RealPropPro Podcast Ep 16 - Scott Carson | July 24th, 2025

When I'm buying mortgage notes is that we're literally going to banks and buying that mortgage loan. Whether it's a residential property note or commercial property, we're buying the mortgage at a discount because usually the borrowers haven't paid in six months to six years. In some cases, we're buying what they owe at a discount and then becoming the lender. And then we make our money because we bought that mortgage at a discount. We can reach out to the borrowers and say, hey, what's going on? Do you want to stay? Do you want to go? If you want to stay, you got to pay. Because you know, pay, you know, stay, you know. Welcome to the Real Prop Pro podcast, where strategy, innovation and wealth converge to redefine real estate investing.

Hello and welcome to the realprop Pro podcast. I'm your host, Ian Dietler, Sacramento based real estate investor. On this show we talk to real people doing real deals, sharing lessons, mindset shifts and opportunities that can change lives. At realprop Pro, we train investors in fix and flips, tax deed and tax lien investing, creative financing, wholesaling, and so much more. If you're ready to take action and start doing real deals, visit realpropro.com to get free tools and access upcoming virtual events. Today's guest is Scott Carson, a nationally recognized note investor, speaker and educator. He's the host of the Notes Closer show and has helped thousands of people learn how to buy and flip distress debt, including myself. Today we're going to dive into his story, how he got into note investing, how you can find deals and buy notes, and the mindset required to win in this unique space. Plus, if we have time, we'll tap into where he sees AI fitting into the future of note investing and how he's using it in his business. Scott, welcome to the show.

Honored to be here. Ian, man, excited. Let's have some fun today, huh?

We really appreciate you taking the time to come on the show. We were just talking about how many shows you've done, which is extremely impressive. I thought you'd done almost a thousand and you were saying it's even more than that.

Yeah, when you figure we've got the note closure show podcast is coming up on this thousandth episode. We've been for eight years. But then we've also got a couple spin offs, you know, three seasons of note camp, which is kind of the. It was our online summit we would record from. And then we've got Night in America, which is started off doing a Monday night webinar like, 14 years ago, and we did it weekly, and it done it for basically 13 years. Now. It's just a rebroadcast. Folks don't like to show up live to webinars. But, yeah, man, it's 1500. And then you add in the 300 other shows I've been a guest on or spoken on, so. But honored to be here, buddy. Always nice to see somebody taking action and kicking butt at what they're doing and launching the podcast. There's not enough of them out there right now, Whether what would people believe or not? But keep. You're doing a great job, man. Very, very excited to be here.

Thank you so much. I appreciate that. Let's get. Let's go all the way back on the show. We like to talk about people and, like, kind of what their life was like growing up. So where were you, like, born and raised and what was life like when you were a kid?

Life was really good. I was, you know, my family's all from Minnesota. I was born up there, but my parents moved to South Texas, and I grew up down in Corpus Christi for a while, and then it's right. Which is right on the coast of. Of Texas. And then parents moved across the bay to this little small town called ingleside, Texas. About 5,000 people. My dad opened the local hardware store in there, and my mom and dad were working in there, and I worked in there. And, you know, when you weren't going to school, you were working in the store or working on, you know, mowing lawn and doing chores and stuff like that. So I feel very blessed. A lot of kids may not have thought that, but I. Looking back now, it's definitely built a work ethic and an entrepreneurial spirit that my parents had. And, you know, it got me working as a young age, you know, from running the register to cutting keys, cutting glass, cutting and threading pipe, and running a register and stuff like that. It really. I think it helped me mature earlier than a lot of kids, stuff like that, and have that. That spirit of, hey, I can do it. Because I used working in the hardware store to help me start going and doing odd jobs and working with people to mow their lawns. And I ran my own business, basically doing cutting grass, stuff like that. My buddies would come work with me, and I think that just led to just an absolute great thing. I look back at it now and really enjoyed it, stuff like that. Maybe not so much when I was in. When my buddies were driving by, hey, we're going to the beach. Have Fun Carson. You know, while I'm on my moaning, 100 degree weather, so. But yeah, you know, growing up the coast is great still. My mom still lives down that neck of woods. Dad passed away, you know, a few years back. But, you know, Corpus is an interesting city. I really like the smaller town, or the Texas Rivier they call it down in Ingleside, Aransas stuff, the neck of the woods. We'll probably end up moving closer, moving back to the neck of the woods before too long, like a lot of folks do. So. But just, you know, working young always had chores. You know, we weren't the richest people, but we weren't poor by any means. We always had food on the table. And my parents, my dad was definitely my hero growing up and my mom is definitely is one of my heroes as I've gotten older and more mature. Everything that she did, you know, she went back to school for 20 years out of high school to become an RN and went to nursing. And my dad's health got bad and just, absolutely just became the bread earner and just, you know, I've never heard my parents say, you can't do something. You know, they never told us we couldn't. You know, it was always a, well, if you want to do that, how are you going to do that yourself? And that, that, that leads to a lot of, okay, I'll find out a way, tell me I can't do something, I'll prove it wrong and right, Ian.

Yeah, exactly. Yeah. I mean, that goes to, you know, that really talks about type of mindset. So hopefully we'll get into that a little bit later into the show because on this show, we love to focus on mindset because we see so many people trying to get into real estate investing. You know, it doesn't matter what strategy you're using, you still have to have the right mindset because things aren't always going to turn out the way that you think and things aren't always going to go right. So we really like to focus on that mindset of being able to be like, okay, well, since this bad thing happened, how can I adjust? Or kind of like you just said, you know, it's not that I can't do it, it's more so of how I do it. So we really like to focus on that mindset.

Yeah, I would typically say that's the biggest difference between people that are successful versus those that aren't successful. And you have people that have been born with a, you know, silver spoon in their mouth and they Fail. And then you have immigrants and the people that had nothing and overcome extreme obstacles. And part of it is that, you know, the biggest tool and biggest asset you have is that six inches between ears. Sometimes it's eight if you got a big old melon head like I do. But other times it's, it's the biggest tool you have, but it also is the biggest handicap. Oh, I can't do that. You know, and it's like Henry Ford said early on, whether you think you can or think you can't, you're correct, you know.

Yeah, exactly. So, so, you know, so you're kind of growing up with your mom, dad, you're in this, this awesome hardware store that your dad owns. That's great. What was high school like and did you get into sports or any other activities?

