Using Social Media To Educate People About Note Investing With Scott Carson From The Real Estate Mastermind "Live" With Jay Tenenbaum & Seti Gershberg

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Well, all right. Welcome to another episode of the Real Estate Mastermind. We're excited to be back here again in 2021. This is episode two for the year and we are super excited to have an amazing guest on today. I'm going to let Jay introduce the guest today. This guy is very important in Jay's real estate investing career. So why don't you say, hi, Jay and do your introductions.

Thank you, Seti. Good afternoon, everyone. Happy New Year once again. Yes, as Cedi mentioned, I am so excited to introduce our guest today because for better or for worse, I would not be in the real estate investing business if it wasn't for this gentleman. Back In August of 2013, I received some innocuous email from a friend of mine about some guy I'd never heard of before was doing a workshop down in San Diego and I attended for four days and oh my God. The rest, as we all say, is history. So today we have my mentor, the infamous, the one and only Mr. Scott Carson. Scott is referred to as the note guy. He hosts the Note Closure show. He's an all around educator. When educator of the year, I believe. 2015 or 16. I don't remember.

Something like that.

Something like that. And just has got an amazing background. His story, how he got in the business is awesome. And what he's done for probably what thousands or millions of students in these days has just been fantastic. Like I said, I wouldn't be here if it wasn't for Scott.

Thanks for that intro. I'll make sure and send that check in the mail for you.

And he came with sound effects as well.

I come fully prepared. You know, we don't want it to be downer. I like to have a good time, you know what I mean? So, hey, honored to be here. Yeah. Jay, you and I've known each other for. It's hard to believe it's seven, eight years now, right? Lots of stories, lots of bar tabs, lots of fun, lots of country western song borrowers and a little drama mixed in with that as well too. For you, right?

Sure. Absolutely. Yeah.

That's a little bit of an inside joke with the country Western song. I'm sure we'll be getting to that later.

Exactly.

So, Jay, we've had a pretty busy week, right?

Yes, we have out of the oven.

And into the fire, right?

I don't think we ever got out of the oven.

Maybe we didn't get out of the oven. I know. It just seemed to like, flip the page. And the year started and here we are off to the races. So, you know, we had mentioned that we took down that deal in Quincy, Massachusetts a couple weeks ago, which we were very excited to do. We closed on the last day of the year. We like that area. It's a nice part of Massachusetts, just south of Boston. And a very similar deal just came up, coincidentally, right down the road on a little peninsula named Cape Cod. It's right at the edge of Cape Cod. It's in a town called Barnstable, which is next to Hyannis Port. And it had very similar specs. So where are we at with that one, Jay?

So, yes. So the pressure and the frying pan and all that good noise. Yes. We have a wonderful opportunity. You know, Blue light special. Here we go. Take it, take it. But we had to close on it by Friday, and so we're getting that put together. But that's a nice note. In Cape Cod, the borrower is dead, but it's not a reverse mortgage, but it is in late stage foreclosure as some of the other stuff we picked up. So we're looking at 90, 120 days ish before they just saw the cusp of getting judgment. So before it goes to sale, picking it up for about 350. 300,000. It's worth about 500 after rehab. So rehab, what we expect about 75ish to 100 or something like that.

5 85. You know, Cape Cod is probably a little bit more expensive than most places. We're typically doing rehabs in the Midwest. But there was a comp that sold for 520. It was an absolute beautiful rehab. The guy who did it put in a lot of money. I wound up calling around the area looking for realtors. And I found the realtor who sold that property. And he told me that the guy who took that down was a flipper and he was going to live there himself. He decided in the end that he didn't want to do that, but he had already put down solid wood floors. I mean, this place was really nice. That guy put in 150,000. We're not going to do that. So we're not gonna get 520, but we'll probably get close to 5. Cause there's nothing for sale there. I mean, it's a supply and demand issue. Prices are going up 10, $20,000 every few weeks because there's nothing on the market and something comes on and it's a very desirable place to live. So we're excited to do that one. And if it closes, if we can get that one from auction or get a good price for it at auction, sooner rather than later. It sounds good to me.

Right, right. And Scott, as you appreciate, you know, kind of pivoted in this environment. We always pivot. Right. So, you know, the buying the occupied assets, lower value stuff and turning them into cash flow, which we still do, but we're actually getting opportunities to. You know, we've grown our business, scaled up our business. We did different levels and you know, so I mean, I used to buy pools for $300,000.

And the discounts were bigger back then too.

True, true. Yeah. So we're doing. Getting a little more flips versus, you know, occupied doing little mods and stuff like that. Although we still do, but yeah. So that's kind of what we're latest and greatest up to. As Steady likes to say in the. You know, when the COVID pandemic hit, we became opportunistic.

Well, I think everybody's got to look at that too. You've got to figure out what the market pays. If you're sitting around waiting for reos to fall in your lap, you may be sitting around for a while, depending on how things fall out and what ends up happening with the evictions in the foreclosure moratoriums, who knows. But yeah, you got it. Take advantage of what's going on. Whether it's finding amazing deals like this that you can pick up at 50, 60 cents on the dollar and put some work into them and sell them, or you're looking to take over some debt and some subject to deals. People want to walk away from their properties. I mean, there's. What did I see? The national default rate as of the end of the year is like 7%. That's still. That's a lot of people hurting. They give you some opportunities to either a buy that debt if you can find it from the bank if it's not government backed, or talk with them if there's some equity or they got a really low interest rate. God knows money's cheap right now that you take over that asset and do a wraparound mortgage or you know, cash it on the equity they're building equity. A lot of interesting deals in a lot of different markets out there right now.

Right. So typically at this part of the show, we typically kind of delve into, you know, what the state of the market is. But today with you on our show, I want to dive into what is your prognostication with regards to the real estate market in general and the note side of life as Scott Carson sits.

Off a cliff.

