's a great spot down there. I mean you guys are going craziness out there. Yeah, like, like I'll give you example, Florida. Basically you were in five miles of the ocean from Jacksonville all the way around the state. Bought a lot of stuff in Panama City, bought a lot of stuff in Broward County, Fort Myers, Cape Coral area, Tampa, you know, Miami, where else? Palm beach county, you know, all over the place there. Florida's not a bad state to invest in. And you know Jacksonville's a hot market. We see a lot of debt in Orlando as well. Gotta love rat land. Always distressed debt there. Especially when you have. We're in such a big, what do you call it, hospitality industry got hit so hard. There's still a lot of distressed stuff there, you know what I mean?

That brings up another interesting question. Do you buy a lot of short term rental notes that have are going. Ben?

Don't see a lot of short term rentals because they're usually doing pretty good. But what we have seen is your single family homes especially that we see the biggest bang for the buck is the values homes valued below 250,000 because those are the folks that are trying to make it that they get laid off for a period of time. They don't have the reserves, the savings to weather the storm alive. So some of our students are buying them and then turning them into short term rentals to make things happen recently. But if it's existing short term rental, don't usually see a lot of distress stuff there.

Right. I mean my personal opinion is I think that's going to change here soon as the short term rental prices are a little overrated. So I think that might shift here soon.

I do totally agree with you on that for sure. For sure. You got a lot of people that are mom paw investors and that especially on the commercial side, smaller like apartment houses, you know, fourplexes, five plexes, 10 units under. A lot of those are mom pa owners that are struggling. Those are what's in default. I mean there's if you look at, we do some commercial stuff and they're right now currently over 1900 apartments that are in default with 100 units or less across the country. No, I'm sorry, 3600 apartments less than 100 units. 1900 with 100 units or more are in default across the country. And Florida's got a big amount of Them.

Wow.

That's a significant number because there's not like, there's not a ton of apartments. So that size of apartments.

You'D be surprised. There's at least 3,600. They're struggling.

Dang. That's crazy.

You would think with all the cash flow they're getting. But I guess no, because they're buying.

Them on 4 and 5, 6 caps. Oh, they have been for a couple years now. So I understand why they're in default.

Yeah. Because they're.

Yeah, they're just priced too high and then the rents aren't covering their nut.

Correct.

Huh. Wow.

I'm assuming correct, Scott, that's what you're saying, type thing.

Yeah. Yep.

So are you buying any of those notes for the big commercial ones? Because assuming the bank gives you. Go ahead.

The banks give us, you know, they give us these lessons. Commercial notes can take a lot longer time in due diligence because you've got to pull a lot of information. You may have financials, you may not have financials. And so whereas a residential note will close in like 30, 45 days or sooner, it's like a one off. It might be fast as seven days, depending on how big the commercial property is. We're usually. It's taking 90 days to foreclose to close on those and going from there. It all depends if the borrower is friendly and working with the bank or the. Or the lender. If they're not, then it, you know, it's a bit of a time. And the banks, banks don't move quickly for the most part. Oftentimes their committees to sell their commercial stuff meet once a month or once every two weeks. So it's a matter of going back and forth with them in a lot of cases. But we see some of that stuff, that small balance commercial stuff is what's really clogged a lot of the commercial banks books over the last couple years. And so, you know, they're interested in selling it. That doesn't mean they always want to take the discount that they want, that we want to take form because it's all based on commercials, all based about cash flows and operating incomes and stuff like that. So.

Right. I own two mobile home parks, so I understand, I understand how everything works.

Yeah, yeah, there we go. That's a big market there in Florida. There's 200 mobile home parks that are distressed with 90 days or greater across the country right now.

200. Wow.

200. Yeah.

Well, I'm going to tell you we need to talk off air too. So.

All right, we'll do that. We'll definitely do that.

So I have another couple questions. So I was thinking, first of all, so when we were talking about the team and you're pretty lean, you have some other people like that. You're also being the note guy, I'm guessing you or I'm wondering if. And you, you teach people how to do this. So that's one thing. And then another thing was, is you're, you kind of also act as kind of the money you mentioned that you don't. That you try not to do it with your own money.

Right.

You get other people to invest. So you're kind of more the money money person as well. Like you're just kind of bringing all the pieces together. You're finding the person, you know, who's distressed and needs to redo their mortgage or whatever. And then you also have investors who are, who are, I don't want to say giving you money, but I mean, you have investors who are bringing money to the table so that you can then buy that note. And then you're obviously paying them out on the proceeds. You're getting paid on the proceeds and you're helping the homeowner. And again, I'm going back to residential, but the homeowner or the property owner.

So.

Yeah, so you're, you've kind of got a lot of balls in the air here, right. That you're always kind of constantly juggling, it seems.

Yeah, it's not really a. Yeah, we do have. We are doing a variety of things. We're always looking for deals and always raising capital. You know, we've got a fund that we're working on getting closed up for that as well too, to make it a little bit easier for that. But you know, the, the big thing is, you know, this is such a vendor driven business that helps alleviate a lot of that stuff where I don't have to do everything myself. And that's an important aspect of it is we're looking at assets and then raising capital at the same time. We're performing due diligence.

Yes.

We're also raising capital because we're using the same thing. And that's why we market. I mean, we market on a race. That's why we have our own podcast. I mean, I love your guys, what you guys doing with your podcast as well. And if you're listening right now, make sure you hit that subscribe button and then also hit that five star review to leave a five star review for these guys because these guys are kicking ass and taking names and you love what they're providing, right? So you gotta like me. But we know they're, they're doing a rock star job here, so make sure you hit that subscribe button. But thank you. We're constantly marketing, you know, drip marketing. It's an easier thing versus them. Send out a million postcards every month. It's much, much easier to sit and send on keep or mailchimp or REI blackbook or whatever you use.

