Timing the Market: Investing in Distressed Assets with Scott Carson | The Better Than Rich Show

You got to know what the market is. If you're waiting around for the perfect time, you're always going to be late the the game. You know, there's money to be made in up market and the money to make in the down market. But if you've been sitting on cash, now's the time to start looking at some of this distressed stuff that you could probably pick up at a significant discount, 20, 30, 40% cheaper than what you would be paying normally by being able and having cash and close quickly.

Better Than Rich show listener we are in for another treat today with Scott Carson. And Scott Carson has personally purchased over a billion dollars in debt. We get into the nuance of how he's done that by buying notes and I ask him some of the most elementary questions I could have thought of because this is a brand new topic for the show and also something that I have a little bit of interest in which is really cool. So he also has a really cool offer at the end with his investing class. I recommend checking it out. He has a community he's built, but the idea of investing in notes and raising capital and how you can create passive income from doing this, it's a cool new strategy that we haven't talked about on the show. So get ready for another great episode of the Better Than Rich show with Scott Carson. Welcome to the Better Than Rich show with your hosts Andrew Biggs and Mike Abramowicz. The Better Than Rich show helps ambitious leaders who are on a mission to leave the world better than they found it, change their perspective on what's important, increase their income and impact, and systemize their life and business. If you've ever struggled with finding your purpose, have felt disconnected or distracted or found yourself going through the motions, this show will remind you that what you do matters and will reinspire you to chase your highest dreams. It's time for you to become better than rich. And welcome back to the Better Than Rich Show. I'm your host today, Micah Abramowicz, and I am here with Scott Carson. Scott, welcome to the Better Than Rich Show.

I'm honored to be here, Mike. Glad to help and glad to deliver some great stuff to your audience.

We have had in the past a lot of different speakers and guests talk about investments. We recently had we had Kyle Reacham on the show talk about passive investing through real estate. Chris Larson on the show talk about passive income through real estate. Rachel Richards talk about it. We had Jim Shields talk about it. Justin Morgan through storage units. We've talked mobile home parks with Dane Asperger and Justin Donald. We've had many, many people on the show talk about passive income and leveraging real estate for that, but no one has been a specialist when it comes to notes. And that's why I'm really excited about this conversation. So the listener can say, huh, what is a distressed mortgage note? How do I buy distressed mortgage notes? And I'd like to start there. I'm sure we're going to get into a lot of different topics today, but I know that's something that you specialize in with your community, with your business and helping real estate investors do that. So can you just break down to an elementary level what a note is? How does someone accumulate a note and why that is the specialty and the area that you chose?

Yeah, you mentioned actually quite a few of my good friends in the investing space and people that on my show and vice versa. But a note, it's basically an iou. Everybody's in the note space in some form of matter. Whether you got a mortgage in your house or a car note, credit cards, or oh, your uncle Bubba down the street, 100 bucks, it's an IOU. That's a note. But unfortunately most people are on the wrong side of the payment stream. They're paying out versus paying in. So when we talk notes, most people will think it's okay, you're going to owner finance a house and sell your house or something on terms. And that' one facet of note investing. But mostly what I do is I'm actually buying mortgage debt on residential commercial properties directly most of the time from banks and institutions who send out lists of their mortgages, primarily stuff that, where people haven't paid in six months or longer. And that's what we call a non performing notice where a borrower hasn't paid in a while and they'll send lists of the stuff to me that I can cherry pick. I can purchase it at a significant discount below what's owed and below property values. And then we work. Instead of rehabbing properties like most people talk about doing, we actually work to rehab the borrowers. We want to keep people in their houses as best as we can or in their commercial space if it's a commercial note. And so we try to work some sort of a modification payment plan and try to meet the borrower halfway. If the borrower is willing to work with us, great. If they're not, then we have the right, since we're now the bank, now the lender on the side of the transaction that we can then Go through the route of foreclosing or working to give cash to the borrower, Walk from the asset so we don't have to foreclose on. It's a very obviously niche within the niche of real estate. Smaller. I'm only one of a few.

I'm going to ask a question just because again, you're talking to someone who's maybe I have a little bit of experience, but I am not a quick learner when it comes to some of this. So sometimes they ask the second and third question and why this is relevant to me. Years ago, I was at a real estate investment meetup group in Tampa and I can't remember the guy's name. Larry Harbol was the guy. So he had this meetup group. It was at a china buffet. And he's done this every week for like 20 years or something. I was brand new, I knew nothing. And someone was saying, I will sell my note. And it was like 20 grand or something. And then I was like, what the hell is a note? And I was trying to think. I even asked him, I said, what is a note? He said, there's a renter in the property. But instead of me making the $600 a month that I'm making right now on the property, I'd rather have $20,000 today because I need to pay for my kids. So I'd rather have the $20,000 than the 600amonth. What do you rather have? Would you rather have the six month, 100amonth or the 20,000? I said, but what is a note? And I still didn't quite get it. And he was trying to explain, you own the house. So you own the house that these people are in, plus you're collecting the rent. And if they don't pay the rent, then you essentially own the house.

You're intertwining two things. Okay? So if I'm the bank, I'm not the landlord, okay? And that's where the confusing side of what you were saying, and I've heard Larry literally say this before, I've been to that meetup before at the China Buff. All right? And Larry likes to buy houses. And then instead of renting it to people and making $600 a month and dealing with toilets, tents and trash outs, what he prefers to do is since he owns the house, he can offer terms to somebody to come in and buy the house from him where he's offering them owner financing. And he doesn't make people jump through the qualifications of check and credit. They may, if They've got some. A sizable down payment. He was willing to finance the property to somebody come buy the house from him, and then they can turn around and rent it all out if they.