Yeah, so I ingleside is. This was a small little 3A high school. So I think I had originally around 80 kids in my, my class. You know, I think we had 60 kids that graduated finally. I mean only like, you know, like 400 people in high school. So plenty of opportunities. I mean I played football, basketball, baseball, ran track a little bit, was in the one act play, you know, theater, was in the band for a little while, junior high, stuff like that. But for the most part it was an athlete and a academic. I was very smart. You know, I wouldn't say I didn't make straight A's. I had, I had too much fun. Let's just say that I made A's and B's and occasional C's because like, I'm not a big fan of science, but I put my mind to it definitely. And that led to doing some good things, you know. I ended up getting an academic and an athletic scholarship to play college football. That was my big dreams to do and was able to accomplish that. And it was just, it's just a great area. A lot of people talked about how close knit your senior class was. You know, there's 60 plus kids roughly. And all of us got along. The jocks got along with the band geeks and then the, you know, everybody in between got along. If something was going wrong or we see somebody on the side of the road, we'd stop to help them or we would all hang out. Maybe not every weekend, but we got along enough that there wasn't any kind of, you know, clicks like there are in a lot of high school stuff like that. It was just a really good, good group of kids. And I'm still proud of the fact they still communicate with A lot of those folks today through social, thank God. But it was, you know, it was fun, but it also made me realize I wanted to get the heck out of Ingleside. You know, I did not want to stay there. And there are still friends today that still live there. Never even, you know, never left Texas. And I just. I just don't get that. So it was great, great place to raise kids. It's obviously grown a little bit different now, but, you know, I call Austin, Texas home and was, you know, I was probably one of the ones that went the furthest away for. For college, eight to ten hours away and. And was out on my own playing ball and going to school for business and. And Masscom. I want to be the next radio dj, the next Stuart Scott from espn. Da da da da. You know what I mean?

So no night in America, man, that's.

That's part of it. You know, the logo looks. Sure, sure looks a whole. Like the NFL logo. But anyway, or Sunday Night Football, but, you know, we borrow from the best out there. Don't steal. We borrow. You know what I mean? Yeah.

Awesome. Yeah. So if you guys don't know, check out Note Night in America, check out Scott's podcast as well. So much great stuff on there. You have some amazing guests. You know, I, I kind of know you all the way back from the no camp days. I don't know if it was the second or third note Camp. It was a long time ago that I was watching or learning as much as I could from you on those events.

So I actually went in. It was actually the second one we did was, you know, I went back and found your registration and the list you're on because I keep everything from those. So I was like, ah, yeah, no camp season two for sure. It was good stuff.

Yeah. Yeah. So check him out on that. Now, you'd played football for what, two years of football? And then what was life like after that? Did you. Did you start working at like a W2 job or anything like that? What was life like right after college?

Yeah, I mean, I took a year off after, you know, I transferred to. I went to this little school up. Originally up out of Dallas and then ended up moving to West Texas Angeles State for a little bit. Then took a year off and moved to Central Texas and San Marcos and finished up my final two years of school getting a business degree. And out of school I took a W2 job. Like a lot of folks figuring out, you know, I got a business degree, made the dean's list and you know, I've interviewed with about 20 different companies and settled on probably the worst one I could have settled on Enterprise rental wreck, you know what I mean? I was in that management training. I was sold the dream. It only lasted about 90 days till I realized this is not what I want to do. My managers are not living the life that I want to live. And thought I'd go back to graduate school. And I remember the district manager, Jeff Klein was his name. Why would you want to go to graduate school? We'll teach you everything you need to know here. And I was, I was like Lila requested, can I get off 30 minutes early two nights a week so I can drive to school. They didn't let me do that. So I put my notice and I was gone. And then got into the world of cell phones and started working for Verizon Wireless. And that I really blossomed at great sales training, was just a top performer. I was one of the top sales reps in all of Texas. I said all these states, sales statistics, you know, sales polls and sales records and made a nice chunk of money. But that was also working weekends in the malls and stuff like that. And I, I fortunately a buddy of mine, a really good friend of mine now came up to me and started talking to me about financing and, you know, finances and getting your stuff together. I was like, that's important. Of course I read Rich Dad, Poor dad about this time. And so I met with Boyd and we got started my first Roth IRA and we got a little life insurance for me and my wife at the time. And he's like, you know, you can learn how to do this. I was like, this is interesting. So while I was working in finance, I went and got my securities license, my insurance license, and started doing that as a part time hobby with, with Boyd. And then I guess I've been in Verizon for about two years and left that for about a year. And we bought our first house and almost lost her first house because about two more investment properties at the same time. And got laid off from my finance job and my tenants got laid off from their job at Dell. So I went from making about six figures a year to, you know, basically trying to pay for three first mortgages and three second mortgages on a private school teacher salary and did not like real estate at that point. Basically when you get kicked in the teeth like that. So it took us a little while. I mean, six months were pretty tight there. I was working odd jobs, delivering packages for FedEx, waiting tables and bartender chili's at nights and stuff like that, and licked my wounds and got a job working in high tech here in Austin for a little while and did that. It was okay. But then Boyd came to me and it's over a period, about four years, came back to me, said, hey, man, I started a mortgage company with a couple real estate investors here. I think you'd be perfect to help us out because I need the help. And I said, okay, well, let me, let me go, you know, meet with them. And I went, met with them. And at this point, I was actually working back at. I was working for Chase bank at the time, doing well there. But I was like, I want to get back in that real estate bug. I want to be more the entrepreneur versus working for a company. And so July 4th of 2004, I gave my notice, which is hard to believe. It's just over 21 years ago, basically. And that was my last W2 job, was working for Chase and started a mortgage company. My buddy Boyd and learned real estate investing from Ron Legrand and my mentor Bob Leonetti at the time and his partner, Jamie Kayle. He and she were just completely amazing. So four years while doing mortgages, I was learning creative financing, you know, rehabbing, fixing, flips, you know, the note business. So that when everything happened in 2008 with a crash, I left the mortgage origination side and started buying notes myself. So that's, that's kind of. It's exciting. 21 years since my last W2 job makes kind of cracks me up a little bit.

