Stacking Deeds: Investing in Real Estate Without Owning Property: Scott Carson's Money Making Blueprint of Turning Troubled Loans into Profits

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Live from the back of Ruth the Realtor's car, it's the Stacking Deed show. I'm Ruth's neighbor and part time mechanic Doug, broadcasting live from the spacious luxurious trunk recording studio. On today's show, have you ever wondered how people make money in real estate without owning any real estate? Joe and Crystal chat with Scott Carson, who's making stacks of cash buying and selling real estate notes, unlike the notes he used to pass around at school. In our headlines, a Nepo baby schools us on how she will be a millionaire by her twenties and the steps we should take to do the same. The nerve. Plus we'll answer a call on Ruth's rotary phone from SIA wondering if a heloc.

Heloc.

Heloc.

Wait, are those the things that are formed by the power of Grayskull? Heloc. She lock he man, I don't know. It's one of those. Anywho, she's wondering if a HELOC can be taken out on a rental property. And of course you'll need your a game for my property pop quiz. And now, the two chuckling chatterboxes of real estate. It's Crystal Hammond and Joe Saul Sehi.

Well, good morning, Chatterbox. Joe, how are you called a chatterbox.

Before Chuckles the Clown? Let's do some chuckling. Crystal. Yeah, how are you doing?

Great. I've had another setback. I feel like every time while I'm building these buildings we get a setback. It's just you're paying tuition and it's like, yay, let's get these mistakes out of the way so they never happen again. We filed our building permits early thinking, hey, let's get a place in line. And we didn't anticipate that it would take so long to get the letter from the alderman. I went to go check the status of the applications and they went inactive because they've been just sitting so long. So long.

For people that are brand new to this story, brand new to stack Indeed show, welcome. Crystal has a bunch of fourplexes she's building on the south side of Chicago. And yes, this is becoming Days of our Chicago Lives.

Yes, I love it. I'm going to coin that phrase, but how are you, Joe? What's going on in this made up word you keep saying? Make believe land. Texarkana.

I'm doing great in Texarkana. I'm going to someplace Doug, you'll never believe where I'm going on Saturday. I'm headed to Disney.

Please tell us all about it, Joe.

The long version please, on every detail.

Are you going to step into the park with your left foot or your right foot first?

For people that missed the 25 minute discussion before we hit record, I was regaling them about Disney and Doug is fascinated.

Regaling, abusing. I mean, tomato, tomato.

I'd say Doug is unfascinated.

Talk about some real estate there, Crystal.

Yes.

Oh, a little mouse making a bunch of money on that real estate.

Oh, he sure is.

Yes. But we've got another person making money in our headlines, so why don't we hit the roads? We got Scott Carson hopefully waiting for us.

Hello, chaps. And now our Stuck Indeed's headlines.

Cheerio and pip pip.

Our headline today comes to us from a little known place called Reddit. Have you read it before, Crystal?

Oh, yeah. There's a Reddit for my job and the people on there love to anonymously complain. So.

Your job?

Oh yeah. Like they complain about everything. And I, I'm just here for the complaints. The anonymous complaint.

That is fabulous. Well, these are people that are complaining about one influencer on the Internet for people that have never heard of this gentleman, but I think if you're a real estate investor, you probably know who Grant Cardone is.

Oh yeah, everybody should.

Yes. And Grant Cardone's daughter made a video and then a Redditor went out and decided to make a video of Grant Cardone's daughter's video. Let's listen in to the sage advice of Grant Cardone's daughter and the gentleman who's trying to learn from it.

I'm going to be a millionaire before I'm 20. And this is how awesome.

All right, what do we got to do?

I work for my dad's company B.

Grant Cardone's child work for dad.

Tough.

Starting stipulations, but let's see where else this goes.

I have a contract with them and I get paid every month, half contract.

Get paid 48,000 to $60,000 per year.

Okay.

Bit vague, but all right. Making 50,000 ish dollars per year. We're going to become a millionaire. How are we doing it?

That money then goes into real estate where I get some passive income, I get to go spend. I never get to touch that principal income. So every year that principal triples, it stacks on top of each other.

Invest in real estate that doubles or triples every year.

Wow.

I need to find me. I need to find me some of that real estate. That'd be fantastic.

And over time, that principle in real estate will make me a millionaire. By the time I'm like 20 years old, I have like 600, 800,000 in real estate.

Okay.

So actually only have about like 600 to $800,000. So I won't quite be a millionaire, but I'll be pretty close. I guess if I rounded up, I'd be pretty close to a millionaire.

Still.

Still pretty good by 20. So I just need to be Grant Cardone's child, work for Grant Cardone, have a contract with him to get paid $50,000 a year, and then invest all that in real estate. That earns me two or three times appreciation over time, and I will be able to have 600, $800,000 in real estate holdings by the time I'm 20. Easy. Let's do it.

Duh.

I don't know why the rest of us make this so difficult.

Right?

You know, can we get Maury on the show? I want a DNA test. I could be Grant Cardone's daughter. We all could be his children. Let's get them on here.

Turns out, Grant, you are Crystal's father.

Step one. What an easy step.

Yes. Step one, paternity test. There's a lot buried in here. Number one, I think Crystal is just the fact that when people give you advice online, Grant Cardone's daughter lately, dishing out advice, it's part of her contract stipulation where she makes 48 to 60 thousand dollars a year. Her job is to dish out brilliant advice. And you know the quality of that advice. Maybe buyer beware.

