Buying Distressed Notes To Make Millions with Scott Carson

Scott Carson: [0:00] You're the bank. And so when we buy that debt, we buy buy it to the borrower still owes the full amount, but we're buying that debt at a a very substantial discount, usually $50.60 cents of the dollar, maybe less $40.30 cents. It depends on what's going on. And so that's one big advantage is that we're seeing bigger discounts than most people are seeing buying retail.

Speaker 2: [0:20] Welcome to the collecting keys real estate investing podcast with your host, Mike DeHaan and Dan Austin From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [0:43] Alright, guys. On this episode of the Collect and Keys real estate investing podcast, you have just me today. Dan was not able to make this interview, and I chatted with Scott Carson who is a professional note investor. And he is the first person that we have had that focuses specifically on real estate debt. And the things that he does in his business, and the kind of spreads that he makes on his money are absolutely ridiculous. If you're not familiar with distressed notes, very basically what he does, he buys distressed properties, like, kinda like the same sort of concept, except he buys literally the debt for it. So let's say that there is a piece of debt, you know, that is in foreclosure with the bank that is worth 200,000, he will work with the bank and go and buy that debt for 70,000 and essentially assume the rest of the value of that note. So in an ideal situation, what he does is he tries to get the person to pay back the full $200,000 essentially in two and a half times his money, or worst case he goes and he forecloses on the deal and ends up getting a house at an extremely huge discount. He goes all into strategies about how he finds these sort of deals, how he analyzes them, how he puts them together, and the different nuances of doing so. And is a really, really unique take on something that is kind of like the long lost, I guess, part of real estate that so many people don't even consider as an option.

Mike DeHaan: [2:03] And he really has some incredible takeaways from this that you can go and potentially explore yourself. So you should definitely reach out to him. Super, super friendly guy. I really enjoyed chatting with Scott. Funny thing is this is one of the first episodes we've done where I actually had to cut away some of the times because we went over on time so much. We were having such a good conversation. So, you know, that says a lot because usually it's we stick to about forty five to fifty minutes on average with these shows. This one, we were pushing well over an hour and I had to trim it out just because he was such a great guy to talk to. So you should hit him up and definitely take him up on all the different things that he offers there at the end. Anyways, guys, please enjoy this enjoy this show. Share it with all of your friends. It is the easiest way for us to continue growing the show as if you share it. And if you don't enjoy this show with Scott, or you don't learn anything, I don't tell you, you must be a pro because there is so much knowledge of this episode. Alright, Scott Carson out of Austin, Texas, the first note investor that we've had on the show. So super excited to get into the world of finance with you.

Mike DeHaan: [3:06] I know it's a big part of real estate that doesn't get talked about nearly as much as like rental properties, everything else, but this is your full time gig. So I'm excited to learn more about it.

Scott Carson: [3:15] Yeah, man. Been buying debt for over fifteen years. That's really we rehab properties. We do a little wholesale and as we stuff, but I got started really on my ass. Bought a couple rental properties, overpaid for them. Market crashed here in Austin back years ago. I was a deadbeat bar myself trying to make three mortgage payments with no money coming in because I was laid off. So I got exposed to distressed debt pretty fast on the wrong side of the books. But

Mike DeHaan: [3:41] Okay.

Scott Carson: [3:42] Know, licked my wounds for a while, got into banking, did that for a while, then had a buddy start a mortgage company here in Austin. We were doing mortgages in about 30 states, and one of our big investors and sponsors was a note guy who taught, you know, creative financing. And from 2004 to 2008, I really had kinda like a four year apprenticeship in learning about debt and financing. And then when everything hit the fan in 2000 late two thousand eight, I just stopped on the origination side and then just started buying debt, started calling those same banks and lenders that we originated for and started buying mortgages. And now fast forward fifteen years later, we bought over $1,000,000,000 in debt, thousands of properties on residential and commercial notes all across The United States. And I like to call it the sexy side of real estate where you don't deal with toilets, tents, and trash outs or rehabs for the most part. So

Mike DeHaan: [4:29] Yeah. You deal with the money. So you've done a lot really quick, and you kinda just glossed over a whole middle bit there. So most of the people that listen to this show are are relatively sophisticated with real estate. But maybe you can, like, give a general breakdown about how node investing works and, like, what exactly that process looks like. So I think what a lot of people don't realize is you're buying it, the debt as an asset, typically buying it at a discount, and that's something that doesn't even come across the radar from those people.

Scott Carson: [4:57] Yeah. I'm glad you bring that up there, Mike, and that's the big thing. When we buy the debt, we're buying a note. That's the mortgage on a residential commercial property. You know, we're only buying first liens 99.9% of the time. That's the senior lien, and we're buying from a variety of hedge funds, banks, institutions, other debt investors as well. And what we end up buying 75% of the time is distressed debt, and this is stuff where people haven't paid their mortgage in six months to ten years in some cases. It's hard to believe that a bank won't foreclose in ten years, but we see stuff like this. And so we get these lists sent to us from banks, lending institutions, and servicing companies, and there may be one note on there, maybe a thousand that we can cherry pick from. And when we buy that debt, we don't actually own the property, and that's one of the big things big caveats I'd like to make aware because a lot of people, oh, I'm buying the note. I own the property. No. No. No. You're the bank. And so when we buy that debt, we buy the borrower still owes the full amount, but we're buying that debt at a a very substantial discount, usually $50.60 cents of the dollar, maybe less $40.30 cents. It just depends on what's going on. Oh, wow. And so that's one big advantage is that we're seeing bigger discounts than most people are seeing buying retail. Now, obviously, we've got to do some things to be able to collect on that nonperforming debt.

Scott Carson: [6:16] Our our favorite strategy is just to reach out to the homeowner or the borrower and say, hey. You wanna start paying again? Let's work out some sort of payment plan modification, whatever it might be, to get them back on track, and we'd love cash flow off of that. I don't wanna foreclose unless I have to, but we still end up having to foreclose about about twenty, thirty percent of the time. But the fact that we bought at a discount gives us a lot of flexibility to be flexible with the borrowers that the original lender that originated didn't really have. The bank was happy to sell it at 50¢ a dollar to us because now they have 50% in. They can go lend that money out and arbitrage it and you know, rinse and repeat that ten, twelve times a year. Mhmm. But we at a discount, that gives us all the flexibility we need with a borrower. And then we're getting the borrower to start making payments on to us on a monthly basis for cash flow, maybe a little bit of extra above their normal payment to for extra skin in the game, or we'll ask for some extra payments in the front end to to modify it. And then our whole goal with this stuff, Mike, is to hold it for cash flow. You know? We hold it for cash flow for twelve, twenty four, thirty six months or longer. I've got something that held on for, like, six years, the borrower's been paying on time. But we have the opportunity that when it's a borrower who started to pay on time for twelve months, it's now reclassified to the nonperforming as reperforming.

