Passively Investing In Notes For High Returns With Scott Carson From Real Estate Investing For Women With Moneeka Sawyer

Are you excited but nervous at the same time about investing in real estate? Are you confused about where to get started? Do you feel uncertain about your ability to invest in real estate because of finances, the market conditions, or not knowing enough? Hi, my name is Monika Sawyer and I'm the host of the Real Estate Investing for Women podcast. I work with professional women on how to get started in real estate investing or grow their current portfolios. In this podcast, I will share my own strategies as well as those of many amazing experts so that you too can build wealth the blissful way. That means building wealth on your own terms, part time with very little stress to get started. Download your free report on my personal favorite strategy@blissfulinvestor.com.

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Today I am so excited to welcome to the show Scott Carson. Scott Carson, AKA the Note Guy, is the host of the popular Note Closer show podcast and a nationally syndicated radio host with millions of listeners each month. He has been an active real estate investor and entrepreneur since 2002. Focused on the niche of distressed mortgage and Notes industry since 2008. For the past 10 years, he has been helping real estate investors and entrepreneurs create wealth through his teachings and strategies. He is highly sought after as a speaker and podcast guest with hundreds of speaking appearances at conferences, real estate clubs and networking events across the country. He has also been featured in many media outlets including but not limited to Investors Business Daily, the Wall street journal and inc.com. he spends his free time traveling to new places and making memories, which I love. And he calls home. Austin, Texas. Hey there Scott. Welcome to the show.

Hey Monique. I'm honored to be here. Excited. It's about damn time.

You and I, Scott and I were just talking about we have so many communities and friends in common and we haven't met and we don't know why. So I'm so delighted that we're finally doing this.

Yeah, I'm honored to be here and I'm just glad to help your network and your audience out in any way I can for you them out there. So I'm here to serve today.

Yay. Thank you. So Scott, could you give us the two minute version of sort of your story and what brought you to where you are?

Yeah, I started off as a deadbeat borrower, I guess you could say. Like many real estate investors out of college, I was working, making good money, six figures, married, college sweetheart, bought our first house. And then we decided that, hey, based on the knowledge that we knew, which wasn't much, but growing up in a small town and working in a hardware store with my family and watching HGTV and flip this house. And with the market being where it was, we bought a couple investment properties to be the landlord. And unfortunately the market went south in Austin here with Dell computers and layoffs. And so we very rapidly became distressed owners because I also in turn got laid off. And so we're trying to make six mortgage payments, three first three seconds on a private school teacher salary. So that's not a good time. Fortunately for us, we're able to get rid of the investment properties, keep our primary house. Licked my wounds for a little bit. I was back in the finance industry. And a few years later, a buddy of mine approached me to start a mortgage company that was traveling the country speaking to real estate investors and teaching proper investment strategies all across the country. And so I said, okay, great, let's do that. And so did that for four years. Ran a mortgage company, helped so many investors that way. And then when the market turned south in 2008, I was very fortunate that one of the sponsors of the mortgage company was very active and creative owner financing and creative financing strategies. So for that four years, I really got to soak in a lot of information like an apprentice. And so when the market turned south, I sold my half of the mortgage company for a dollar and started buying debt by dialing for dollars and calling banks and lending institutions to try to buy their debt for a fraction of what was going on, especially during 2008, 9 and 10. And so like I said, for the last 12 plus years, that's really all I focused on, is buying debt, I like to say, trying to keep people in their homes, if we can. I mean, I've bought over half a billion dollars in distressed debt, you know, on residential and commercial properties. And you know, the biggest joy though, and I know you have this too, is we've helped a lot of people dive into this niche and really change their lives through, you know, setting up performing loans and cash flow. Because I know that's such a huge passion for you and where you come from and your listeners out there. And so, you know, that's the biggest enjoyment I get is not only helping somebody stay in their house, you know, where a, their dream is turning a nightmare, either divorced or going death or layoff or Corona pandemic, who knows what's going on, helping them stay in their house, but also helping other investors who maybe struggled or found themselves in a hole, help give them the hand out of that hole to really find a true win win scenario that makes sense for a lot of people out there. So that's kind of why I'm called the note guy.

