The Hustle of Note Investing: Straight to the Money Podcast with Dylan Silver

Hey folks, welcome back to the show. Straight to the Money podcast brought to you by Silver Property Ventures. We buy distressed properties, we wholesale deals, we work with investors, and today on the show we have note buyer based out of Austin, Texas, Scott Carson. Scott, welcome to the show, Dylan.

I am honored to be here and to be around like minded individuals and in the distress space, but strength of the money, baby. We're here to help. Whatever.

We talked a little bit before hopping on here. I'm glad that we were able to connect. You found me on LinkedIn, which means my marketing is getting out there. I want to ask you, how did the real estate space come about in your life? Did you always know that you were going to be in real estate?

Yes and no, I think you could say. I mean, I grew up in a small town down in South Texas called Ingleside. Dad owned the local hardware store and I worked in that as a young kid and stuff like that. I was always interested in real estate, but didn't think I do much besides taking a real estate class in college at Texas State or Southwest Texas. When I went there, fast forward. Bought our first house out of college, married, you know, you do all those things. Bought our first house in Round Rock. And my realtor comes to me like, hey, you guys have great credit. You should buy some more stuff. You could get great finance. This is back in 2001. So we had a first, second and a primary. So I went and bought two more investment properties, 100% financing, right? So I had six mortgages. Thought I'd be the next, you know, landlord, the great landlord. And in a matter of about 90 days, I got laid off from my job and my two tenants got laid off from their job. So I went to being an excited landlord to being a distressed borrower very quickly. Okay. Lucky for me, we were able to get rid of those two investment properties. We were able to modify our loan and save it about a week before the foreclosure auction. And I was pretty disappointed there as my first four. I think the only person that made any money was our realtor, you know what I mean? Fast forward a couple years later. I was working as a banker for JPMorgan Chase. Here was with the top banker in Texas. And a buddy of mine started a mortgage company with a couple other real estate investors here locally. And they were going around the country teaching about creative financing and doing fix and flips. I was like, you know, I got kicked in the teeth of hand, but I think I could do that. You know, I'd love To go do this and try this, I can always go back to banking. Yeah, let's give it a try. So 4th of July actually in 20. Wow. It's hard to believe 21 years ago this week marks my foray as a full time investor, basically as a mortgage broker. It's hard to believe that. Yeah, I gave my two weeks notice then. Anyway, so I started learning about creative financing. We were doing mortgages and then I started learning real estate the right way about subject to deals and options and wholesaling stuff. And I was very fortunate for four years to have a really great apprenticeship with a guy by the name of Bob Leonetti and a lady named Jamie. Kayla learned a lot from Ron Legrand and Lauren Legrand circuit because for four years we were traveling the country doing mortgages and I was just, just a sponge learning the right way to do real estate investing and started wholesaling, started flipping property, started doing some light rehabs and then when everything hit the fan in 2008, I got out of the fix and flip side.

Yeah.

And started buying notes, started buying distressed notes because that was I taught and that was a great opportunity. And now fast forward 17 years later, we've bought thousands and thousands of non performing mortgages on residential commercial properties and just had a blast doing it. I like being the lien lord, I like being in the distressed note space. It always pays to be the bank and it's definitely a niche. I'm only one of like four people in the country that teaches like that niche of note investing out there to other investors. But I love what I do. It's, it's, it's always never a dull day. Like yesterday I was looking at 187 notes from one hedge fund. I got 3,000 other notes in just a few minutes ago I was looking at before we jumped on here from a hedge fund out in California to review. So it's a lot of fun. I love what I do.

It's an alternative for these people versus foreclosure, right?

Yeah, exactly. When I buy the debt I'm usually buying it on a note or a mortgage where somebody hasn't paid in six months to six years so they're already behind. And we buy in about 20 to 30 states. When we buy that debt, we're buying it at a discount because that's how we make our money. We create our own equity and then how we make a good return is either a go to the bar, say hey Dylan, you haven't paid your mortgage in six months. What happened? You Know, did your, did mama die? Did grandma get run over by a Rainier? Did you get divorced? Do you have sickness? What you know, do you want to stay or do you want to go? If you want to stay, we're glad to help rehab you and keep you in the property and get you making payments on time through some sort of payment plan. If that doesn't work, then we can give you cash for keys to walk, help you sell the property and make it a win win. Or if you won't work with us, you tell us to go pound sand. I'm the lender. I have the same rights that bank of America does. I could foreclose and then take the property back or sell it at auction. So our preferred strategy is to keep people in their houses. But that's what we do. I mean about 70% of the time we're able to keep people in their homes, work some sort of payment plan out with them that turns into a double digit return for us. And then I'm not responsible for toilet sins and trash outs. I've been there, done that, got the scars and the tattoos. But yeah, it's a great way to help make America great again. One distressed bar at a time.

So how does it, yeah, how does that work? If they're not making payments to their lender, why would they start making payments to you? I mean, they're facing foreclosure either way.

