Taking Real Estate Notes To Another Level With Scott Carson From Eight Billion With Liza Florida

Welcome to the 8 billion project where we're on a mission to make an impact by discovering and sharing the purpose of every person on this planet. I'm your host, Lisa Florida. Enjoy today's episode. Hi everyone. Welcome to the 8 Billion podcast. I am your host, Lisa Florida and today we've got a special guest. Our special guest today has been an active real estate investor and entrepreneur since 2002, focusing on the niche of distressed mortgage notes. Since 2008, he has purchased over 1 billion in distressed notes on residential and commercial properties all across the country. He has helped thousands of real estate investors and entrepreneurs create wealth through his debt buying tactics and classes, helping his students close thousands of deals. He also hosts the nationally syndicated radio and podcast Note Closer show podcast. An avid sports fan, he spends his free time traveling, gardening and making memories. He calls Austin, Texas home with his better half Stephanie and their four legged kids. Let's welcome Scott Carson to the 8 Billion podcast. Welcome, Scott, to this show.

I am honored to be here, Lisa. Excited to be here.

Thanks for having me. I know I am equally excited to have you on as I promised the audience that Season 4 of 8 Billion was going to be amazing with a wide array of so many different guests and you are going to be no exception to the rule because what I did commit to, especially for season four, was to, you know, go into the financial and real estate industry, which I come from, and you we happen to meet and I thought it was absolutely amazing what you do. So could you, could you share with the audience what you do? Even though I've given you like this amazing introduction, I'm pretty sure everyone's asking like, how did you do all that?

So yeah, everybody honored to be here and just here to give and be an asset for everybody. But for the last, especially since 2008, I've been known across the country as the note guy. And what I do is I focus on buying mortgages, distressed mortgages from direct from banks and investment institutions, REITs and REITs and things like that, where we're buying the mortgage or the debt on a residential commercial property, somebody that hasn't paid in six months usually or longer, we buy that debt at a big discount from the bank, become the bank and then our biggest and number one goal is to reach back out to the borrower or the property owner trying to modify, reinstate, you know, work with a homeowner to create a win win solution for them. If they want to stay or they want to walk, we'll work with them to walk as well. But Our biggest goal is to get them back. And I like to say instead of rehabbing the property, we like to rehab borrowers and keeping the property. So we're always trying to, you know, our tagline is turning problem properties into profitable solutions if we can. So that's, you know, I'm not, I'm not buying, not trying to buy the property, I guess you could say, if you've ever seen a movie, watch the Big Short. I'm a bit like Christian Bale's character in there where I'm looking at spreadsheets and properties all day and working to buy this debt from a variety of lending institutions and then just try to find what's going to be a win for the banks to get rid of it at a big disc going for us and our investors and. But ultimately, first and foremost, a win for the homeowners.

Well, that's exactly why I wanted to have you on from the onset of you telling me exactly what you did. Because what I do like is that you provide these homeowners an option to actually stay in there. And we talked about this when I was on your podcast was oftentimes, unfortunately, the banks don't see you as the individual and what happens to you, they look at the numbers and the risk. I like the fact that you do that for these homeowners. So could you take us down a scenario like so say for instance, you do, you've identified some distressed properties, you negotiate them with the bank and then where do you go from there?

So what's beautiful is the banks, we've been doing this for so long and it's actually easier to do this, is that we reach out to banks directly. I don't usually go after borrowers unless I'm working with like a short sale agent or agent like yourself that's pulling lists and then we'll identify the banks that may have more distressed debt. So we contact the banks directly, they'll send us a list, as I guess you could say, of their problem children or their, the people that are going through financial, financial hiccups. And we're usually looking at something where the borrower hasn't paid in at least 90 days, they're in default. And when we, we get that list, then we do a very in depth due diligence process of evaluating the note, you know, looking at the actual collateral file, you know, what's going on, the hardship letters, what are the borrowers said. We'll look at the property, get a value of what it is, where does it look like, what kind of condition is. And then we'll also look at the borrower. What's going on with them, Are they working? Have they been responsive in reaching out to the servicing company or calling in when they've been late or try to negotiate something? So we're looking at those three kind of things and that helps us to determine the best deals to buy. So if we get a list in, say from a bank, maybe it's 100. We might make an offer on 50 of those knowing that we'll probably only end up closing on probably 10 of them. 10 to 15 of them because some may be kicked out because they've already worked it out with a bar and they want to keep it. Or they may not like our offering so they don't accept it. Maybe they do accept 25 of them, but we end up kicking 10 out because there's something wrong with the property taxes are out of skew or the borrower looks like they're going to be aggressive and not somebody that we want to work with.

Wow, so you really served like it is huge underwriting for you guys, right?

You know, we're very lucky. We've got a great team of people that do this. When I get a spreadsheet, people will laugh about it. A lot of people will spend forever on that spreadsheet and identify their top two or three. I don't do that. I run like three numbers on it and then I just submit an offer in like less than 24 hours on a big. And I can identify opportunities because it doesn't make sense for me to do a deep dive if the bank's not going to play ball, if the numbers aren't going to work for me initially because I. And what's great in buying the debt is that we're constantly adjusting our bids or as we like to say in the industry, fading our bid if the value comes back different or the payment stream is off or there's documents missing from the collateral file. So I'll just submit an offer and it's like throwing spaghetti against the wall and seeing what sticks. And when they come back, then we have an agreed upon price. Then we'll start spending money on pulling broker price opinions. We'll run title reports which cost money. We'll send somebody out to be our eyes and ears and look at the property and then do it, you know, start really doing a deeper dive. So spending all this money on 100 assets that we only end up with 10, we'll mitigate our cost and really focus on the ones that we actually get under contract and we still have the right to, if we need to, we can adjust that bid up to the closing date or up to the end of the due diligence period. Say, hey, we need to reduce our bid, or hey, we need to kick these three or four out because they don't meet our requirements.