Scott Carson: [7:31] And what a lot of funds do, they'll buy nonperforming stuff, try to work it out with the homeowners, get them back on track. And then in twelve months' time of on time payments, they'll turn around and sell that debt back to Wall Street, back to other investors at $85.90 cents of the dollar.

Mike DeHaan: [7:46] Oh, wow.

Scott Carson: [7:46] Without ever owning the real estate. So you get lump sum on the front end, scan the game from the borrowers, usually it's four to five months, monthly cash flow that may be at or above what they were supposed to be paying, and then a lump sum on the back end now that that loan is reperforming. And, you know, what's great about this stuff is, you know, we're direct, so we're often seeing really clean assets from banks and and lenders. We Yeah. It's a different animal when it comes to marketing than most investors are used to. A lot of investors are used to direct mail or postcards or bandit signs or whatever like that. We don't spend any money on that stuff. All of our stuff is like direct marketing, like LinkedIn to asset managers or harvesting an email list of banks, yes, secondary marketing professionals, and drip marketing them on a monthly basis. And every bank has notes available for sale. Some just don't want to sell stuff, especially your smaller one branch institutions. They're too conservative. They can't really take a discount. But you start getting to regional sized banks or servicing companies or funds, they're they usually will have more stuff they're looking to sell. You know, of course, Bank of America, Chase City, they've got notes to sell, but they're not gonna sell them anything less than, a $50,000,000 pool. Mhmm.

Scott Carson: [8:54] And they're not gonna sell them at a big discount for the most part anyway because they're so leveraged, and they they got money so cheap. So but there's still tons and tons and tons of deals out there for investors like you to me who can pick up one note, two notes, a dozen notes. I mean, Monday alone, I got a list in from a servicing company of 291 nonperforming notes that I can cherry pick from. My bids will be roughly around 52% of value. Alright. I got another one with a 179 notes that were nonperforming. They're a little further defaulted, so my bids are a little bit lower at roughly 49 percent of value. And I also got a list of 65 notes that we're reperforming that are offered, if they accept it, is gonna be about a 15 yield on the cash flow basis for things. On the nonperforming side, well, you know, once we make offers on, we'll probably get reperforming 60% of the time. The other 40% will be a mixture of foreclosure or incentivizing the borrower to sign the property over by giving them cash for keys or offering a deed loan for forgiveness of debt. So I know I unpacked a lot of stuff there, but that's kind of note investing in the basis is not really going after real estate in, like, one ZIP code or one city. I'm investing in 25 to 30 states.

Mike DeHaan: [10:05] Yeah.

Scott Carson: [10:06] And so it's really kind of unpacking, knowing the foreclosure laws in the state. Each state's a little bit different. Knowing values, but, you know, we don't do a very big deep dive on the front end. We get a spreadsheet, run some quick numbers, run some formulas, make some offers, and then the fund will either initially accept their offers. Then once they accept their offers, we do a deep dive, and if we find stuff that's wrong with the asset, we can reduce our bid. We find a ton of taxes owed or the value's not there. What based at the, you know, at the value that they based on, we can reduce our bid or just kill it off if it doesn't make sense for what we're doing long term.

Mike DeHaan: [10:41] That's crazy. Because, like, at at the core, kinda what you're doing is similar to wholesaling real estate. Right? But you're working with the loan holder. But, you know, you go through, you have the distressed debt, you're working with a distressed seller or borrower, I guess. And then you make, you know, you kind of have like the rental property aspect of a cash flow where you make it as you get it reestablished and pre performing. But then you make a larger sum of money when you exit after, twelve to twenty four months. So that's fascinating. What are your When you're going through that and you're doing the underwriting, how many of these sort of deals do have to look at for everyone that you buy? Are you Good question. Underwriting 20 or 30 of these?

Scott Carson: [11:23] I love it. So what we always say, you probably have about a 10 per when you're brand new, you're probably gonna have a 10% closing ratio offer. So if you wanna one accepted, you'd be making like 10 offers.

Mike DeHaan: [11:32] That's not bad, though.

Scott Carson: [11:33] It's not.

Mike DeHaan: [11:34] Like, compared to like off market real estate, we'll look at 17 to 20 to 30 sometimes, depending on the time of year.

Scott Carson: [11:40] That'll vary too on where you're buying. Like, if you wanna buy in, like, Austin, Texas if I was I don't buy much in Austin, Texas at all. I haven't bought anything in Austin, Texas in ten years. So if I was just trying to buy notes in Austin, Texas, I would've gone broke a long time ago because I just I don't see a lot of distressed assets here. Mhmm. And Texas has a fast foreclosure market, so the banks that do sell stuff here, they know that it's gonna sell fast, so they just don't don't take that big a discount. So I buy a lot like Ohio, Michigan Mhmm. Indiana. I like the Hoosier state. I like the Carolinas. I've bought tons of stuff down in God's waiting room Florida. You know what I mean? Back in the day, I was buying condos at $5.05 cents on the dollar. Wow. I'm still buying stuff at $50.60 cents on the dollar because it is a it's a year to foreclose. So when it's a longer foreclosure time frame like that, I ask for a bigger discount because then we're gonna have

Mike DeHaan: [12:27] Mhmm.

Scott Carson: [12:27] More holding costs that's gonna cost me more to foreclose too. So, like, here in Washington state, up in neck of the woods in Spokane, don't buy that much stuff up there. You know, there are some states that require specific licenses individually to have to operate. Like, Washington State wants you to be a licensed mortgage broker to buy debt in Washington State. Whereas about 75% of the states in the country, you don't have to be a licensed mortgage broker. You just have to hire a a loan servicing company who's a debt collector in that state to collect on your behalf or to do the borrower outreach. So Gotcha. It's really a a vendor driven business in a lot of cases. You know, we have a I've got a small staff that helps with marketing, a little bit due diligence and stuff like that, but we really rely heavily on servicing companies to do a lot of the borrower outreach and then collecting the payments and and sending out statements. Then, of course, attorneys should we have to foreclose, and, yes, you've gotta have a different attorney in every different state, and that's okay. Why you buy the discount. You just figure in, you know, 3 to $6 in foreclosure costs per asset across the board.