Great question. That's a great question. It's the number one question we get. Why wouldn't the bank go ahead and foreclose? Because you got to realize banks have thousands and thousands of thousands of these properties. They're going to work at the higher value ones. We work in the. Don't get me wrong, we bought million dollar loans, but we buy a lot of lower value stuff too. But the banks often want the people you think you've got. People in loss mitigation or customer service are making like 18 bucks an hour. They don't give a rat's ass about this borrower. Yeah, and they usually want the bar like, oh, you're behind because you're out of work. Well, you got to bring the full year to the table. And they just don't have that. With my team when we buy a note at a big discount now we've got a lot of flexibility because a, the bank was happy to sell it to us at 50 cents a dollar because they collect that, they can go now, lend that out, you know, 50, 40 times. They don't have to deal with foreclosure. We have much more flexibility now because they were in at $0.50 of the dollar. We can say, hey Dylan, I know you can't pay 12 months of back payments, but can you bring three or four months to the table? Can you bring a couple months to the couple grand to the table? Can you pay $100 extra per month to get you caught back up? So we've got a lot more flexible strategies to do. Don't get me wrong, we got to foreclose a chunk of the time too. And we buy stuff that we do just foreclose on because it's vacant or the borrowers have walked away, they're deceased. But the great thing about that is the banks like to work with us because they can literally get that money now. They don't have to wait around 3, 6, 12 months for foreclosure to proceed. Depending on which state it's in, they get the money to move on and then we've got the flexibility and can really work with the borrower to create a payment plan that wins for both parties.

So, I mean, I'm a real estate agent in Dallas. I almost want to at some point in maybe the near future deactivate or not renew or hand in my license so that I can do some more of these strategies. Because so much of what I do, I feel like I'm handcuffed with the real estate license. Because you have this greater responsibility for anything related to real estate. You have to disclose, disclose, disclose, disclose for wholesale. It's even difficult right in the, in the note buying space. For instance, if I was to go in and buy these notes, these people find out that I'm an agent now, I'm like taking their house.

No, no, no, hang on. Let's, let's, you're, you're, you're merging the two together. You're thinking you're coming from a property. Yes, you're buying a property. Okay. When you buy the note, you're not buying their property. You're the lender. And there are servicing companies, third party servicing companies out there that do the collections, that will handle the foreclosure. Your name, personal name, doesn't need to be disclosed. If you're using an llc, the LLC is the investor. It's not you, Dylan, Realtor to do. We have plenty of students that are realtors that do the real estate side of things, but they also buy notes and that's handled through a third party servicing company. That's who the borrower is contacting to make payments. That's who's contacting the borrowers to try to get them back on track besides attorney. So it's not a conflict of interest. You don't have to disclose to the borrower, hey, I bought your note. Well, your LLC isn't you. You know what I mean? So it's not the. But I agree totally. It's becoming harder and harder for wholesalers and other investors to be able to flip properties to get into it. And if you are a licensed agent, yes, you've got to disclose that. And that can be good. It can also be bad for you in a lot of cases.

I want to ask you about getting into the note buying space. So I've seen a couple people, there's a guy out in Florida who I know very well that are really highlighting the fact that you can buy some of these notes for pennies on the dollar, like for next to nothing in some cases. Now, not all the time, but in some cases those are the deals that I actually want because I think in many cases the headache that's involved for, you know, airship and probate issues and so on and so forth is so tremendous that people will be willing to kind of part ways with it as long as it doesn't go to foreclosure, so to speak. But I'm curious to get your perspective on that.

So first thing first, let's, let's, let's make some clarifications because I want people to realize this. We used to be able to buy notes for like 5 cents on the dollar. I mean, I was buying in God's waiting room for Florida condos on a 1A for 5 grand back in the day, all right, Bought hundreds of these condos. We took them through the foreclosure process because people were way upside down and sold them the auction or held them for a while. And it took two years to foreclose on a lot of those in Florida. Texas is a different story. Texas is the fastest foreclosure state in the country. So stuff in Texas is more expensive than say in Florida or say Ohio, which can take nine to 10 months, or Indiana, which is nine months. You know, Texas and Georgia, the two fastest foreclosure states in the country. Now the thing is, when we're buying notes, we still buy big discounts, 50 cents on the dollar. A lot of times that's a phenomenal discount off of either the value or the balance, whichever is less. Okay, so we might be at 25 cents of the dollar value. Now we don't have the whole equity, but we have what's owed on the, on the value of the note. So yes, you can buy these at a discount. And they're. The fact that you try, there's multiple exit strategies. It ain't just foreclosing and selling. It's try to keep the bar on the property. You could do a deed loom, you could do a short sale. You know, there's a whole variety of different exercises go along with it, but it's a lot less headaches because a, as a realtor or a property owner, what are you dealing with? The property management, the rehab. Right. In a lot of cases. But with us, hey, if they won't, if the borrowers won't play ball, then we just stick it with our attorney. We pay our attorney $1,500 to foreclose in Texas, 3,500 to 5,000 to foreclose in Florida. They handle it, it forecloses, we bid it at auction. We could sell the note actually at auction as an reo sale, you know, just like other lenders do. And we're done with it, we get our check. We bought it at 50, we sold it at auction somewhere between 80 and 90. That's a good day, right? Yeah. No property management, no toilets, no worrying about, you know, little Timmy, you know, flushing his rubber ducky down this toilet. The other thing is too, is if we buy a non performing note and we get the bar back on track, which we were able to do about 70% of the time, we're doing that in like the first 60 days, right? So now the bar's excited to be back in there. They put some skin in the game to stay in the property. After 12 months of on time payments, that note is reclassified on the secondary market, sort of as a non performing note, but as a performing note. So if I bought it at 50 cents, I could turn around and sell it at 85.90 back to banks or other institutions or IRA investors. I got some skin in the game for the bar on the front end. I got 12 months of payments and then I got a 35, 40% lump sum at 12 to 18 months. That's a good day without ever owning the property. You know, I still put insurance on the properties and make sure insurance is on there. If the borrower's not paying it, I gotta double check taxes, make sure the borrower is paying the taxes. If they don't, then I gotta pay that to avoid a tax sale and making sure that the due diligence is right. But really, Dylan, when I'm Buying isn't the actual property that you're going to go out and knock on the door and paint the paint or carpet. This is what I'm buying. I am buying this loan file. You know, this secures my collateral of the property. I don't want to own up with the property, but if I do, this is the power. This is why I say the pen is mightier than the, the hammer. You know what I mean?