Wow, congratulations on that. That's a great feat for you to be able to, you know, get into this real estate investing and owning businesses full time and, you know, you've never looked back. So that, that's really cool that you've been able to, you know, sustain. Sustain this, you know, amazing streak and, and invest the way that you do and have all these businesses teaching people how to do stuff and especially in the notes. So, you know, kudos to you, great job on all that. And you know, I see, I see you out here doing a lot of stuff, so I know that you're always busy and you're always, you know, helping people as much as you can. So, you know, we really appreciate that and just want to say, you know, thank you to you for all you do.

Well, I appreciate that. I mean, it doesn't mean there was all uphill or all peaks. There's some values in there. You know, ups and downs is not real thing. And as market shifts change and stuff like That, I mean, entrepreneurship is not easy, you know, it's not for everyone, I'll just tell you that. But you have to understand it. It's a process. And there are going to be good days and bad days. Now, the best thing is that my peaks are greater than anybody would ever imagine. You know, friends and people that I know that I just would have never imagined, but the valleys are so much higher than the peaks ever were beforehand, you know, and you just got to stick with it. And sometimes, like I was talking to a guy the other day, he's like, I'm gonna quit my job. No, no, don't quit your job. Keep your job. Let's. Let's build a roadmap to success. Let's work 12 to 24 months at it and replace your income. So it's a much easier way versus just going cold turkey, you know what I mean? But, you know, part of the reason I started coaching and teaching people how to what I do is because I had that four years, you know, learning. I was like, God, if you help me get through a bad situation or get me through this, I'm gonna make sure and help as many people along the way as I possibly can. That's why, that's why we just crank out so much content and try to help as many investors as possible.

That's awesome. Now, you'd mentioned 2008 happened. Was that something that really affected you and your business or were you pretty well isolated from that type of massive drop that happened?

It affected us on the mortgage business because we went from originating loans, not original anything, you know what I mean? So that hurt there. I mean, luckily I had some investment properties. I'd started, you know, buying some fix and flips and stuff like that. And I bought a couple properties right there at the cusp. Like, I'll give you an example. This house that was a four bedroom, four bath, you know, 3, 500 square foot house was valued at like 310, 320. When I bought it, I bought it for 150 and I borrowed 100, you know, 8, 30 grand to get to 180. Well, the matter of six months, the values of that properties in a neighborhood dropped because of foreclosure. So they went from being valued at 300 plus down to 150. It was upside down, you know, I mean, that's not where you want to be on a fix and flip. Of course, you had people, you know, other people, you know, and another rehab, I was able to get out of it and sold it off. Made Some money, but that one, I basically just had to move into it for a period of time while dealing with a crazy market like it was now. The flip side of it, I started buying more debt. So I started getting more lists sent to me from banks and hedge funds like, okay, I can offset some of my losses by buying some of this debt and either flipping it to other investors, wholesaling it, or taking it back myself and working through that. So there was pros and cons during that period. There's about, you know, I got divorced in 2008, so that was a little bit of a hiccup. I didn't expect. Had a business partner I was working with for about a year, two, two years too, that we went our separate ways. And so it was kind of 2010, was, well, I'm going to do this myself, basically. And it's. I literally kind of sold everything I own, Ian. Even the house I was living in. I sold it, wrote a check back to the investors who'd funded the deal and said, here you go, and decided I was going to start traveling for, you know, a year at least. Planned out this baseball journey across the country to hit all 30 Major League Baseball parks in about 30 weeks. And, you know, when I planned that and wrote it down, wrote down that goal, literally went out of ESPN and found out who was playing in Houston and Atlanta and Miami and all those things, I wrote it down, a calendar and just put it up to divine intervention. And fortunately, over the next couple weeks, I started getting phone calls from real estate investment clubs and conferences and stuff that were going on and said, hey, would you come speak to our group or can we use your videos or blogs in our newsletter? I'm like, yeah, when you want me to come speak? And the dates they want me to come speak lined up almost perfectly with this baseball journey. So I said, sure, God, all right, I'm gonna follow your lead there. That's. I don't need to have a helmet or, I mean, a baseball hat, you know, bat upside the head. I can follow what you're telling me. So that's what I did. I went traveled when I thought would be 30 weeks turned into basically three and a half years of non stop travel and, you know, talking in investment clubs across the country, buying notes, working with banks. I mean, walking into bank conference rooms and there's just stacks and stacks of loan files all the way to the ceiling and just made for a very interesting time during those, you know, three and a half plus years, you know, was the educator of the Year. And we ended up, you know, we bought, oh, about 1 or 2 million and over a million. Over a billion dollars in distressed debt in the last 15 years, which is kind of crazy. So that makes sense.

Crazy for sure. Do you remember the first note deal that you. Or the first note that you purchased?

Yes, I do. It was a. It was a property in Detroit, Michigan, and it was on a list of like 1500 notes from Banco Popular. Okay. Banco Popular is a bank out of Puerto Rico and South. South Miami. And this property looked like it was in pretty good shape, but Detroit was just this, you know, smoking wreck of default. So I paid $500 for this note and then I flipped it a week later for 1500 bucks for scrap metal. Basically somebody was bought to go through and. And he was like, oh, yeah, yeah. So I was like, oh, I just tripled my money in less than a month. This is pretty good. You know, the next note I bought was on a. Oh, my God. It was these, this property out in Phoenix that we flipped. Actually, we partnered with our investor on a deal on this one. It was only like 2,500 bucks we paid for it and the guy owed like 30 on it. And after we got a cash for keys from the guy, my realtor was the investor that funded the deal. After all, we ended up splitting and making 16 grand each on the deal. It was a pretty good deal. That was from Wells Fargo Financial back in the day. And, you know, we bought a lot of small little one off stuff, but, you know, then got into multifamily deals from Capital One and buying some multifamily notes at big discounts and then either a, selling those off to other wholesale investors or going through the foreclosure process to take the process back as well, too. So, yeah, it's. You remember those first couple of stories and how. I think, because they're more stressful. What am I doing? Am I figuring this out and how am I going to get this done? And like making bids on apartments and not having money in the bank to fund them, but knowing we could figure something out in 30 days, you know.

Yeah, can we take a step back here? Because I just realized that, you know, there might be some listeners on the show that are like, what the heck are these notes?

Sure.

Can you do a quick, like, overview of what notes are and how they're kind of different than buying an actual property?