Mike DeHaan: [13:28] Yeah. Well, and the and the thing that's interesting too about it, because it's in the finance business, there's a ton of industries and professionals that are involved in that. So it's not like off market real estate where you're kinda having to piece together teams and figure out, like, individual players that are willing to play along.

Scott Carson: [13:41] We do have some of that fast. I'm not sure a little bit. Especially if we're doing in due diligence on an asset. We've always gotta find realtors. You know, we can pay a a national company to pull a BPO or and that's great, but we always still like to put eyes on every asset. I mean, I'm not flying out and looking at 300 assets. We, you know, we'll look at online to see what kind of pictures and the dates of those Google Maps as a good indicator, kind of maybe what the initial valuation or condition of the properties, but then we're still gonna put a realtor locally to drive by, and hold current comps, and look at the market, because the market's changed in the last six months, you know? Days on market have escalated, and that's also a big thing we have to look at our exit strategies. You know, can we sell this asset in ninety days if we need to? If it's gonna be a hundred and eighty days, well, then we've really gotta reduce our bid and reduce our our our value of that asset based on a quick sale price that's different than a traditional value of the property. You know what I mean?

Mike DeHaan: [14:32] Yeah. So when you're when you're underwriting these as well, you you mentioned, like, the foreclosure laws in the general market. Do you ever look at, like, the seller demographics and seller temperaments in these markets? So with our main business, we're mainly a wholesale brand. Right? We do it all over the country. We work in we're currently active in 12 different markets. And what we always have to sort of cater the conversations to is around the seller cultures because they're all different. And one of the big things that we look at is, especially buying something with tenants or buying something with squatters, is how we approach them and, like, states that I would say have lower income, cash for keys is much more effective. Right? States that are a little bit more landlord friendly, you can bring the law down on them a little bit more. Do you get into that at all? Are you more just like on the, I guess, like the bigger picture market side?

Scott Carson: [15:23] No. That dictates the the states that we market in and buy in. Like, I won't buy in Chicago. Yeah. Okay? I won't buy in Cook County. It's so corrupt. It's difficult to evict anybody there. So been there, lost money, got the scars. Just nope. Anything in Cook County, it's getting deleted off. K?

Mike DeHaan: [15:40] Yeah.

Scott Carson: [15:41] New York State, New Jersey, we delete those because they take two years in New Jersey, three years in New York to foreclose, and that's not even evicting somebody yet. You know what mean? COVID was a bit of an ass kicker because we couldn't foreclose or evict anybody for twelve to eighteen months. Fortunately, most of our portfolios stayed performing and and did quite well. Nice. But that drug out foreclosures in a lot of markets that you're right. Like Florida. Florida can take you a year to foreclose. Easy. And the cash for keys is something that you've gotta to reach out and try to negotiate. So that's the thing is our biggest goal isn't to own the real estate, though. It's literally just trying to get the borrower on track and said, listen. I mean, I've bought notes that borrowers have been trying to modify their loan for four or five years, and their loan's been sold and sold and sold. But when I and we are doing due diligence and we are looking at these, you know, servicing notes or these collateral files, we'll see short sale files where borrowers have sent in stuff, I see these hardship letters like, this borrower wants to stay. This is stupid. Let's call them up and negotiate this right now. And a lot of times we find that, especially when you're dealing with lower socioeconomic individuals, you know, we buy a loss of that $250 or less, but, you know, like parts of, like, Ohio or Michigan, that's what I mean might be LeBron James' house out that neck of the woods versus, you know, a shanty in other places. But just having somebody that that people can talk to, I mean, everybody's going through financial difficulties at some point in their life, whether it's job loss or sickness or, you know, a death in the family or divorce, sometimes people just need a reset. And I think me going through a rough time when I first became investor really helped me empathize with borrowers that are in tough situations. It was one mistake I made early on as a note investor in two thousand eight and nine is I let oh, we have all these foreclosures.

Scott Carson: [17:26] All these borrowers aren't worthy of staying, and I I didn't modify a lot of stuff in my first two years. And looking back, I should have modified everything because I would have had cash flow immediately versus servicing and legal costs coming out of the books and then having to rehab those properties. I could have just kept people in it, and my ROI would have been even higher without all the headaches. You know what I mean? Yeah. That's one thing that I that we really love doing. If we can keep this money in the house and it's gonna be a double digit return for us or or greater, it's a win win. Mhmm. You know, I don't have to try to squeeze the bars for every dollar they got because then I found that investors that try to do that, that bar ends up defaulting later on, and it's really a downhill spiral. You know, there's times that we'll we've forgiven debt right off the bat, you know, or like I bought a note in Cleveland, Ohio, and it wasn't worth much at all. It was a $16,000 worth house. So it was not it was like a shack, really. And I I think my cost base was a thousand bucks. I'm like, I don't wanna foreclose on this house. I don't wanna take the asset back. Let me just and the the bar we're living at, single mom with four kids. I'm like, listen. Mhmm. Tell you what. Christmas came in July.

Scott Carson: [18:30] I'm just gonna forgive you of the money that you owe. I think she owed, like, $60 on this property. I'm like, I'm just gonna forgive you. Do whatever you want with it. Merry Christmas to you. I don't wanna foreclose on it. And, you know, sometimes when you do that, it's amazing. Now I'm I'm writing off a thousand bucks. Whoopi whoopi freaking doo dah. It's not that big a deal. I'm losing it. But those are the kind of things that we can help people stay in their houses in a lot of cases. You know? It's like, do some good, and that's the beautiful thing. We get paid really well to keep people in their houses if we can.

Mike DeHaan: [19:00] Yeah. I love that. And and that's something that gets so lost on people when they're trying to get into this business. And something that we preach a lot, it is a people business, Right? And and even wholesale business, you know, the wholesale business, people say like, we're equity stealers, know, those sort of things. The vast majority of people that we work with, they don't have any other options, you know. And we've we've done all sorts of wacky stuff to help people out. And, you know, the the note buying side, it sounds like it's it's quite the same. So as you're going through these, I imagine, you know, with the amount of volume you're doing, you've done a billion dollars over the last fifteen years. I mean, I'm just assuming you're not sitting on a billion dollars cash. You must have some kind of arbitrage that you do on this. So like, hey, what does that look like? And what are the legalities of it? Because I know when you're raising money, if you're raising money to tie to other debt, there's different rules versus if you're raising money to tie it to a hard asset. So how does all that structured?