Want to, even if it's tenant occupied.

On a house, even a tenant occupied, you could literally sell it to another investor on terms and now they can transfer that rental agreement. So I buy mortgages, there are tenants in place, but the borrower is who we have to deal with. We don't get the rent. So if the mortgage payments say 350amonth and all ITI, principal, interest, tax, insurance, maybe say 450amonth off the. A landlord is charging $600 a month, they should be cash flowing. One hundred and fifty. Right. If we buy that note, we're not getting the 600 because the 600 doesn't come to us. We're only entitled to the principal and interest, parts, taxes and insurance need to be paid to the county, stuff like that, unless it's escrowed. So if the borrower walks away, the landlord, in this case, if the landlord doesn't pay us, we have the right to foreclose because we're the bank. And then that tenants in place. Then we could turn around and keep the renter in place, or they could move out, depending on this. Each state has a little bit different when it comes to evictions on a property sale. But what we're doing as a note investor is just selling, is buying mortgage debt. We're the bank, not the landlord.

So this is assuming the landlord is not the owner of the property. So we're saying those are two different people.

The landlord is the owner of the property, but I'm not entitled to the rent of the tenant. So do you have a house? You own a house, Mike?

I rent. We had a house we owned, but we just moved.

Yeah, that's fine. But you owned a house before. Okay, Right. So with your situation, you're renting from a landlord.

So he owns the house. He's a landlord and he owns the house. But actually there's a property manager who I deal with.

But the property manager is just for 10% of the rent or whatever it is he's just handling so that the landlord or the property owner doesn't need to have to deal with toilet stamps and trash. If you got an issue, you call on the property manager, not the property owner. Now the property owner, if he gets tired of renting, tired of dealing with it, which is what happens a lot of folks, people can often own or finance the property to another buyer to come in and buy it. And so you like, you could say, I don't know what you're paying for rent, but if you wanted to buy the property and you could reach out to the landlord and say, hey listen, can I buy this property for it? Would you sell it to me on terms so that you're still getting cash flow but you're no longer responsible for the taxes, you're no longer responsible for the insurance, you're no longer responsible for any type of repairs for doing that. But what I do is I'm not really dealing with a lot of owner financed borrowers. I'm literally dealing with banks that have all these mortgages where people haven't paid and there may be tenants in them. They may, those borrowers may have renters in place, they may be landlords, they may be owner occupants. It varies on what we see. But we're buying the debt and we don't really want to. I definitely don't want to own the property management side. That's another job in itself. I like being the bank. And once I buy that debt at a discount, then I work with a homeowner to say, okay, what's going on? If you do have a tenant in there, what are they paying? Rent. You should be able to pay me if you're collecting rent, if you're living in it, what can you afford? What happened? What kind of country western song to Covid job loss, death, divorce, whatever it might be, what caused you to stop paying your mortgage? And let's figure out a win win plan for it that makes sense.

So I'm going to try to break it down and correct me if I'm wrong, I'm missing this. Okay, sure. The owner is almost defaulted to the bank because they're not paying the mortgage payments. So the mortgage payment is called a note.

Yeah, the mortgage is the iou. The mortgage payment is just the payment.

So it's I'm not making my payments, I'm defaulted. The bank has put me into collections or whatever. Like I need, hey, the bank needs money. So since the bank doesn't have the head to deal with or the capacity or the desire to deal with that owner anymore, they'll say, hey, who wants to deal with this owner and try to get money. We don't want to deal with it anymore. And instead of banging on their door and taking the property from them, we'll just sell you this mortgage payment, this note for a discount. Then you could deal with it yourself.

Exactly.

And then you would then go to the owner, the landlord of the property and say, hey, bank X tried to get the money from you. You weren't willing to pay bank X, but now I'm bank Y and I want to work with you to figure out how you can pay me on this property. And if we can't come to agreements and come to figure this out, then I'm going to come in and take the house from you.

Exactly. Most banks will sell stuff off because they have these huge portfolios and they're for them to foreclose on. One costs about the same across the board. But when you have lower valued assets, 200,000 or less, it's more expensive to foreclose on them than say $1 million house. And it's also more impactful on their portfolio for the higher end. So we see a lot of the stuff that comes to us where it's maybe in a longer foreclosure state or they've had issues with it, or they've got a big portfolio, they want to sell a big chunk of their. They don't want to deal with the problems of foreclosing in a variety of states and let somebody come in.

Wouldn't that be risky for you as the investor to say, hey, I'm going to take this property? Or do you have the confidence to say, hey shoot, I'm going to kick you out, man, I'm going to, you're going to get the boot and I have no problem giving you the boat because I have a team in place to do that if you're not paying.

So it's all risk. You evaluate that risk. We do due diligence. It's not just buying blind. We look at the value of the property, the condition of the property. We look at all the servicing notes of the payment history, what the credit score of the borrowers, what's going on with that borrower, how communicative have they been with the existing lender or servicing company? And then we look at the actual collateral file, which is what we're really truly buying is not a set of keys that we're buying a file. Basically the right to foreclose. So we have our attorneys review those files, make sure all the documents are, all the T's are crossed, the I's are dotted so that we have the same legal right to foreclose that the other bank had if the borrower doesn't follow through on things and we, I'm not going out and knocking doors. There's third party companies that we leverage and use to do all that borrow outreach or they send out door knockers and then they report back to us.