Right. So let me. So first question that I'm asking in some cases, are these properties, if they're 90 days, have they had a recorded nod or like. So for the audience reference nod would be notice of default. It's a recorded document that they're under default.

So we get tapes that people are 30 days late, 60 days late, 90 days late. We're looking at stuff all across the country. So in California, where a notice of default is filed, like here in Texas, we don't file notice of defaults. So now there may be an appointment of substitute trustee filed where the, you know, the bank is hiring an attorney to start the foreclosure process. We'll look at for. But we look at stuff, you know, that's relatively newly in default. We don't usually buy that stuff because it's not a big enough discount for us. But yeah, we see deals where the borrowers have filed default where foreclosure's already been started, the borrowers filed bankruptcy. We'll buy those notes all day long if it's in a bankruptcy, chapter seven or chapter 13. And it's different being the banker mindset versus the property owner mindset too, because that's our goal is not really take the property back, although it's a very vital, important number. We never want to buy a note, pay more than a note than what the property's worth. We always got to have a good 30 to 40% spread between what we pay for the actual debt versus the property value.

Correct.

So it's, it's, you know, we get defaults of all time. Sometimes it's just people that, you know, they've gone through a financial hiccup Covid or they got divorced, which we're seeing such an increase in divorces and defaults because of divorces, people leaving and splitting up or they're just, you know, they've been unemployed with the back to work and they just need somebody to talk to to get back on the right track. Changing their payment date maybe a couple days or working to do a forbearance or trial payment plan to get them back on track. Adjusting payments over 12 months or letting them make a partial payment. Because most of the time, Lisa we're buying debt where they owe a lot more than the property's worth. So if we can get a borrower back on track, making their payments, existing payments or something near that for 12 months, we'll often at the end of 12 months, readjust the balance and forgive them 20, 30, 50, 100 grand, depending on what the property's worth. Because it doesn't make sense that the property's not worth that full amount. So it's not doesn't make sense for us to try to collect on something that it's not really there anymore.

So then for you as an investor, right, because you're obviously you're going to try and get them back on track. So as an investor and because you teach this, you know, to other people how, where? Okay, so in that space, even if you've forgiven a lot of debt, I'm assuming you didn't, you know what I mean? You're in that space where you are still in a profitable space. But where does it for you, where does this, the benefit come from? If they make the 12, like say for instance, 12 months of payments, what ends up happening from there?

So let's run a scenario. Let's run some numbers, make it a little bit. Let's just say we'll use simple numbers. These are non California numbers, but we'll use them. Say the house as it sits is worth 100 as it sits. Simple math. Okay.

Okay.

And let's say they owe 125, they haven't made a year of payments and they're behind a little bit. A little dip in the markets. They owe 125 on a house that's worth 100. A mortgage payment on one 100p and I is going to be somewhere, we'll just say somewhere between 4 and 600 bucks. Okay. Okay, well, we'll come in, look. Okay, the house is worth 100. They owe 125. What? Taking their principal and interest, payment times 12, we want to see somewhere around a 20% return on investment based on 12 months of payments. Okay, so we take 500 times 12, that comes to six grand. Okay, six, six grand is not bad. So we want to see if it's. If we look at the asset, look at the collateral file and the service notes and we say, hey, the borrower wants to stay. Okay, let's look to see somewhere between a 15% return because it'd be performing and maybe a 10% depends on what our money costs are as well too, because we've got money costs to fund these deals. Because we use other people's money. It also depends on what their money costs. So if it's a 6% return to us and our money costs are 6%, that's not a good deal for us. It's a breakthrough. If we make 12 or greater percent return, then it makes more sense because we got cheaper money. So six grand on a $60,000 investment, say that's really what we'd offer, is somewhere around 60 cents on the dollar on that. That's a 10% cash on cash return based on them making their payments and what we paid for the note, right?

Correct.

But if they pay for 12 months, after 12 months, it's no longer considered a non performing note. It's considered a reperforming note that we can sell to Wall street or other investors at 80, 85, 90 cents on the dollar.

It's amazing.

We bought it at 60, we're selling at 90. We made 30 grand in that different split, plus the 6 grand of payments or more that they made along the way. So our we made $36,000 on a $60,000 investment over a 12 month period. That's a pretty good yield. Now I wish every borrower worked with us on that to get back on track because we're doing a good thing for the borrower allowing to stay in the house. We forgive 25 grand or 10 grand, whatever the house is over encumbered by at that 12 month period. But if they won't play with us, then we got to go the legal route and foreclose. And that's going to cost us, you know, three to five grand or more to foreclose. So same thing, we bought it at 60, we're paying 65,000 total with our foreclosure cost, maybe say 70 with some light repair. We'll sell it at the auction at 90, 95 cents on the dollar. That could take six months or 12 months depending on the state it's in. And so 25,000 profit on a $70,000 investment still pretty good as well.

Wow, that's amazing. Now tell me Scott, how did you get into this? Because this is definitely a creative and unique way of investing.