I thought that was your borrower in Quincy dying to get out of their house. Now here's the thing. Obviously, real estate's all relevant on location, location, location. And here's the thing. I think it's going to be the tale of kind of two different asset classes. You have the residential and commercial side. Let's start first. The commercial side. I think you're going to see the most amount of opportunity for those that are pivoting in troubled asset classes. I think commercial wise, you see a lot of office hurting. You see a lot of hospitality motels, hotels that are really struggling. And we've seen a few of our students actually taking the opportunity to pick up some of those assets on hotels that have been vacant or closed down for a while and look to kind of turn them into apartments or multifamily by getting them rezoned and putting a little bit of work into them. So I think that's some opportunity that we're looking at. Self storage I think is also a nice play. But I think you've got to stay away from the bigger, big box companies. There's a lot of mom PA owners have gotten to self storage that have struggled and turned into another job for them. And so we're seeing a lot of opportunity on smaller units. If you can come in and management or put the right management in place, that'll be a great play because people are still going to be looking to put their stuff away as they're being foreclosed, evicted out of the residential side. Or I'll tell you a funny story on a deal I looked at downtown Denver executive office place. Okay. 110 doors open up just recently right before everything hit the fan in February. So they had some leases but not much. And obviously they were having a hard time trying to be an office space. So they did the smart play of converting their office spot, their executive office space to self Storage Containers or self storage facility. So they reached out to all the businesses and the companies that were ending their leases and they booked up in a matter of about a week and a half. And so it was 10 by 10 offices. It was basically when I talked to the seller of the deal, the realtor on the deal, they said basically 95% of it was office furniture from other buildings that they should need to put in a place to go. So I think that's a lot of opportunity. Residential side, you have to pick your markets. I think looking at each city is going to be completely different how it's been impacted with foreclosures or layoffs or the employees of some big organizations, depending what's been hit. Obviously, I think college towns are being hit very, very hard if kids don't go back to school here before too long because you've got. Especially in places where the major university is the major employer and everything feeds around the university's restaurants are struggling, obviously, if they have to shut down again here with everything going on. Covid. But that's what we're looking at is a lot of okay, pivot plays. And we're still looking at residential. We've had been pretty luck with our portfolio of performers. We've had a few that have, you know, we've stopped paying that we've had to delay the foreclosures on for a couple of reasons because they weren't offering things in the county. But that's the biggest thing I'm looking at. Okay, what's going to be cash flow, what can make sense of the price that gives us a decent roi. And it's not really a fix and flip market the way I look at things in some areas like the one you're talking about. But I'm still staying in that sub $200,000 market because that's where I see the most amount of impact of people being in default. I track a lot of different markets across the country. Last year we targeted the top 40 media markets all across the country looking at their foreclosure rates and what price point of homes were impacted roughly mid year. And we're starting to go back and redo that again, reevaluate and see what the changes have been. It's been very dramatic. The hardest asset class as far as residential and the price point has been that sub $200,000 market for the most part, and defaults and modifications or forbearance agreements that have started but then failed for some sort of fashion. So that's really what I'm targeting. Anything really above 250, I'm really not interested unless it's a fast foreclosure state. I try to avoid rehabs unless it's in Texas or Florida for the Most part, yes, I do love God's waiting room out there in the Sunshine State, but that's kind of what our focus is. Sub 200,000 that we can. If we take a buy down at 50, 60 cents a dollar, it can be a good return on and plan on holding to it for 12 to 24 months.

See, Sadie, now you know where I get some of my stick.

I was just going to say that, but I didn't want to interrupt. Scott, that's exactly what I was thinking.

I'm not brain surgeon. I just picked up from other people. Just know what to look for.

Is that where you got country western song?

That's probably mine, I think.

Yeah, that's probably your time. Although I went to college and worked my way through college bartending in a dance hall before. So Jay's been there to see where I grew up. So working in Texas oldest dance halls, you learn some things.

Yeah, like when there's a hole in the floor, you just put a license plate over it.

Exactly. That's what they do. Green hall, baby. Texas oldest operating dance hall. This is 1929.

That was. That was a lot of fun. So, yeah, we talked about the real estate market. Let's go back a little bit because when we started together in 2013, you'd been in the market since what about 2009, 2010?

2008?

Actually, let's start there. Just tell everybody your story, how you got involved.