I guess it's not even buyer beware, it's just, okay, she's in an. Not an unrealistic place, but you know how many people are just born into that kind of wealth situation where you can ask for, hey, I'm gonna get a contract and make 50,000, you know, a year at that age, at that young age, no education besides, you know, she's getting great education on the job, training with her dad. But who has access to that dad in the first place?

That is interesting. But think about it. I mean, let's try to put a positive spin on this. If I can find somebody like her dad and I can find that mentor, I mean, what a great place to be. The bad news deters, I don't think you're ever going to find property that doubles or triples every year.

I mean, where is it there would be a competition for that? That's a bidding war right there. And then the way it just rolled off the tongue.

Yeah.

And then. And she said it doubles and triples every year. So that's taking like even from our last, our last episode, that due diligence and that envelope math is through the roof. If you're finding that there are reasons.

That people invest in real estate and get rich quick. Crystals, you know, is one of them. And sadly we have yet to see that person.

Right. Nope, not the longevity. And then she said the 600 to 800. So yeah, if you round 600k up.

I'm going to be a millionaire by 20. But I'm not later in the video, I'll tell you, I'm not going to be one.

Right.

Does it sound like she did any math at all to get to the.

True.

Did she get out a pen and a napkin? I don't know. She's 11, so I don't even know if she's capable of doing that compounding math. But I just don't know how she even gets from the 50,000 a year to 600k even, let alone a million.

And you know what I mean, the fact that she's there and she has that leg up at such a young age, once again trying to put a positive spin on this is, I mean, good for her, right? That she's going to have that much money by the time that she's 20 before she even clearly I think realizes what a leg up that is. It doesn't seem like in her video it sounds like a kid bragging that doesn't know what they're bragging about. My dad drives a whatever car.

Well, yeah, the self awareness is not there. But then how much self awareness do you have as an 11 year old? But I think she is in a very good position to like she's owning it. I like her attitude, like I like her confidence and she's not going to fumble the bag. Because we've seen celebrity children that fumble the celebrity bag. And I think she's gonna go far.

Her head's in the right place there.

Absolutely. And she's gonna go far. And it's thanks to her dad. But, you know, it's still up to her to make that decision to take what he gives her and not buy Barbies or, you know, not buy Tonka trunks. You know, I still want an Easy Bake Oven. I never got my Easy Bake Oven. But she's not buying, you know, typical 11 year old stuff. She's saying, hey, I'm gonna buy real. Yeah, definitely. That is a huge, huge positive.

Yeah. I think Crystal, her version of Barbie's dream house is a little bit different.

I love it.

The one that my kids had at that age, you know, but the importance of starting early and of just starting. Right. I mean, you're not going to get a 48 to $60,000 contract with Grant Cardone like she has. But you can't build that income stream. At some point, Grant Cardone had to start from nothing.

Yeah.

He had to begin and get out there and do it. You know, he had to hypothetically get a note from an alderman and begin the process. Maybe putting some four plexes in the ground, you know.

Yeah, it starts somewhere. And then this also, like you were saying earlier, Joe, you're taking the influencers advice with a grain of salt because a lot of reasons people connect with us or maybe reasons that someone would connect with her is that you have something in common or you're speaking my language or, you know, I can relate. This business too, it's a people business and it's about relating. So if you can relate to what we're saying, we know what it's like to be completely new. Starting off, no handouts. At least for me, there been no handouts. I've learned everything from the ground up. A lot of people can relate to that and that's why they stick around because it's okay. This person, we're starting at the same place, I can follow along so she'll find her tribe of people. That's.

You know, when I first started in real estate, I tried to start completely nude as well and it didn't work out for me. Is that the secret? That's what I heard.

Did I not enunciate? Did I not enunciate?

I think Doug took what you were saying a whole different direction.

Wow.

Whole different.

Now I get it. Okay, starting over. I'll do it right this time.

My bad.

It's bad.

You know, it's a bad real estate showing when Doug comes out and goes, whoops, wasn't the.

Try that again.

Wasn't the showing I thought it was. I thought by showing you meant showing.

Oh, my goodness. The physique show. Oh, Lord. Oh, Lord.

How do we get here? What is going on now?

No.

No idea. I can go back to my discussion about Disney is what we need to talk about.

No, but I do love these videos where we're taking someone's advice, an influencer's advice, and then we're telling you, okay, this is the reality of what this looks like. Because I feel for a lot of people that fall for the scams, that fall for the, oh, yeah, I want to be a millionaire by 20. This is what you have to do. And imagine that being behind a paywall and she just got your, what, 20 bucks? Hopefully it was 20 bucks or less, but that's what a lot of people are doing. They're putting this advice behind paywalls, and you pay it thinking, oh, yeah, I'm going to unlock the secret. And it ends up womp, womp. Cue the sad trombone. I know that has another name. I forget what it's called, but here.

It is, I think. Nope, not that one.

What is that? You just paid for this influencer's insight to get to a million by whatever short period of time, and it was all nothing. It was all smoke and mirrors. So do this the slow way. Do this with people you can relate to and connect with. That's my advice.