Got it. I really love that because I think it's great for the investors. But if we're working for the owners of the homes too, that's such a great marriage of intent opportunity, right?

It is. And you know, I would love to say that we could modify or keep everybody in their homes. Unfortunately, that's not the case. We're able to do that about 60% of the time by buying the debt at discount and trying to work with the homeowners in some sort of fashion. But people sometimes just have buried their head in the ground like an ostrich or they don't want to work with the bank. And when I buy the debt, I become the bank. And so I've got plenty of options to really keep them in their house if they want to. But they, if they won't work with me, then there's not much I can do. And then of course there's A lot of people that I always surprised that people have moved out of their houses, just left their house vacant. I'm like, why? The bank wasn't going to foreclose on you then you could have stayed and kept the house to date and not gone pay rent somewhere. It's just sad that we live in such a financially illiterate society.

For the most part, it's really, really amazing. When I saw the level of pain that There was in 2008, and certainly there were people out there that didn't have a choice, Right. But most of the people that walked away from them are homes, had a lot of choices, and it's just too bad that they didn't understand that. So it's nice to have people out there educating, like you, like me, you know, people that are talking about it so that as the market changes, because it always cycles, right? It's up and down, it's always that way. There's going to be cycles, there's going to be hard times. So the more educated people are, the more able they are to sort of weather those storms, right?

Totally. And that's the thing is most banks aren't going to tell the borrowers their options. And we. I want them to have options. So I'm like, hey, if you want to stay, let's work something out that makes sense. If you don't want to stay, do you have somebody you want to sell us to? Somebody take over the payments? Do you want to walk away? What do you got to do? But you've got to do something. You no pay, you no stay. But let's figure something out, you know, that can be not so confrontational. You know, I don't want to foreclose, but if I've got to get my attorneys involved, I will. I mean, it's just that most people don't realize that there are options. And we're seeing a lot of that right now as we've come out of this pandemic and seeing a lot of things happening with people being laid off and businesses closes and things like that. You have to really take a look at. I'm expecting us to be very busy here over the next six months. As we get into the end of 2020, into 2021, there's going to be a lot of people that are hurting, that aren't going back to work, that have not able to pay their taxes on our houses or their mortgages and trying to figure out a way to stay. And we expect to be really busy, not only on the residential side. But also on the commercial side, trying to help borrowers out as best we can.

Got it. That's so good. So let's actually deep dive, actually go into what is a note. What is it that you do to make this happen?

Yeah, so everybody is in the note space already. They just don't know this. Okay. If you got a car payment, a house payment, student loan, debt, credit card, whatever it might be. If you're paying on a loan and I owe you to your uncle Tony, you're in the note space, you're just on the wrong side of the payment stream. You got it going out. We want it coming in, all right. We all want the cash flow coming in. So what we do when we buy distressed debt or distressed mortgage is we're buying a mortgage from a bank, primarily just first liens on residential or commercial properties. And with a borrower, a distressed loan is somebody who's not paid on their mortgage at least 90 days or greater. Okay. They've been out of work, you know, they've gone through a divorce, sickness and health, whatever it might be, they just stopped paying. And the banks often want them to bring the full three, four, five, six months to the table. And most people don't have that. You know, most people have less than one month, less than one paycheck in the same account. So the banks, when somebody starts to get longer and longer and further and further behind their mortgage, they're often willing to sell that debt off to investment firms, other banks, other institutions like my company. And we'll come in and review those assets, that list of non performing notes across the country, and we'll cherry pick those or buy a bulk package for a sizable discount off of the owed amount. And then we step into the bank's shoes and have the same rights as the bank. And then we'll reach out to the borrower and try to say, okay, what happened? Tell me your country western song. This is your kind of get out of jail card. It's kind of like real world monopoly for the most part, you know. Okay, I know you were six months behind. Can you start making your existing payment? If we take the six months and put it on, do a forbearance and put that on the face of mount or if we reduce your interest rate or your mortgage payment or your interest rate, we can do a variety of things to help you stay in your house. What's it gonna take to make a win win out of this? And that's kinda what we do, that's where we make our money, is Getting people to stay in their house and get re performing. If they won't work with us, then we've gotta go the legal route in some sort of fashion to either file a foreclosure or try to work a short or something like that.