Yeah, yeah, yeah. I, I want to ask you about kind of the entry point for people or how I want to get granular really and talk about logistically how much money people need to have saved up in order to execute on some of these strategies. I am bootstrapping to some degree, but I'm also looking actively for people to open LLCs with and maybe capital partners. And one of the things that I realized going along this journey was yeah, sure you can make some money wholesaling, but it's very tricky right now and I think for probably the last however many years, once this has become popularized to make enough money wholesaling where then you can start fix and flipping. I used to see that as more of a common trajectory. So now I'm really looking at, okay, I've got to get a nest egg, however much money it is to qualify for a hard money loan, maybe partner with a contractor or partner with someone that has land. So that way we can have access to the land and maybe do a new build, new construction. But overall I'm thinking like if I really want to get into new builds or fix and flips or anything, I've got to have a solid like 50 racks stacked up in order for me to make a dent. I would say in order for me to be comfortable. Is there a similar number getting into notes?

So yes and no. Let me one of the things you just said are things I hear in a common basis. And you're going the traditional, I gotta finance this traditionally with hard money lenders or get that route. One of the biggest huge rivers of wealth out there, river of private money is the is people that have self directed IRAs. Okay, so you're in, what county are you in? Tech? Dallas, Denton. Okay. Denton County. If you go to Denton county, the county appraisal district or Dallas county appraisal district or Travis county appraisal district and go there and do a search by owner name. But you don't type in Scott Carson or Dylan. You type in Equity Trust or you type in previously around Quest IRA or Pensco Trust or Mid Atlantic ira. If you type in the self directed IRA company names, it will pull up a list of people who have used their self directed IRA to either buy a property. Or if you go to the county clerk, you can do the same search with the same names to see people who have lent money out of their self directed IRA to investors like you and me. Okay? So we do that at counties to harvest information because it gives you the mail address, gives you, it may not give you the borrower's name, sometimes just the counter, but it'll give you a mailing address. They will mail postcards out or it'll say, you know, equity trust for the benefit of FBO, Scott Carson IRA 1, 2, 3, 4, 5, 6, 7. And then we skip trace those and that's a wealth of private capital there. With people who are smart like you, they've got money to invest, they've pulled the trigger. And guess what? They're looking for deals to fund. Now if it's with a self directed ira, it's got to be passive. They can't go out and touch it and feel it and rub on it.

Right.

It's got to be like a passive return. And we've raised millions of dollars in private capital at 6 to 10% interest rates passively at 24 to 36 month time frames with investors to fund our note deals because we're buying them at such big discounts, we can afford to give them an 8% return because the deal is going to bring 16% or greater, you know, 24 to 36 months. And they're getting, they're happy getting their interest rate payment every quarter. And that's how you get around that aspect of things. It's just targeting like I jumped on just alone Williamson county, which is like Georgetown, Texas where the floods went through and stuff like that. And here in Travis county, in a matter of 5 minutes, I can pull 500 self directed IRA investors with their mailing addresses. And then all that we do to reach out to them is send a letter or a postcard or we put it with a VA skip tracer and they go find their Facebook or find their contact information and we email them directly.

Wow. So if I wanted to get granular again, I would put in the CAD self directed or it would be something along those lines or LLC or how would I find these people?

So you type in the, the self directed IRA custodians. Okay. So if you go Google, you literally go to Google right now and type in ultimate list of self directed IRA custodians. Okay, you're on Your computer, you can do that right now. And it'll give you. If you scroll down, you'll see like an ultimate list of self directed IRA custodians. Like 50 plus names. Okay. And here in Texas the two biggest names. Well it used to be Quest before Quest was sold earlier this year, but you still look for Quest. But Equity Trust is the biggest company out of Elura, Ohio.

Yeah.