Yeah, sure. Everybody's in the note space already, whether they, they know it or not. If you have a mortgage on a house, car, note, student Loan debt, credit card debt. You owe your cousin Bubba 50 bucks. That's an IOU. Those are all technically notes, you know what I mean? But you're on the wrong side of the payment stream. What I talk about when I'm buying mortgage notes is that we're literally going to banks and buying that mortgage loan. Whether it's a residential property note or commercial property. We're buying the mortgage at a discount because usually the borrowers haven't paid in six months to six years. In some cases, we're buying what they owe at a discount and then becoming the lender. And then we make our money because we bought that mortgage at a discount. We can reach out to the borrowers and say, hey, what's going on? Do you want to stay? Do you want to go? If you want to stay, you got to pay because, you know, pay, you know, stay, you know, and work out some sort of payment arrangement with a borrower and try to keep them in the property. That's actually where we make the most amount of our money. And the biggest bang for a buck is not by rehabbing the property, but rehabbing the borrower. I don't mean send them to the Betty Ford claim to dry out because they're alcoholics, some of them are. But no, actually trying to keep people in their houses. And we're able to do that about 70% of the time. And so if they won't play ball and come to some sort of payment plan or liquidation, then we'll with the same rights as the lender does to foreclose. And then we can either a sell that property off the auction or take the property back and keep it and either rent it out, resell it, you know, fix it up and sell it then, or turn a rental. And so when you buy the note, you don't own the real estate. What you're actually buying is. And I keep a file here, this is a file folder in a property in Kankakee, illinois, worth about 85. I paid 25 for it. Okay. And the borrower started making payments of 578 to me. So their mortgage payment was now I became the bank. So when I. You look at that, we were able to hold on to this for 12 months cash flow, which is really good. So they paid about seven grand on my $25,000 investment. That's a pretty good yield in the first year, right? Well, it got even better because that after 12 months we sold this note because they're back on time. We sold this now back to Wall street for 70K. So made an additional $45,000 in profit by holding it for 12 months without having to rehab the property. Just working with the bar to get them back on track because they were in a bad situation.

Yeah, it sounds like you had to rehab the note instead of the property.

That's, that's what I love to do. I like to buy owner occupied assets as I can. If I, you know, sometimes, you know, the properties need zero work. You know like you're talking about this morning we were doing that live stream with on those 20 multifamily apartments where, where we could pick up the debt somewhere between 65 to 80% of what's owed on it. And they've all got equity. Well, some of these properties have been fully rehabbed that just that the underlying borrowers can't refinance out in today's market. So it leads for an opportunity for somebody like me to come in, buy it at a discount. Either a, work with them to keep stay in the property management or if they won't play ball or they want to get out of a bad deal, just beat it over to me. Now we own the property, do whatever we want with it.

Awesome. What are some, what are the best ways for new investors to get started in node investing?

Gotta, you gotta learn. It's a, it's a total different mindset being the bank than it is being the property buyer. Right. That's the biggest thing and that's where if you don't know what you're doing, you'll overbid or do the wrong thing by trying to buy the note and basing it off like the, you know, maximum allowable offer mao people are used to in the rehab side or arv. Well, ARV does not exist in the note business. It's always as is because we may never end up with a property. So some of the best things is obviously there's a lot of YouTube videos and podcasts out there, including the no Closer show podcast. But you know, we have a free class just designed to help you kind of learn the basics of it. If you go to noteweekend.com noteweekend.com exactly as it sounds. You can sign up. It's about a three hour class of how we teach the basics, how we find these, how we fund a deal and then also how we make money and flip it, you know, whether flipping the paper, keeping it and like I said, it's just is there designed to help you get a good overview of not investing and see if it's something that you want to pursue.

Yeah, great stuff. I mean like I said, you know, that's where I learned way back in the day on how to invest in notes is with you and your program. So you know, I can't recommend it enough to listeners to, you know, not only check out the free stuff but consider signing up with some of you know, Scott's programs. I think, think today I saw that you have like a, a monthly subscription as well.

Yeah, we have a monthly membership. It's $97 a month. It's designed to kind of help people spread out their cost because we do teach a, a full blown three day workshop that's usually 9.97. I think we're running a discount at it right now. And we host that three day class once a quarter. But the $97 a month membership is, I think it's the best bang for the industry because not only do we do weekly coaching calls with that group, we upload lists to folks so they can cherry pick it themselves. Will also they can always book a phone call with me to get a little bit of coaching to help them when they're making an offer trying to raise capital. All that's included in the monthly membership. So folks always tell me like we give way too much because it includes three day class as well. So it's just, you know, besides there's a class on wholesaler notes and due diligence and marketing and raising capital. All designed in that thing to kind of give people a really great spot to go to. I think just the biggest bang for the buck is when we upload lists that people can cherry pick. You know, they don't have to buy the whole tape, you know, buy one note to get rock and rolling. And then there's also sort all sorts of education in there too of how to raise capital from IRA investors or how, what to say, what not to say to people to get them to fund your deal, whether it's a property or a note deal.

Now you'd mentioned a couple terms there. I'd like to break that down for the listeners. So you'd mentioned tape. Can you talk to the listeners and explain what a tape is and usually where they come from?

Yeah, Tape is just an Excel spreadsheet that lists all the details of a non performing note. So like this tape of 20 notes was basically a spreadsheet, 20 line items deep. Every line is a different asset, different address and it gives all the information from like the borrower's info, the payment history, when they last paid, the interest rate. The payment, where they're at in the foreclosure process, what's the full payoff amount, what's the value of the property? So it used to be on a, you know, remember the big IBM big blue computers used to have everything on a tape roll and that's what they used to call it when they send out a tape. Well, these days it's just a set Excel spreadsheet that they send out with all the details, you know, of the note, of the bar and stuff like that. And you know, we get these from banks, lenders, hedge fund. Any mortgage company should be able to do a download and it's going to download a spreadsheet of what they have as far as the lending portfolio. And the reason they do an Excel spreadsheet like that is it's all kind of uniform. I mean there's some of, it's different, but there's a, you know, when it says like unpaid balance that can match up if it's, if the loans being sold or transferred to another company as well.