So the banks would sell to a company like you for say pennies on the dollar? Not really pennies, but a short amount of money.

Right.

Used to be 2008 it was pennies on the $10, it was at a sizable discount. But yeah, they'll still sell to us at 40, 50, 60 cents of value or what's owed. Just depends on the situation the state the loan is in and kind of how far the borrower is behind.

And they'll do that so that they don't have to take possession of the house. Right.

They do it for a variety of couple reasons. If it's in a long foreclosure state like New York, New Jersey, that money that they've got into the loan is tied up that they can't really touch for two to three years. And banks make their money by creating an originating loan. So if it's a long foreclosure process, they would rather sell it to me at a fraction of what's owed so they can take that money, go out and lend it out 10 to 12 times in a year and arbitrage their funds to get their velocity of capital really moving. Whereas I, okay, I bought that note at a big discount of what value is. I'll make my money by getting creative with the homeowner or the board, set up a modification or foreclose. Banks don't like to foreclose. They don't like REOs that's real estate owned. Whether you believe it or not. Banks really hate because there's no type of income coming from it. So they would rather get rid of it. And it cost them two to three times what it would cost you as me as individual investors to work that out and go from there. I think HUD said it well four years ago where they expected to to sell more mortgages than actual REOs to investors like me. Because us as investors have a lot more options and being flexible and really identifying opportunities in specific markets and really kind of being able to meet somebody, maybe not in person one on one, but let's have a talk where we are invested because we bought it versus an hourly employee to bank making 17 and 20 bucks an hour who's just that borrower is just another number on a spreadsheet. Does that make sense?

Totally makes Sense. Yeah. Ladies, Stay tuned for more great conversation and amazing nuggets from our guest.

And for now, let's take a quick.

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People think that the banks want to foreclose on you. I hear so many times that people are like, the banks are evil. They will repossess your home. The banks really, really, really don't want to do that. They really don't. They're not in the real estate business, they're in the money business. And Scott used an interesting term, arbitrage. I don't know if you ladies know what that means, but it's basically they get the money at a certain rate. So they have to pay a certain rate to people that have cash in a bank or whatever. It's a little more complicated than that. But then they lend it out at a higher rate. That's where they make their money. They're not making money by owning real estate. So this is a great way for them to kind of for everybody in the whole train. Right. Of people involved in a mortgage to benefit. So do you work all over the country?

We do. We buy in about 30 different states for the most part. It just depends on what we see. We are not a fan of New York and New Jersey because it takes forever to foreclose in those states. New York's going to cost you at least ten grand to get started. Foreclose and then you got to hire an attorney to talk to an attorney to have an attorney for the most part there. New Jersey will take you two years. So we buy a lot in the Rust Belt States, Michigan, Ohio, Indiana, Illinois, Missouri, Kansas, the Carolinas. I'm a big fan of Virginia, Florida, South Carolina, Georgia, a lot of those states. Even along the Gulf coast as well too. So we get a lot. You know, people always ask me, hey, can we got any notes in California? And I'm like, eh, I don't see them. It doesn't mean I want to buy them. Because for what I could buy, you know, like you're in San Jose buying one note in California. I could buy like a block in St. Louis for the most part. So you can leverage your funds and know what kind of. You know, I like buying in bulk because I can leverage and spread out the risk of money versus just buying one individual note.