Yeah, I was very blessed. I started a mortgage company with a buddy of mine, I used to be a financial advisor, worked with Smith Barn until they closed down my location here in Austin.

I remember Smith Barney.

Yeah, Smith Barney back in the day, the Citigroup and went into banking, was working for JPMorgan Chase as a banker here was the number one banker here in Texas, Opened up a Bunch of different branches throughout here. But a buddy of mine that I worked previously started a mortgage company and I always wanted to be an investor. I actually tried being an investor out of college and fell flat on my face. And was, I like to say I was my own deadbeat borrower. I was facing foreclosure. So I empathize with a lot of people that have fallen behind on bad times. But we started a mortgage company. Our sponsoring broker was traveling the country to all these real estate expos and teaching owner financing, wraparound mortgages, note buying, along with all these other speakers at these big expos. So for four years while we were doing mortgages, I was literally traveling the country every other weekend in a big investment seminar, sitting in the back of the room, not only learning the note business, but also learning all these other creative strategies. And when everything hit the fan in 2008 here in Austin, you know, I just said, okay, instead of me calling banks to originate loans, I just started calling the same banks and said, hey, what do you have on your books that you're looking to sell now on the note space? And just would make 50 to 100 phone calls three to four times a week, three or four days out of the week to like get a list in. And I would, okay, what do you have? You know, I like, I flipped a, I got a note in on an eight unit apartment complex in San Diego that I flipped for $35,000 in 24 hours. I bought a note on this little property in Jacksonville, Florida that was worth 60 grand at one point, was maybe worth 25 grand. Was a big downfall they had there that I paid three grand. I flipped it for 13 grand. You know, I bought a, I put an, got a note in Los Angeles, a 16 unit apartment complex that I wholesaled for $100,000 profit to another investor really fast. But we have bought residential commercial notes, like you said, over a billion dollars in debt over the last start, I believe last 14 years. And it's just because I dial for dollars. I make phone calls to banks. We leveraged LinkedIn to contact these departments, these internal departments at banks. You're not going to call the customer service number. You're not going to call it lost mitigation. Unfortunately you're going to call it like the special assets department or the secondary marketing department. These are the departments in the banks that handle the debt sales. They are reviewing what's going on on the collection side of things. But oftentimes most people don't realize that a one note like $100,000 loan that's in default actually ends up costing that bank about $1 million in fees.

Yes, absolutely.

And so that's why banks are often motivated to sell debt. Maybe not. I wish we were seeing nickels and dimes on the dollar like we did back years ago. But it's still an opportunity for us to buy a lot of debt. It's substantial discounts compared to what things are going for. The auctions and foreclosures taking place.

Yeah, absolutely. Because even back in the day, right when the foreclosures were happening, they were saying like what, you know, what each property was worth. The bank had to have at least a credit line of 10 times that much. And so I was telling people, yeah, the bank of America Chase, all those big lenders, they're not going to come out on media and say like, oh, I have 50% non performing assets. Because remember at the time they were, they were risking getting, you know, taken.

Over by the government, the Justice Department stepping. Now here's the thing. The government literally set up bank of America and some of those other companies with record numbers. We all know the TARP funds that went up. And remember, the banks returned to TARP funds after a year without using a dollar. Here's the situation, okay? In California, you had a product called a pick a pay or a negative amortization loan, okay? One of the biggest originators of those loans was New Century Mortgage out of Dallas. They were doing them all across the country. If you ever watch the big short, you'll see one of the news flashes was my New Century files Bankruptcy.

I still remember where the building is here.

Yes, yeah, I've been there.

Okay, keep it in my memory.

New Century was selling most of their stuff to Countrywide, okay? That led to the downfall of Countrywide. Well, bank of America bought countrywide for 20 cents on the dollar, lock, stock and barrel, okay? Now when a bank goes out of business, the FDIC makes that acquiring bank sign a loss share agreement where they can't sell the assets off below 85 or 90 cents on the dollar for 12 months. So a year after bank of America bought Countrywide, they reported record earnings. Why? Because they bought all this debt at 20 cents of the dollar. They sent out letters and automatically modified people to 30 year fixed rate mortgages at 4% interest rate. So then those assets went from 20 cents of the dollar of value to 90, 100% of value. So they basically made five times what they paid for Countrywide in the first 12 months alone. Just on that alone.

That's so Crazy because back in the day and my, our first, our first reo, you know, our first relationship with the bank was Countrywide. Right. But when, when they, when bank of America were like, who would be crazy enough to buy Countrywide? Right. With all of the properties that they had. Now it's just like, because you and I were both dealing with them, we're just on two other sides of the coin.

Yep. Well, I ran a short sale negotiation company for investors for my travels. So we were doing short sales in 30 different states at the same time. I was buying notes and I was actually targeting short sales as a way to go in. Oh, here's a seller that's motivated to sell. Let's go and see. We can't buy that note direct from the bank and approve the short sale.

Wow. That's why I'm even seeing, like, even in this, I mean, we were talking about the. Scott, like, we are hitting like this really unprecedented times. But even with me having met you now, I feel like I have another option for my, you know, for my clients or potential clients or borrowers or people that just want, you know what I mean? Because, like what you said, depending on the bank. So let me ask you, have you had people like homeowners find out what you do and just say, hey, could you, could you buy the note on my.