And so you go. If you go to Dallas CAD or Denton cad. Denton CAD to be a little bit smaller but like Dallas cad and just type in Equity Trust in the county appraisal districts, it will pull up here. I can jump on here and look too. So if we go to. And if you're. There's a great website that I use for every county across the country. It's called Netra Online, netronline.com and that's basically it's just a website that will pull up an online directory of all the county appraisal districts and stuff like that. So if we go to Texas here we go to Dallas county because it's always want to surf in. Some smaller counties aren't going to have anything obviously, but some bigger, you know. So if we go to Dallas, where is it? Dallas County. Alright. And now we go to the appraisal districts. Owner name, just type in Equity Trust and hit search. And in a matter of seconds IT has pulled 145 addresses and properties. So if you click on the first one it tells you, you know, out of Garland, Texas. And it was, let's see here, the legal description. It tells you Equity Trust custodian for the benefit of Alan Merult out of Sea Pines Drive in Dallas, Texas. You've got his mailing address right there. Wow. And the value of the property is 283. So who knows what he paid for it. But he used his ira, so it's not his primary residence, he's not living in it, you know what I mean?

Yeah.

So you know, he's Investor 145 just like that in seconds. Now you just got to do a little bit of work, you know.

Wow, that is one heck of a strategy.

That's on the money, baby. That's straight to the money.

Right to the money. That's granular right there. Scott, I want to pivot a bit here and ask you about the note space and some of the logistics, some of the X's and O's that go into this because you have acquiring the note from the banks. But at that point you have to establish relationships with the banks in order for them to do this, how do you start establishing relationships with banks? Or is there a marketplace for these notes?

So there are some smaller marketplaces, there's some smaller websites that will list some individual notes for sale from smaller sellers. Like paperstack.com is. Okay. Lender Direct is another company that a buddy of mine runs. It's not so bad, but I've always like to go direct to the bank. So if you go to LinkedIn, we're all on LinkedIn. Like I found you originally, right?

Yeah.

Instead of typing in real estate podcast host and looking for podcast host and listening to their podcast, see if I'm a fit. You can type in special asset manager or secondary marketing manager or whole loan trading department because the departments inside of these banks and lenders go by those names. So once again it's special asset manager, secondary marketing manager, whole loan trading or even chief credit risk officer. Okay. For the smaller banks. And that'll pull up if you search by that job title, it'll pull up all these people in those specific functions at banks. And it's just a matter of sending out invite requests from. Hey, see that you might be the right person at ABC Bank. Are you looking to get rid of any of your notes this quarter? I'd love to talk with you. And that's what we used to do was literally just send individual requests out to those people and make connections. That way you sign usually a non disclosure agreement with them. They send you a spreadsheet which is called a tape. It may be one note, it might be a thousand notes. It just varies from lender to lender. But what we started doing is putting this email list together people. And over the last 15 years we've got a list of over 5,000 asset managers that we can just drop an email out to once a month. Hey, what do you have in your books this month? You could also find note sellers by typing in note sellers or note portfolio manager. But also look at like servicing conferences. Like most states will want you to have a debt collector's license to be a note investor. The way to get around that in 75% is to have a third party servicing company who's licensed in the state that you're that note is in. And we when you're a note investor, you're going to pay a servicing company, you know, 15 to 25 bucks a month for not for a performing note. And then in a non performing note you might pay 75 to $95 a month for them to collect on a non performing note. That's you know, but they're the ones doing the bar outreach. They're trying to get the bar to the table. They're the ones collecting payments on your behalf and then sending you a wire on the 5th or the 15th, or they send you, you know, we have an email campaign back and forth with our servicer once a month to see where we're at in the portfolio, who paid this month, who didn't. If those didn't pay, haven't started paying, then we put it with our attorney in that state and attorneys going through the foreclosure process. So as a note investor, you never want to buy in your own name. So you always want to have an llc. Okay. You can use your IRA if you want to, but I don't necessarily recommend it. You want to have a little bit of asset protection, so have it in an LLC. You can use trust as well, but LLCs are usually most common stuff. Then you're gonna have to have a servicing company and then you need to have a real estate attorney in each state that you're buying. And then understand the biggest thing that you're going to be doing is usually going to be finding notes and raising capital and putting the heavy lifting. Like as we say, instead of rehabbing the property, you're putting it with the servicer to handle the rehab of the borrower. You know, I don't talk to borrowers. You should not talk to borrowers. You also have to, because what we found. Now, I've talked to borrowers in the past because I come from a mortgage background. I've taken some licensing classes for that and I can get great with them. But you should let your professionals handle the talking. A lot of people like, oh, I want to work it out with a homeowner. No, no, no. The homeowner. They're liars. Okay? Borrowers are just liars.

Yeah.

If you're talking to them, they're going to talk to the servicing company and they're going to talk to the attorney. They're going to tell a tale. So leave it with the servicing, you know, professionals, your team there or the attorney to talk with the borrowers. I mean, you can always direct them. Hey, I bought these five notes. I'm glad. Doing modifications for these three. And I want to foreclose on these two and go that route.

This beats the heck out of wholesale.

Yeah, I mean, look, I always said that wholesaling and you can wholesale notes, too. Don't be wrong. You can wholesale notes or real estate. Either way, wholesalers are the guys that. And gals that work the most, but they make the least amount when. If you put that same energy that you would do into wholesale, because wholesaling, what's the biggest key you gotta have as a wholesaler, Dylan? You gotta have a good list, right? A buyer's list, right? Yeah. Well, if you put that same effort into building a list of investors, it's the same work. You're gonna make more of the lion's share. Instead of a fee, a broker's fee. You know, your IRA buyer, your IRA investors are often a lot of note investors as well, too. So it's also a buyer's list versus just a funding list. So I always tell folks that are wholesalers that come to notice if you have a database, reach out to those that you've closed deals with, said, hey, I know that you've bought this deal from me and made some money. I appreciate that in the past, I was curious if you're interested in funding a deal that we could pay you 8 to 10% return for 24 to 36 months. Because a lot of people out there are looking for deals. They just can't find good deals. And we see plenty of deal flow in the Nope. Space.