Yeah, thanks for sharing that. I think, you know, a lot of these terms, you know, we kind of just talk about it and then, you know, when we talk to our listeners, they're like, what are you guys talking about? So, yeah, I think it's really important to kind of explain some of these things and again, you know, explain like where to get them and like how to get them. I know that's something that you teach, so we don't need to go too deep into that. But I know you have a lot of really good strategies on how to get a hold of these special asset managers and stuff like that.

So yeah, when you're buying notes, you're not getting it from a, you know, not getting from a realtor. There's not a multiple assisting service. You know, you've got to be direct to banks and most of the banks aren't, you know, call the bank, say hey, I want to buy notes and REOs or foreclosures is what, you know, real estate owned is. They're not going to just send it to you. You got to know, get ahold of the right department and you know, jumping on LinkedIn, you can find people in the right departments that go by, like you said, special asset manager, secondary marketing manager, whole loan traders or chief credit risk officer. Those are the four most common names for people who handle the distressed note sales in any type of bank out there as well.

And there's another type of person that has notes and I love that you have A name for this type of person. And I think you know what I'm going to say. The joker broker. Can you explain to the listeners what a joker broker is?

Yeah, I mean, this is nothing against any wholesalers out there. First and foremost, you can wholesale notes. It's all about being direct. So, like, if I get a list in from a bank, like, I got a list in from my buddy Matt this morning. Well, if I turn around and sell it, you know, send the list to Ian, and Ian's like, well, I don't want to buy anything, but I know Steve over here, and Steve's trying to. Is buying notes. Well, Ian sends in the list. Ian kind of is the joker broker, right? He's. He's trying to sell it, but he's not direct to the source. And so you have people that will get these lists and they'll just blast it out to their buyers list and stuff like that. And they're a joker broker. They're not really. Don't really know deals. So, like, in the scenario, if Steven wanted to buy notes, he'd make an offer to Ian. Well, Ian's then going to turn around and send me the bids, but he's going to make it a little bit less so he can charge Steve 3 points or 3% or whatever he might be. And I'm going to then have to send the list in to Matt. Well, for Steve to get all the information, he's now got to get the information through three people. That's called a daisy chain. So joker brokers create daisy. Like, I just literally had a guy, literally right before we got on, this guy saw my post about this morning, goes, hey, you got notes for sale? And I'm like, yes, I do. Are they for you? Are you buying? Are you looking at broker? And he, the guy said, own, which I name it himself. Then he says, well, I, I have buyers. I'm a, I'm a buyer's rep. I just vomited. So somebody's saying they're a buyer's rep or a seller's rep just means they're a joker broker. I'm like, educated. Like, dude, don't say that word. You know, I got a buyer who's. I'm like, no, no, if you're not buying for your own portfolio, I'm not going to send you this list. I don't want it being blasted out because I've had my own list. I've sent out before. Ian come back to me at like 20% higher than what I'm trying to sell. It, you know, and I just have to laugh about that. So that's. That's something we see in the note business that, you know, sometimes you'll deal with joker broker. I mean, there's joker brokers in traditional real estate too, that are just thrown against the wall trying to stick like spaghetti.

You know what I mean? Yeah. I think they kind of use co wholesaling as a term. It's like, well, they're a wholesaler and I'm going to wholesale that wholesale deal to another person and then another person is going to co wholesale that. So they have three people trying to get the same. The same, you know, wholesale fee. And it's like, man, how thin can you slice that pie?

Yeah, exactly. I mean, look, I'm not opposed to wholesalers, you know, occasional. I mean, I've got a broker from a fund that isn't selling anything they own. They're, you know, getting listed from like 600 banks, you know, that they're willing to partition off and sell to us. And that's fine. He knows I'm buying from my own portfolio. If I'm. And he's also like, hey, if I bring a buyer to a table, he's willing to pay me, you know, a point off that I'm like, okay, that's a good relationship. So if somebody. I find a buyer, I'm gonna step away, say, hey, go talk to Matt directly. So we're not creating any type of Disney Cheney's talking directly, but you have a lot of people out there that don't want to do that. So they're going to send out what's like a. Called a sanitized tape where the address is removed. Or they're just going to send details of the property details and not the full address. You know, I don't bid off zip codes. You can't do due diligence off a city state. You know what I mean? Unfortunately, people just come from a scarcity mentality and a lot of educators out there, like, oh, it's. There's, you know, you can't share information. I'm a big believer that there's plenty of deals to go around, but I still have to protect my sellers because what is going to happen? They're going to get a list of. A list is blasted out all across the event. It actually reduces the validity and the value of that offering. And, you know, people don't want to know. I mean, lenders don't want borrowers or people that our clients will know that they're selling distressed notes. It reduces the value of their portfolio overall and they're afraid that people are going to make a run on the bank or something like that. Not that that would happen. It's not 1929 again, but same thing. It's you're dealing with addresses and borrower information. So you got to protect that as well.

Yeah, thank you for sharing that again, you know, for the listeners. You know, hopefully some of this is starting to make sense a little bit on how, how you're buying the debt, how you're getting these list of notes that are available and then how, how would someone like if they have identified a note that they want from the tape, how would they go about purchasing that note?

Yeah, it's really easy. You're going to make an offer, I mean usually it's just an email direct back to the seller, hey, here's the loan number, here's what I want to offer for it. And then I mean you're obviously do a little bit of upfront due diligence, checking the value of the property, making look at the condition. You're not going to go out and drive by the property all the time. It's hard to do that when you're buying across the country. But using Zillow as just a base guide, not due diligence, but as an upfront guide. Because then if the bank accepts your offer, then you're going to have a period of time to do a deeper due diligence dive. Then you're going to order a broker price opinion, which is a realtor, pulling comps and driving by the property, making sure the value, the as is value, the asset you're going to look at like the loan file docs that I just shared, where you're going to actually make sure everything's there. So you have the right to foreclose, review the loan documents, making sure it's a note that you want to end up owning. You're going to do a title report and pull to see what's on title as far as liens, judgments, anything like that. And then if all that acts, you know, works out well. Besides, you're also going to do some due diligence to the borrower. You know, is it occupied, have they made any payments? Are the utilities on, is the insurance still being paid? Are the taxes up to date? You know, if all those things work out in your favor and your bid still makes sense, great. You then wire money to the bank and they'll send you all the documents, usually a couple days later. If it doesn't work out. Then you can what we call fade our bid or reduce our bid. And they can either, the sellers can either accept it or counter it or say no, we don't want to accept your new offer. And they don't accept it. Guess what, you just walk away scot free. You know, you're out some due diligence costs, but those due diligence costs really work as an insurance policy. Make sure you're not buying a piece of, you know, or buying a property that's actually there, not trashed out or anything like that.