Yeah.

I have a question on your raising funds. Do you actually have a fund or is it close friends and acquaintance?

Right, We've done a lot of deals with close friends, acquaintances. We're working through the SEC right now with getting our 506B and C approved and we're in a mid phases of that right now. So the beautiful thing is if we buy like 20 notes, I could literally put 20 individual investors into each one of those notes, you know, so investor A gets one deal and investor B gets another deal that they're funding. And we work through that with agreements and LLCs and stuff like that to protect their investment. So we're not pulling funds because it's. You don't want to pull funds. That's a big, big no no out there. But you know, we have an investor, you know, we do a lot of hypothetications. You know, somebody brings in a quarter million, okay, let's go buy a portfolio together. And we, you know, set up a special purpose LLC just for that one investor who's funding the deals. And in, you know, they're, we're educating them as go. Because it's a different process in buying a note than in buying a property. You know what I mean? That's why we started teaching 15 years ago was the fact like listen, hey, this is it. Not buying a property, you're not investing in a property, you're investing in a note. So there's a, there's different twists and turns to it and you got to be aware of what you're investing. I always say only invest in things that you understand and know. If you don't know something, sure as hell don't invest in it. Because that's the easiest way to lose money real fast. You know what I mean?

Yeah, that's the truth.

Totally.

Okay, so how do. So you basically said you teach this course. So how do people find you and how do they learn more about note investing?

Pretty easy. You can go to weclose notes.com, that's my main website. Pretty simple. We teach classes On a regular basis, we have a one day teaser class that we teach every third Saturday. It's kind of a. They call it the Cliff Notes version. We teach you how to find fun and flip notes show you how to tap in these asset managers. We show you how to raise capital, you know, local investors around you, around your property. And we also show the different exit strategies. And I've been teaching that for years. I was the educator of the year 2014 and runner up, I think two years ago. And it's pretty, pretty excited. US Reporter magazine ranked me at the number four real estate entrepreneur to watch during this new year. So. Wow, we're busy and. Thanks, man. Got a lot of information, you know, 700 plus episodes on the Note Closed show podcast.

Nice.

And then we've got a YouTube channel with about 1500 different videos and webinars that we put up there as well. So.

Nice.

We close notes TV's our YouTube channel. And then weclosenotes.com is the main website.

Nice.

We close notes. Just reiterating.

We don't talk.

We don't talk notes.

That's right.

We don't talk notes. We actually close them. So we close notes dot com.

Nice.

And the note guy, that is your nickname.

That's right, baby.

Now, do you own that? Can people find you there too? Like the note guy.com you said? I think.

No, it was taken. Somebody who ran Note music actually had that taken. But if you just go. If you ever want to talk with me, it's really easy. You always get a Talk with Scott Carson.com and I'll take you direct my schedule.

Okay.

And we can always jump on a call and talk about things. Whether you're looking to get started or do some things, I'm always glad to get somebody 30 minutes to let them pick my brain.

Nice. Excellent.

Okay, Kyle, do you have any other questions?

No, but I'm very interested to talk to you more.

So yes. Oh, I had one last question as we're wrapping up. So if, if somebody just wanted to contact you to, to invest money, like they're like, you know what they. This all sounds great. I don't have time to do it myself. I don't even have time to learn it really myself. Or maybe I'll learn it and I'll understand it better. And then would they be able to contact you and just say, hey, I just want to invest some money. I understand how it works. Because you did say don't invest in things you don't understand.

Yeah, we'll wait for our Fund finalized for that kind of aspect if somebody wants to learn it because it's important. You got to know what's going on. I mean, it's like these people are like, I'm just going to go invest in crypto. Well, crypto has its ups and downs. You got to know what you're doing.

Yes.

So part of it's part of what we started teaching is for people that understand what we're doing. And it's like, oh, yeah, this makes sense now. But yeah, people want to invest with us. Yeah, for sure.

Cool.

Reach out to you. We'll put you, put you on our list to contact once the fund's up and going.

Okay.

If you want to learn it, hey, we've got a variety of different classes and we can maybe partner with them and put them in an individual deal that we're partnering on. The deal.

Awesome. Awesome. Okay.

Okay, great. Great. Scott. Thanks for coming on. And the note guy, I love that name.

So it is catchy.

Catchy. Very catchy.

Well, I will tell you how I came across. I do a lot of YouTube videos. I do a lot of webinars. And I was speaking at four different investment clubs. One in San Antonio one night, one in Austin the next night, once in San Diego, then one in LA like a couple of days later. And every time I walked in the room, so I thought, hey, you're that note guy on YouTube. I'm like, okay, thanks, God, that's a pretty catchy name. I think I'll use that. You know what I mean? Yep, it sucked. Exactly.

Nice.

Nice, guys.

Thank you so much for. Hey, glad we'll. We'll be talking later on, but thank you guys so much for having me on. You guys are doing a kick ass job here. Once again, everybody hit that subscribe button and we'll see you all at the top. Everybody. All right.

Wisdom. Wisdom. Thank you, Scott. Have a great one. We hope you enjoyed today's episode. If you found value in it, please share it with someone you know who is looking for ways to generate extra income. New episodes come out every Friday if you want to know the second they are available, hit that subscribe button and leave us a review about how today's episode will increase your cash flow. Or get in touch with us on our website at doyoucashflow. Com.