I want to pivot a bit here, Scott, and talk about some of the hairier situations that we've encountered. Let's do it in the real estate space. So I have a friend and mentor who actually rent an ADU on a ranch that he owns in Denton. It's where I'm. Where I'm staying at, where this podcast is based out of. And he calls himself Dallas, DFW's number one trap house buyer, which is absolutely the truth. And I think, you know, a lot of the HGTV and the glitz and the glamour, people don't understand that from a lot of the fix and flips. The way that especially I can speak for Texas and you can speak for Texas, a lot of the way where people are able to acquire distressed property is because you're willing to go into these just like, absolutely horrific, potentially situations.

Let's call it what it is, shit shows. Let's just talk about it.

I mean, I mean, I've seen literal, like, drug houses where you walk into it and it's like these people are selling their house and you realize, you know, there's spoons on the table and there's like Bunsen burners around, and you're like, what in the world is going on here? And I would say that is common. I think that's Common?

Yeah. When you're dealing with distressed assets, you're not catching people at their best. My first ever, ever house I walked into as an investment, I got to tell you the story. We were sending out a foreclosure mailing list off the Roddy list here in Williamson county. And I'm sitting at home on a Sunday afternoon and my phone rings. I had a VOIP phone just for my real estate stuff, and it rings up, it says Walmart payphone. I'm like, what the hell? So I answered this lady name was Susan. I can remember it to this day because it goes way, way back. And she's like, are you Scott Carson? I'm like, yes, I am. Well, I got your letter. I'm like, oh, really? She goes, yes, take my number down and. Or take my address down. Can you come by my house tonight at 7:00'? Clock? I'm like, oh, yeah, I guess so. So the address is 207 Silk Cove in Cedar Park. It's so grained in my head. She's like, I got big dogs. Come ring the doorbell and go stand by the garage. I'm like, okay. It was kind of cold. It was early February. We had a little bit of ice here. So I'm like, okay. So she sends me her address. And like me as a new real estate investor, I'm getting all excited. I pull up a Google Image. It's a Dr. Horton or a KB home. You know, kind of the box here, big boxes, you know, See, it's on a third of an acre with a big. On a cul de sac. I'm all excited about values and what she might have. Oh. So I drive up there, knock on the door. Sure enough, I hear four big dogs. I go stand by the garage, and that's where it goes. Ugly, stinky. So she comes out, a few minutes later, the garage opens up. And it's like one of those scary movies where all the mist is coming out underneath there. And all I see is this car parked in all these black trash can bags with like, dog everywhere. And this little lady comes out about 4 foot 5, okay? And she's about 4 foot 5, wide as she is tall, right? And she's like, are you Scott? I'm like, yes, ma'. Am. Who else would it be? And this whiff of dog shit hits me on this cool Sunday night. I'm like, oh. And we're talking a little bit. She tells me she's got this house here. She's owned four houses, lost three of them. And she's Facing foreclosure on this home. So, well, let's help you. I said, but I gotta go inside, take a picture, see what is inside. She didn't want me to go inside. Well, finally she let me go inside and it was a shit show inside, literally. She had four bathroom or three full bathrooms and one and a half bath. The water had been off for four months. Okay. She's still been using the toilets and then the homer buckets from Home Depot to do her business in. Okay. Dirty dishes everywhere. Dirty dishes and rotten food in the sink. Flies everywhere. But the worst thing was when I walked in the carpet in the living room. The carpet went squish, squish like water, right? Well, her four big dogs weren't going outside to do their business. They were doing their business in the house. The bottom, like 2ft of the sheetrock was all a yellow tint from them pissing. There was excrement everywhere. There was clothes everywhere on the couch. She sat down and one of the dogs immediately, who had just seen run through all this, jumps up and starts kissing her on the mouth. I almost vomited. I mean, I was just stunk. It was horrible. I didn't want. She's like, you don't like dogs? No, I like dogs, but I just was a little skeeved out. So we walked around, took pictures. It was disgusting. Sent the pictures into World Savings, who was a lender trying to do a short sale. It went back and forth for six months. They wouldn't do anything. Like, you need scratch and sniff photos for this. About six months after they said no, they called me up looking for somebody. I was like, well, no, that deal wouldn't go through. But whatever happened, the lady ended up dying in the house and her dog started feasting on her because nobody found her for two weeks. And it was just a disgusting thing. I'm gonna try to do as best I can. Somebody else was able to get something done, but that was my first experience. I remember driving home and calling my wife to say, honey, put the garden hose in the garage and some clean clothes. Cause I'm getting rid of this, throwing my shoes away and everything. You know, that's what makes you. I've also rehabbed the worst roach infested property in Utah. You know, one of those hollow walls, the miller's gonna knock it down. And it rained down la cucarachas on me.