Yeah, I've actually turned down to reality TV shows because I don't want to do that. Here's the thing, people reach out to us and then, hey, can you buy my note thinking that I'm, I'm just going to let them stay in the house for free or give them a ridiculously low rate, unfortunately, I can't do that. Yeah, I don't, I don't go after borrowers. I go after banks. So I'm not. If you've got a mortgage with bank of America, Chase, Citi, Wells Fargo, One west, or formerly IndyMac Bank, I'm not going to be able to buy your one off note. Those banks are selling stuff in large portfolios of 50 million or greater. They're selling them to China. They're not selling them to somebody like me. Now, we have bought big portfolios, but those banks, it's just the pricing doesn't make sense. So that's why we target banks. Banks will then send us their problem children in the nuts that they're looking to sell. And I mean, if you cut out the top 10, that still leaves about 4,000 lending institutions out there that we buy from.

No kidding. Yeah.

And we've bought. I Mean you're more likely and have an easier time to buy a commercial note that you own or you're borrowing on versus a residential note from banks across the board. But I mean, we get lists sent to us that we cherry pick. You know, it may be a onesie twosie here or maybe 100 that we can cherry pick from. It just varies. And some banks will say no. If you. Here's a big thing. I don't want you walking to your local bank. I'm here to buy some notes of Florida's podcast.

There's a part of me that's holding back my laughter because I'm going to be like, you guys don't call customer service and tell them you want to buy these.

Because they're going to say. Because they're like, huh? Because when I was a banker at Chase, I had. I remember a couple of people coming, we want to buy our notes. Like, we don't sell our notes, you know, but every bank does sell it. Just whether they don't sell them to you or they sell them to large institutions. And it's not the same. These are internal departments. I mean, we use LinkedIn and leverage LinkedIn like you do, to connect with other asset managers and find things. But it's a different process. It's not every bank is selling. One of the things that we've seen over time, especially over the last year, is that banks have record amount of reserves. And for them to be able to justify selling debt off at a loss, they've got to have the money in reserves to offset that. And that's why the fourth quarter is so amazing. Because over the last nine months you started seeing reserves across the board. Americans are saving more money than we ever have. So we're actually helping the banks out. If you think about how arbitrage takes place, banks, oh, yeah. Five year fixed rate CD at 100 grand, we'll give you 1%. Banks are lending that money out at 3% for mortgages or 5% for. Or 10% for car loans or 20% for credit cards. So they're making 2,000 times on your money they're glad to give you. You're like little Oliver Twist. Please can I have some more interest rate, sir? So that's the thing.

Or even just even in those two, three days that your wire is not going through. I. Do you know how much money they're making off that? Whatever you're wiring for, whether your mortgages or to close. I was just like. You would be. Yeah, you would. It would, you know Blow your mind to find out, even if they just hold it for like a day, how much money they're making on your.

It's literally like something out of the office where it's a fraction of a decimal, but those fractions all add up. You know what I mean? And that's. And I honestly believe. I mean, that's the thing. If you're in the banking business, you're at the top. Everybody wants to be a banker. Banks don't want to be in the fix and flip side, they don't want to be in the rental business. They're in that arbitrage, that velocity of capital of making loans out and arbitrage funds. And that's basically when I buy a note, I become the bank. And we have a variety of ways of working with a homeowner, keeping their house. I mean, we'll modify loans all day long for people if it makes sense in a couple of fashions. But you got to realize, ladies and gentlemen, the more you can learn about finance and numbers, the wealthier you will be and understand the different opportunities that are available out. Out there for you.

So, yeah, that's very. That's very true. And that's why I wanted to do this for my audience. So thank you so much for actually coming on, because I was just like, scott, I need to have you on 8 billion because I am committed to actually showing my audience so many different options of how they can, you know, whether you're an investor and like, and how you can make money during these times. Because we said it on your podcast, right now, it's really about going back to the basics. And then, like I'm saying is, unfortunately, there's a lot of American. I mean, like, with what we see coming on, right, Potentially maybe a crash or. You know, I hate to say that because I don't like scaring people, right? But it's. This is the facts, you know, and they want. And they want to be able to. To start a portfolio. And this is what you do. You teach that.

So one of the.

Yeah, so could you tell us about that?

One of the best strategies that you guys can do out there. And here's something. It's. It's. It's a note type of deal. We're not buying that at a discount, but it's subject to financing. And you have all these people across the country have gotten such amazing low interest rates on their mortgages, you know, 1%, 2%, ridiculously cheap. Okay. But now, through a financial hiccup, you know, they went through the big D and don't mean Dallas, you know what I mean? They're divorced or got lost their job, they want to walk away from the house, they're moving somewhere cheaper, but they can't maybe afford to sell their house at a loss or the bank's not playing ball with them. One of the things that we do is we target those type of borrowers to come in, pay the, you know, take over that payment subject to the existing financing, put in a land trust to have the assignment of the land trust interest to us. Start making that payment on time. The borrower walks, they're still on the mortgage, but now somebody's paying their mortgage. If they've been late for six months, we'll make up that last the six months of payments to help get back on track. They can't go buy a house because they have a mortgage late.

Yes, correct.

Four months. We're paying their mortgage, getting their credit back on track. We may take that property and then either turn into a rental at a higher interest rate, obviously making arbitrage what's owed on the PITI and then the market rent rate or will owner finance it, bring in somebody who's got a sizable down payment, doesn't have the credit score, the fico, but has plenty of money for a down payment. And then we'll do a wraparound mortgage, you know, owner finance it to them at 5,6% with a down payment and cash flow that way. But be able to acquire and control real estate without any money out of our own pocket for the most part, or having to qualify.