Scott Carson: [19:53] Great question. And what we do is we work with a lot of IRA investors out there, and depending on what somebody's gonna invest with us, we'll structure it a little bit differently. So if, like, somebody's bringing $50 to a $100, we'll put them in our fund and pay them a flat, you know, annual return, 8%, something like that. They're just giving a flat Just like a pref. Yeah. Like a pref. They're not getting anything in the back end. It's just a flat you know, especially if they're not that's the one thing is when we talk to investors, we're always asking, what have you done? What are you investing in? If they haven't done anything in last two, three years, I'm not gonna give them 12% because they're not gonna go do it for themselves, but 68% is damn good right now for passive returns. If somebody brings a 250,000 or greater, then what we might do is create a separate special purpose LLC just for that one investor, buy five or six, and then we will go splitsies on that deal. And if it's cash flows, great. They're getting a split of cash flow. Our normal turnaround time on that isn't gonna be like ninety days. It's gonna be like twenty four to thirty six months because it takes time to work those assets out and go that route.

Scott Carson: [20:49] But they'll be co owner of the LLC and go from there. You can't have somebody fund a note and then give them a preferential perforate and then split the back. That would be technically selling a security, and that's illegal. So we don't do that unless we're actually in an LLC together. They're funding the LLC, and then we're going that route for that. And we've got a fund that we're working on. It's in it's a reg a right now. You know, that we can do, we'll be able to do a a pref and a split of the back end. Know You know how that goes jumping through hoops takes a little bit of time to get that done.

Mike DeHaan: [21:18] Oh my god. It's such a headache. Even on some of the stuff that we've worked to bring in partners on an acquisition, sign if it gets to a five zero three c, a five zero three b, or, like, how are you gonna structure the JV? And they're all kind of different ups and downs for each one. So yeah. So that makes sense. On that same note, how about, like, taxes? So, like, it's for example, this is maybe this me just being completely ignorant right now. Can someone, like, ten thirty one from, like, real estate sale into debt, or can they ten thirty one from like one kind of debt into another kind of debt?

Scott Carson: [21:47] That's a great question. No, you can't actually use a ten thirty one exchange, because it's gotta go from hard asset to another hard asset. Okay?

Mike DeHaan: [21:53] Okay. What about debt? Like, could you sell some debt that you have, like, let's say, a massive gain on in ten thirty one into another kind of debt?

Scott Carson: [21:59] No. Because your debt has still gotta be the asset. If you're buying an apartment complex and you're selling an apartment complex, you've still gotta go into a physical asset. Okay? Notes are not the physical asset.

Mike DeHaan: [22:09] Interesting.

Scott Carson: [22:09] You can't do that. But here's how we've helped people that have that is if you're taking cash and you're putting it into an asset Mhmm. And you're you're buying that asset cash and not doing financing, then go get a line of credit against that asset and use that line of credit to fund note purchases. Okay? Yeah. Another thing is that you get with real estate is you get a lot of deductions and dollar cost, oh my gosh, not dollar cost averaging, but you know, depreciation you can write off, you know what I mean? Cost segregation. Well, don't get to write off depreciation on being a note investor, but we do get to write off a lot of the debt that we forgive. So like if I buy a note, the borrower's in at $120, and the house is only worth 100, and we modify that loan to 100 in twelve months, we just forgave them $20. So we write that $20 off by $10.99 to them, and that reduces a lot of our profits. I guess you could say paper profits on paper, it looks like, when we haven't realized it yet.

Mike DeHaan: [23:03] That's interesting. I mean, is that like a strategy that you do on an annual basis then? Oh, yeah. You basically go through and you look at everything and try to get your line to zero.

Scott Carson: [23:11] Yeah. We try to. I mean, if I'm I'm paying Uncle Sam, I'm paying Uncle Sam, and sometimes that's a good thing. Here you know, what what we end up doing is when we do take an asset back like, I've got an asset right now in Florida that we foreclosed on. We're finishing the eviction this week. Thank God. It's been thirteen fourteen months in the making. We got COVID kinda delayed things a little bit. We'll take that asset back and and then fix it up, and then we'll be able to write some of that depreciation off. So you're you're having it. We and you're a note investor, you really need a good bookkeeper that understands both the note side of the business and then also the real estate side of what you can and can't do in a lot of cases. So, yeah, we write a lot of stuff off, write a lot of debt off. Sometimes when we're buying in bulk too, we know we're gonna take some assets that have no value that we're just we'll take it just to write it off knowing that it'll get us a bigger discount off the pristine assets that we wanna own. You know? And a lot of funds will do that. They'll when they're buying a big bulk stuff, their top 25% of that asset portfolio is really there to make back what they paid for the assets. The middle 50% is where they're gonna make their most profit margins, and it's not gonna be huge rehabs. It may be, I call it bread and butter assets where you get a borrower paying $500 a month or 6,000, you know, $600 a month on cash flow basis, and you hold it for a while. The bottom 25% is really the tail that you gotta get creative on if you're gonna if you buy it. And that may be Dean Lou, Cash or Keys, forgiving the debt, selling it to somebody locally at just a rock bottom price, let somebody else take on that deal.

Scott Carson: [24:42] I've got a contract with one hedge fund where it shows $7 for, like, 30 assets. And they're like, how the hell did you get these for $7? I said, well, this was costing that asset manager $95 a month in servicing. They're crappy. I can donate those all to local cities for parks, or I can call the next door neighbor and get a deed in lieu or work to just sell it to the next door neighbor for a $100 each and make it make something happen at it. So a lot of what we do is making lemonade out of lemon sometimes. You know what I mean? But it gets creative, and it's the beauty is you can do this business from anywhere. Mhmm. I'm in Austin, Texas, but I've closed deals when I was in Spain or on a cruise ship because you've got such a great strong team with vendors of servicing and attorneys to help handle a lot of the heavy lifting once you end up buying something that makes sense.