So I've kind of an interesting thing. I was started as a real estate investor in 2003 and fell flat on my face trying to thought I knew everything. Bought a couple rental properties, full price. And then my tenants, who were employed by a company that rhymes with hell here in Central Texas, Dell got laid off. And so I was a deadbeat borrower. Then I also got laid off from my. The company I was working for closed. And so I was a deadbeat borrower. We were making six mortgage payments on a private school teacher salary. Three first three seconds not very good. So luckily I worked my ass off, got rid of the two investment properties, kept a primary and started back on the finance side working in banking and a buddy of mine that I'd known for a few years. So I started a mortgage company with a couple, I guess you could say gurus or real estate investors that were traveling the country speaking and teaching on creative financing, you know, wraparound mortgages, owner rehab, short sales, that kind of stuff. And was fortunate enough that I knew that's where I wanted to be. So left and started immediately, actually. First week, July 4th weekend roughly, I was out in LA at the LAX Marriott at a Ron LeGrand seminar in the back of the room, pitching mortgages to investors and 1500 people. And I was very fortunate. For the next four years, I basically had an apprenticeship on creative financing and real estate investing. Now I was offering mortgages up to investors. We were just killing it. 30, 50, 100 mortgage applications between 2004 and 2008, because if you followed him there, you get approved. I took to heart that I'd screwed up previously before. And so I sat in the back of the room on a lot of workshops, a lot of conferences, a lot of masterminds, learned some great marketing skills from some of the best in the industry to this day. Then when everything hit The Fan In 2008, I left the mortgage side of the business and went 100% full time real estate investor and focused on basically buying debt, buying mortgages. Started dialing for dollars, 50 to 100 phone calls a day and built a pretty good database of banks and asset managers that I'd get stuff from and start sharing on Facebook and LinkedIn. Started to build a bit of a kind of a grassroots audience. Got divorced in the process. Ended a business partnership at the Point and was sitting there and you were joking about my tc, my Minnesota Twin shirt that I'm wearing and I'm a big baseball fan. You are 2J. And I was sitting there in April of 2010, beginning of the season, man, watching one of those commercials come on, you know, $5 for a hot dog, $8 for a beer. Being able to see every Major League baseball park priceless. I was like, man, I really want to do that. And my mentors, I told me if I wanted to accomplish something to write it down, not just talk about it, but to write it down and put it somewhere where you can see. So I did that. I said, well, let's just plan out this fictional trip to travel to all 30 Major League Baseball farts. So I pulled up the schedule on ESPN.com and started planning this all out and figured it would take about a 36 week trip to hit across the country, to hit everybody and spend a little time. Well, I just wrote that down, put it in my Gmail calendar for the game series, stuff like that. It was interesting. Over the next four weeks, I had a lot of about five or six real estate investment clubs reach out to me and say, hey Scott, we see your blogs, we see your videos on note investing. This is kind of the new thing. Would you like to come out and Speak to our investment club. And I'm like, okay, when do you want me to come speak? And that they gave me lined up perfectly when I would be in town for a baseball game. So I call it divine intervention right there. So I was like, okay, God, thank you. I see what you're saying. So decided to sell everything I own, sold my house, did a garage sale, wrote a couple of checks to get out of a bad deal and jumped in the truck. And what I thought would turn into 36 weeks turned into about three and a half to four years of non stock travel across the country, meeting investors, speaking in investment clubs. But the most valuable thing is the relationships I made with a lot of these bankers walking in, making a phone call with them and schedule an appointment, and walking in and, and talking to them saying, hey, I know you've got $75 million in bad debt. What are you looking to move? And then kind of dropping their jaw and like, what the heck do you know? You look like you're 12. With my short haircut. I'm like, well, I can help you or I can walk out the door, go down across the street and help your partner out there. Like, no, no, no, come on in. So there's so many amazing stories of that triple walking to banks and walking in their boardroom and seeing just their boardroom stacked to the roof with loan files. And they're like, okay, this is my personal secretary. We ain't got to buy it all, but please, please, please, please buy something. And just sharing those stories. And really, like I said, built a grassroots effort over time from 2010-13 and 14, speaking in San Diego to Florida and we're between. So just that's kind of how I got started in the note business and kind of got where I'm at today, looking back, closed on over a billion dollars in debt on different residential and commercial assets and really enjoy this space. It's a creative space. You do a lot of the same things on a day in day basis, but it's always different. And it's always nice to work with. Investors that empathize are willing to work with borrowers out there because a lot of people have faced bad situations in the past, none to their own fault. It's not their fault that the market dropped 50%. A lot of their markets or layoff or Covid hit, you know what I mean? And so that's the thing I like the most, is being able to, you know, if I have to jump on the phone with a borrower or work through my Servicer to really negotiate something that makes it's a truly win, win, not only win for us and our investors, but a win for the borrowers to keep them their house as well too. And of course you've got to go the legal route sometimes, but that's kind of, kind of my journey in the foray. Here is how I became the note guy. People would just, I do a lot of videos on YouTube and so I would come to these new investment clubs and get ready to speak like, hey, I know you, you're that note guy on YouTube. And yeah, you can't remember my name, but you remember me, I'm the note guy on YouTube. So that's how the note guy stuck.

Very cool. So when I've heard your story before, like 2008, 201011 circa, you've always referred to it as the wild, wild west.

Yeah, right.

So how west are we now?

Are we Will Smith West? Are we talking the Duke? You know what I mean? No, that was one of the big things when this stuff hit the fan. 2010 for the most part when they finally started because everything we had 1.8 million borrowers. It took about 18 months for us to finally hit that number as everything hit the fan starting back in 2000. But in 2010 we all thought it'd be like a three to five year cycle and it turned into being closer to an eight year cycle, seven, eight year cycle. And there's still stuff out there, legacy assets kind of hanging around. But we are still not on the wild west yet. There's still a big gap compared to if you look at what pricing was like. Steady mentioned earlier, pricing was a lot cheaper back then than it is now and we're starting to see it get a little bit closer. Investors don't want to pay prices a day. They think it's closer to 2010 prices and it's not quite there yet. And sellers don't want to take that big, big of a discount. So we're somewhere in between the gold rush and everything getting started off for the most part, I guess you could say you just got to know where to strike and where to go. There's a lot of opportunity out there, but it's not just a free for all with pennies on the dollar of what's owed compared to what it used to be.

Well, it's a different market, right. So we've got this huge supply demand imbalance in the housing market. There's just not enough homes for everybody that's out there. I mean if you look in any major metropolitan msa. I mean just go on Redfin or Zillow right now and pull up what's for sale. There's just not a lot for sale. Right. The inventory is low and that's just keeping prices elevated. So unlike 2008, 2010 when everything was underwater, we have that opposite situation where now there's equity in these homes. So people, they're defaulting but there's actual equity. So what we've noticed or what we've seen are prices have actually gone up from sellers. Sellers want a lot more because they think you're just going to foreclose and then get the equity in the house. Are you seeing the same on your side?

Well, it all depends on the market. Depends is the magical term there we see. I'd avoid those higher priced or high demand markets for the most part. I like going to the secondary market. I don't like fighting that stuff. Part of the reason I like the debt play is usually we can buy in bulk and get a bigger discount that way versus buying on a one off basis and getting down on a loan level basis like oh hey, this is a great asset, it's the best asset of the group. You're going to pay more for that. Well, I'm not opposed to taking some of the fertilizer along the way or the mid level assets on a portfolio to offset the demand and make it a win win not only for me where I get a little bit better pricing buying in bulk, but also it helps the seller because they're moving some of the stuff off their portfolio that they're getting tackled on. So there is that big demand. Usually I take those assets directly off the list and don't even waste my time on them for the most part because I agree they're going to go for banks think they're at a premium, they're going to try to sell at a premium. Think you're going to foreclose and do that. And so I just, if anything with equity I usually remove it from my list right off the bat. I usually just try to focus on the underwater assets for the part. And what we are seeing a lot of it's kind of surprising is new builds and a lot of new originations defaulting when the tax values have been reevaluated. You know, for years we've tracked the subprime and the non prime borrowers that were around. Obviously they're gone but I've done a good job tracking on who they sold their mortgages to after origination. And you're seeing a lot of places where the new builds, new constructions, people getting in 500 to $1,000 down. Well, now their payments aren't fully considering the tax implication once the new appraisal comes in. So we're seeing defaults first six months, defaults on that. Seeing a lot of scratch and dent stuff that we're kind of harvesting, arguing back and forth yet, but just looking at secondary markets for the most part. I'm not trying to buy in the Miami's or the Austin's. God, I wish I could buy in Austin here. But we're just overpriced for the most part.

So when we first got in 2013, went to your class, 2014, 2015, you were traveling all over the country. Did you ever have any idea that while you pivoted to Virtual in 2016, do you have any idea this would become the norm?