That's right. There's a little bit more diversification. Right. So not necessarily in the place, but in the different properties that you have and different owners that you're dealing with. So that's really great. So Scott, do you actually teach people how to do this or do you have people invest with you? How does it work for you?

We do a bit of both. I've been training for over 10 years now, other real estate investors how to dive into this niche since the last Great Recession. And I'm a big believer that if you give people the tools, those that really want to do something will go out and do it. So I'm one of the few people that actually really educates people and other investors on the niche of distressed investing. There's a lot of people that talk about owner financing or performing notes, which are great. I'm one of the few guys that's actually said, okay, here's how you roll your sleeves up. Here's who you call, here's who you email at the banks, here's what you say, what you don't say. Because there's just so much debt out there. I mean, before coronavirus kicked in, Americans were already 1 out of every 10Americans was already a month behind in their mortgage. Yes. I mean, yes, the market was doing strong, but we were already still 30 days late or right behind a month from the most part. That number has obviously increased over the last couple of months. So, you know, people don't know their options. They don't know that this actually exists. Now let me clarify something. You're not going to go into your local bank and knock on the door and talk to the bank president, say, I want to buy some notes. They're just going to laugh at you, send you on your merry way. So there's specific departments inside the bank that you gotta reach out to. So we teach people how to do this. And then, you know, I walked the walk before I ever started talking the talk. So we're buying on a consistent basis, showing people how to invest. We've gotten a fund in the final phases of getting approved. So we're gonna start taking on some more capital to start taking advantage of some of these opportunities that are out there. On the residential commercial side, what kinds.

Of returns can people expect when dealing with notes?

You know, that's a great question. Let's start first with the performing note side because it's almost not really, it's almost a passive aspect of things. If you can buy a note that's been performing, you may be able to pick something up. That's an 8 to 15% return on investment to you.

So Ashley, let's back up. Define performing for anybody. Cause there's performing and there's non performing. So let's get that clear first.

So performing is when the borrower's on TikTok dancing, you know, they got a little performance going on. No, I'm just joking. Performing. You and the bar basically just paid on time. Paid on as promised. Paid as promised on a month, first or fifth of the month, that payments come in like clockwork. That would be a performing note. Now a re performing note would be a note. Let's say I bought a note, the borrower was not on time, they were late and we worked a situation with them to get them back on time and they started, they've made at least 6 to 12 months of payments back on time again. We would call that a re performing note. Okay. So banks lend, institutions, other investors will sell performing notes off. And it just depends on what you can kind of negotiate. Yield wise, 8 to 15% return on investment is pretty good for a performing note. On a re performing note, it's going to be a little bit higher up on that higher echelon. Because I'll give you an example. Let's say a borrower has a mortgage for 100 grand on $100,000 house. Their interest rate, let's just say is 5%. I'll buy that note say like at 50 cents on the dollar. If I can get them start paying on time again, it's instantly a 10% return on investment to me. Right. That's exciting for me. Now if I can get them to start paying a little bit extra each month to get caught back up, that boosts my ROI up to 15, 20% as well, which is kind of nice. So that's kind of the way we look at it, we're gonna pay a little bit extra or the discount depending on what they're paying and then what the underlying debt of what we paid for would be great. So if I were to sell that note for like 85 cents on the dollar, I'd make another 35%, which would be great. An investor comes in, they got a note that's gonna return them a nice return on investment with some equity there too, in case something goes south.

Got it. And so non performing, you turn into reperforming. That's the goal.

We try to. Yes, we try to get to reperforming so we can hold onto it for 12 to 24 months. Not only for cash flow, but the upside of now it's reclassified. We could sell it at 80, 85 cents on the dollar if we bought it at 50 cents. So we always try to get the bar to bring a little bit to the table. So we get some money on the front end to kind of secure it cash flow along the way. And then a bigger payout in the back end. If the borrower doesn't pay, doesn't work with us, then we take a legal route and then that can cost you from a grand in Texas to 10 grand in New York for that. And then try to sell it as a at the foreclosure auction or as an REO or sell it to another investor who wants to take it over and deal with it that nightmare locally.