Mike DeHaan: [25:28] Yeah. That's awesome. So one of the big things I think a lot of people ask about this is with the security aspect. So, obviously, you know, you can claim the property back if you go through a foreclosure. What's your typical exit strategy at that point? I guess, I mean, you're already relatively secure because you probably bought that at like a 50% discount, which puts you in an okay position. So at that point, are you looking to, like, sell the debt again? Or are you like just listing the property on the MLS as is? Are you trying to wholesale it to a cash buyer? I guess probably all kinda depends.

Scott Carson: [25:57] Yeah. It all depends on the once you and here's the thing. If you go through a foreclosure, that's a strategy to kinda take the property back to legal aspect of it. That should wipe out everything except tax liens. You still gotta pay taxes. Okay?

Mike DeHaan: [26:09] Mhmm.

Scott Carson: [26:09] And then it's an REO at that point. If you get a deed in lieu from the borrower, the way that the courts and everything, the legal system, once the borrower signs the deed in lieu, literally signs it, you are responsible for that property. Even if you haven't filed it, you are still technically responsible for that property because they've deeded the property back to you. It all depends on the condition of the property. If the property needs to be cleaned and we can list on the MLS at basically full price, we'll do that. If it needs a little bit of rehab, paint and carpet, maybe appliances, we'll do that and then sell list on the MLS. If it needs a heavy if it needs a heavy rehab, no. We'll just move it to somebody else. A wholesaler, you know, we'll advertise it in an area club or meet up, know, he's a handyman fixer or stuff like that. You know, one of the great things we've been doing this for a while is that we got a pretty good network across the country that we can distribute things to. And, you know, we use a lot of text messaging when we have something like that. We can pull a list of people that are in Memphis. Hey. We got this rehab property. We just take it back. Take a look at the properties available for three hours on Tuesday. Bids are due by Friday if you wanna proceed and stuff like that. So we move stuff a lot that way as well.

Mike DeHaan: [27:14] Do you ever sell stuff, like, subject to? So like for example, if debt's cheaper than like an end buyer's hard money cost, and you know the property isn't terrible and you find a good buyer, so you sell it to them with like the previous owners. I guess I call you up on maybe a seller wrap or something, wouldn't it? Or like a seller finance.

Scott Carson: [27:31] So, you gotta realize, we take the property back, that's distinguished alone, okay? Yep. So now we own the real estate. There's no existing financing in place.

Mike DeHaan: [27:40] Yeah, right, so it'd be a seller finance, no,

Scott Carson: [27:42] I guess, I'm Yeah, we would seller finance, and I actually, seller financing is a horrible exit strategy.

Mike DeHaan: [27:47] Yeah.

Scott Carson: [27:47] And that's kinda controversial because there's people out there making money on it. Sell or finance your property, you'll make more in income over the time. Which is actually false because here's the thing. Let me just give you a strategy. Got a house that's worth a 100, I buy it at $50. $5 to foreclose, deed and low, whatever it is. I'm in at 55. That's my cost basis. K? Well, if I owner finance it to somebody at a 100, I just tied up that 45,000 equity that I can't touch.

Mike DeHaan: [28:11] Mhmm.

Scott Carson: [28:12] I can't do anything. I can't go get a loan against it because I need seasoning of that asset to be really ninety days for a traditional lender to give me a a loan on it. And most of them aren't gonna give me that number off a 100. They're only gonna give it off what the the foreclosure price was. Mhmm. And if I owner finance him, I gotta hold on to that note now for twelve months to make sure that he's got seasoning. I gotta make sure the borrower's got a six twenty FICO score or greater, make sure there's FICO score. And then I can maybe sell that note off to get a big chunk of it, where it makes more sense for me just to list the house on the MLS and sell it traditionally or list it at $85.90 cents, and get multiple people in and sell it traditionally. I don't wanna create new notes because it's just a pain in the ass to cash out. It always makes more sense when you look at numbers, and then I can cash out of that deal, make, you know, my $55 back plus my 45 in profit, now go buy two and do the same thing. Two turns into four, four turns into eight, eight turns into 16, and I'm not that long delay. Get people all the time that call me, Hey, I own or finance a property. Will you buy my note? I'm like, Well, when did you originate? Oh, a month ago.

Scott Carson: [29:15] I'm like, well, I'll give you maybe 60¢ on the dollar.

Mike DeHaan: [29:17] I'm like, what? I'm like, you

Scott Carson: [29:19] have no ceasing. The borrowers got below a $6.20 FICO. They brought 5%, not 10% down. You overfinanced the property. The house is only worth 100, but you finance a 125 because you're the bank. Well, when you do that, you better expect to hold on to stuff and that people just don't know how to underwrite, create that stuff. And then, of course, they've gotta go through Dodd Frank compliance. You gotta hire an MLL, and they'll want them like, oh, I just did this once, I don't need that. I'm like, well, your paper is the napkin with my bourbon and and rum on is more valuable than the paper you finance the house with.

Mike DeHaan: [29:49] Yeah. Right. And that's something that I think that's a very valid point that you said there with the dodge rank. A lot of people don't realize that when it comes to debt, you know, the the different legalities around that. Can you can you give, like, a brief, like, five second, you know, one minute overview about what exactly that is?

Scott Carson: [30:03] Yeah. Dodd Frank was a law that was enabled by Bernie Frank, I don't know the other other senators' names after 2008. It was basically to set some standards up that people that were gonna owner finance a property had to make sure that the borrower or even traditional lenders too. It's not just owner financing. That all lenders who were either gonna do traditional lending or an owner finance had to comply to make sure that the borrower could actually, you know, afford the property. I mean, that's a noble concept. I'm gonna finance it to you, make sure you're able to afford it. So there's specific laws. There's specific percentages. There's specific things you've gotta do in checking and verifying income, the thing that always cracks me up is when you gotta predict that the borrower can afford that property three years from now. I mean, who has a crystal ball? But that's Congress for you. Yeah. So what the great thing is, unless buying existing debt, is we're only usually buying 99% of the time, we're buying from banks and hedge funds. All the loans that we're buying are already Dodd Frank compliant, I don't have jump through the hoops. If I modify, I don't have to Dodd Frank compliant because they're already approved that way. Now if I were to initiate a new loan, yes, I would have to jump through Dodd Frank compliance. Totally fine. But being the lender, if somebody comes to me and they're struggling to make their payments, one of the things we ask them, hey, do have somebody that wants to take over the payments subject to to the terms? And so we'll let people do subject to deals all day long as long as that new payee can pay the mortgage and go from that route.