I think this is why the shows on TV are so, you know, why HGTV is so popular is because we think. Think that we can get there very quickly and look at the way they value those houses. And, hey, I came in for three days, I changed the house around, rerate some furniture, blew out a couple walls, and bam. It's that easy. Then you hire your own contractors and you're like, how come you guys can't do this in three days? Like, they do it.

Yeah, they get permits, they get all that stuff instantaneously. Meanwhile, since what I think May, July, August is when, you know, I've been trying to get these permits, and here we are in February. January, February. And it. Yeah. Nope. That it's not like it is on TV at all. Which, honestly, I thought it would be, I'm like, yeah, just going to put these applications in. Oh, Alderman's going to say yes, and it's going to go smoothly. So nothing has gone to plan. But that's why you make all these plans and you listen to all these other people that are going through things. I can't wait to hear your stories of what you decide to build or rehab or purchase. White glove ready.

Thanks to Justin for sending that to us. By the way, if you've got any clip like that, any discussion, we've had some great stuff sent in. Justin sent us this. We had Denise last week, wanted us to evaluate the property. I'd love you guys getting involved. Let's dive into the things you want to talk about. Clearly making money faster is what's on Justin's brain. Coming up next, Scott Carson is a guy. What if I told you, Crystal, that you could make money in real estate without actually buying any real estate?

Oh, tell me more. I'll pay $5 if it's behind a paywall. Only 5?

Your money might not double or triple next year and you might not get a contract with your dad's company. But this does involve contracts. Scott Carson going to tell us what it's all about right after I think Doug, you've got a property quiz for us.

Hey there dealers. I'm Ruth's wrench wielding repair guru, neighborhood. And since we're talking to Scott Carson today about real estate, it reminds me that on Today's date in 1959, a three day long dense smog rolled through London, England. With visibility being almost zero, the AA reported the pollution level as very grim. That's weird. Why would Alcoholics Anonymous be commenting on pollution? Anywho, the only time I've experienced smog that thick was back in 92 when Ruth went back to smoking unfiltered Camels. Now that was some dense smog here in the Town Car. Another place famous for smog, Los Angeles. And we can't talk about LA without talking about Hollywood and famous actors, right? So let's talk about John Travolta. He owns a house in Ocala, Florida. See, I told you there was a real estate connection to this thing. That house has a pretty special driveway. So today's property pop quiz is what is special about John Travolta's driveway? I'll be back right after I find my gas mask.

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Yes, either our website or stackingdeeds.steadilypartner.com.

Hey there daters. I'm walking smog detector and and welcome back Cotter's biggest fan, Ruth's mechanic neighbor, Doug. You know, John Travolta and I have quite a bit in common. We were pretty big deals when we first came on the scene. People went crazy over our hair. We languished there for a little bit in the middle. Then we both got roles that finally made us international superstars. Oh, and we both had our fair share of mistakes too, I suppose. John turned down the lead in Forrest Gump and and I missed my tryout for the Olympics because I tried to drink a gallon of milk in an hour. Turns out I'm not a goat. Who knew? Even with his mistakes, John Travolta has made enough money to leave smog filled LA behind and buy some pretty sweet property in Ocala, Florida. Property he probably bought just because of the amazing driveway. So what's so special about that strip of pavement in Ocala? His driveway's long enough.

How long is it?

It's long enough that he can land his 707 jet on it. In fact, his driveway is also a Runway for his collection of airplanes. And now let's check back in with Joe and Crystal as they sit down with Scott Carson.

Hey, Crystal. Is that Scott Carson?

That is our fincon buddy, Ruth.

Pull over, Ruth. Here he comes. Scott, what the heck are you doing in Texarkana?

I'm just chilling, man. Having some fun up here today. How about you guys? Hey Ruth, good to see you again.

It's so weird that we do an introduction around you and you're just walking down the road, right? Fortuitous.

Random.

I do a lot of that.

They say, Scott, that the riches are in the niches. And what I love about real estate, people think real estate. They think there's one little real estate thing. You are a man who does it.

I'm glad I'm a man. Yes, I Identify as a man today.

You are the man at number two. You're the man in a niche where I frankly don't know anybody else. Tell our dealers what you do.

Well, the voodoo that I do do is on a little bit of a niche. Been doing this for about 16 years. And I buy debt. I buy mortgage notes direct from the banks. And the best way I could explain if you're a movie buff out there and you like Christian B. Bale, the Big Short. I'm like Christian Bale's character in the Big Short, where I'm looking at like spreadsheets all day long of mortgages from lenders and banks and hedge funds. And I buy that debt at a discount because it's usually where somebody hasn't paid their mortgage in six months or longer and we'll buy that and then we make our money by trying to work it out and keep the homeowners in their property. And so most people think of like real estate investing, like those flip the houses, like they're gonna be a fix and flipper or they rehab homes. I don't do that. I rehab borrowers by, you know, Ruth likes to go to the Betty Ford Clinic every once in a while. Well, I'm not sending anybody that type of rehab. Sorry, Ruth.

Ruth's gonna swerve a couple times on purpose if you don't watch it.

Well, are you sure she's swerving or is that just the buzz? You know what I mean?

The cool thing is though, did you get into that accidentally?