No, didn't have a clue. I have to thank Stephanie for the idea of that. She says hello. She's downstairs right now. Jay. But pivoting to virtual events, I did it because I had a big failure. You know, we were putting on, gonna put on a big event in Houston. We rented out a hotel space, you know, dropped $15,000 in direct mail marketing. And then we heard nothing but crickets. And I've never been closer to a heart attack than I was leading up to that event because nobody was signing up. And you're on the hook for AV and food and Bev. And my biggest thing is if I'm doing an event and having speakers come, I want people, I want butts in the seats. But I don't like to give away free tickets because people that show up for free tickets basically are, as I call it, dead wood, the prize pigs, you know what I mean? They're the people, if they show up to an event, even free, they're the ones stealing all the candy and the stuff out of the. And you know what I'm talking about on that one. It goes back to a San Diego event stealing all the goodies. So we did it because I was like, okay, we need to do an event trying to offset what we just lost on this event we lost 20 grand on. Stephanie was like, well, why don't you just do a virtual event? Why don't you just do an online. You're already doing webinars every Monday night. Why not just do. I was like, oh, no, because people have to be in seats have to be. And I'm like, well, shit, let's give it a try. So the first we did give it a try. We had 75 people show up. 95% of them stayed around from start to finish. And I was like, oh my God. The overhead was less than 1000 bucks versus 12 to 15, which is what the average was in overhead initially without printing and stuff. So that's when we decided and said, screw it. I called my sales staff who said like, oh, you can't do this. I'm like, I just did it, but I don't need you now. And it's been an amazing ride ever since then. I'm pretty excited. We've led the way in our industry with some of the mid year, the conference events. We're still getting three to 500 people to show up to events where a lot of people are having a hard time putting butts in the seats, even for in person events before COVID So it's worked our favor. We're always evolving, trying to make things better, trying to tweak things and separate ourselves. And excited we lead the pack. But I think you've got to be doing something virtual these days, regardless whether it's a podcast or zoom call or these days it's clubhouse. The app clubhouse is all exciting for people to get on and talk. You've got to be marketing, Always be closing. It's abm. Always be marketing. And I think whether you're in tiddlywinks or fix and flips or wholesaling or notes or reos, you've got to have a marketing first mindset. Because we're not in the real estate niche these days. Everybody's in the media space these days. That's one thing that we've prided ourselves always. Okay, where are we starting the day off with? Marketing. What are we marketing? What am I talking about today? What webinar am I doing? Whose show am I on? What deal flow are we talking about? And that's helped us tremendously.

So walk us back a little bit. Because you do a lot of things. I mean, we talked about how you got involved as an investor in the space, but you do a lot of marketing. As you just said, you do a lot of education. Kind of go through the multifaceted world of Scott Carson.

Ooh, do you have two hours? No, I'm just joking. Actually, it's not a lot. It looks like it's a lot because we do a good job of cross pollination and cross marketing and I've got delegation that helps me get the word out. And we're doing through like buffer and some other things. So we have our classes through weclosenotes.com, we have our classes that we teach. We do a one day class every third Saturday, then we do a three day class every two to three months. They got a media convention. So that's our aspect of that. We market for that. Not a regular basis on going through emails or direct mail. But what fills the. Puts the butts in the seats is our day in, day out marketing. Got the no Closer show podcast now that we've had for about four years. We crank out three to five episodes a week for that. So that's anywhere from three to five hours. And just providing content. I mean, we've had you on there before, Jay. A couple times. It's a mixture of bringing on experts in the industry, but also bringing on vendors and then also me teaching. And that's what I get over and over and over from people, is they like the content that we put out because we put more content out than anybody else. So not just filming that with audio, but also the video side and then resharing that to Facebook, resharing that to YouTube. We take our audio from our podcasts and we're now on the radio on 17 channels that we reshare there. So we take one piece of content and then basically share it seven, eight different ways. And that's why it always looks like Scott's always doing all this other stuff. I'm like, no, it's basically we take one thing and just replicate it out. I've got, like I said, A VA that works 20 plus hours a week and just marketing for me. Some teams and vendors do a lot of work for us and make it very, very simple for us to drop things in a Dropbox that automatically get uploaded and shared out to our masses. So basically I'm buying outs and basically educating people through our podcast or our workshops. Those are basically the two things that I do. And I'm not traveling anymore. Otherwise that would be the third thing of traveling and going around and having fun is what I usually do in a normal world. But pretty much Since February of 2020, I've been in my loft here at the house. I have an office that I only go to every once in a while. But pretty much I get up at nine o', clock, we start marketing work till five or six, you know, three, four days a week. But we decided to take a lazy day. We do that, but it's really those two things. Marketing for our classes and then marketing out and reaching out for deal flow to asset managers. But we've kind of automated that through email blasts and LinkedIn to reach out to them so that when they do have something available, they send it to us directly. We're first on their mind.

When Jay and I first started to partner up, Scott, we focused on purchasing a pool of contract for deeds. I think Jay told you about this story from Harbor. It was like they had 50 left. We wound up getting like 21 or 22 of those, and it was super cheap, like 11 cents on the dollar. I think we got those for like $85,000. And it's just been a cash cow for us. But our business evolved, right? Jay and I didn't pivot once. I think the reason that last year was so good for us is that we keep doing it. We don't reinvent ourselves, but we see opportunity and opportunity sometimes shifts. So after that we decided to look at rental property. So we wound up buying property in Cleveland and actually it just turned out to be a really good time to do it because we got in right before all the prices went up. So we got six properties there, we rehabbed them, we put in renters, and then we pivoted again in a way because we purchased a pool of rental properties in Evansville, Indiana.

Right.

And then since then, we've been doing this opportunistic stuff. So for you on the note side, though, what has your business looked like over the years? What's been the evolution? Are you doing the exact same thing or is there something else you're focused on now?

So I like, I want to give kudos first of all to you guys for a couple of things. One thing you guys did a little bit differently in the pivot is that you bought multiple properties in an area versus trying to do single onesie twosies. I know Jay and I have been down that road before. Onesie twosie rentals across the country will kill you, you know what I mean? Cause of having to replicate teams and property management. But when you buy six in Cleveland and was it 20 in Evansville, something like that or something?

40.