At that point. With that Utah home, are you buying it for like, lot value or are you. Is it worth something?

No, it's worth something. It was not trashed out. I mean, it had some work in it, but a hoarder was living in it originally. But we cleaned it out for 1500 bucks. You know, we had the junk guys come and get a lot of that stuff off. And then we paid a couple cleanup crews 1500 bucks to go in and haul stuff off. But that wall, it was just messy. I mean, it was cosmetic stuff. On that case. In a lot of cases, the floors were good. I was planning on knocking out this wall. We would open it up, you know, 25 grand later. It was a. You know, we made double our money on that deal. But it was a distressed asset.

I mean, I've walked into so many of those homes as you've walked into upteenth more. But it's a. It's really kind of humbling to see some of this stuff because it makes you realize there's homes like this in every nook and cranny in every American city.

And not always bad neighborhoods either. You'd be surprised. Yep.

You know, and you know, homes where dogs and cats and the home is falling apart and there's cans everywhere and you're walking in and you feel like you need a gas mask on just for the debris that you're sucking in. You feel like you're giving yourself, like, you know, cancer walking into these houses.

Mold, black mold in a lot of these houses. So that's why I got away from rehab. I mean, don't get me wrong, we still rehab some properties that we take back. We recently rehabbed a property in Anderson, Indiana, remotely. Another one down in Naples, Florida, all remote, because we're buying at a price. And I don't want to go out and walk this. I'll go out and have my realtor do a walk through with her phone, do a video, take some photos, and then we'll rehab those remotely for the most part. But you know, the great thing that we see on the note side, it's a little bit different is we're seeing the comments, the servicing comments between the borrower and the homeowner. We know if it's distressed. We'll send somebody out to review the property, look at it, see what it looks like from the exterior, peeking the windows, if it's vacant. So we know kind of ahead of time if it's going to need a lot of work or not. I mean, in the rare cases where we don't get interior views or don't have an idea what it is, we've got force place insurance that covers our ass in Case it's a mold issue or a drug house or a crack house that you've got to strip all the way down into the studs and seal everything.

I mean I've seen those houses, I've seen houses where they've had the electricity shut off and then like hot wired electricity from the street type of thing.

I bought a duplex in Phoenix, bought the note and it was an investment property for this guy that lived on the other side of Phoenix and he just stopped working on it. Wells Fargo was the original lender on it. And I sent my realtor friend out there, Bobby Waymore is her name, and she drove by the property. It was a duplex and there were bums, two bums living it, two homeless people living it. And on one side of the house they were running an extension cord outside to the neighbor's house. On the other side they were running a hose into the bathroom from the neighbor because both neighbors weren't home, but they were still in the utilities and limited life in there. They had a big screen TV on the wall, watching tv. It was just kind of crazy.

It's crazy. I mean I've seen so many of these instances, Scott. I mean it, what it has made me aware of is to your point, like every nook and cranny, even upscale, you'll find these, these deals and you know, right now in my business I'm passionate about infill lots and land and developments and modular homes. I haven't thought about the note space and I think that a lot of times when I have thought about the note space, I've thought of it as kind of like a graduation from fix and flip or from midterm or long term rentals. But now talking to you, it's made me realize I don't necessarily, I'm curious to hear your perspective. I don't necessarily think you have to have that experience. You don't have to have that experience in order to go into note buying.

No, you don't. It does help me wrong. More knowledge you have. My mortgage background obviously helped me. My rehab background obviously helps me do things. But I always tell people never buy a note that you don't want to end up owning the property. If you want to just own clean property or clean looking assets, then just buy clean looking assets. If you don't mind a little bit of work, then do the, do more the granular. But you said a very good thing. Most people, when they think of note investing, they think of the creative originating side. They think of creating a note or selling on terms and owner financing. That's very common. But what I do is it's a niche within the niche. It's a whole different side of the ball game of buying direct from banks and notes. And it's been around since the first note was created, you know, but it's, it's a differently, it's a different mindset being a banker's mindset versus a private property owner's mindset. You know, and there's, you know me wrong. I think what you're talking about, the infill, I think there's a lot of opportunity right now. I think there's especially right now how unaffordable housing is all across the country. I think one of the best biggest opportunities is to take some of these infill lots and see them, give them a privilege, just throw some RVs on there, some campers on there for affordable housing. You know, buying some of these micro houses, giving people an opportunity to live. It's not going to be their dream home, but it's a definitely a home. Yeah. I mean it's a roof over their head. It's a lot cheaper than being homeless or paying through the nose for rent.

I feel that I'm from northern New Jersey and I don't know exactly where the home prices are now. Although I do know from speaking with a lender out there that you need a average household income of $220,000 a year in order to qualify for what would be considered middle class housing. And over here, of course, you know, those homes would be maybe 350 to $400,000 over there, probably 800,000 to $1.2 million.

Yeah, I mean the, the ratio of home prices to income is a lot higher up in New Jersey than say here in Dallas. I mean Austin, it's higher than it is Dallas. Yeah, it's just become so unaffordable. But it's also too, you know, we have affordability issue. So many new homes are that second tier level. You know, people get into it, they want to buy their forever home now when they're straight out of college. That's not just not the case, it's just not feasible.