Kind of shifting gears a little bit here. If the end goal was to acquire the property, but you wanted to do that by buying let's say a non performing note and then for, you know, and then acquire the property, what would that process look like?

So here's the thing, there's no guarantee that you're going to end up with a property on a note because you don't know what's going to happen to the foreclosure auction. That's like the wild wild west. Okay? Now there is some ways that you can kind of control that in a little case. So I'll give you example. So if you're, you know, you're driving down the road, you see a distressed property, a property that's got some weeds on it, you know, it's the typical oh you're driving for dollar scenario. The first thing is to find out who the lender is, who the bank is, okay? Now if the lender is like bank of America, Chase, Citi, Wells Fargo, they're not going to sell you a one off note, okay? They're just not going to do it. There's no reason for them sell a one off note. They just don't, it's just too small. They sell in like 50 million dollar portfolios, okay? So if you got 50 million, great, we can talk, if not move on. So that's the first thing is finding out who the lender is. And it doesn't need to be a big lender. It also doesn't mean to be like a small branch, like a one off bank either. That's not a good point because they're not going to be able to sell that note at a discount. We find the biggest bang for the buck in like regional banks that banks that have five or more branches up to some of the bigger lenders. And so it's once you identify who the lender is and then see if they will sell notes, it's all about finding the right department in there. But Then also understanding what's owed on the property, if they owe more on the property than what it's actually worth, you can often get a bigger discount for that. You know, 50, 60 cents on the dollar, as is value, they owe 300. The house is worth 200. We might pick that up for 100. Okay. The other way scenario that we see, especially in, in California, a note where there's a lot of equity. So let's say the Property is worth 300, but they only owe 200 on that. In that case, you're not going to get it at 50 cents of the dollar. You may have to pay like 80, 90 cents on the dollar of the 200, which could still be a deal, but it's not going to be as good as a deal as buying at 50 cents of the dollar. So if it is, they owe more than the property is worth. Like, let's go back to that first scenario. They owe $300. A house loan worth 200. If you're the lender, after you've bought that note at $100, you can determine what you want to sell it for at auction. All right, so if you really want to own that property and don't want anybody to bid, then what you do is just list the property, make the opening bid, the full payoff. Because if it's, you say the full bid is 300 with a house loan or 200, no investor is going to pay 125 or 130%. We agree to that, right, Ian? So then you, then nobody buys it. Then you take the property back, and now it's yours to do whatever you want with it. The other scenario, where there is equity is where it gets tricky. So the other strategy is it's worth 300, they only owe 200. You paid 90 cents on the dollar means you're paying around or 89, somewhere between 160 and 190. Since you're the bank, your maximum bid at the foreclosure auction can be the only the full legal amount. So if the legal amount's 200, that's the most you can put as the payoff. And we all know a lot of times properties that are at auction do sell above 60, 70 cents on the dollar. So 70 cents on the dollar of a $300,000 property is 210. Right. In other areas, California, you guys often go up to 80 cents on the dollar, depending on what the after repair aspect is. Right? So in that case, if it sells for 240, guess what? You don't get the 240, you only get what the legal amount is. So in this scenario, the legal amount is 200. You paid 180 for it and it only sold. It sold. Above that 240, you're only getting 20 grand. Hopefully that covers your money costs and you make a little bit of profit. For me, that's often too skinny. The 40,000. The 240 minus 200. The 40,000 doesn't go to you. It goes to. If there's a second lien or any other liens against the property. If there's no other liens against the property, that's going to go back to the borrower and the borrower's got to claim that. So that's why. That's why we usually target assets that they owe more than the properties is worth. When we do buy equity deals, we'll buy the note at a discount. And when we become the bank, then we can maybe even sometimes work out a deed and we'll know cash or keys to the borrower. But you can't approach the borrower before you actually own the note. That's a violation of fair debt collection practices. So you have to kind of. That's why we do a lot of sleuthing on the borrower. You know, how old are they, how long they lived in the property? The great thing is that during the due diligence period, we're getting a look at the actual servicing notes. So like if the borrower's called the bank and talk to an employee about the mortgage payments, or the bank has reached out to the borrower to get them back on track, we see all those notes in the servicing notes and say, okay, this borrower wants to stay or wants to go. And that helps us determine our strategy in a lot of cases and also determines of what we're going to pay for the note too, if we think we get a bit higher or bid lower.

There was a term that you used when you were talking about that. You said deed in lieu. What is that and how would that convey ownership?

Yeah, so deed in the loan is basically a friendly foreclosure. Maybe you've heard cash for keys. All right, so when we're buying the note and we're buying the first position only, we don't buy second liens. We only buy in the first lien position. Okay. So nothing can wipe us out. Taxes and God. And we pay the taxes and put insurance on the property. So if a borrower's living a property instead of us going through the foreclosure process, which can vary anywhere from like 21 days here in Texas to three years in New York. Instead of going through that three year process and cranking out more attorney fees and servicing costs and holding costs, it makes sense for us to say, hey, instead of going through a foreclosure process can be drained out going to the borrower and say, hey, you know, if you don't want to pay, you can't or you can't afford to pay the modified payment or the, you know, the payment plan. Instead of going through a foreclosure process, let's just give you some money to walk or let's have you just sign the property over to us, deed the property back to the bank. That's called a deed in lieu of us foreclosing on them so they don't have a bad foreclosure on their credit. So foreclosure will kill somebody's credit for 7 years. Late pays 24 months. A BK will only affect about 24 months, but a foreclosure will kill their credit for 7 years. So that's why it's like, listen, you owe more than the property's worth. You don't have a payment plan that makes sense. You can't afford to pay this. You know, let's just give you some money to walk. And a lot of times we'll give them cash for keys, give them some money to get out of the property and move on. If they got a ton of equity and they not in a position to rehab the property, we may give them a big chunk. Like we've done anywhere from like 1 grand to $75,000 for cash for keys before. Just depends on the scenario.

Yeah. And so once that deed in lieu of foreclosure is completed, the, the lender now owns that property. That's called an reo, correct?