40. Sorry, I didn't mean to take away 40. That's a big number. But economy of scale works in your favor. And timing works out there where you have one handyman versus having a six handyman, so they can save you in a lot of profits and time frames. So I first started off, my first two years in the nubus was buying stuff that I could foreclose on and take it back as an REO because that was where I kind of came from that involved into Buying stuff that I could hopefully modify or foreclose. I bought a lot in Florida. I love Florida. But as that market heated up, I evolved in buying a lot in Ohio, a lot in Michigan, a lot of Indiana, a lot in Illinois. But our biggest goal in the most, I guess you could say the bit of a pivot was to avoid empty properties. That was one of the big things because we always found looking back at the portfolios we bought, all the biggest trouble ones were the ones that were vacant. Those are the ones that need the most amount of rehab. Those are the ones that were the hardest ones to track down. The bars that have moved on. I've bought a lot of contract for deeds and I pivoted from buying a lot of first liens into the CFD space. I actually got a Christmas card for Harper one year, which is kind of surprising. I actually am getting a deal worked out with them right now to fix screw up on a filing. But avoiding vacant properties and focus on the owner occupied stuff and really doing a deep dive on the borrower. You know, what's going on? Doing a little social sleuthing. You know, Jase probably heard me tell the story about we were buying and looking at contract for deed in a bar or posted on Facebook, do I pay my mortgage this month or do I go to Disneyland with my kid? I'm like, that's not a bar that I want to have. Right. You know, priorities, priorities or another one. We bought a note on where the bar was going to pay for. He was going to pay for his breast implants as he was going through a bit of a pivot himself versus pay for his mortgage. So you have to look at what the market is. We started buying a lot of contract for deeds because they were cheaper than they were when the market overheated. In a lot of residential markets, we're still looking at that, but it's the same thing. Okay, what's going to be the best cash flow for us? The more I can stay in my lane, the happier I am. And by lane, I mean stuff that is basically systemized. Okay, if we can buy it, is it occupied? Have the borrowers made any payment? Have they communicated anything with the servicer? That tells me somebody who really wants to be. If we see in the service scene that there's no comments or the borrower's been aggressive, we just kind of kick it to the side because we just kind of want to turn key this stuff so it makes it really simple and blind. I'm not really opposed to really low end I mean, I'll look at, but I think everybody inches up on their value ladder on the properties. Won't really look anything below 50 grand for the most part. Now we try to stay in between that 50 and 250 mark. Try to stay in areas of 50,000 people or more. I think the longer you get in the game, you end up focusing, bringing in your target a little bit. And that target, like you said, will shift markets, shift values should play depending on what opportunities that come across you. So that's what we're focused on. Pretty much owner occupied stuff that we can take down that will get us a, you know, 15% or a greater ROI if we can't be performing and then look to hold it for 12 or 24 months and then go from there.

Yeah, we've got one of our harbor assets dutifully paying, but a couple has a kid and as husband and wife or boyfriend, girlfriend. But now I got to keep a scorecard because I think it's boyfriend, boyfriend.

There you go. Different strokes for different folks.

Yeah, and the real borrowers in jail. You know, like I said, the country western song all over again. But they're beautifully. Came out 600 bucks a month.

So we did just pay 100 bucks to go to somebody's commissary for a guy that was filed in Leavenworth, Kansas to have him sign over a deed and lie on a property. Yeah, so you gotta realize, you know, you feel for people. You know, that's. We've seen interesting stories. I saw it. We bought a contract for Deeda, originally back from harbor, golly, five years or six years ago and found a dead person in the house in Dayton, Ohio. You know, they'd been in the house for like two years from what we could tell from the servicing notes that nobody had reached out to him. He had no family. Realtor went in to change the locks, we bought it, and there he was laying in the closet. So a lot of people are hurting out there. It's a crazy world. God knows what that's going to happen in 2021. You just got to be prepared to pivot and maybe cycle back a little bit. Cash is king these days. Like you said, you guys can close by Friday. You get a great deal close by the end of the year. It's a good deal. I would be stingy. Try not to. You know, you and I have both seen people overpay for assets and if you can have one or two multiple exit strategies that worked out well, great. But you know, be flexible. If you can in your exit strategy in some sort of fashion, like you guys on the way talking about you're buying at a great price there. You can put a go high end on the rehab or go midway on the rehab. But if you had somebody come to you and say, hey, I'll give you this as you're halfway through it and it's a good ROI to you, I'm sure you'd say, show me the money, baby, and walk right.

Actually, we're the process of show me.

The wire.

Herding cats as we speak. We bought a reverse mortgage in New Orleans. We're working on the foreclosure, getting it finished up, bought it nice. Because, you know, I tell this story. How do you go from third to first? You just change the numbers.

Reverse mortgages, we're starting to. You're probably seeing more portfolios like we are.

Yeah. So on this one, there was a little bit of some title issues and some. And some liens that could have made that lien our mortgage third. But got cleaned up. Even diligence. I knew it was gonna get cleaned up. And so we bought it for about 85,000. It was worth about 385 at the time. Market's heated up. It's worth about 440 now. But it needs. It's an historic area. It's gonna need 150, 200,000.

Over 200.

Over 200. So we've got a guy who, you know, I met him at one of your. In Houston, I think one of our masterminds. And I'm getting, you know, I'm going to pay you Tuesday for hamburger today. But, you know, we've got a good price that he pulls the trigger like he's got a short lease to pull the trigger because just go. The price is going up and up because the market's going up. But. But the other thing is, have you ever had a double death in your properties?

What I mean by that is double Ds, double deaths. No, I've not had a double death.

So we bought a loan a long time ago and there was a suicide in the property. Not a big deal. Right. I mean, it was many years ago, but while we own the note and the property was vacant, a guy was getting chased by the police, ran inside our house and got shot by the police.

You didn't have it secured?

We had it secured. But that security only goes for so much. Right.

This is Chirac.

No, it was not. It was in Toledo. I think so, yeah. How is the market? So we talked about, you know, the varying degrees. So from a virtual standpoint, you're getting. Let's talk. Go pre Covid. For the moment, your virtual workshops, et cetera. You know, you were still educating a lot. Whatever. How is that? What is a marketplace? Pre Covid. Let's talk pre Covid. What does that marketplace look like as far as you know? I think we had a conversation just yesterday with our partner on REI Blade, and that was, you know, from the standpoint of how many people go through a educational funnel and actually do. Any question is how many do anything? Or what they do is what that scale gets to and how many there from there sustain it.