Right.

You know, you're not going to make six figures right out college unless you're doing something or you gave up on college. You got an Only fans account. Who knows, you know, I should start an account called Only Notes. Maybe I would do, you know, you.

Get some clicks, that's for sure.

Yeah, exactly. So I actually had, give me one second, I Think I've got some, something here. So if we look at like New York. Yeah, it's a little bit different market than New Jersey obviously, but yeah, like New York, it's like a seven to one ratio. So it's seven times the value of somebody's salary on average to buy a house in New York. You know, New, New, New Jersey, Newark, New Jersey is six and a half. Is the ratio, 6.5 to 1 of what the prices are compared to average income. Crazy.

Compare that to like San Marcos or like, you know, what would, what would it be?

I don't have San Marcus here. That's kind of rolled into Austin. But the Austin market is, I can tell you what that is here. Just a second, I got a list here. Austin, Texas, not Austin, Minnesota. Austin is 4, 4.4 to 1. So 4.4 and a half times what your income is to the pricing. It's a little bit more affordable here than obviously New York, New Jersey, but it's still compared to income, it's different.

You know, I think when I, I'm hugely, hugely empathetic to this, even though I am in the real estate space and an aspiring real estate investor, you would think that I would not be empathetic to this, but I am. And I, I think a lot of people, if they don't start looking at the real estate from the lens of being an investor, I hate to say this, they may never own real unless their parents die and they have money coming to them or unless they inherit. But you know, I'm actually not bullish. I'm bearish on the concept of younger people owning homes. I think unless they make, you know, that large income or unless they are able to, you know, marry into money or just have two people in the same household with money, I think it's, it's tougher and tougher. How, how are teachers who are making, you know, 60 to $80,000 a year supposed to be able to specifically on the coast, but even elsewhere supposed to be able to qualify? I think some of them do, God bless them, but a lot of them don't.

Well, but you also, what are they teaching that's making 60 to $80,000 a year? Most teachers aren't making that. Most teachers are making 35, 40, 45,000. My brother in law is a head administrator to junior high in South Texas, my sister's administrator as well. They would love to make 60, 80 grand as that aspect of things, but that's just not the case. So the thing you have to keep in mind is it's once again, it's the affordability and setting. You know, people love to live in nice places, but it doesn't mean that they can afford to live there.

Right.

You know, and that's where I think the. I buy a lot of stuff in the Rust Belt states, the Michigan's, the Indiana's, the Ohio's. For what I. My house here now would be like 100,000 compared to the half million dollar value here it is. It's the same thing like why people from California are leaving in droves to come to Arizona, to Texas, because they can buy 3 times amount of home for a third less and put a bunch of equity in their pocket. So that's what you have to think. Living in Miami, living la vida loca is great, but not if you're broke. You know, living in, you know, New York City is great, but if you're broke and can't afford anything, you're living in a tin can. I mean, that's not the life for me.

But when you look at, I call it geographic arbitrage. So, yes, part of the reason why I'm in DFW is because being from northern New Jersey, of course I miss home. I miss Italian food. I frankly miss Italian people. I'm not. But I can fake it. And also I grew up around that, so I miss it.

I miss the fresh air of New Jersey.

Yeah, yeah, yeah, New Jersey, yeah, it's great. But you know, I, of course I miss home, you know, the concept of home. But I also know that I'm going to pay $40 to go park my car to eat dinner out with my family. I also know that in order for me to go to the beach, I have to pay like $20 per day, not per summer, per day. Right. I also know that everything costs more. Food costs 50% more, going to the movies costs 50% more. And so when I think about all those things and I think about what I want to do with my life as far as from the real estate standpoint, I'm like, I, I want to give my. I don't want to take the hardest path. I want to give myself the best possible chance to succeed. So where are places that people can do that? Texas, Arizona, Oklahoma. You mentioned Rust Belt states. You know, I throw in like a Wisconsin in there as well.

Yeah, totally. I mean, the property taxes, Wisconsin might, might shoot you down a little bit, but it's much, still much more affordable for housing there compared to Texas here. So looking at opportunities, I mean, yeah, you got to deal with A cold. If you're up north, that's fine. It's all about what you want your quality of life to be in a lot of cases, you know what I mean? When I was a financial advisor for JPMorgan Chase and a banker, I used to have a can of beans on my desk and an A1 steak sauce bottle. And when people would sit down with me and we start talking about investing, okay, what. What do you want your life to be when you retire? Do you want to live on beans or do you want to live on steak? I said, well, I want to live on steak, not beans. Okay? So now it means you need to eat more beans now and save for the stake later in life. There's ways to do that, but you gotta be smart. And I think, honestly, while we have the gig economy with Uber and doordash and all those things are great, that actually is eliminating a lot of wealth because people are inherently lazy. So paying $25 for a $5 Big Mac that you could buy separately because you're paying all those fees and tipping is killing you. I mean, cigarettes, you know, going out for night in the town. I hate going out on a night in the town because would I pay for one drink? I could buy a 12 pack and drink or a bottle of bourbon back home and be even smarter and not have to worry about a dwi. You know what I mean?

You're.

You're.