Scott Carson: [31:27] Another thing that for those that are subject to investors, like, I get these listed from banks all the time with nonperforming loans. If we make offers on a chunk of them and they don't get accepted, well, we send a subject to letter out to the the homeowners as well trying to take over the property subject to.

Mike DeHaan: [31:41] There you go. That's smart.

Scott Carson: [31:42] So and we have that's a side business of what we do as a note investor. And we'll we may take over, I don't know, one to four property subject to each month and just doing that follow-up drip campaign, and we know that the buyer of that note, it would probably want a loan mod. So that's what we do is we'll take it over subject to, then negotiate a loan mod, unfavorable terms for us.

Mike DeHaan: [32:02] Yeah. Yeah. I mean, it's your ATS or, like, different entry strategies into the deal just depending on who you're docking to. That's smart.

Scott Carson: [32:08] They're not gonna show up on, like, PropStream. They may show up in a default aspect if the bank has already filed the legal side, you know, like, filed the list pendants or the notice of default. You may see it in those, but a lot of times, we're seeing these deals six to twelve months ahead of most normal investors seeing these assets on the MLS or the foreclosure markets. We see them way ahead of time, and it gives us that a lot of stuff that I buy will never show up on the open market because we modified it or, you know, worked to get to keep the borrower in the house or come to some sort of agreement with them before we ever got to that legal finalizing the foreclosure side.

Mike DeHaan: [32:39] Yeah. I mean and that that alone is is worth its weight in gold, right, being able to do that. I mean, like, anything you can do to get access to opportunity before, like, the general crowd, I mean, that's the greatest way to make a lot of money, honestly.

Scott Carson: [32:52] Well, that's the thing is that when we make contact with a bank, a bank's not just sending us one note and never talking to us again. Yeah. They're literally sending us tapes and spreadsheets every month, every quarter, and that becomes a great way for us to consistently just drip market. Hey. What do have in your books this quarter or this month that you're looking to get rid of? Nothing? No. No. We'll fall next month. Yeah. And just getting stuff that we so we're not spending a huge amount of overhead on, like, postcards or SEO or anything like that. It's all email blasts and then reaching out to new asset managers on LinkedIn and connecting with them that way.

Mike DeHaan: [33:22] Yeah. That's awesome. So for people who are kind of interested in this, what is a general return expectation that people can get?

Scott Carson: [33:29] Great question. It's kinda there's kinda a couple phases to it. So if you're Yeah. Want something that's very passive, you're not doing any work, you can you can actually buy performing or reperforming notes. K? If you're gonna buy a performing note, you could probably buy a performing note right now at a a pretty decent 6%, 7% return to you. K? Mhmm. That's you can be direct from a bank, direct from a lender. There's stuff that would sell newly originated stuff off. If you're looking for something a little higher, you can buy reperforming notes, or maybe the bar was nonperforming for a while, and somebody like me got the bar back on track, and we'll sell it to an investor at a 10 to 15% cash and cash return. K? It's gonna be with a servicer. They're collecting payments. You're gonna buy it at a bit of a discount. So if you ever do it to foreclose, you're gonna make your money back. If you want a higher return, then you're gonna go more of the non performing side, and that's gonna be more active aspect of that. So when I look at nonperforming stuff, I wanna see where I'm gonna make either around a 24 to 25% yield. So if I've gotta pay my costs, I'm still gonna see a 12 to 18% return for us. If it's gonna be an asset that I'm gonna foreclose on, I wanna make sure that we're seeing at least $20,000 in profit to make it worth our time to foreclose on.

Scott Carson: [34:38] Now that may be more if we rehab the property. It might be a little bit less, but that's kinda our ballpoint that stuff is looking for.

Mike DeHaan: [34:43] Okay. So that 25 percent yield, that's like like a reoccurring?

Scott Carson: [34:48] Yeah. Exactly.

Mike DeHaan: [34:49] Or is that including the exit?

Scott Carson: [34:51] That's an annual basically, if we can take their monthly p and I payment times 12 and divide that into what we're paying for the note, that's what we're kinda looking for, 20 to 25% yield on that. Okay?

Mike DeHaan: [35:03] No shit. And does that include the exit when you sell the note at the end?

Scott Carson: [35:06] It doesn't include the exit. It doesn't include the exit. Because here's the thing. We're gonna figure in, like, four extra months of payments. There will be some skin in the game from the borrower on that to to keep them in the house. Because they don't put we don't get any skin in the game. They're gonna default again. Yep. Alright? So we're looking for that 20% yield at least usually to maintain it because if we're paying 6% or 8%, we wanna see see 12% after our money cost for the most part. And then who knows what we can sell it for? We don't ever plan on that in the backside. But, yeah, if we can buy it at 50 let's let's just run some numbers here. Say we buy a $100,000 note and the borrower's got a 6% interest rate. Right? Mhmm. So they're paying $6 a year that they're supposed to pay, which comes down to $500 a month. Right? Well, if we buy that at, say, 50¢ of the dollar, we paid $50 for it. K? Well, if they pay they're paying $6 a year, right there off the top, if you take $6 divided by 50, that's a 12% return right there too. It's just off of that alone. Now, we get them to bring six months to the table, now that returns an 18%, okay? We hold that for a period of twelve months, and then we sell it at 85% or 85,000. We just realized another $35,000 in profit.

Scott Carson: [36:15] So there are deals that we're into that we're making high twenties, 30% over a twelve to eighteen month period because we bought it at a discount, we put the work into it, and then we cashed out with a nice lump sum later on. K? Shit.

Mike DeHaan: [36:27] I'm fucking I think I'm done with houses, man. This sounds way better. I'll answer that.

Scott Carson: [36:31] Like, I I bought a note one time from a bar that was going to foreclosure the next month. I mean, why the bank sold to me, I'll never know. Yeah. But they did. We bought it at 40. We sold it at the auction two weeks later at 88 and made $48,000. We knew we were gonna foreclose. Another one, they sold me a note, very similar numbers, but we thought we'd have to foreclose, and the idiots at the bank didn't see that the borrower had already signed the property over to them. There was a deed in lieu sitting on top of the collateral file when we got it. Great. We just let's just sell this thing. We sold it in a hot market, made it. And we got another deal like right now. It's a Florida deal. It's worth 1,200,000. Borrower, when we first bought it, it was worth $9.50, the asset was. Borrower originally financed it for $6.95, did a hard money loan, then never paid. Okay? And he's drugged this out, played all these tricks, filed bankruptcy. Well, now his debt is 1,200,000. Okay? We bought this roughly about fourteen months ago, knowing we were gonna have to go through a long foreclosure process, but we paid, get this, 441,000 for a $950,000 asset.