So here's the thing with anything, and I would say Covid has nothing to do with it, okay? Has zero to do with it. Only about 5% of people will do anything. If they go through a workshop or seminar. Only about 5, maybe 10% of people will take action on anything. Okay? And that's always been the case. All right? 5 to 10% of people will actually sit down and actually do something. And one of the things that we used to do at our workshops is we would try to help spice up the networking. If you couldn't make in person, we would give you the database, everybody. So you run around trying to swap business cards with 50 to 100 people, trying to do it virtually. I'll just give you the registration list so you can contact people afterwards. But I would always put my own email address in there. And I could always tell who would be successful, who would start off at the right point. It would be those that sent a hello email out within 48 hours of an event. You know, and it's always the case. Hey, it was great meeting you at the last event we attended, whether it was in person or virtually. You know, here's what I do. And it was the thing. I would always harp on the class, like, you need to connect with people, you gotta email. You gotta market to people on a regular basis. Gotta get the word out not only to the people in here, but to your warm database. Cause we've all got a stack of business cards sitting in a shoebox somewhere right under our bed or in the closet. So 5% of people take action. And that's really. I wish it was better than that, but unfortunately, the thousands of people that I've taught over the years going back, you know, not many people, you know, some people. And it's like podcasting. Talk about podcasting. A lot of people love the idea of a podcast, but only about 1% make it to 100 episodes, you know, less than, I mean you might have 20% make it to 10 episodes, but when you get beyond 10 or get to that 25 mark and you guys are coming up on 25 if I remember correctly. Right. That puts you in some rare air. Hard to believe that 25. But consistency is the key when it comes to. We have such a. Oh my God, my attention span is so short and distractions, people just, you know, this is one of the biggest things when I first got, when I was traveling the country as a mortgage is going to all these events. I would see the same people week in, week out. And I'm like, weren't you just at this event two weeks ago in St. Louis?

Yeah.

I'm like, what did you do? Oh, I signed up for this guy's class. I'm like, okay, what'd you do? Oh, I've been too busy. I haven't had a chance to do any marketing or. I did marketing. I sent out like a mail, direct mail campaign or something like that. Like, oh, that's cool. How'd it work? Oh, I don't know. I didn't have time to call any of my leads. I had to jump on the next class. That bugs the shit out of me. Okay.

Go ahead.

You don't want to be the jack of all trades when it comes to real estate scenarios. It's good to be knowledgeable, but focus on one or two activities, that's about all the focus you can get. There's nothing wrong with education, but if it's not going to serve your purpose of what your long term goals are, that's just like being an educated idiot. In my opinion. That and $4 might get you a glass of coffee at Starbucks.

Yeah. So I've thought about this quite a bit and I think a lot of it has to do with there's the perception of what you think it's going to be like to be a real estate investor or to be a note investor. And what you're looking at is you're looking at the sizzle, right? You're looking at the excitement of buying something, helping somebody stay in their home and then making money selling the note. Right? But what it comes down to is what do you do every day when you get out of bed? You mentioned to me at 9 o' clock you guys start marketing. Well, I know you love marketing. It's obvious you love doing that. You love getting the word out and doing the podcast and you've got a good mind for it. So it works really well. When People figure out what they actually have to do on a day to day basis to be a real estate investor. It's complex. It's a lot of work. It's not like it's rocket science, but there's a lot of moving parts and a lot of things you got to know. You have to be very organized. You also have to raise capital. Right. A lot of people are afraid to do that and no matter what, won't get past it. And then the ones that do get past that, you know, it's like, do they actually want to do, you know, how do you get organized? How are you able to scale from that point on? So, yeah, I don't know what the answer is. Maybe some ongoing training that never stops. Right?

Well, but then, but five, that's the thing. Five percent of people. You have people. Okay, here's the thing. People like to scratch an inch. They romanticize being a real estate investor because they've watched HGTV or Flip this House or Joanna Gaines from Waco, Texas, thinking it's all gonna be romantic and sexy like that. You know, sexy is when you're in Chicago for a reason. It's a damn cold ass day with some snow on the ground. You gotta go knock on doors and afraid that somebody's gonna answer the door with a gun in their hand, or you need somebody to be there to watch you knock on the doors in case something happens. Jay and I've been there, you know, running through neighborhoods that we're like, we probably shouldn't be running through these neighborhoods. There's a lot of nitty gritty that goes into this. You've got to build a thick skin. And I think what a lot of people do is they don't have the patience that it takes a lot of offers. I mean, Jay, if you think back, think back to the number of deals that you've made offers on, then how many of those have you actually closed on? You know, what's your closing ratio? You know, 10, 20%?

Maybe in the very beginning. I mean, remember, you know, Valisa, Terry used to, you know, like, you know, we didn't get off on the right foot because, yeah, I could make offers and not hearing boo. And then I kind of changed up the approach a little bit. So I kind of.

We do trade, Jay, as Val would say.

Yeah, exactly. So I think my, you know, I'm as a competitive guy as anybody else, as, you know, so I think I kind of got to a point, you know, really refined the addictive bid process to where if I'M going to make a bid, I'm going to get it accepted. Right. I may fade and I may drop it, but I've got relationship with sellers as you've taught me with regards to, you know what, my dog ate my homework, I need more time. Or they're just, you know, good, good about, you know, refining that pool population, et cetera. But the question I have is, okay, so we identified that there's 5% people will do something. But of those 5% that do something, what does that something look like? Does it look like they're going to buy like your students on average, how many deals do they do? And what is this life cycle? I mean, I've been in this business for eight years. Great. That's my, it's my, I loved every minute of it. Right? But how many, you know, am I in? The 1%, the 10% of your students? I mean, what does that look like?