I started a mortgage company with a buddy of mine back in like 2004. I had like a four year apprenticeship with our sponsoring broker who had bought a lot of distressed debt back in the 80s during the RTCDS, the Resolution Trust Corporation Signal loan scandals. And of course that was all sorts of debt, distressed debt out there. And when I started working with this guy, Bob Leonetti, he just kind of taught me the ropes about creative financing, owner financing and buying debt was a niche of what he taught. And then when everything started to hit the fan in 2008, I sold my part of the mortgage company for a year. And it's just started calling banks and applying what I had learned as apprenticeship and started getting these lists from banks on a regular basis, the stuff that they wanted to get off their books. And it was like pennies on the dollar back then. So I was kind of fortunate enough to learn from one of the few people that taught it. And then I went and applied what I learned.

This is the type of thing though, that our dealers can do too.

Yeah. Most people think that you've got to have a huge amount of money, like 5 to $10 million to buy the stuff. I mean, the hardest thing is getting into the right departments at banks and lenders to find this stuff. There's not like an mls. Nobody's posting a sign out in their front yard, hey, buy my mortgage.

Yeah, right.

It doesn't work that way. I wish it was that easy. But yeah, you can. Literally all sorts of banks will sell debt. You're not going to buy from like bank of America or Chase or Citi unless you can write like a $50 million check. And if you can, let's talk offline.

Well, and the reason for that, Scott, to stop you right there, is because banks like that sell, like big tranches of this stuff. Like they'll package up a bunch of mortgages together and sell that.

Exactly, exactly. It's not worth their time to try to sell an individual loan. They sell, yelling 50 to $100 million at a time. But there's still a lot of little smaller banks and lending institutions out there. And even on the commercial side, some of those bigger banks will sell one off commercial, not residential notes. So, yeah, we closed down over a thousand notes, bought over a billion dollars in distressed debt in the last 16 years from ranging from anywhere like seven bucks. We paid for one crappy ass, like, house in Baltimore that was trash, but we flipped it to somebody else all the way up to the individual, largest individual note was like a million and a half dollar property down in Miami that we bought the note on. Wow.

Yeah. I wanted to ask, like, so what are the downsides? Like, what happens when things go wrong?

Exactly. You're stepping into a situation where the borrower, the family hasn't been able to pay the mortgage through something. Now it could be like a country western song. It went through a divorce, the dog died, got laid off, you know, mom got run over by a reindeer. I've heard it all. Okay, that sounds familiar. We could have a whole nother episode on all the crazy stories that borrowers have told me out there what they couldn't pay. But you're stepping in that situation. You're literally becoming the lender. You're literally becoming the bank. And you can negotiate with the homeowners. It's best to hire like a third party servicing company or an attorney to do that. If you have a soft heart, you're gonna end up forgiving a lot of people. But. But I like working out with these people to keep them in their houses. As I say, rehabbing the borrower. Look, everybody goes through financial hiccups. We've all had good times and bad out there. You know, I don't mind keeping people in their houses if they're willing to meet me like halfway. Maybe you haven't paid in six months or a year. What happened? Let's work out a situation that makes sense for you. Is your interest rate like at 10 or 11, let's drop it down to nine or, hey, let's get you making partial payments for six to 12 months to get you back on track. And then we'll modify or forgive some debt or reduce the interest rate a variety of fashion. It's great to really like to keep people in their houses. 70% of the time, we're able to. The other 30%.

That's a pretty good number.

It is a big number because we really go into it. I faced financial difficulties back years ago where I almost lost my house. So I think I empathize with borrowers a little bit more because I've been in their shoes back in 2001, 2002, facing foreclosure. So. So I always like to say, if you want to stay, great, but you got to pay. We got to figure something out. If you don't want to stay or can't stay, then let's figure out a solution that we don't have to foreclose on you because a foreclosure will haunt you for seven years. Late pays will only affect you for 24 months. I mean, if you can't pay, we'll give you cash for keys to walk or we'll do a deed in lieu of foreclosure where we don't foreclose on you, just deed the property back to us. But if you're going to fight me, you're not going to win, you know, if you're not going to work with us and we still have the same right as the banks do to foreclose and take the property back. I like to make one clarification. Banks don't really want to own your real estate. They really don't want to own that. Yeah, I don't want to own your property.

What's in it for the banks?

The banks for them is they. I mean, we're not buying it. Pennies of the dollar like we were a few years ago, but they're able to get, say, 50 cents on the dollar of what's owed. Now they get that money back in. Now they can go lend that money out 10 to 15 times.

Right.

Whereas if they've got a non performing loan in their book, they can't leverage that. They've got to hold money back in reserves. It really cost them. For every hundred thousand dollar loan they have on their books, it costs them 10 times that. What they can leverage that out. And so you and I were talking about that earlier, Crystal, is, you know, each state's a little bit different foreclosure time frame. So in Illinois, where it take a year to foreclose, they might take 30, 40 cents on the dollar for somebody to step in. That gives me the necessary amount of leverage to work with a homeowner. But also if I have to foreclose, it means I can make some money on the.

What's really interesting, Scott, is because you're not a bank, because you're much smaller, you know, it's just you and the homeowner, like you said, maybe you an attorney and the homeowner, whatever it is, you can be much more nimble. So there's probably a lot of negotiation that you can do that a bank would have to teach a huge field organization how to do. The economy of scale is lost. It's kind of the economy of not scale which allows you to win where a bank would have a tough time.

Exactly. I say I'm agile, mobile and hostile.

Sometimes you don't want to go for the hostile.