Mike DeHaan: [37:31] Oh my god.

Scott Carson: [37:33] Okay?

Mike DeHaan: [37:33] That's pretty crazy.

Scott Carson: [37:35] You know? Right? It's gonna be a nice Yeah. Like, $304,100,000 dollar payday even after paying our investor a nice chunk of money on that that to finance the deal.

Mike DeHaan: [37:43] And Even if you burn the freaking thing down, like, you can re build it and still have some room on it.

Scott Carson: [37:47] Well, that's that's why insurance is a case of an active guy or an angry borrower. So if we Yeah. Yeah. They do trash it, great. We file an insurance claim, and we dance all the way to the bank. And then we then we sue the borrower for for vandalism and arson.

Mike DeHaan: [37:59] Mhmm. Yeah. Right.

Scott Carson: [38:01] But that's that's the thing. I mean, sometimes we'll get notes and we're you know, a borrower may own a portfolio of real estate, and they got a loan on one they haven't been paying. They've been robbing from Peter to pay Paul. Mhmm. And those are always interesting conversations. Like, listen. We know you've got these other 10 that are in your name on the same LLC. Just either do something with us, not with us, or deed it over to us. Because otherwise, if we foreclose, we're gonna slap a judgment against all your other assets.

Mike DeHaan: [38:22] Yeah.

Scott Carson: [38:23] Or if we forgive the debt and you're underwater, just, you know, we'll send you a ten ninety nine and just file a was it an IRS form nine twenty eight or something like that that they can show to be insolvent, and they're not gonna pay any taxes on that. Yeah. So, I mean, we work at a lot of people. We try to do something always try to do something that's a win win. Sometimes you got assholes out there that wanted to play games, and, you know, the bank always wins. You know, you're not dealing with me. You're dealing with my attorneys, and my attorneys are undefeated right now.

Mike DeHaan: [38:47] Yeah. Exactly. And when and when you're a debt holder too, you have many more rights on a property versus even being like a landlord where you're, you know, you're securing the debt. But at the end of the day, everything is going towards helping the bank out that you have your mortgage with, not necessarily with you.

Scott Carson: [39:01] That's so true. And that's one thing about what happened here in COVID. You had all these small mom pod landlords who were left with the short end of the stick. You know? The tenants didn't have to pay. Uncle Joe's gonna save them. You know what I mean? I'm like, no. It doesn't work that way.

Mike DeHaan: [39:14] No. Yeah. Right.

Scott Carson: [39:15] The bank and many times, the bank's like, okay. We understand what's going on. We'll give you a six months. We'll give you another six months. Well, that's what's causing so you have a lot of these borrowers out there who are the landlords, they're still not made whole. They're still struggling to get by. You're gonna see a lot of that in in small multifamily.

Mike DeHaan: [39:30] Oh, yeah.

Scott Carson: [39:30] Already seeing it in even bigger multifamily. You know, a lot of these investors go buy these multifamily value add. They're gonna add the value up and then refinance out in three to five years once the property's re gentrified. Well, with interest rates going up, that has killed a lot of these deals down. Now the property isn't worth as much as it was because their debt service coverage ratio has gone down, which reduces the value. Their operating income has gone down some because lack of payments and stuff. So you're gonna get in a lot of mature loans where the, you know, the investors were paying on time, but now the bank wants ten, twenty, 30% capital to get them back to a 70% value or 70% And a lot of these operators don't have that ten, twenty, 30%. They're not gonna go back, and their investors that they got the money from aren't gonna have that to pony up. So we saw a lot of this back in 2010, and we're starting to see some defaults and stuff like that happen right now. And so that's I'm pretty excited about what's gonna take place in the next twenty four to thirty months on the note investing side. Yeah. You know? We're already seeing more inventory than we've seen in a while. It's always an interesting thing, Mike, when when banks start calling and emailing me on what I'm buying. You know?

Scott Carson: [40:39] It's usually the other way around. But when they start reaching out to me, hey, what are you buying? I'm like, oh, hey. This is a this is a song by a different tune. You know what I mean?

Mike DeHaan: [40:46] Yeah. Right. Yeah. The lead flow is starting to turn out. Yeah. That's crazy. So I I love everything you're saying, man. You got me got my brain really turning. So I guess one last question before we go into the end of show questions here is someone's listening to this. They have a couple $100,000. They wanna go and invest in a note. Right? Where do they find that? Because obviously, you have a banking relationship, but how can someone that's gonna do like one or two, how can they get started with this?

Scott Carson: [41:09] The first thing you gotta learn is you gotta get educated. That's the first thing, because it's a different mindset. I've seen a lot of fix and flippers, landlords, stuff like that, they decide they wanna jump in the note business. They overpay for an asset, or they buy something in a market that doesn't make any sense. Okay? So you gotta understand there's different, you're owning the note, not the asset, okay? Yep. And one the things that we love to help people out with is we teach classes on this stuff, so if you wanna learn, it's great, but every third Saturday I teach a one day class called Note Weekend. It's kind of the cliff notes version of note investing. A lot of new investors, they love it because it's we show you how to find, fund, and flip these things. But it's usually $99, but for the Collecting Keys audience, I'll give it to you for free.

Mike DeHaan: [41:47] Oh, sweet.

Scott Carson: [41:47] So if you go to noteweekend.com, let's just say collecting is the keyword, it'll give it And to you for you don't have to be live, it's recorded as well too, so you can catch the replays, but that's a great way to kinda get your feet wet without any investment. Yeah. There are platforms out there for investors to go take a look at. Auction.com has their commercial side, 10x. There's a couple other websites. I always help folks, hey, reach out to me. You never know what we've got available and what you're looking for. Schedule a call with me, then I can help guide you in the right right path and set you straight. Like, if you're in California, oh, I wanna buy something in San Diego for a 250,000. I'm like, yeah. Good luck with that. It might be better for you to take that 250,000 and go buy a dozen notes in Memphis. Because your your money's gonna be leveraged out and spread out. So if you've got a dozen assets and you have one borrower that's or one tenant doesn't pay, guess what? You still got 11 that are performing notes for you versus if one asset that well, one borrower doesn't pay, then you're not getting anything in. So that's why we kinda love those more value add states in a lot of cases because our money goes a lot further.