That's amazing because everyone was all like, you know, and I was even talking to another friend and she was just like, well, what if you don't you know, qualify for even like traditional mortgage? And I was like, well, there's so much creative financing right now. You know, I said for me back in the days, or at least was obvious, I was just like, hard money lending, right? You're going to be paying a little bit higher interest, but you're typically just using it to bridge during like a short term time before you're trying to max.

Exactly, yeah, yeah.

And this is exactly. And so you teach all of that too, right Scott?

So, yeah, I've been teaching. I started teaching real estate investors how to dive in the notes space because most people are like looking at me like I was speaking Greek or Latin note. I mean, I mean you were. You're a, you mean you're a mortgage broker? No. Are you a realtor? No. Well, what are you then? You know?

Yeah, it's like this thing in your pile of loan documents. It's called the note.

Yeah, exactly. So, yeah, I've been teaching investors how to do this as a way to not only get the word out when I'm doing, so I have more people I can sell notes to. But it also helps us raise capital. People are like, okay, I like what you're doing. I understand what you're doing now. Instead of doing the work, I'd rather write a check and invest with you. And so that's what we've done over the last 10 years. We're very, very proud of the fact that we've got a lot of students who've gone out and done amazing things. They've bought 25, 30, 50, 100 plus notes in a year and making a big impact by keeping people in their houses. That's our number one thing. If people don't get into the note business to take property back, I mean, it is something that happens probably 30, 40% of the time. We end up foreclosing or offering cash for keys for the board of Walk. But I don't want to own real estate. I mean, I'm investing about 30 different states. I want to own the note, which turns into cash flow each month without having to pay any rehab costs, without even pay any attorney fees. We pay a servicing company to collect, and then if the borrowers don't play ball, then we just boot it to our attorneys. But I'd rather. I want that cash flow coming in without having to do any work.

Yeah.

Dealing with toilets, tenants, and trash outs.

Yeah, no, that's. That's where I. That's the other side of the coin I was on whenever it was all, like, we've all been there. No. And then everyone. When, back in the day, when. When, you know, like what you were saying, like, 60% of the market dropped because they were all like, you want to see what real realtors are made of? You're like, you're gonna knock on that door and find out if you're, you know, there's even someone that's there that's living. And then if you walk in, you're just like, you don't even know what's gonna pop out of anywhere. Right.

So what's your. Lisa, what's your scariest story?

Oh, my God. The scariest story. Okay. It wasn't because the good thing is because we knew that they were foreclosed properties. I would always go with my uncle. So my. You know, my uncle. So then for me, it wasn't a scary story in terms of, like, anything, but, like, I mean, I'd walk into homes that were just completely trash. There was, like, poop on the floor. It was. You know what I mean? But you won't know because they could have been broken into. Someone homeless could be staying in there. It was just a lot of, like, just. Just different things like that. But I don't know, obviously, since you've been offered, like, two shows, have you seen any interesting.

Oh, my gosh. So I've seen some crazy ones. I bought a note on a portfolio of notes in Ohio and Michigan. There's one property in Dayton, Ohio, and the borrower hadn't responded in over three years. Why the bank had already started the foreclosure, I don't know. But we bought the note. We reached out, couldn't find anybody, any homeowner, any family member. So we sent a realtor out to change the locks because we have the right to collect. Well, we found that the guy had hung himself in the house. And nobody had. Three years been dead in that house. Okay. I bought a note, and he gave.

The banks three years to, like.

They didn't do anything, the banks. This was a lower value asset. So banks want to focus their time on the higher end assets. This is like a $30,000 property in Dayton. We bought. I think I paid five grand for the notes. Okay. And the guy just didn't have family, hung himself. It was. There was other properties around him. Nobody had seen him. When we talked to the neighbors. Yeah, the realtor got a bit of a surprise when she walked into that house and saw that. Bought a property in Salt Lake City. Bought the note, foreclosed in Salt Lake City, and it had the worst roach infestation in the county. And I was actually up there when we changed the locks and walked in there, and I was like. It had kind of a wall separating the kitchen and the living room, and there was roaches, but not as bad. Well, I went and just kind of pounded the wall because we knew, we're gonna knock that wall down. It rained roaches down on top of me. It was so bad that we got junk. Guys would not get the junk. They came in and said, heck, no with that, and they took off.

So what did you guys. You had to obviously do extermination first.

We had to 10 it up, exterminate it. I mean, it was a little bit. We bought it cheap enough, so it still made. We still made money on it. But this is why I don't do Rehabs. I said, somebody else to do it if we have to do rehabs for the most part. Let me tell you a good story. How about we tell a good story?

Yeah, let's tell a good story.