So got it. Okay. And so that's what you. So you would sell the non performing that stay non performing more as foreclosures to people?

It depends where it's at. You know, we always evaluate each asset. If it's in Texas or Florida, I would probably take it all the way through, do a little rehab and then sell it on the, you know, market as an reo. You know, other times it makes sense for us just to sell it at the foreclosure auction at a price below. Or that makes sense with what's going on at that auction. In some cases where we take the property back if they didn't sell at the auction, then we would either look at. Okay, does it make sense for us to do a full repair or just sell it to a local investor as a handyman special or sell it at a big enough discount so that we can get our investment back plus some profit and turn around and double down and go to after two versus just one.

Nice. Okay. I love that you've covered some amazing information. So we've got more to come and extra. But before we move on, could you tell everybody where they could meet you or get in touch with you, Scott, and meet you maybe?

Exactly. I don't travel as much as I used to and I'm looking forward to getting getting back on the road a little bit some. But you can find everything that we do really@weclosenotes.com that's our main website, weclosenotes plural.com. really easy to go there. You can find out our different podcasts are educational and then you can go to Weclosenotes TV's our YouTube channel with over a thousand videos and video podcast episodes as well for you to watch and learn as well too.

Perfect. And tell us about the special gift you have for my ladies.

Well, I'm going to share. This is really cool. I'm going to share with you. One of the things that we do buying notes in real estate is we use a lot of other people's money, private investor money. So I'm going to share a strategy that we use either with our staff or VAs to harvest self directed IRA investors literally in minutes from just about every county in the country that you can use to market to fund your own deal.

Nice. So that's actually going to be an extra. So if you're subscribed to Extra, that's going to be an extra, which is going to be really, really cool. So definitely stay tuned for that. And then you were talking about your one day Cliff Notes version seminar that I know you're also offering to the ladies. That's for free, correct?

That's correct. Sorry, completely spaced there for a second. Yes. I get so many people that come from the rental side or the fix and flip side. They've heard about notes. But it's like either somebody's talked way over their head, didn't talk in layman's terms because the note investing is actually a pretty simple business. You just got to know the players and what it's different than your fix and flip or taking a rental down. So yeah, I have a one day class that I teach monthly. It's called my Note Weekend. It is the Cliff Notes version of me just kind of going in for six to seven hours breaking down notes, performing and non performing notes and kind of things that you need to look at, things you need to consider and why there's such an opportunity in that space. And so if you go to noteweekend.com Monica. That's right. Use the special code Monica, all caps. It'll give it to you for free. Give you that $49 class for free. And it's not a pitch fest. It is me teaching for six hours and you get the replays with it as well.

Okay. And is it online?

It is. It's delivered online via Zoom once a month. Yes, ma'.

Am.

Perfect. Perfect. And so you said it was noteweekend.com with the coupon code Monique?

Yes ma', am, that's correct.

Great. So noteweekend.com with a coupon code of Monique. Perfect. I will put that in the show notes also so that everybody gets that. Okay. So Scott, are you ready for our three rapid fire questions?

Bring it on.

Scott, give us one super tip on how to get started in real estate investing.

Oh, that's really easy. The first thing you want to do is you need to learn. Now that's the most important learning and networking. And that was the big. Those are couple of biggest things I think a lot of real estate investors make is they get too busy watching TV versus going out and connecting with local real estate investors in local market. Whether you've got a local real estate club, a meetup group, I mean, you can go to meetup.com and type in your city and within 10 to 20, 50 miles where you're at and often find a real estate club that you can go network. And those are the places that you want to go initially to learn, get a good grasp of the basic concepts, learn some things and then identify a lane or two that's working in today's market. And then you want to network with those people that are actually pulling the trigger and doing deals that we want to do. And oftentimes the most successful investors are also the most giving of their time and resources because they've made enough mistakes. They often don't want to see people make or remake the same mistakes. So go network, connect with as many people as you can, grab business cards and start networking with the other investors in this space. That's the first tip I would recommend.