You're the 1 percenters. All right, so I see what happens is that shiny object syndrome. People work for a little while and then when it actually takes down to them being having to work and show up on a regular basis and make offers and market the thing that really make people. God, what the hell, I'll just be on it. I'm always honest with you guys. But people, the listing websites like the watermarks or the FCI exchanges or the paper stacks or the granite loan solutions or the condors out there, they made it, made it easy for people to find low hanging fruit and they didn't have to work to go find assets. Okay. And so you see people like, oh, I don't want to do an email blast, I don't want to jump on LinkedIn and market. I can just go here and buy one or two assets. I can scratch my itch and be good. That worked for a while for a lot of people. God knows we've bought from all of those sources, YouTube including, there's nothing wrong with them. But when the market starts to tighten up, you've got to learn how to develop those marketing skills. It's like raising capital. The biggest handicap for anybody in raising capital is to have capital to start off with because you use that as a crutch. Like, I don't want to go raise capital. I got 200 grand here for my retirement account, I'm going to use that and then that's all I'm going to use. Or I got 50 grand, that's all I'm going to use. Well, at some point you're going to run out of your own capital. And you can either sit there twiddling your thumbs, playing Dixie, or you can actually get on the phones or reach out to people. And you network with or met at different investment clubs or meetup groups or stuff like that and start marketing to raise it. So that's what it comes down to is people just are lazy. And if you want to, I would say this, I would say the average 5% of people do take something that comes from our classes. Okay? A lot of people like to itch their itch by just showing up and educating themselves. They want to be the educated idiot that knows everything but has never pulled the trigger. Okay? Out of that, there's 5%, you probably have four out of five that will close on somewhere between, you know, 10, maybe 20 assets over time. And then the other, the Rare error, the 1 percenters really do make a business and close on. On 50 or more. And that's what I would say. I mean, you've closed on a couple hundred assets. You know, our buddy Wayne Snell's closed on a couple hundred assets. We've got a few other students have done well, Robbie's done well, closed on a couple hundred assets, you know, and then you pivot from that, depending on what market you're in and what other opportunities you have. We've got some students that, you know, bought a chunk of assets and then they landed a commercial tape. Matt Mueller out of San Diego is a Great example. Bought 130, was able to get financing on 130 commercial notes at a big discount years ago. And he said, I don't have to do anything else. I'm good. So that's another thing, you know, we preach a lot about, you know, if you have a goal of 5 grand or 10 grand or 15 grand or 20 grand a month, you know, kick, bust your butt to get that point where you've got it coming in residual. And a lot of times then you don't have to work so hard after you've got your bases covered. And you're at the point where more does not always mean more. Sometimes less means you live a lot more. And that's what it comes down to more than anything else. Of course, everybody's different. Situations, divorce, whatever, things happen along the way. But yeah, rare air, you're close. More than 50 individual note deals for the most part.

How has your education style changed over the years?

How's my education style changed? I think I'm still pretty brunt for the most part. You know, I've never been A big guy that likes to blow smoke up people's asses. I'd rather tell people straight up how it is, you know, And I'm the first one to admit, hey, I screw up. I am far from perfect. If you're looking for perfection, go down the road somebody else's thing, and they can promise you that, but they can't deliver. I've always prided myself that we're always buying. That's one of the big things, always looking at buying. The last thing I ever wanted to do because I saw this in the industry is people that did two flips or three flips now they started teaching a class on it and never bought another deal again. And they became just pure educators. And that would be one of the big things. I think it always separates those that are actually doing it from those that are just teaching it. A lot of times there's a lot of teachers out there that have closed on five or ten note deals. Now they're teaching a class and they've only bought an appreciating market. They've never had to deal with something crazy like what's going on right now. So teaching method, the virtual stuff makes it a lot easier. Steph says I need to be a little bit more patient with people because I'm, you know, you imagine that me losing patience, but I'm like, I believe I teach in a way that gives people the tools. If you're going to go do it here, here's how you go find the asset managers, here's how you raise the capital. Here's the bucket in the pick. Go mine your gold for you. I'll show you how to fish. I'm not going to feed you. And I think that's probably the biggest thing is my patience sometimes wears thin a little bit because I get. Especially when I see people that are showing up and showing up and not taking action. Like, look, save your money, go donate it to a charity or cause, but do something. I mean, we all learn more from pulling the trigger and closing on that first deal or two deals than we ever do from sitting through a workshop. So I said goodbye to some people because I'm like, it's just not. You're not going to do anything. And no offense, I don't need you clogging up my classes with non doers. I want people that are going to take action as best I can. So. So that makes sense.

Yeah. I remember back in the day, some of you live events, so it's the evolution of Scott and his patience.

So first of all, you have to clarify if it's like three day workshop is different than a mastermind that I know everybody.

Yeah, yeah, no, I'll clarify. A live three or four day event and you've got the political science asking every imaginable question guy in the room. Day one Scott is very patient, answers all the questions. Day two, he's answering maybe one of every two because he's getting a little annoying. Day three, he tells the guy to.

Leave if they're asking the same question over and over again. You know when you've been teaching off you hear a lot of those limiting belief questions from people. Well, what if this happens? What if, what if? Well, what if the opposite happens? And that's what so many people get bogged down into. Worrying about the worst possible situation and really the worst possible. If you prepare for it, you know your numbers and know that and do the due diligence, you can avoid a lot of problems. But it's the same thing if somebody's an asshole. I'm not afraid, like listen, let's talk afterwards. But you're usually I get short because I've had people complain to me about somebody else. So I'm like listen, let's keep your questions and we'll schedule some time one on one. You can ask away but we've got stuff to get through and I can't stop and answer your questions every five minutes.

Right. How has the content changed from over the years?

Oh, it's always changing. It's always changing as new things change, market prices change, due diligence offer software. You know, there's got, what's great now is we have a lot of great new marketing tools that have changed since I first started, you know, but there's still a lot of the basic stuff with LinkedIn and email blast are still two of the most basic stuff that still works. But there's a lot of cool tools that can help you maximize your time and help you save time and money by posting. You know, Buffer really wasn't around there. Hootsuite was around when I started. There's all sorts of great email services. You guys are developing some great software to help automate a lot of things for people. You know, the markets change, the names come and go, but the same basis comes in. You know, the same basic strategies exist. You know, you work to get people modified or Dean Lieu or you end up going to foreclosure. Those are the three basic routes are going to happen with a non performing note for the most part. And you know, we've changed markets that we focus on. I'm always trying to keep up to date with what's going on in different states and cities. Especially right now. It's weird with all the foreclosure moratoriums and some markets are better and others like, you know, like I'll give you an example. We talked what happened like 2008 or 2010. Attorney General in South Carolina canceled foreclosures for a year. Okay. I'm worried that states will do that again. Massachusetts was one of the states where they suspended foreclosures for over a year. You know, we basically had this happen across the country in 2020, but is that going to happen now in 2021 once things change? So I think you've got to be good, you've got to be a marketer and understand some things. If you don't know what an email service provider is or a CRM, you have to embrace social media along as well. If you don't embrace social media and some of the tools out there, then you're kind of in the dark ages and you're going to either get run over or get lapped by everybody else who's embracing that stuff. So, you know, just embrace change. That's the one thing that's constant in life. Change. And try to be as flexible as possible.