No, no. I could be your best friend. I can ride in like a shining white knight on that horse to help you stay in your house. And that's great. We've helped a lot of people stay in their houses. I've gotten a lot of Christmas cards and a lot of great things. Because a foreclosure just doesn't affect the family. It literally affects the whole neighborhood too.

Sure.

In depreciation, stuff like that. So being able to modify. Actually, I hate to say this, but it actually works in my favor. It's the biggest yield we get. The biggest return on investment is to actually get somebody back on track and making payments versus going through the foreclosure route, taking the property back. Then we got to rehab it or fix it up and then try to sell it. I'd rather get somebody back on payments and hold it for 12, 24, 36 months and then either keep it for cash flow or now it's reclassified as a performing note. I could even sell that note back to the banks as a performing note or sell it to other investors out there too.

What's the forum to get that done?

What do you mean?

It's the form, I mean strategy.

You don't just walk into bank of America and go, hey, I turned this note around. You want to buy it?

So there's a secondary market out there that exists, but there's every bank, every institution has something called like a secondary marketing or a special assets department or chief credit risk office in a lot of cases. So it's just networking. You know, some banks out there are looking to buy performing debt out there. So, you know, it's networking's relationships, knowing what they're looking for. Like there's a fund out in California, if they can get an 8% yield, the bar has been performing for 12 months, they'll buy everything I send them on a regular basis. So it's just networking, knowing those folks, that's.

I was going to say crystal. This sounds a lot like any type of real estate we've talked about during the first year of the show where it's riding a bike. Like once you know how the wheels turn, then it becomes a process.

It totally is like that. The one big thing that investors struggle with this is that you have to think like a banker versus like a fix and flip.

Oh, sure.

A lot of people get into this. I want to get into like tired landlords or fix and flippers that can't find deals and then they shoot themselves in the foot because it's a total different mindset when it comes to buying the debt versus buying the property. So like a lot of fix and flippers, they think about the after repair value of a property. Right. I can buy this and fix it up and it'll go from 100 to 150. Well, in the notes space after repair value doesn't exist. It's exactly as.

It doesn't matter.

Exactly. And equity is something I don't chase in the note business because the equity actually really doesn't belong to me. It belongs to the borrower. So if we foreclose, we can only foreclose for basically what we're owed. If there's a bunch of equity and the house sells at the auction for more than what we're owed, that extra overage goes to the bar, not to me.

So we've mentioned, we've mentioned California, we've mentioned Illinois. How are you like segmenting your markets or are you.

Great question. I buy in about 20 to 30 different states and I start off, I always tell people, like, listen, that's a lot. You'll learn the foreclosure laws. You need attorneys in this of type. And that's not hard to find attorneys and servicing companies that are licensable to states. I start off with like two to three states and then I added another state the next month. And when we get these lists from banks, what we call them tapes, you know what I mean? They're just a big Excel spreadsheet. There might be one note or there might be a 1500 on there that we can cherry pick from. And so we get rid of some states like I don't buy and no offense, any New Yorkers out there or the dealers that live there, but New York and New Jersey, I just don't buy anything. Takes forever to foreclose there. I'm not a fan of Crook County. Chicago can be difficult to foreclose in Crook County. Sorry.

It's fabulous.

Oh, it's just tough. That is hilarious. It's tough. I don't buy. Yeah, I love it. Don't be wrong. I love the sports state.

I love the food.

Yeah, exactly.

Free Britney.

Exactly, Free Britney. Anyway, but we don't buy on the west coast either because it just is so expensive out there to buy. And when I can buy like one note in like say San Diego, I could buy like a whole block and like, like St. Louis or Kansas City, you know what I mean?

So smaller markets are your friend then.

I actually like smaller markets. And we always find that if the house is like at 250 on market value, 250 or below, those are going to be the best really returns for us in buying me wrong, we've made some money on the big stuff, but when you start getting above 200, 250, 300, a lot of times those borrowers may be defaulting, not paying for a reason because it may be cheaper to pay their attorney a thousand bucks a month to delay things versus actually paying their underlying mortgage.

Part of more of a strategic decision to.

Exactly.

Yeah.

Yeah, well, that was my next question too. Okay, if they're ignoring the bank, why are they all of a sudden going to pony over money to you?

A lot of banks and lenders may not want to foreclose. They may not have the manpower, depending how big their institution is. Stuff like that. And the fact that I can buy it, they owe 100 and I buy it at 50. That gives me the flexibility and knowledge knowing like, if this does take me a year to foreclose, I'm still going to do okay because I've got that bigger discount. By buying it, they still owe 100 and so I'll pay. You know, it may cost me a thousand Bucks to foreclose on something here in Texas. Okay, it's fast to foreclose here in Texas. A lot of times borrowers that are in a distress situation or a strategic default, they won't do anything until a shots fired across the bow till literally somebody's pinning a paper on their door that, hey, you're getting foreclosed on. And I've seen funds that have bought portfolios of distress debt not do anything for a while because they literally work with a low hanging, you know, who's going to be the top 25% of that portfolio is going to reinstate immediately, you know, or the middle 50% that needs about 90 days to get back on track. They'll work on that because that's the low hanging fruit. They'll push the other stuff down the road a little bit. That means there's opportunity for me because I'm agile, mobile and hostile and can make decisions a little bit faster. And here's the great thing too. When we are doing our due diligence and there's due diligence that you do on this, not just the property, you look at the collateral files, the loan documents, you look at the servicing notes is from when somebody's calling into the bank or if the bank's calling out to them. That's one thing we really look at to see how difficult that bar is going to be. If they're telling the bank to go pound sand and some choice four letter words that you wouldn't say to your mom, you know, that bar is going to be difficult. If they're calling in and trying to get a loan modification, trying. They're sending in documents to try to adjust things. That's a borrower that I will help all day long. And so that helps us know when we're walking into a situation, is this going to be a difficult borrower or is it going to be somebody if we can meet them halfway?