On a monthly basis and just to use numbers, and then we'll go in whatever direction makes sense. There's the $200,000 home. Or let's say there's a 200. Yeah, $200,000 home. Let's say there's $150,000 that's owed to the bank. How much might the bank sell that $150,000 debt for?

So in that situation where there's equity, they probably, if the borrower hadn't paid in usually about six months, they would probably sell that note at a discount of probably around 20%. So they probably sell it for about 120. To me, that's about what we would look at where there's equity. Because if you foreclose, you're probably gonna get paid off in full at the foreclosure. On. Now if you flip it around the other side, let's say it's a $200,000 house, but they owe 225 or 250 because the market's dropped or they haven't paid in a while. So all these payments go on the face amount. So they owe more than the property's worth. On something like that, we would probably pay 60 cents on the dollar of the property value. So it's worth 200. In that case, we pay about 120. Because we've got now the headache of foreclosing and working out. And that's, you know, that's where we make our money is if I can get that bar to start paying on time again, and we there at a 6% mortgage rate and we bought it at roughly 50 cents to the dollar. Well, if I can start paying on time, that's right at 12% cash and cash return to us. If they start making some extra payments to get caught back up, that number can jump into the very high teens or even 20% on a cash flow basis. Now the goal is we'll hold this stuff for cash flow passive income that I don't go out and collect rent. I have to go do any work. I have to go rehab the property. That after if this borrower makes payments on time for 12 months, it's now reclassified as a re performing a performing note. Now I could go back, take this new performing note and sell it back to Wall street, sell it back to other banks at 80, 90 cents on the dollar. And if I bought it 120, and I'm now selling it at 161 70. I just made a year of cash flow plus 40, $50,000 in the middle for just working with a bar to keep them in the house.

Very cool listener. Here's the deal. Like there, there's some things that you don't know what you don't know, but what a cool specific, specialized knowledge using Napoleon Hill's language, right? Like specialized knowledge of knowing. You don't need a degree necessarily to do this. You could partner with someone like Scott because you don't even need to know how to do all this. He already has the connections, already knows the know how, and I assume that's part of the business model. The billion dollars in debt that you've purchased over the course of the last 20 years in this industry, the wisdom that you have of what to do and what to avoid is part of that, I'm assuming, part of what you're able to offer to people.

Yeah, it is. Every state's. One thing you got to keep in mind too. Every state's a little bit different in the foreclosure process. Things change. States pass laws. Covid kicked in. We couldn't foreclose for almost two years. So you get a little bit creative on that stuff, knowing what your options are. There's about 10 different little strategies once you buy a non performing note to try to working it out with a homeowner. And depending on where they're at. I hate to use the analogy, but you remember those choose your own adventure books.

Oh yeah, yeah, of course.

That we had when we were kids. You'd read one chapter and pick A and it'd go to another book chapter. But sometimes like that, if the bar decides to do A, we're going to go this route, but the bar decides to do B, then we got to go this route. We can go back if they decide to do that. It's knowing the difference. It's an opportunity to get creative. In a lot of cases we've modified loans once we own the note and work really well to keep people in their houses. And because I don't really want to take the property back and own it, I'd rather just keep the cash flow going and own this debt across the country without having to do any work. And let my third party attorneys or servicing companies collect and just send me a wire every 5th and 15th of the month.

And if I'm an investor, I'm listening right now. Maybe I'm not like I don't classify as an investor, but I'm sitting on some cash right now. And hypothetically because right now there's a different narrative. I asked this question to Jim Shields too, who's here in the Jacksonville area of Florida. And he has huge portfolio, but he has his business Build to Rent I think is what it's called. And it was such a great conversation. I asked him a similar question. I asked you with some people in the market right now would say sit on cash, right? Be cash heavy so that way you can deploy capital when things go on sale. Things are a little unpredictable right now. What would be your response to that? I know I asked him recently on a recent episode, but what would your response be to that same question?

I'll tell you, there's much smarter people than me in the industry that have been sitting on cash for several years now with the markets, real estate markets being up at all time highs. Let's just look at some of the biggest investors on Wall Street. They've been holding on, sitting on cash, waiting for the market to turn south, for there to be a decrease in the market, for defaults to go up. And so it's what happened back in 2008. You had all this appreciation and the markets fell down. A lot of people that bought at the top, they lost their shirt, you know what I mean? They lost value, they lost equity. But those that stuck around, they saw an opportunity. They use that cash to buy distressed asset at a significant discount, knowing the market's going to rebound and they're going to ride that way back up very. And it's a big thing. It all depends on where you're looking at because every market's a little bit different and what asset class you want to look at. Let's give an example. A very popular asset class right now has been multifamily apartment investing people. Oh, I want to buy apartments are like an all time high the last couple of years overpriced with an interest rate change, interest rates going up like they have. That's really affected a lot of apartment owners who bought three to five years ago with the idea that they were getting low interest rate. Re gentrify the asset and then sell it or refinance out in three years and cash out. That exit strategy is no longer there. So you got a lot of multifamily guys that are struggling or in default because they can't go the refinance route. That's a prime opportunity for those sitting on cash to come in, buy that debt from a bank or the lender at a discount below what they would pay for the asset traditionally and then either Work it out with the homeowner or the property owner and then either stay as the lender and make a good yield or offer a friendly foreclosure for the owner of the property to walk away. Now they own an asset they bought at a significant discount because they had cash and could pull the trigger on deals that show up at times. It's always good, but you got to know what the market is. If you're waiting around for the perfect time, you're always going to be late. The gang there's money to be made in up market and the money to make in the down market. But if you've been sitting on cash, now's the time to start looking at some of this distressed stuff that you could probably pick up at a significant discount. 20, 30, 40% cheaper than what you would be paying normally by being able and having cash and close quickly.