Anybody starting off, I love that. And then give us one strategy on being successful in real estate investing.

Well, here's the thing. I know that you agree with this. Know this, you can't be a secret agent, woman or man and succeed in real estate. Okay? Yes, you have to get out and market yourselves. For the love of God. You have to market. That means sending an email blast out. It means video. That means a blog. Figure out something that's natural to you. You don't have to do it all. But these days you're not just in the real estate business, you're in the media business these days. Everybody's looking for, you know, to learn something new. We all are looking for eyeballs and earballs either to look at you or listen to you. So get out and start developing your marketing skills. If you're gonna be in real estate for more than a year, then start planting those seeds. Start doing some videos, talking about case studies. Share your story. People love stories because they identify that more than strategies. So start marketing yourself, start developing those skills on social media, video, email, blasting out to your audience, your network. Just share your journey. And that's what helped make me successful initially. And I know it's what helps make other people successful because they don't remember the case studies, they remember the stories. And that's one of the most important things that you can share. Share your story.

I love that. And then what is one strategy you would say that you use daily that contributes to your personal success?

Oh wow. This is an easy one time blocking. Especially when you're a brand new investor out there in your juggling, you know, your passion of real estate, your job or career, and of course your family. And you've got to literally learn to control your schedule because if you're not productive and you don't take your time serious, other people won't take it serious as well. So when I one of the biggest mistakes I made early on when I left the corporate world and got into being an entrepreneur is my freedom of schedule nearly strangled me. I wasn't dedicated to it. So if you've got a limited number of hours each week because you're juggling a full time career and you only got 10 hours a week, well, block out that 10 hours. Maybe it's only an hour or two a but be dedicated, create a calendar link or some sort of calendar that you can put it on and set up specific actions to get done. Because getting something done is better than nothing. 15 minutes of marketing, 15 minutes of prospecting is a whole lot better than nothing. It's kind of like going to the gym. Maybe you can't go and get a full workout and walk out drenched, but at least you got something done. So time block your schedule, you'll be much more productive and be able to stick to a plan. You'll see little steps get you to a much longer and much further longer path to success than anything else. Those that don't time block their schedule, they drift, they get distracted and they're not going to find a success as well as, I mean we all know that entrepreneurship is a windy, testy road in real estate is just like that. So the more focused and organized you can be, the better off in the long run.

I love that. Thank you so much. Yay. Such great information, Scott, on this portion of the show. Thank you for that.

Hey, thank you. Honored to be here and honored to serve your audience.

Yeah. And ladies, stay tuned for Extra. We're going to be talking about how to get investors to fund your deals in your local market in under 10 minutes, which I totally love. So Scott's going to be talking about that in Extra. So if you're subscribed for Extra, please stay tuned. If you're not, but would like to be, go to realestate investing for women extra.com you get the first seven days for free, so you can binge on a total ton of these extras and then see if it's for you. And you will get this juicy next interview with Scott in there too. So that's realestateinvestingforwomenextra.com for those of you that are leaving us now. Thank you so much for joining Scott and I for this portion of the show. I super appreciate you and I'm looking forward to seeing you next time. And until then, remember, goals without action are just dreams. So get out there, take action, and create the life your heart deeply desires. I'll see you soon. Bye.

Thank you again for joining me on the Real Estate Investing for Women podcast. If you love this show, please subscribe, rate, and review it on itunes. As women, we need to support and empower each other to build wealth and live joyful lives. Your support of this podcast, by subscribing, rating, and reviewing it, will help other women just like you learn about building blissful wealth through investing. And remember to download your free report so you can get started on your investing journey at blissfulinvestor.

Com.

See you next time.