So what was the one thing you would tell your younger self?

You want the R rated or the PG rated? I'm sorry, I tell my golly, here's the thing that I. When we talk, how young we talking like teenage Scott or 20 year old Scott? Your pick. Your pick, My pick. I was always really blessed that I had great parents that taught me a good work ethic. I think I probably would have, you know what I'd say live it like it is. Because if it was, if I go back and change anything, I wouldn't be where I'm at today. I've had some amazing things happen, met some amazing people. I've had ups and downs along the way. But what doesn't kill you makes you stronger. And just, you know, just focus on communication more than anything else. If you're dealing with issues in anything, communicate. Don't try to swallow your ego or pride and not communicate it. Ask for help. Don't be afraid to ask for help. In some situations, that's probably what got me through some better, some lower situations by just reaching out and asking for help instead of trying to do it all myself. So that would be the bit of advice I get. But I don't think I would change much of anything for the most part.

Sidney, anything you have closing ads.

Well, I did want to go back to one thing. I think we've got a few minutes here. So you said way back when you were going to the different ballparks and you'd go into these local banks and you talk to them about buying some of their, their debt. Do people still do that? Or, you know, like, where are most people now? Or what are you guys doing to source new assets?

I'm glad you brought that up steady because yeah, most people you're not going to walk into Wells Fargo, bank of America, say, I want to buy some of your notes. They're going to call security on you. Security, security. So those would have been some like regional banks, mid sized banks that I'd already built relationships with their special asset managers or secondary marketing managers. So a lot of that happened in Florida, Florida and Austin. I was communicating with Ocean's bank, which is one of Miami's largest private banks. So there are two asset managers. I was in town. I reached out to them. Their secondary marketing department was actually there. So we went to lunch, actually took them to a Miami Heat game as a way to kind of prime the pump to get some deals sent my way. And then I asked for referrals. Who else do you know that I could talk to locally that I could work with? So it was always not me, just really cold calling. It was like I knew what they had in their books. I knew who I needed to talk to a lot of times and would walk in knowing, hey, I know you got 20 million in distressed debt. And actually speaking to the actual, the person in charge of the bank, the president of the bank, or tracking down where the bank's secondary marketing department was or their whole loan training desk was where that was located and scheduled an appointment with it. So it's still a lot of email blast out to those contacts and seeing what they have on their books. Once a month, I still pick up the phone and dial for dollars for four to five hours. Jay's see me do that. That's still one of the most valuable things is it's still a relationship business. And if you're gonna be dealing with banks, banks have a lot of filters on their email with all the fraud going on. So if you send an email blast and don't get a response back from people, pick up the phone, track them down. It's still one of the best things to do. That hasn't changed much over the last 10 years. It's still, one of the best ways to make relationships is just follow up. 80% of sales comes after the fifth contact. And that's one of the biggest things. We religiously track. Who we call, when did we call them last? Did we leave a message? Did we reach out to them on LinkedIn? And when I do travel, if I can set a meeting, hey. We try to schedule around something fun, whether it's a happy hour, a baseball game, a basketball game, or something like that, just to stand out from the crowd for the most part. Here's a little thing most people don't know. Bank employees can accept up to a gift up to $100 in value once a year. So a bottle of their favorite bourbon scotch. The Miami heat tickets had $100 face value, even though I paid $500 for them for the playoff game. So it worked that way.

Very nice.

So really, we're coming up at the top of the hour here. This has been a really awesome conversation. I really, truly enjoyed it and it's good to get to know you a little bit better. Scott, we've had a couple conversations before. Really appreciate you coming out here and speaking on the podcast. Do you have any final words? Is there anything that we missed? Anything that you'd like to get?

Here's the big thing. If you're listening to this on itunes or any other plans, go on over and hit that subscribe button right now. For Jay and Seti, hit the subscribe button and make sure to leave a five star review for them. It takes a lot of work doing a podcast, the editing and the reaching out and scheduling things. And these guys have a busy schedule. The fact that they're taking time out of their busy schedule to spend time with you, to enter head, some knuckleheads like me says a lot. So go out and as podcasters, we love seeing the subscribe button. We love seeing the comments. So share your comments, share what you like the best, and do that for Jay and Cindy. It goes a long way. So that's my final words. Anybody interested? You know, I once got Carson on social media platforms. You can always, hey, check out the Note Closer show podcast. It's my 50 megawatt blowtorch podcast out there as well. But always glad, always glad to help out. And anybody on a path to real estate or trying to better themselves, I'm always glad to jump on the phone and share 30, 40 minutes with them, helping get them on the right path.

That's awesome. Thanks so much.

Thanks for having me.

Yeah. So, yes, you've always been. You've been for support. You've been my friend, my mentor, and everything in between for many, many, many years. And I sincerely thank you for coming on our show. It's always, always a pleasure catching up with you. We always say we should do it more often, but we really should do it more often.

You know, that's the same thing. Jay, you and I have known each other for years, and I appreciate going, man, but you've learned more than I would ever teach because that's the biggest thing we all learn by taking action more. And so. So I don't think if you. Somebody I mentor. I just think of it as a buddy and family note. Family people that I actually. We all wish we could pick our family, even though sometimes we can't. Okay. And if I could pick, I'd pick you as a brother in the family store.

Brother. All right. I appreciate that. Thank you so much.

Thanks, buddy. Be safe.

All right, well, on that note, we're signing off. This has been another awesome episode of the Real Estate Mastermind. We will be back next Tuesday at 3:00pm Mountain Standard Time. That's not Mountain Daylight Time. It's not Standard Time, even though it's the same this time of year. But remember that mst. All right, folks, we will see you then.

If you enjoy this week's episode, please subscribe to our podcast and join us every Tuesday at 6:00pm Eastern Standard Time. The Real Estate Master Mind is brought to you by reiblade.com raising capital, tracking performance and managing investors has never been easier.