Really fascinating. Scott and I appreciate what direction we're going here because we have a lot of value that you just unpacked for us. And my curiosity immediately went to like, what is your origin story that led you to understanding how to do this and why did you go in this direction? What was the first. Take us back to the first time you bought a note of a distract distressed mortgage and say this is the aha and this is my, the very first part of the origin story. And when you do, if you wouldn't mind taking with what I know now, this is what I would have done a little bit differently or, and, or if I was starting right now, this is how I would potentially start if somebody is listening. So however, whatever direction you want to go in there, that would be helpful.

So my origin story goes back actually about five years prior to me buying my first note. I bought my first house out of college. We bought two investment properties because the market was you could finance stuff. I was married at the time. We thought we'd be the next landlords, you know what I mean, that we're going to be the next renter kings. Then I lost my job, got laid off and both my tenants, my renters lost their jobs. So I had six mortgage payments. Three first three seconds that we're trying to pay on a private school teacher salary. So I was a distressed borrower. My notes were non performing. Okay. Luckily for me, I was able to get the two investment properties sold off without losing my shirt. And we were able to modify my primary residence like two days before the foreclosure auction. The lender was willing to work with me to keep me in the property so for about three years I licked my wounds as I, oh, real estate investing, I'm not ready for that. I tried it and failed horribly. Okay. I got into finance. I was a banker for JPMorgan Chase. It was one of the top bankers in Texas here and was doing really well at that and had a buddy of mine that I worked with previously was starting a mortgage company with a couple well known investors that were traveling the country, going all across the country, teaching creative financing and real estate investing. And I went to lunch with him, he said, hey Scott, I need some help. I trust you, you've got a great work ethic. Why don't you come work with me, we'll do mortgages. And I was like, that sounds great. But I was really interested in what Bob and Jamie, the two partners, were doing. I was like, oh, this might be an opportunity to learn the correct way and learn what I really didn't know back from four or five years ago. So I remember going home, talk to my wife at the time and said, listen, this is what I want to do. I think I can do that. I can always go back into banking, but let's give this a second shot. Okay, let's do it. So that was 2004, July 2004, when I left banking and got into the mortgage side of bits of originations. And for four years we traveled the country like almost every other weekend, going to another big real estate seminar expo all across the country. And while I was doing mortgages for investors, I was also the guy sitting in the back of the room listening from all these other speakers and all these other educators in the real estate space, learning all the different activities. And that four year period from 2004, 2008 was like a four year apprenticeship with Bob and Jamie, also learning about the note business, learning how distressed mortgages works, and learning how to get creative with terms and helping people out. So that when everything hit the fan in 2008, in the recession, I left the origination side of the mortgage business. I started calling the same banks that I was originating for, said, hey, I know you got some non performing stuff, can I buy some of this stuff from you? And I remember I started getting these lists and the first one I bought, you're going to crack up. But this was in Detroit. It was a house. Detroit was in shambles back then. But I paid 500 bucks for it, all right? On a debit card. It was from Wells Fargo Financial, your cornerstone subprime lender back in the day. And I flipped it for $1,500. I made $1,500 in money because it was. Somebody bought it for scrap metal. Okay. I was like, oh, that's great. I could do that. But then I started flipping some of these notes to other investors because I was getting them cheaper. I bought one note, and we were able to immediately get the bar back on track. I think I paid five grand for it. I got the bar to start paying their mortgage on time for 500amonth, and they paid on time for six years straight for me. So I got a great return. And I didn't have to go out and rehab the property. It was in Jacksonville, actually. It was in Jacksonville, Florida, actually, at that neck of the woods. I investor was willing to pay me ten grand for it, but now I'll hold on to this. And so I use my own. Scrape my own money there to buy that note. And that was exciting. But there was a lot of people. When you talk about hindsight, the. Really, the first two years of buying these notes, I was just going to foreclose on most of them. And I did, which drug the process out, because in some states like Jacksonville, Florida, it could take you up to 12 months, 12 to 18 months to foreclose at the time. Other states were longer. And I should have modified the loans and worked with the borrowers more so to keep them their property. And I'd made more money versus, okay, I'm gonna foreclose now. I'm laying out servicing costs every month, attorney fees, then repair cost, repair the property to get pretty result. Whereas I could have had it cash flowing in 90 days. So that was one of the biggest things I learned is an aha moment a few years later. I should have bought more back then, and I should have been willing to modify more stuff the first two years because I was coming from the fix and flip side, coming from the real estate side, I was like, okay, I need to. I need to focus more on, like, as I like to say, rehabbing the borrower. So I'm not. So I'm working these things for cash flow and just holding it for passive income instead of being more active in the deal.

Yeah. So what's life like now? What is Scott's life on the other end of learning all this and implementing all these different processes to find these notes and hold or sell and all the things that you've learned over the last couple of decades? Like, what's life like for you now?