Exactly. We once the, once the actual document, the deed is signed, the quick claim deeds of what it is and we go record it, we now own that property and yeah, it's, it's technically a real estate owned asset is what we call it a reo. Yeah.

Awesome. Thank you for explaining that to our listeners. You know, I know we have a lot of new listeners and even a lot of seasoned investors aren't very familiar with note investing. So I really like how you're able to really break it down into, you know, digestible pieces and you know, in terms that people can understand.

Yeah, I mean it's a, I mean note investing is a niche within a niche. Definitely some of the smaller niche Most people when they note investing, they think of like owner financing a property or selling a property in terms or buying on terms. And that's one niche that's creating a note and stuff like that. But we mostly buy direct from banks, which is a whole different niche within the whole note investing world.

Very nice. You know, I appreciate you explaining that. What kind of mindset do you think, what type of mindset do you think separates successful note investors from those who struggle?

You've got to be coachable and you got to have multiple strategies on stuff like that. If you're just trying. I'll give a great example. Let's talk with a guy today and he's been trying to buy a note but he does it ass backwards. Like he's trying to go find somebody to buy the property from him in case he ends up foreclosed and then doesn't sell at the auction. Like, dude, you're all worried about Z. You need to worry about A, B, C. Because if you buy at the right price and go through the legal process, you won't have to worry about this one guy buying your property. Everybody you know, just selling on the mls, just selling it. Traditionally you have plenty of buyers at the provides in a good area. You don't buy an asset, you don't want to end up taking the property back is that you'll be able to buy. And he's so scared of that for some reason. I don't get it. Or you only want specific properties in one specific zip code where he can like drive to like there's plenty of opportunities and he lives in Maryland. What you need is a little separate license to get in Maryland. I'm like, there's so many more opportunities to think about and you don't have to go do the work yourself. That's one of the big things about note investing is different from most folks is that there are servicing companies who are doing this for thousands of mortgages out there. There are attorneys that handle the foreclosures for thousands of assets out there. You as a note investor need to go a find a deal and then obviously raise capital for it. But you're not going out and rehabbing the property. You're not going out and laying carpet and she, you know, putting sheetrock in and painting it. We don't deal with toilet stands and trash. Yets is one of the less stressful ways of investing, as I like to say, and can be somewhat passive if you're just buying like performing paper. But that's the thing is that you got to understand, be a little bit coachable. You know, it's different than coming from. And he's a big commercial, been a commercial investor for years. I'm like, you're talking about owning and managing apartment complexes, that's one way. What you're trying to do is completely different. And he's just not coachable. So that's the biggest thing is it's a different niche. You got to understand different terminology, different ways of approach, different approaching things. That's the first thing. Second thing is patience. I think that's one of the most important things we've seen people, they want to do a deal, I got to do a deal, I got to do a deal. I'm like, dude, relax. You don't have to do a skinny deal. There are plenty of deals and plenty of opportunities out there. If you'll understand it, that if you start doing the marketing side, which is no direct mail campaigns, that saves you a lot of money. So it's either like LinkedIn or pick up the phone and dialing for dollars. You know, it's all about that repetition of marketing. You know, we have lived in such a society that the patience is kind of non existent. A lot of cases with instant gratification. Everything being delivered to your door, your handheld, you know, it's. It takes time. It takes time to make offers, it takes time to get offers approved. It takes time going through the foreclosure process, you know, in different states. It takes time to get the bar back on track. So that's, that's the biggest thing. Build some patience and understand it's different and be coachable, I would say are two of the biggest things. I had some faith, you know, I'm maybe a little bit more of a riverboat gambler than some folks. But like if it's a good deal and you understand that it's really a good deal, you're buying a property, buying the note on a property at 50 cents of value, that's usually a phenomenal deal if you'll just market. And that's another thing. You gotta have a marketing mindset a little bit. Start marketing and sharing what you're doing. You'll have, you'll raise enough capital. Everybody listening to this, I don't care how seasoned you are, is capable of raising a million dollars or more in the next 90 days if you'll market. If you just sit around and don't share people, you're a secret agent where you don't talk to anybody, you're not going to raise any type of thing. So getting out and being a little more extroverted, even if you're introverted, is important.

Yeah, it's all very good advice. And you know, I, I know that you know this stuff very well because you have coached so many people and you have seen, you know, you know, some of the excuses or some of the things that people don't want to do and, and therefore you, you know, don't usually become successful at this.

No, I mean, that's the thing is if you're trying to stay in your comfort zone, you'll never be successful at anything. You know, I mean, you got to get outside your comfort zone. And what you end up realizing is that most of your fears are just a facade. You know, they don't really exist. It's just how we're programmed or how we're taught. I think that a lot of that goes back to my parents. I mean, I could, didn't tell me I couldn't do anything. So I just had to find a way to get it done. And that's one of the biggest things. It's easy to, it's actually easy to raise capital today. It's ever been before because of social media and the ability to jump on the county records and find lists of people who have used their self directed IRA to fund a property or have used their self directed IRA to lend money out of it. I mean, it just takes some time and then marketing to those lists or marketing online. One of the biggest things these days that you have to think got to market like it's 2025, not like it's 1995. You know what I mean?

Yeah. That kind of leads me into my next question. Are you using, you know, we talked about some ways that you're using AI and we'll get to that in a sec. But are you, are you happening to use any AI for this marketing piece?