The million dollar question, and I think I know the answer to it. And you've probably been asked this, Scott, a million times, which is like we just should show over on stacking. Benjamin's recently about asymmetrical risk, right? Lots upside and control my downside. So I think I could control my downside even more. If I haven't bought this note yet and I get to talk to the homeowner, like I get to maybe dig in and maybe do a little Sherlock Holmes on the homeowner and see what's going on. Is there any way at all to maybe eke out some information about the note before I buy it.

You can't call the borrower to negotiate ahead of time. That's a violation of the Consumer Finance Protection Bureau. Yeah, so I wish that was now. It doesn't mean some people have done that. Okay, Right. I can't do that. You know, but what I do do is the workaround aspect of it. So if we have realtors in a specific city, and realtors, you know, pull foreclosure listings and foreclosure filings all the time, they go knock on doors. I'll send a realtor to go over and knock on the door and just see if it's occupied. If it's occupied, I've got a much bigger chance to get it, you know, reperforming. If it's a vacant house, I'm probably gonna have to foreclose. Okay, I know that. Bars. See you later. Sayonara. I'm gone.

So you're not buying that one in the first place then?

Not usually. Unless it's in pristine condition in a fast foreclosure state. And it's also in a warmer state that's not going to have an indoor skating rink in the middle of January or February. You know what I mean? I've had that happen before. Literally got a call from the city one time on a property in Chicago that we bought the note on, we foreclosed. It had been vandalized three times where someone gone and stole the copper. The third rehab time, we get a phone call and say, hey, you've got an outdoor skating rink. I'm like, what are you talking about? Oh, you got water running out of the house, down the driveway, and all the neighborhood kids are over there sliding down your ice.

Literally.

I was like, oh, literally. Serious? Yeah, yeah, yeah, yeah. So I only buy vacant assets in a couple states, like Texas, because that's home for me. It's fast to foreclose, and I got good cruise here. Then also God's waiting room Florida, because I've bought a lot there.

Oh, Lord. Wait a minute. Unlike these state nicknames, we need to just go state by state.

I mean, Ruth, if you ever get tired of Texarkana, you got plenty of Betty Blue hairs there for you to go to as well.

Oh, that's fabulous. But that does. So the answer is kinda, right, that you kinda can get a feel for these. First of all, for somebody that's gonna pursue going after notes, right? We talk about the down payment on a house. We talk about doing real estate with other people's money. If I'm going to look at notes. What's kind of the minimum amount of money I want to bring to the table?

I always say it's good to have some money. You don't need a lot. $50,000. Stuff like that can help you usually buy your first note. I mean like I said, we got some students that bought some stuff that was like five, six grand that were smaller balance notes that they bought at a discount. There's plenty of those floating around. I got started, I was coming out of a bad situation with rehabs. I didn't have any of my own money. So I really leveraged OPM and other people's money. Self directed IRAs. A lot of people will use their retirement account or self directed accounts to buy their notes. And actually about 40% of the balances and self directed IRAs through like a equity trust or Quest trust account is actually in notes.

That's actually interesting, Scott, because just as an aside, Crystal I can't stand, as we've talked about before and I hate these commercials that say I don't buy rental real estate with anything but IRAs. And I'm like. Because you're an idiot. Because there's so many ways to F that up and to get in trouble with the irs. But notes, Scott, makes a ton of sense because you're never going to touch that money. You're not going to touc house. I mean the chance of you messing that up I think is a lot less.

So okay, it is. You can also buy performing notes. You can buy reperforming from investors.

Sure.

And there's a third party servicing company that's licensed as a debt collector in the states that you're buying in. And they're the persons or they're the companies who actually doing most of the borrower outreach once you buy that debt. And so they know what's going on and they send out the paperwork every month on the statements. They gotta make sure those are Dodd Frank compliant.

Yeah, you've got that mandatory intermediary that you need.

Exactly.

Beautiful.

Exactly. Yep. So it's a great way to get started. You know, folks are buying stuff and they're getting a performing out. They can get stuff, you know, 7, 8, 10 return if it's free performing work, maybe had a few months where the bar wasn't paying and the investor bought it at a big discount, got the bar back on track. Then it may you might be able to pick up a double digit return on that stuff too.

So just like you're the collection agency, so where do you guys hang out. Where do I find other note buyers? So that I'm like, hey, what strategies are you using? And, you know, how are you finding your deals?

You used to have to travel all the time to just a few conventions. You know what I mean? But I don't like to travel anymore. I mean, I used to travel, like, 35 weeks a year to speak at real estate clubs and conferences.

I feel like those conventions, though, if they're note buyers, I mean, Scott talks about hostile. There are a bunch of dudes walking around with baseball bats. No, there's a fight in a bar at the end of the night.