Yeah, so it's great. I work from home or I work from wherever I want to work, which is great. I had an office here with a staff and we've down with COVID We let that. We kept those folks around for a while. But we've got VAs different parts of the country or overseas that help us with stuff. I get banks that send me lists of stuff that we can cherry pick from on a daily basis. There's so many deals that go that are out there and no, investing is a smaller niche obviously than fix and flipping or landlording or even wholesaling real estate. So it's a smaller niche of people, but there's still plenty of opportunities. So I like working with other investors that want to get in the game because we will help them find deals that make sense for them. Like I was working with one of my students this morning, John. He's out of. John Varonko. They're out of New Jersey. He's actually a clinical psychologist. All right. He has his own office up there. But he's. I need more passive income. I want to do more real estate. We found him 12 notes today that he's going to pay about 225 for all 12. Okay. He's paying about 60 cents on it. They're worth about 330 is what the borrowers owe on this stuff. But on average it's a 23% cash in cash return if he gets the borrowers back on track. If he doesn't get the bars back on track, it's a higher return because he's buying them at a bigger sizable discount that he'll foreclose and get the equity in the property. So he's tickled pink because 12 notes at 235 or 240,000 is about $20,000 a piece. He's working through his due diligence now. If he buys all 12, he's happy. If he buys one, it's still going to be a great day for him. But he's in New Jersey. He doesn't want to own in New Jersey because it takes for to foreclose there. He wants to own stuff in other areas. These are in like ones in Florida. A couple are in Ohio. A couple are in Michigan. Two are in Texas, one's in Alabama, another one's in Mississippi, I believe, if I remember correctly. But that's the great thing is I've loved what I do. I'm not an educator. He's got more initials and acronyms behind his name than I've ever seen. A very smart guy. But he's gotten to the point where he's. I just, I Love what I'm trained in, but I want to do something where I can spend more time with my young kids. I don't have to check in. He goes, I want to have a little bit more of my time. I want to travel more. I want to set up cash flow that's coming in whether I decide I got to drive into the office today or not. You know what I mean?

Yeah.

And that's the thing that really invigorates me is helping other people do that. It's. There's plenty of deals. I'm not going to buy them all. And that's actually why I started teaching back in 2010 how to do this, because it's a niche within a niche. And for me to close more deals, I need there to be more note buyers and more people to understand what this niche of investing is in the ins and outs of it. And so I like, I started taking my phone and creating short videos or the little flip camera. That was years ago, like recording me walking around in assets. Here's what it is and here's what we're looking at and here's the numbers. And so it. And I started sharing that to Social years ago to start getting the word out. And what we're doing, it's led to a great following. We've helped a lot of people close on a lot of deals. We've helped a lot of homeowners stay in their houses, save families from foreclosure. But also on the other wind side of it, helped a lot of investors make a lot of money as well.

And with this model, my curiosity went, if I were you and what I know, I mode of, instead of teaching other people to do it, I would just raise a bunch of capital and just do it for them and get a cut. Is that something that's also was done or is being done or.

It totally is exactly that way too. Yes. We get a lot of people that go through our classes like, hey, this is great, but I don't necessarily want to do all the work. I'd rather just write a check and have IT invest with you on the deal.

That's where my mind went. I'm like, yeah, that sounds good. For the psychologist to be able to go buy the 12 notes and do all this and figure it out. Out. And then there's that other piece of me. It's. I just gave 25 grand to a couple of different syndications. So I have, I don't know, 25. 1, 2, 3. So three different syndications of 25 and then there's a couple of private equity private lending. There's one that has I let 51 that lend 35. So there's just like all these different places where it's just.

So you're the no business you're lending money to what a fix and flipper, right? Or a lender.

I'm lending money to. To an. To someone who needed the capital for whatever it is that they were doing. So just like private hard money lender.

You'Re hard money lending is part of the note business because you're lending money to an investor to buy a mortgage on a house of some sort or a business. So you're in the know about like we buy hard money loans from time to time from hard money lenders that want to cash out their spots. You're a no buster, Mike.

I do not know it. I just am collecting anywhere from 8 to 12% depending on who I'm working with. And that is just paying me each month. Just because to what I mentioned earlier, I don't know exactly what like the big play is. So therefore just hedging against that. We have two kids, we had a medically complex kid. I'm like, I don't want to be too high risk and I also want to be diversified so I have it spread out in these different places. But my ultimate goal that I have shared on the podcast and the people that know me is to get to a point where it's 10k a month and this passive cash flow, because that's roughly what our household expenses are, give or take a little bit. So if by getting that to passive cash flow on average to be 10 grand a month, that's a beautiful place for me. So right now it's not there. Because what I'm learning with the syndications that I've done is it's like very small payouts and then there might be larger payouts down the road and then it like a quarterly distribution or whatever, which is totally cool. Like cash is cash. I don't necessarily need the monthly. But it is a whole different ball game compared to where I was. Let's go back 15 years ago when I had three rental properties and I was being the landlord and I was going in there to fix the hot water heater and change the lock on the door and there was a mold break out of one of the houses, so I had it abandoned that one. There was vandalization on the other one. Like just dealing with all that shit, I'm like, gosh, I really do not want to do that. But it was high return. There was one of the properties, I was renting it to a group of college kids for the summer. The mortgage was only like 900 bucks, but I was renting it for almost three grand for the house. And I'm like, this is awesome. I rented it out and it worked out great until it wasn't great, until the rent. Rent went down, until the property was vandalized, until I had to go pay court fees and attorney fees to try to get my money recouped from these places and these people and.

But did you have a mortgage on that property?

I had mortgages on all of them, yeah.

And you paid him.

Paid them until I couldn't and then I had a foreclose on them. Deficiency judgments.

Go after deficiency judgments. They're just not going to collect in a lot of cases. But I would in that case, I'm the lender and I probably willing to bet that you probably got a litter or two from the time that you bought that and financed that property, that your mortgage had been sold to some other bank or some other lender.