You're spot on. I mean, you mentioned all of those things, and it's a huge. All of it is a risk factor. I've traveled abroad, and honestly, that I got my passport two years ago, that was what changed things for me because I actually sold my. The car that I loved, you know, Dodge Challenger RT Hemi, red leather interior, big engine.

There we go.

Yeah, exactly. I loved that car. I sold it. I regretted it because I had to pay five grand to sell it. But, you know, I regretted buying it, not regretting selling it. And, you know, one of the things that traveling taught me is that these things that I've truly in my soul, felt like I needed in order to be like, okay, I made it, Were like, not even in the thought of people in other parts of the world, like, they're living actually great lives and not even concerned about what kind of car that they own.

Yeah. There's a movie up in the Air with George Clooney, and he says in that movie he's talking about that the things that we own end up owning us. When I, back in 2010, after I went through divorce, And a partnership breaking away. I came, I thought about that whole commercial that I was seeing on TV about going around all the major league baseball parks. I said, well, I'm single now, why not? So I planned this trip. Well, to plan this trip, which I thought would take 30 weeks or longer, I literally decided to sell everything I owned. I got rid of the house I was living in. I did a garage sale two weekends in a row. I kept literally my truck and my dog and some clothes. That was about it. And the freedom that came with that for traveling, what turned into three and a half, four years of non stop travel, particularly being the only homeless guy that owned a couple hundred notes, was uplifting. Like you said, traveling abroad, things you don't need like we think we do, because like it said, things end up owning us if we don't be smart about it.

So why do you think we'd suffer from that so much?

Oh, it's just, it's, it's, it's such a Keeping up with the Joneses. It's every, we're inundated with it everywhere. The real, real, where you can buy knockoff luxury items. It's the going to Disney World and everybody's got to buy the Giving up on Life sweatshirt. You know what I mean? It's the, it's the got to get the brand new car, you got to have the brand new house. It's all the social media and it's the, the magazines we see. It's everywhere. And unless you're a strong enough person, say, well, shit, I don't need that, because that's not going to add value. Having a garage full of cars or a closet full of clothes isn't going to help me get in life and make me any happier. You got to find happiness yourself and what that means for some people, it's traveling, for people, it's doing deals. You know, if you're not happy, you're not going to be able to fill that dark hole in your soul with just stuff.

I'm convinced, I'm convinced I may change my mind at some point, but I'm convinced that one of the things that truly unites all Americans is consumerism. Like wherever you're based out of, whatever your political beliefs are, whatever your lifestyle is, there is on some level, whether it's you want your kids to go to this university because you think the name of the university is this, whether it's the car, whether it's the clothes, whether it's, hey, I'm going to this club or this Gym. On some level, people in my mind, and I could be, I could be wrong about this. On some level, people are wrapped up in consumerism in a way that it doesn't even really benefit them, but is purely, purely materialistic in a way that is not the case elsewhere in the world.

You're 100% accurate. I think a lot of it comes from how we're raised. I was at an event two Octobers ago. Fincon is a big conference where money and marketers meet. And one of the keynote speakers is a guy that I've listened to for years, Clark Howard. You know, and Clark got up on stage. He's wearing a nice looking polo shirt, a pair of shorts, a pair of tennis shoes. He got up here. The problem with all of y' all is when you all came to this event, you went and bought a three hundred dollar outfit. My shirt cost me ten bucks at Walmart. My shorts cost me eight bucks at Sam's. And the tennis shoes I bought on eBay for 50 bucks. That's why I'm wealthy. Because the other 200 bucks that you guys would have spent I put into my ira. I put into an investor. Got it working. Our buying decisions affect where we're at. And we're all at where we're at today because of the decisions we make on a daily basis, whether it's a, to put the money away or to buy a shirt or whatever. And we all have different habits that are good or bad. Some people like watching, some people like cars. You know, if you can afford it, great. But if you can't afford it, quit keeping up with the Joneses until you can afford it. I've got a mentor, Greg Reed. He's the author of Think and Grow Rich. Three Feet From Gold. And he always says, don't fill the, don't fill the, fill up the cup. The world's cups. Fill up your cup first and feed the world with what overflows your cup. So take care of your needs first, your finances first, your financial standing and then worry about what everybody else has.

Scott, we are coming up on time here. Where can folks go if they want to reach out to you or maybe learn more about the note buying business?

Sure thing. Really easy. Just go to our website, weclosenotes.com it's very easy. We close notes.com. we've got the number one podcast, number one YouTube when it comes to note investing. This is a note closure show. We're actually excited. Coming up on our thousandth episode here in the next month. But go there. If you'd like to learn about note investing, we've got classes there, but we've got a free class that we'd love to give away. If you go to noteweekend.com you can sign up for our one day cliff notes version of how to find fun in flipnotes. It's free. It's about three and a half hours. You can watch it. No credit card needed. Go watch it. See if Notes Investing is right for you. But most importantly, while you're listening to this right now, I need you to go over and hit that subscribe button and make sure you leave Dylan a five star review. We as podcasters love to see that stuff. And he's busting his ass here. He is bringing you the money on Straight to the Money podcast, doing a great job. So make sure you leave him a five star review.

That's right. Scott, thank you so much for coming on the show here today.

Hey man, it's been, been a pleasure, man. Good luck. We'll talk to you soon.