Oh my God, yes. So AI people use AI a lot of times to ask questions and to come up with like lists. That's the easiest thing. Like, that's one of the things I teach my students. Like list. If you're trying to raise capital and you're targeting a specific niche or listen area, go on to AI or chat GPT or something like that and say, hey, give me a letter series, seven letter series or seven email series about how to raise capital and why notes are more advantageous over fix and flipping or rentals or something like that or whatever. What are their fears are? First thing is say, what are the biggest fears of real Estate investors investing with their IRA and then write the letter based off of that. That's the easiest thing you do or write. Give me 52 weeks of email headlines that are associated with the, the calendar, you know, so you can send out an email once a week to your database. These are all great things. But what we've been doing is taking like our audio like, like I'll give you an example, like the audio from this podcast. We'll upload that to Turbo Scribe, which will do a complete transcription and I'll take that PDF and drop it into chat GPT and say, hey, summarize this into 4,000 characters or less with an SEO rich intro outro and then bullet points and the main features and it'll literally write the blog article or YouTube description in seconds. And so now I have a really valuable piece of content that I can upload to my YouTube channel or the podcast episode. That's just one thing. But then I can also go and say, can you create an image for the thumbnail for this podcast episode? And they can do, do that, you know, describing a few things and being more detailed through like Canva and that uploads it. There's. That's great. You can also take like what we get in like copies of the mortgage documents or a bankruptcy file. We can upload that to Chat gp say, hey, can you identify the pros and cons of this bankruptcy payment agreement or this loan document, making sure everything in there and it'll go in there. Yep, it's here's these documents and here's the order and dates on them. So we all know everything's good and clean. So it's just absolutely mind blowing at what it can do. You know, we're working through even uploading spreadsheets into Chat GPT and say, hey, can you identify the opportunities, the best opportunities here based on a, B or C, you know, and going from there, that's a little bit hickey hiccupy because it liked wanted to say if we don't clean the spreadsheet up some get rid of the states, we don't want to buy it. It's going to evaluate those like buying a note in New York similar to buying a note in Texas. And there's nothing similar about that, so got to be careful. Another thing is that, you know, some of this AI stuff is also, it's kind of lazy too, you know, so you gotta restress it or refresh it and pay the 29 or 49 dollars a month for it. It's well Worth it. We've got some really cool things that we're working on right now just to share more content or create more videos and get the word out. And we're doing and like take I'll give you this example. We got this listing of the economic standing forecast for 855 cities across America. And you know how much overvalued they are, what's been their one year growth, year over year in value, how much economists think they're overvalued and then where do they see the markets going? It's all downhill. But I could take that spreadsheet for 855 cities, upload it in there and then say write a script to create a little blog for 855 of them and then I could upload that into another AI engine called hey Gen with my avatar of my face and my voice and it can create 855 videos that are a minute to two minutes long. Talking about the economic forecast of all those cities in minutes versus it would take me hours if not days in some cases.

Yeah, thanks for sharing that. And there's also another thing that was really interesting you and I were talking about just before the show. Can you tell people this clone thing that you're working on? I love the concept.

Yeah. So we've toyed around a couple of things. There's one thing that we used we're still mess around with which we upload like our favorite hundred videos from YouTube and people can go into this platform and type in a question and it'll go on these hundred videos and find exactly where we stated what they asked. You know, find the second the video the minute it's fully transcribed, which is nice, which is okay. It's a little clunky. I'm really excited about is an AI clone where we're basically uploading my YouTube videos, my blogs, my books, all our YouTube channels, all the podcasts I've been on, all the guest appearances, stuff like that. And it will become a, I won't say it's walking, but a talking, texting, even video aspect of it where you could go on and ask questions and I will answer it back to you in my own voice to answer all your questions about note investing or other things. And you can try to get me off. And I toyed with like Arnold Schwarzenegger and a few others out there. I've got some clones, we're using the same company for that. It's pretty stinking cool and sounds pretty freaky out there when you have your own Voice coming back at you, answering a question. And it's just, it just, it's, it's pretty, it's just the way it is. You know, if you're not using AI in some sort, you're spending too much time or too much money trying to do it all yourself. I mean even VAs virtual assistants are great, but I think this is, There's a new ChatGPT has a new thing, it's called an AI assistant that literally is mind blowing. Just like came out this last Friday as an update on some things. So it's just a, an interesting time to be a real estate investor and trying to figure what can I give the AI to do that's going to be accurate or what can I offset so that it saves me time and money and increases productivity exponentially.

Yeah, I can't wait to, to hear this clone and see how it goes. You know, is that something that your, your members and like the general public get to use for free? Or how would that work? Is that something.

So what we'll probably do is do like we always. I always open up for people to make a phone call with me for 30 minutes. They can always pick a, you know, go on my schedule and book a phone call with me and pick my brain for 30 minutes. And so that's what I'll probably do is, is just make it open to the public for 30 minutes. After 30 minutes you'll need to sign up for a monthly membership to get full access to it and go from there. My goal is the first a try to replace me teaching a class for three and a half hours where I can have it now an AI agent teach that and give people kind of a self guided questions to ask, prompts for people to ask from this class and going from there just it's fun. Don't you know, I'll never stop doing video podcast episodes, but it's still pretty freaking cool to be able to offload a lot of those routine Q&As that people have.

Yeah, I'm sure you see the same questions all the time. So really cool to hear the stuff that you're working on, you know, both in your business and in the AI space. We're so happy to have you on. Thank you so much for sharing all the information you have today. You know, I know our listeners will really get a lot from what you talked about and hopefully the listeners will, you know, follow you and wait for that clone to come out so we can ask it some questions and mess around with that. So Scott, thank you so much for coming on the show. We really appreciate it. Every week we do a free book giveaway. Here's how to enter. All you have to do is like this episode and comment which book you'd like. Five days after the air date, we'll pick one lucky winner and we'll ship it free. Some of the titles we have available are Rich Dad, Poor Dad, Cash Flow Quadrant, Real Estate Millionaire Investor, and a couple others as well. E Myth Leaders Eat Last and Go Giver Scott's story is proof that you don't need to own real estate to build wealth. You can control the paper behind it. Node investing is about strategy, patience and perspective. It's not always about speed, it's about structure. And as the market shifts and AI continues to evolve, opportunities will favor those who are creative, efficient and focused. So whether you're chasing cash flow, discounted properties, or just looking for your edge, learning how to flip debt may be your most valuable move yet. Thank you for listening and we'll catch you on the next episode.

For those out there listening, if you could do me and Ian one big favor, we as podcasters love to hear from our listeners. And so if you're getting value, which I know you are from these episodes that Ian is kicking ass and taking names I'm doing on a regular basis is go over there, make sure you hit the subscribe button and then also leave a five star review. We love to hear from you. If you don't like me, that's fine, but we know you like Ian, so leave him a good review. Not me then in that case, but go ahead, subscribe, leave a review and then share this episode or the podcast with one friend as well you think you might find valuable out there. It's one of the best things you can do for Ian to help support him on what he's doing here. And so go out, take some extra buddy, and I look forward to seeing you off the top at some point. Thanks, Ian, for having me.

All right, thank you. Have a nice one. Appreciate it, buddy.

Sam.