There was actually interesting enough. Yeah. I never put that together. Why that? Why it went from IndyMac bank to another bank or whatever.

That mortgage was sold in a portfolio from one institution, another institution. Instead of me buying like 5,000 notes, I'm buying five or ten at a time. And it's the same thing. So if it goes from any Mac bank, it may go to Inverse Asset Fund or Scott Nose Rack Investments, whatever it might be on a smaller basis. So I don't know if you're a fan of movies out there, but have you ever watched the Big Show?

And it's fascinating that I still can't comprehend.

Christian Bale's character, right, the drummer, he's sitting there in the office looking at spreadsheets, listen to rock music every day, and he's looking literally at all these mortgage docs and stuff. It's like that. That's what I do on a daily basis. I'm looking at spreadsheets. I'm saying, okay, what does the property value look like? What do they owe? We'll send somebody out to take a look at that property, make sure there's not an alligator in the pool, make sure it's occupied, make sure it's not been vandalized or left. If it's been vandalized or trashed, we'll just kill that offering and move on to another one. So it's funny, you're a hard money lender. If the borrower stops paying you on his deal, you probably have the right to foreclose and take the property back.

It's not backed by a property I would have to. It's backed by one of them, is backed by their house, I think is what they have as collateral.

But yeah, you'd have the right to foreclose on their house. Interesting. Yeah.

Hopefully that doesn't happen. I don't want to go through the pain of doing that, but we don't.

Want to do that. But you have it. But in the mortgage docs, he's got a loan lien on a property and so you'd have the right to go through the legal route to collect the collateral. That's the collateralized. So you're in the note business.

I'd like to have you riff a little bit. I know you mentioned a little bit about virtual assistants and I know you mentioned just some of the processes. A lot of our audience, they're either members of our community. We have our operator to owner education community. We have our virtual assistant services that a lot of listeners use these services. So just from your lens of like, how have you implemented systems and implemented delegation and VAs into your current lifestyle? Or how you have seen some of your students implement some of the like VAS or systems into their lifestyle so they can still do the investing, still have their business, but also have some sort of time freedom by having some efficiency and some help.

So yeah, right off the bat, we tell people all the time, if you want to, at some point, if you want to leave what you're doing in the workforce and go do something, you got to have an assistant that can help you do the things you were not able to get done during the day. And one of the first things that we tell folks to do, listen, if you're getting, you know, we'll get a spreadsheet in, we call it a tape in our industry and it may have 100 properties or 100 notes or like a thousand notes. Like I just got one that had 550 different notes all across the country. You've got to do due diligence on it. So instead of using there one at a time, looking on Zillow and looking at Rentometer to figure rent rates and looking at what taxes row, we delegate that to our VAs and like, okay, here's a new list. We'll eliminate the states we'd want to buy in. Even they can do that now for us and say, okay, do A, B, C and D. Check the rent rates, check the market values if there's photos of the property line, pull a photo so we can see what kind of condition it is. Check the taxes, check for the name of the borrower, make sure it matches up with the tax records. Check how much in taxes are owed. Pull an APN number so we can check that the counties do a skip trace to see if you can pull a phone number or an email address of the borrower. If they don't have that, then let's pull neighbors. Look at what else do we have them do, man? Have them map that so we can see what it looks like where a part of the city is at. Look at the rent rates, how's that compare? Look at the vacancy factor, look at the crime map. There's this whole set of things that we have them do so that we can literally in a matter of a few minutes, once they pull that information, run it a couple formulas and it narrows it down to the top 10 to 15% of that list that we want to really focus on. And then they're using those top 10 then we're using them on social media to also raise capital. Okay, take that photo. If this asset we're buying and it's going to hit this expected roi. If it reinstated then here go create images, go into Canva, create the images, talk about this asset of being available for sale that we can then use in our newsletters using our direct marketing to our list of IRA investors that they can tap into. And then we also have our VAs go to the different county websites and scrub to pull people that have a self directed IRA that they may want to use that to invest in real estate. We actually can target people who have used it to buy a rental property or have lent money other IRA like you have on another property. And so they'll scrub that pull information, then we can upload that to our database and market to them with emails and borrower investor outreach to get them to hey, this sounds interesting. I want to find out more information and reach out to us. So delegation of due diligence, one of the biggest things, delegation of marketing, obviously like I had a VA that basically wrote 50 articles through Baird in AI on some of the most common questions asked from investors. And so we have this whole series of things going out that she pulled and was able to write and editing and, and then going and creating thumbnails and images so that we market. So it looks like we've got a full team and we've got a smaller set of folks that just know exactly what they're Doing and leveraging smart tools to make things happen for us. So same thing. We got a VA that's actually checking payment history or is reaching out to borrowers, reaching out to people that haven't paid to try to get them on the horn to see what they want to do, what they can do and which route we're going to go and using other tools just to find note buyers for a new product and also stuff that we can sell stuff to and then also note sellers so we get more listent to us on a regular basis that we can cherry pick for ourselves or provide for our students. So it's a whole. One of the biggest things I like to try to do is when I look at activities that we do each week, what can I delegate? What's your. You have. You have an amazing acronym.

What can you delegate?

It's just mine and it's the same facet. That's why I love so much about having you on my podcast was and that's a great. The same thing like she we got a VA delegates me getting booked on podcasts or delegates me sharing my podcast out there with marketing stuff like that too.