So we bought another portfolio, and it had one property in a city in Illinois, South Beloit, Illinois. Okay. And when we were looking at this, the collateral file was just huge. I mean, it was just huge. And we bought it. It was something we threw in. I think we ended up paying only five grand for this note. The borrower owed 65. The house was maybe worth 35. She hadn't paid in four years. Okay. And I said, okay, well, I'll give you five grand for it. Based on that was part of a portfolio. So when all the collateral files showed up, there's this one big box. I'm like, well, that must have 20 files. No, it was one file. And this lady, Sheila and William, her husband and wife, had lived in the house for 18 years. They've been trying to do a loan MoD for four years. But every time they would go down that process to get a loan mod, the loan had sold, it sold to somebody else, fourth person. And so there it was. Every fax document, her income statements or bank statements, the hardship letters, the tax returns for four years. Well, right out there. So I'm like, okay, I got to see what's going on. So I open up the first page of the file, and there's her most recent hardship letter. And you could just almost feel the anguish. Like, we've been trying to do a loan mod for four years. My husband had a heart attack a couple years ago, was out of work for a year. He's back to working. We've raised our three daughters in this house for 18 years. When we took out the new loan, it was because of value. We used it to pay off some credit card debts. But then the market tanked, so that's why we owe more than the property's worth. We really want to stay the probably, like, oh, this is easy. So I literally picked up the phone. I don't usually recommend this, but I picked up on, said, I want to talk to this bar. So I called, and Sheila answered the phone, and she's like, hell. And I said, hello, is this Sheila Blank? And she's like, yes, it is. Hi, I'm such and such with my inverse asset fund. I said, you should have gotten a letter that your mortgage has been sold. She's like, yes, I sold again. I was like, whoa, relax. This is a good day. She's what do you mean? I said, look, I'm looking at your file folder here. Why don't we make a decision right now, get this thing solved? She was, are you serious? I'm like, yeah. I said, okay, your existing mortgage payment is 453Amonth. Could you start making that existing payment? She's like, yeah, I could do that. I was like, don't worry about the past. You can make 453amonth right now going forward. She was like, yes. I was like, okay, can you bring some money to the table? Can you bring five grand to the table? She's like, no. I said, well, what can you bring? Did you do your taxes or. But she said, yeah, well, I can bring 2,500 the table right now. I was like, okay, because when you modify, you always want to have a little skin in the game from the bar. You don't want to do it without any skin in the game, otherwise you're going to have a high default rate. She's I got 2,500. I said, well, could you pay a little bit extra each month on top of your 453 to make up that other 2,500 for the first year? She's like, yeah, I could pay 200 extra per month. Wow.

Right?

I said, let's do this. I said, okay, Sheila, you start paying 453amonth, your main payment, you bring $2,500 to the table and meet my attorney not too far from you, and then you pay an extra $200 a month on top of your 453 for the first year. Will you do that? She's like, yes. Here's what I will do for you. At the end of 12 months, what we'll do is go back in and adjust the balance of your mortgage from 65 or 70, whatever. We'll adjust it down to the value of the property at 35. So we'll forgive you, like 30 grand in back debt. She's like, oh, my God, that's amazing. So that's not it. We will also get this. We'll also, based on your existing mortgage payment, it would take you 33 years to pay off your mortgage. She's like, yeah. I was like, here's what we're going to do. When you make those 12 months of payments and you follow through, they tell you, I'm going to retroactively drop your interest rate to zero so that every penny you pay towards this mortgage goes towards the principal. And then you'll have your house paid off in 72 months. How does that sound? She's like, yes, yes. What I got to do? I said, I'll have everything in my attorney's office. He'll contact you in the next week, and we'll get this all taken care of. Okay? Can you do that for me? If you fall behind, I want you calling my servicing company or calling me or calling my company, if anything. She's like, yes, yes, yes. So sure enough, a week later, she shows up with a check for $2,500. Her husband broke down crying at the closing table with, my turn. Okay? Six months goes by. They're paying on time. Paying on time. I get a letter from Sheila and I said, remember, they raised their three daughters in this house, and their oldest daughter was 21, had a baby, and they named the baby Carson after me for helping them out. And literally, they paid on time. They paid their house off right at the six years, which is 20, 27 years sooner than they would have been. The values appreciated. It was a good win for them. It was also a win for me, the capitalist that I am. If you think about this, ladies and gentlemen, I paid five grand for the note. Okay? They paid five grand plus 453 times 12, which is almost another six grand. They paid 11 grand roughly in the first year. I made a pretty damn good return on my money plus 453amonth for basically five years after that as well. So it was a win win. But I think it was a bigger win for Sheila and William.

No, absolutely. This is why I do the 8 billion podcast stories like this. Scott, you actually almost had me. Well, I was actually in tears because I'm all like, imagine that. Like, I know from the real estate side and even trying to modify our loans back in the day how, like, grueling that process is because it's just like sometimes you get to the end and then it's like, oh, you don't qualify based on your guidelines. Oh, it got sold off. Oh, it got sold off. And like, genuinely, like, I mean, what you're saying, like their hardship letter. That is amazing.

This, you know, one Christmas time, we bought another portfolio that had some low, low hanging stuff, like Cleveland, Columbus, Ohio, Cincinnati. We bought a portfolio, some really good stuff, and they had just, I hate to say, but just junk in the bottom as far as notes. But somebody was living in these properties, right? Like, there was a note in Cleveland, Ohio. We came across that it was part of our portfolio. The house was maybe worth 16. We paid a grand for it, and we found it's a single mom of four kids living in there. So we just forgave the debt and deeded the property to them. We just really said, hey, merry Christmas, you own your house now. Wow, you can do what you want with four kids. Now on the short sales side too, we once had a short sale negotiation that ran four years of delays, delays, delays. But we did it in intensive. We meant to do it so that the bar with her two kids could go to dentist school and get a degree in that four year time too. That's the thing. I love it because we do a lot of the same things day in, day out, but every deal is different because the borrower is different. Everybody's going through something different. Look, if I can make money and help people, great. If people want help, we will help them left and right. If people don't want to help, hey, we're just going to send it to our attorneys and foreclose and go that route. But the beautiful thing is you see a lot of great things in Americans. You see a lot of great things. People that still want to have that dream of their home with a white picket fence, their two kids and the dog or like that. There's a lot of people out there that need help, that want help, that are willing to meet you halfway. And that's why I stopped watching the news. Because the news and social media oftentimes just spreads the negativity and the worst of the worst out there. This cancel culture and stuff like that.