What's funny. It's funny is the ladies. The ladies out there actually have a better job with this because most of the bankers, the people at the banks that handle this kind of stuff are guys. And guys. When we get phone calls from ladies or voicemails, what do we do? Do we call the guy first or we call the lady? We call the lady. Okay.

Sexism works in their favor. You're saying it does.

It totally does. You can use AI. I was listening to the first episode, and Ruth had a bit of a masculine voice on the first episode. You did?

Good point.

She had a frog in her throat.

She had a frog and a 12 pack of Marble Reds over 20 years.

Ruth is gonna kick your ass when this is over. Look at that she's giving you, man.

That's okay. We'll shoot her some REO listings after we foreclose, and she'll be all happy. But, you know, the thing you got to realize, like I said, is we do a lot of due diligence. This. It's easy to cancel these bids, too. So, like, if we get a tape in, we may make 20 offers. No, we're probably only going to close on one or two. We don't pay any, like, earnest money deposits, stuff like that. And we're all looking off, basically a spreadsheet and then jumping online to check value. So if we get a bid accepted, then we start paying for due diligence. Then we'll send out, like, Ruth and a realtor to go pull a BPO or do a drive by, you know, or Facebook.

I feel like Facebook is underrated for sleuthing.

Oh, seriously? I call that social sleuthing on the borrowers all day long. I had one borrower one time who we were searching and doing a little background check on her to see what she do, and she literally posted on her Facebook, do I pay my mortgage this month or do I take the kids To Disney. You're not getting a modification or. We found one guy, he was going through a transition. Literally. He stopped paying his mortgage because he was literally becoming a woman. So we saw him document all this stuff online. I was like, yeah, he's not paying his mortgages. He was getting implants this quarter order. And another guy, we found that he broke his leg. And so we're like, oh, well, we'll work with this guy. Yeah, a bit of a medical thing. So, yeah, you find all sorts of stuff and those put everything out there.

Yeah. In those last two instances, you can see the cash flow and determine then, wow. If only, if only. Scott, there were a podcast where somebody talked about this stuff.

I know, I know. You know, you can check out the number one podcast out there for note investing called the Note Closer show, which is truly. You're truly host. I know. We've been doing it for about six years now. 823 episodes, something like that. We're cranking them out. Yeah. I mean, we have me teaching on that. And then I also bring on, like, you guys bring on guest experts or vendors or other note investors to share their story and their journey. If it's going to be helpful to work toward listenership, it is great.

What I. What I love, what I love that you're doing here is this is all about education. Right. And the more you get educated, the more likely you are to be successful. And the number of people I know, Scott, that you've trained to be successful is pretty exciting.

Yeah, that's the thing I'm most proud of. I was talking to a student this morning, and he's made, like 20 offers. He got 12 accepted. He's, like, freaking out. He's like, oh, my God. I'm like, take it easy. We'll probably end up canceling four or five of these, and these others will be good for you. Another lady who just bought a note up in New York State, the guy was a retired military. The lender didn't want to work with him, and so she bought the note. And with like, one phone call, she got the guy back on track, paying 800amonth. And he wants to stay in the house. He's rehabbed the house. A lot of work to try to keep it up. And those are the kind of people that you want to help. And that's the beautiful thing. So it's really, truly a win win across the board as best we can.

That's fabulous. You know what else is a win win, Scott? What is we get to keep driving and you get off here.

Oh, yes, yes. I think I see a distressed note I gotta go take a look at right now. Thank you, Ruth.

Ruth is gonna tell you to roll. I don't know if she's even gonna stop, right?

She may not.

Okay, hang on, McDuck and roll. See y' all later.

It's always amazing to me, Crystal, that our guest just appears along the side of the road right when we need them.

I love it. It's kismet, right? Is that what that's called? We have good karma. We're putting good karma in the world. That's what it is.

We are. Hey, let's put a little more karma out there for a ring to roost. Rotary. And you know what? Nobody lately has been ringing Ruse Rotary. People are just firing us. Questions on our From Everywhere email chain, on social media, and we're taking those. But people want to actually call us.

Yes, please, please, please move your pizza to Daddy Green's Pizza. Daddy O's Pizza.

What?

No, I don't.

That's from the Last Dragon. All right, so head to stacking deeds.netvoicemail and we will answer your question or do the thing. So let us know what you want to talk about or a deal or anything.

Okay, here's what I want to talk about. Crystal wrote our open today, everybody, and her open was all about Grayskull, and now she's quoting the Last Dragon.

Like, what a great movie.

Crystal Hammond, how big a nerd are you?

I'm all in on my nerdom. I'm not afraid to admit it either.

I think Crystal moved her pizza to the mimosas this morning. A little early.

To tea. I like tea.

Maybe that's it.

Tea and brandy.

Who wrote us this week? Crystal.

All right, so our question comes from my friend Sia, and she's asking about helocs. So what is a heloc? A heloc, first of all, is a home equity line of credit. So a lot of people tap into the equity of their homes, and then you can use that money for whatever you like. Some people do remodeling, upgrades. I've heard of people going on vacation. That is not what you want to do with a heloc. Please, please, please don't do that. But other people use that money, too. And we talked about this in the ways to come up with money for your first property, the down payment. You can use it to buy another property. If you have, like, what, 50,000 in equity, why not use that to buy another property? But Sia's question is different because she actually wants to get a HELOC on a rental property. So this is an investment property that she rents out. And so she was saying that bank of America doesn't do HELOCs for rental properties. And some banks just won't touch HELOCs on rental. But they directed her to a credit union, and some credit unions said, yeah, maybe, but up to maybe 100,000 for rental properties. So she wants to know, like, so what is the deal for HELOCs on your rental property?