I will say listener, what you just got from Scott, if you listen to that and transcribed it and just put it in and you're using our virtual assistant services already and this is something you want to do, you can literally take that list and say, all right, go do that. That was a perfect example of you already thinking about the process. I think sometimes people get stuck on what can I have them do. I know there's stuff that could get done, but what are those things? And for you being able to articulate that so and so smooth of yeah, find this is these are the things you want to look for. Find. Create a canva image for these. Post this on the social, attract these individuals, make phone calls to these people, collections for this. Right? That's what the owner's mind needs to be focused on. And too often the owner is focused on doing all of those things that they can't take the steps, step back and say how can I build a process of somebody else doing all of these things? And then once I build the process of somebody else doing all these things and that's offloaded, what's the possibilities on the other end of that now? What can I focus my attention to? Strategy and content creation and adding value to my community or strategic partnerships or podcast guesting or travel or family or kids or self development for myself, it opens up more of a possibility and that's Why I love buyback your time. Really cool stuff. Carson. I keep saying Carson, Scott.

I've been called worse.

It's not a big deal.

Scott Carson.

It's a double first name. I don't know why I keep going with the last name, though. Maybe one of our clients is Carson Yates. So I keep thinking that I got.

To share a story with you on the name of Carson. So I bought a note on this property in South Beloit, Illinois, a few years back, and borrower Oat wasn't a big house. They owed 60k on it was maybe worth 36 at the time because it dropped in value. And this borrower, William and Sheila, I remember Sheila and William basically because they. When I was looking at this file that I got in from the seller, they'd been trying to do a loan modification for four years. Okay. And the reason it failed is that their mortgage had been sold, like, four times to another fund. And it was such a small amount, nobody wanted to spend any time on it. I get it. I'm looking at this pool I'm buying of notes. I'm like, this one wants to do a borrower. Why is anybody reached out to this homeowner? Because literally, in the hardship letters that this Sheila was sending in, she outlined what she could pay monthly. I'm like, that's a pretty good deal. And the seller only want, like, 12 grand for this note. Okay. I was like, we'll take it. This is easy. So we bought it for 12 grand. We reached out to the homeowner, Sheila, and in her letter, she had said the reason they hadn't paid for two years is because her husband had a heart attack, was out of work. Okay. And they could start paying again because he was back to work, but they couldn't bring the full two, three years of payments to the table. And so, anyway, when we reached out to him, I actually made the phone call. I said, I want to talk to this folks. So I picked up the phone, and I introduced myself, said, hi, Sheila, Scott Carson. You're probably gotten a letter saying, if you haven't, you'll have something showing up that your mortgage has been sold again. And she's.

Oh.

I was like, no, I know. You've been dealing with this for four plus years. We're gonna fix this tonight on the phone. So really, I was like, yeah. I said, you said in your letter you could start making your existing payment. I think it was like $400 a month, and it was a higher interest rate. And I said, can you start paying that monthly? Yes, I can. I said, can you bring some money to the table? Can you bring five grand to the table? No, I can't do that. I said, okay, well, can you bring half of that? Yes, I can bring half of that. We just got our tax returns, some other things like, okay, perfect, bring 25 under the table, start paying your 400, $450 monthly payment on time. Can you pay a little bit extra each month? She's, yeah, we could pay $200 extra.

Perfect.

So do that. If you do that for 12 months, Sheila, @ the end of the year, what we will do is I will a pull appraisal on your property and whatever the property values and appraisal will make that the loan amount. So you owe 60 some on and change if it comes back, it's only worth 40. I'll, we'll forgive you like 20 grand on your loan. We'll also drop your interest rate from nine and a half percent down to zero percent. Are you serious? Yeah, not a big deal. Drop it as representatives. And now if you keep making your 450amonth payment, we're going to keep your payment the same. You'll have your house paid off in six years versus 33 years or whatever it was. And she's, oh my God, it'd be great. I said, all you gotta do is just show up to my attorney. I've got an attorney, not too far. If you're mad, can you go meet him sometime this week with a cashier's check and you'll have all the documents signed off to it. So they showed up. They both cried at my attorney's office. They couldn't believe it. She paid on time for six years until she paid that mortgage off. And it was great. We saved them so much in interest. It was just a good thing. But about a year into the deal, after we modified everything for him, a deer. I get a Christmas card in the mail and it's a picture of Sheila, William and their three daughters and their new grandbaby, that their eldest daughter. Now, they'd raised these three girls in this house for 18 plus years. It was her castle. It wasn't a very big house, but it was their home. Right. They had named the granddaughter Carson after me for helping them stay in their house. And it's a great story. I love sharing it because we do a lot of good with what we're doing. Yes, it's great to make money. We like to help people keep on their houses. And when we can do that, it's really a great Day because it's a truly a win. We keep some in their houses, we make good money. But it's also, it's a win for everybody involved in this thing.

I love that. Scott, man, I think stories like that is really important for everyone to hear because it's not just about how much can I make, it's how much can I help. And frankly, a lot of individuals that are listening to the show that are attracted to what we do at Better Than Rich is I want to be a force for good, for, for myself and also for others and in my community. And we believe that if we can help entrepreneurs, they're the backbone of the change that we want to see in the world. Entrepreneurs are the ones that if we're helping them in their marriages and reduce the divorce rate and we're helping them be better parents and reduce the teen suicide rate, and if we're helping them give back to their community, we could see the change that we want to see, whether that's with the homeless or whether that's with mental health or whether that's in prison or whether whatever passion is for you education, we can help business owners create jobs. Business owners can create change. We serve that demographic. So I absolutely love that. And you need to have the time freedom and the money freedom and location freedom to be able to pursue that. And we want to help you with that. So I love that. Scott is there anything that we didn't hit on today before we transition to final three questions?