So yeah, no, that's amazing. Now I know why you were offered two TV shows. You're just like, you know, like those flippers, but you're just gifting them something beyond anything that they could now.

You know why? Because if I'd been on TV on HGTV and I talk about a story like this, I would be inundated with people, oh, can you do this? Can you do this? Can you do this? And no, we can't. People wanting a free freehand, it like, no, no. Everybody pays rent, everybody pays their mortgage. You've got to show up. There's no such as a thing as a free lunch. And unfortunately, like we were talking earlier, I think that's what's happened the last two years. People have been given free lunches or free stays. They don't want to go back to work. They're used to that free lunch. And that's part of the problem of what we're seeing right now. Unemployment is still high or sorry, we have all these jobs that need filling that people aren't stepping up to fill because, oh, I'll just stay home. I can make more off unemployment than actually working for a living.

Yeah, that's what we're saying. And that's why I'm all like, we are. I mean, I just don't have the words. And I'm just like, you too, Scott. I don't watch media, but yet I have to stay, you know, like, I'll get forwarded media like, I just got forwarded where JP Morgan Chase made the big announcements that we are going to see mortgage defaults. Well, I think they kind of knew this for a while. Surprise, surprise. They kind of, you know, it's a. It's just like, oh, what's the schedule and timing release of our announcements? Nuts, you know, but it brings me so much joy to put people on like you, Scott, where you can get so many benefits. If you'd like to join Scott's course and learn how to become an investor or in a. No, in a way, you're like an angel investor. That's so weird. That's yours. Hashtag angel investor.

There we go. Exactly. We've been called the white knight, the shining white knight and the riding on the white horse to save people that they're for. But look, I'm a normal guy. I've been in people's shoes. That's why I empathize with people that are facing difficulties. You know, we try to help everybody, not everybody's. And sometimes the banks aren't willing to play ball with us either, too. They want to hold on their stuff and drag it out and foreclose because they see the value, what's going on. And it's an interesting time, I will tell you that.

It's going to be an interesting, very interesting time.

We had part of our portfolio get hit hard this last year, too, was people stopped paying. And we were. The banks, they're like, okay, we had half our portfolio stopped paying, so we had to start figuring out how to try to get people back on track and reaching out to them. And we still have some people that haven't paid in the last 18 months that we couldn't foreclose on because of all the moratorium. So I feel both sides of the coin when it comes to everything, you know.

So you can truly attest to that. Right. With the moratorium ending now, you're just like, okay, now you're probably in that situation space. Like, I have to, I have to figure out these notes because. Yeah, yeah.

So we'll give you an example. Got a Property in Winston Salem, North Carolina. We foreclosed. Actually, we did de loo a Dean Loo with a borrower. The borrowers moved out. We had squatters move into the house. Okay, okay. Waters moved to the house in North Carolina right as the moratorium in it. So we couldn't evict squatters living for free in a house that we own because the county wasn't doing any evictions of any sort for 12 months plus months. And I'm like calling the county, I'm sorry, we're just not enforcing any type of eviction at all for the next 12 months. And I was like, oh, so, you know, I've been ready. Because I'm like, okay, let's start filing some eviction notices, some foreclosure moratoriums of this stuff ends. Like I say, I'm glad to work with people, but I don't run a charity. I donate to charities.

Okay, yeah, no, absolutely. And that's what you're saying, like, she made, you know, was that Sheila? Was that Sheila. Right. Sheila made good on her 12. And I'm pretty sure that you could tell by the hardship letters because there was a stack of them that they really trying. And that's, that's what I mean. This again, that's why I was like telling God. I was like, really? Again, this other market just give me the strength to get through it, you know?

Yeah.

But now I'm. I'm much better connected. I have other resources that I can give them to. I have, I've just been, I feel very blessed to have this really great network, including you, Scott.

Well, that's the thing is what we connected on LinkedIn. I remember it was Neba Blast or something like that a while back. And that's the thing is I think knowing your energy, knowing. I think we've met before. I think we may have met back previously, eight, nine years ago. I was looking and I think I may have found an email from you that we connected originally back in the day out there. But that's the thing. I think those that people that have been around for a longer period of time, you understand the opportunities and you understand the connections and that you don't burn any bridges as best you can because you never know when something's going to happen or when that pendulum is going to swing back in the opposite direction in the market.

And that's what I was just going to say, you know, before I ask, you know, your information, so people could actually join your programs and get a hold of you one of the things I wanted to go back to. And probably at the beginning that you were explaining that as you traveled around and you got to hear how these notes were negotiated. And then of course, you, like you said, you started dialing. I mean, is this what happens? Because you said you don't call customer service. A part of that work, too, was calling in and probably getting denied by the banks. Like, who are you to try and buy a distress note? So, I mean, you're talking about many years of established relationships, but it did take that initial hard work too.