Yeah, HELOCs, SIA, are a very difficult deal, as frankly, you're already finding out on rental properties, because letting institutions get afraid when you come in with, I'm not going to live in this house, and I want to borrow a bunch of money on it. Which is why when you don't occupy a house, even a first position, a first mortgage has a higher interest rate than your own house that you live in. Which I think Crystal is maybe the key to this. If you do own a house, rearrange your debt debt so that hopefully you have room in that main property, in the house that you live in and do the HELOC on that property. So if you're able to structure your debt so that you're able to take money out of that property, use your home as a place to be able to use that leverage because the bank will give it to you easier. You'll get a lower interest rate. You'll often just frankly get better terms all around. So if possible, that's the workaround we see a lot of people use. The downside, of course, is that more. More debt on your home means things go wrong. Easier to lose your house. So, you know, we saw a lot of people get washed out in 2007, 2008 because of bad math. As Crystal likes to say. Do the math.

Do the math. The math needs to math at every decision you make. And the math makes your decision easier because there's guess what? Math is not emotional. So no matter how many notes you passed in math class, even if it was a love note, math's not gonna return the love there. So math is gonna tell you black or white, yes or no, emotion or not.

Spoken like an engineer. Crystal, like somebody who might use math once in a while.

Logic, logic first.

What made you go into engineering, by the way?

Well, because I knew they made money. I knew that I did not want to be broke when I grew up, because first it was lawyer. Lawyer was a lot of school, but engineer, we had a program in our school too. It was C this the students engaged in engineering. And it is funny too, because I didn't know even through college what the heck engineers do. I just knew was a term for people. But I always loved math and science. So they're like, you should be an engineer. And I'm like, okay, what do they do? Still didn't know for a long time.

No, I had no idea.

A lot, right? Me neither.

But I had friends in high school that went into engineering and all the way through high school, I still thought they were the people that drove the train.

Like, right, yeah, that's your first first impression. But yeah, I had no ideas because even in my freshman year I was a general engineer because that way you take a class in each engineering discipline to figure out which an electrical and computer. Those were the ones that made the most sense to me. It was still, okay, what kind of job can I get? Like, still, what do they do? So it was a long time of. I knew I wanted to make money because I would always look at the magazines like, oh yeah, I'm gonna have a house like this one day. And engineers were the owners.

I'm gonna own a bunch of fourplexes in Chicago. That's what I'm gonna do. Yeah, that was. My son was very attracted to electrical and electrical engineering. So now that's his job too. I was always curious about that. So I asked you cool with the microphone on. So now everybody knows. Meet your host. Welcome to the meet your host section.

Yes.

Of the show. Yeah. All right. I think that's gonna do it for today. Big huge thanks to Scott Carson for joining us. What a funny guy. Crystal.

Yes. I love that he rehabs the buyer and if he finds a good buyer, he finds a way to. If they just were down on their luck, he finds a way for them to stay in his home. And 70%. He's able to keep 70% of the people in their homes. He's doing what the bank doesn't have the emotion to do. I guess that's what it is.

It's so great when you can make money and help other people make money.

Yes, yes.

But you can get that good feeling without knowing Grant Cardone's your dad.

That too. That too.

All right. Where can people get the show notes?

You head to stackingdew.net shownotes and then you will get the hand delivered notes, you know, made by me. Made with love too.

And if people want to made very technically with love. And if you want to call us and dial Ruth's rotary, how do people do that?

Yeah. Please, please. We love hearing your stories, even feedback. Just head to stackingdeeds.net voicemail and then we will read it with a cup of hot cocoa over fire and all our warm fuzzy feels. So please, please, we love hearing from you guys.

I just. Everybody's getting this visual of us that.

Is listening to Joe talk about Disney.

It's all we do. Yes. And then watching Doug's head explode.

Yep.

Yes.

It's only because I've been listening to that Disney story for 27 years.

Doug, did I tell you about all the parks we're going to? All right, that's gonna do for today. Thank you for everybody who's also left us a review of the show. If you could do that. That helps people know exactly what they're getting into with the Stacking Deeds podcast. Thanks to everybody who's done that and I guess, Doug, man, what's on our to do list today?

Well, Joe, first, take some advice from Scott Carson. Like everything else in real estate, mortgage notes are about people. And by focusing on helping your renter, you just might be able to help help them stay in a home and help yourself make some moolah. Second, comparing yourself to others, like Grant Cardone's daughter. Some people might be fighting a different battle than you. And maybe their advice about how to get rich is because they're on a different path than you, too. But the big lesson, turns out I'm gonna need a longer driveway. Either that or I could just pay for a brake job from Al Camino know. Nah, the longer driveway is way cooler. Hey, Crystal, can you give me a good deal on a Runway in Texarkana? Maybe. Thanks to Scott Carson for joining us today. You can find Scott's podcast, the Note Closer show, wherever you're listening to us right now. We'll also include links in our show notes@stackingdeeds.net.

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