What I do is a niche. It takes some getting used to. Understands a little bit different mindset than owning real estate. If with anything that you look to invest in, it doesn't matter what notes or rentals or whatever might be your hard money lending like Mike's a fan of there too, in syndications. Know what you're doing, know what you're investing in, do some research. If it's not for you, don't do it. Not everything works in every market. And so really get educated, spend the time. Because if you're going to be investing your money and your time, make sure it's going to work for you and talk with those that are actually closing deals in that niche in today's market, not people that have closed something two years ago, three years ago. Find out who's actually doing the deals today. And I guarantee if they're doing deals, they're going to be very forthcoming with their time and questions and be willing to help you avoid any pitfalls or hurdles along the way that they may.

Have run into, well, I appreciate that. Let's go into our final three questions. Scott. So the three questions we ask every guest, the first question is, and these could be short hitting, whatever's top of mind. What do you think the world needs most today?

You took the words out of my mouth. I think we need more entrepreneurs, honestly. We need more people that are willing to take action. Somebody posted something on social. We need less content and more implementation, which means taking action. A lot of people are very good about. You've heard the analogy, ready, aim, fire. People will ready, aim, ready, aim, ready, aim. And never pull the trigger to fire on something. We need action takers out there because those action takers, they're making decisions. They're doing a lot, mostly things for the good to help us be in a better spot. If you're sitting back and waiting, somebody's going to make the decision for you. And most of the time, it's not going to be the decision you want. Take. Take action and get out there. You're going to make mistakes no matter what it is. Surround yourself with coaches, mentors, people that support you, and you'll reduce your mistakes. But get out there and take action. That's one of the biggest things I can tell you is it's the first year. Do what you're wanting to do.

That's great. And the second question is, what are one to three books that you think people should read?

One of my favorites is Outwitting the Devil by Sharon Lecter and Napoleon Hill, One of my favorites. I don't know. I've probably given 100 of those books away over the years. I don't know if you've had anybody talk about it on here before, but it's where Napoleon Hill was basically. It was written back in 1938, not released until about 10, 11 years ago. And it's basically Napoleon Hills having a conversation with the devil about what makes the devil successful. And the devil says that I like to throw shiny objects and syndrome in front of people. We like to distract people. We like to get people drifting away from their main focus. And I think it's an amazing book. Sharon was given the manuscript by Don. Don Hill, who's the president of the Napoleon Hill Foundation. I'm very blessed to call both of those folks friends. And Sharon didn't rewrite the book. She just took the manuscript because Napoleon's whole wife wouldn't let him release it back in 1930. People are gonna think you're crazy talking to yourself of the devil. And so she basically rewrote the book. But just added segments at the end of each chapter of what she thought Napoleon would think of the world. In today's thing, that's probably the number one book and there's so many books. The E Myth is another one that I love. Was a big one. Rich dad, Poor Dad, Three Feet From Gold is another great one by Greg Reed that I like to read. It's also in that Think and Grow Rich series.

Great, great. Some awesome recommendations there. Highly recommend several of them. Thanks for that, Scott. Last question we'd like to ask is what does it mean to you to be better than rich?

Better than rich is to be happy, I think is the biggest thing and have freedom. Some of the rich is defined by a lot of things. Different things for different people. I think for me, rich is being your own boss, doing what you want to do when you want to do. It's not a dollar sign. Don't be wrong. Money makes the world go around and you do more good with money. But I think sometimes I've seen people that they make a thousand dollars a month and they're the happiest people in the world. They're rich. The way I look at it, I've seen other people that make a million dollars a year and they're the most miserable people out there. So whatever you can find to be happy, cover your bills and wake up with a smile and be happy and thankful for where you're at. I think you're rich and we're often rich. In a lot of cases it doesn't have to be just money.

Well, Scott, I'm sure some people are going to want to stay in touch with you. Where can people learn more, hang out with you offline? I know you have the one day note investing class. Obviously I know you have their podcast as well. Where would you like people to, you know, stay in touch with you if you want to learn more, first and.

Foremost, make sure you hit if you're listening to this, make sure you hit the subscribe button and leave Mike a five star review. You don't have to laugh like me, but we know Mike is kicking ass and taking names on the Better than Rich show. So make sure you leave a review because we as podcasters love to hear that. But if you want to find more information, you can go to weclosenotes.com that's we close notes.com that's my website. You'll find our podcast, you'll find our classes. If you want to learn more about note investing, we offer a one day class that we're glad to give you for free. Usually 99 bucks. You can go to noteweekend.com and sign up for that class for free. It's six hours of me going through the Cliff Notes, how to find fun and flip distressed awesome.

We'll put those in the show notes and this is great. A lot of awesome content that you shared with us, Scott. Like a masterclass. And I'm sure people are going to want to take you up for that and stay in touch with you. Thank you for your wisdom. And if you listen to this episode and you're like, all right, I want a VA to do all these things that Scott's talking about, we would love to arrange a conversation with you. You can go to betterthanrich.com 90day plan and that's nine zero day plan and we'll hop on with you and do a delegation plan of exactly what Scott talked about with you and figure out how you can get a VA to do all these things. And if it makes sense for us to use our team, we would love that. But if it doesn't make sense to use our team, then at least you can establish that strategy and and be able to put it in place for yourself. Betterthenrich.com 90day plan. We would love to do that. And again, we appreciate you, Scott. We appreciate you, listener, for taking the time and as always, till next week, leave today better than you found it. Until then, cheers.

Take care.

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