Yeah, I mean, I would make 50 to 100 phone calls a day. It's gotten a lot easier now because there are things that are out there that didn't exist 10 years ago. I mean, it's so much easier to use to make connections. Like, I just had 20 of my students in the month of August. I would give them list, and they would be making 50 to 50, 100 phone calls a week. And we built a new database of 2,000 new connections on LinkedIn and emails and phone numbers that we can tap into on a monthly basis. Because banks won't sell something every week or every month, but they will usually at least once a quarter or at least once a year. And I had another thing that was in 2010 when everything was going crazy. Lisa? Yeah, I'm a big baseball fan. Okay, baseball fan. So I was like, you know, you're seeing those commercials of, you know, $6 for a beer, $5 for a hot dog, seeing all 30 parks of your family, priceless, you know what I mean? Those Visa commercials. So I was like, I want to do that. I just gotten divorced. I just had a business partner that we split. I'm sitting there, april, sorry, March of 2010. And I said, okay, I want to go do that. What's it take for me to go around the country? Because I don't have a lot of connections right now. I don't have a lot of attachments. I can kind of be a free man. So I planned this 30 week trip across the country to go to these major league baseball parks and the power of marketing for those out there. So I started. I'd been sharing blogs and videos of what I was doing over the matter of a couple of weeks. I had four or five investment clubs reach out to me and say, hey, Scott, we see your stuff, we like your stuff that you're sharing on YouTube or the blogs. Would you be willing to come out to our investment club and speak to our members? I'm like, yeah, when do you want me to come out? And the dates that they had lined up, lined up perfectly when I would have been in that town to watch baseball. Okay. So I was like, okay, God, I get you. Sold everything that I own except my truck and my dog and some clothes. And I jumped in the truck. And what I thought would be 30 weeks of traveling the country turned into three and a half years. And I met so many times. I spent like three months in Florida as I was going, like, door to door. Instead of talking to borrowers individually, I was knocking on banks and talking to the bank presidents and looking at their portfolios and buying debt and then meeting investors. And it was just an amazing three and a half years of travel and meeting banks and making deals happen, other investors out there. And it's just, that's, you know, that's why that revolutionized my business. Totally changed how my. Almost like a grassroots effort for a politician and raising capital. You know what I mean?

It is. It is. Because, like, that's what I'm saying. They. There's. I know everyone wants to be. Back in the day, I knew everyone wanted to be this. These foreclosure agents, right, because you. You just. Yes, they were. They were assigning properties. And then, you know, it's not as, you know, you don't have to go to the listing appointment, but there is a lot that's involved with it. I mean, we had. We had, you know, one of our biggest mistakes, too, was when we gave them our zip codes. We went out to the high desert. Well, they were. Because, you know, we. There was more foreclosures there, but we were thinking, oh, shoot, like, that's an hour and a half. So every time we were assigned, we had to go drive out there. So it just made sense that after a while we kept someone out there. We were, okay, these are your properties and assign it. But, yeah, I mean, like, it's a learning game. But that's sometimes often when you look back, it's all of that hard work that goes into all that that makes everything so much more fulfilling.

Well, anytime you can stand out as an individual and do a little bit extra, I mean, REO agents have a tough time because they're turning the utilities on. They're having to do all this extra money out of pocket, hoping that it sells to get reimbursed for a variety of things, and that's a lot of work. REO agents. I want to be an REO agent. It's a gravy trainer. No, it ain't.

No, it's not.

It takes work, you know, and work is a four letter word to many people, you know.

Especially with what we are going through now.

Exactly.

We have got to retrain so many people. But gosh, I mean this is amazing and I am pretty sure you have so many more stories. But of course we have an hour and you have been so kind enough to like give us a whole wide array of so many things. So thank you so much for sharing. If anyone from the audience would like to either get a hold of you or check out one of your programs, what would be the best way to get a hold of you?

It's pretty easy. If you can go to our main website is we close notes.com that's we close notes.com you'll find our training, our podcast. We, you know, check out if you like podcasts, what you do and make sure you hit the subscribe button right now because Lisa's doing an amazing job at the subscribe button. To hit rate and review, leave her five star review. You check out my podcast, the Note Closer show podcast or our Note Night in America podcast, which is a replay of our Monday night webinars that we've been doing for 10 years. Every Monday night on some sort of facet of note or real estate investing. It's free to the free to the audience.

Thank you so much. So again, thank you to Scott for his amazing work with the Note Closers and then for all the things that you've done and the difference you've made in other people's lives. I'm pretty sure we've got a fourth quarter and a 2022 that is going to be unbelievable but probably might be the best word for it.

Exactly. Out of this world.

Out of this world. But I'm definitely going to be. Scott's going to be one of the people I'm going to be on speed dial. Scott, what do you think of this?

Hey, bring it on, Lisa. That's the only way we, that's how, that's how you make lemonade. You take lemons and turn them into lemonade with a little bit of work and you just keep, keep rocking along. Love what you're doing with the 8 Billion podcast. Like I said, everybody make sure you hit that subscribe rate button. As podcasters, we love to hear from our audience. So make sure you do that for Lisa. She's working hard. And was it a season four Kudos on the one year anniversary as well. And keep rocking and rolling, Lisa.

Oh, thank you, Scott. Like I said, you're always welcome on this platform. So anyone? Everyone, I should say who tuned in. Thank you for tuning into this week's episode of the 8 Billion podcast. We'll see you on the next one. Thank you for listening to today's episode. If it's moved you in any way, please review and share your thoughts or text me your thoughts at 949-247-2800.