Mike DeHaan: [42:42] Yeah. That's awesome, man. Yeah. That's good stuff. So, yeah. So noweekend.com, I'm definitely gonna check that out because I'm super interested in how I can get going on.

Scott Carson: [42:49] There you go. I will send you I'll send you the the links and everything to it for you. This video is about eight hours of me teaching and then about eight hours of additional other videos and training for you about the business and things.

Mike DeHaan: [42:58] Awesome. I like it. Cool. Awesome, Scott. Well, so thanks so much for all the knowledge, man. There's tons of great stuff in here. We're gonna dive into our end of show questions here as we start to wrap up.

Scott Carson: [43:08] Hang on one second though. You're listening to this show right now, which you are, and Mike is kicking ass and taking a lot of names when it comes to being a great podcast host, Make sure you smash that subscribe button, and make sure you leave Mike a five star review. He's doing great stuff with his show, so make sure you leave that five star review and hit subscribe. Alright. Go ahead. Let's continue. I just wanna get that out before we got going there, Mike.

Mike DeHaan: [43:30] No. I appreciate that. Thanks, Scott. You'll say you'll save me saying it at the end. But no. Yeah. I do appreciate that. Thank you. Certainly, Trane. Alright. So the end of show questions here. First question, which is always the group favor. We can modify a little bit for you as well. But we always ask you, what is their craziest real estate investing story? And I know a lot of your stuff has been on the note end, but either way, with foreclosures and all sorts of things, I'm sure you still have some pretty crazy ones.

Scott Carson: [43:53] Man, I got I got tons of stories on this stuff, some of the crazy stuff. I bought a note where the borrower died and been dead in the house for, like, two years, and our realtor found the dead body.

Mike DeHaan: [44:02] For two years?

Scott Carson: [44:03] Oh, years. He'd been sitting there vacant, and he'd been in the closet, and the realtor walked in taking photos because we were changing locks. And there he was. There's the remainder of the body in the closet.

Mike DeHaan: [44:13] Oh, man.

Scott Carson: [44:14] And so

Mike DeHaan: [44:14] That's crazy.

Scott Carson: [44:15] But there's one. I bought a note one time. It was on an eight plex outside of Charlotte in Concord. It turns out it was a working brothel.

Mike DeHaan: [44:24] Okay.

Scott Carson: [44:25] So I was like, well, does that mean is the commercial asset is cash flowing? You know? Why can't you make your mortgage payment if you're, you know, you're you're you're charging by the hour? Yeah. But there's a really good one here. We bought this note in southern South Beloit, Illinois, and it was a bar. Husband and wife had lived there for eighteen years, raised her three daughters. They had taken out some money when the values went up, got a loan for, $60, which isn't nothing, but then the market values dropped, and the husband had a heart attack, was out of work. And so when we got this note sent to us, they owed 60. It was maybe worth 35,000, and we bought the note for $12. So we bought it for 30¢ on the dollar of owed and monthly 20¢ of UPB, as we call it, unpaid balance. But the borrower had been trying to modify for four years. There was four years of tax returns and hardship letters, and so when I got it, I was like, This lady's slam dead from us. So I called her up, get her on the phone, tell her, Hey, I'm now your bank, and she just like, Ugh, it's been sold again. I was like, Yes, but this is your lucky day. Can you start making your existing payments? She's like, Yeah, I could do that. I was like, Great. So that was like $4.50 a month.

Mike DeHaan: [45:24] Wow.

Scott Carson: [45:25] I said, If you start making your existing monthly payment, that's great. Can you bring anything to the table? Can you bring like $5 to the table? He's like, No, I don't have that. So, Well, do you have 2,500? She's like, Yes. Great. You bring 2,500 to the table, you pay $4.50 a month, can you pay anything extra on top of that? She's like, I could pay $200 extra per month. I was like, There we go. 2,500, 2,400, that's my $5 that I want extra. Okay? I said, if you do that for a year, what I'll do at the end of the year is we'll modify your loan. We'll drop the interest rate from like, it was like 9% to 0% for you. We'll adjust the balance. We'll appraise your property at that point and forgive anything above the value so that you're making a 100% of your payment at that point, a four fifty a month goes to principal reduction, and you'll have your house paid off in not thirty three years, but in six years. And she's like, are you serious? I'm like, yeah, yeah, go do it. If you figure the numbers, I was making $10 in cash flow that first year on a $12,000 investment. Right?

Mike DeHaan: [46:18] A 100% return.

Scott Carson: [46:20] A 100 yeah. 88% return my first year, and it was like 20% afterward. But she went and did this, and they showed up at my attorney's office. The husband been sick, had a heart attack, couldn't believe he's back to work. They cried at my attorney's office. They literally broke down crying because they've been trying to do this a long time. Six months later, around Christmas time, I get a Christmas card in the mail from them, and their eldest daughter who'd raised in the house the entire time had a had a baby, and they named the baby Carson after me.

Mike DeHaan: [46:45] No way.

Scott Carson: [46:46] Seriously, That's seriously. So we do a lot of good. Of course, we've got enough people that we've had to foreclose on or evict and stuff like that, but we didn't have to evict the brothel queen. She ended up paying, started paying on time.

Mike DeHaan: [46:57] She figured it out. Yeah. I mean, that's awesome. I mean, that's what it's all about. And and you're right amongst all the dirtbags that you gotta kick out because they're they're being that way. There are a lot of people that you help in this business. I mean, even on the wholesale side for for all the squatters that we've had to kick out or the the drug problems we've had to deal with. I mean, we've also had situations where we've helped people get into apartments. We've even like supplied them furniture and things like that because they didn't have any

Scott Carson: [47:22] of it. Yeah.

Mike DeHaan: [47:23] So And that can change people's lives. That's that's cool. That's very, very cool story. Financially, but also just the whole view of it, that's rad. All right, so the second question is, what is the number one tip you would have for a new investor looking to get started or a small time investor looking to take their business to the next level?

Scott Carson: [47:41] Learn marketing. That is the biggest key. A lot of new investors, they think they can only invest and make offers on what's in their account. That's the biggest limiting mindset that you have. You gotta realize that there is millions of investors out there that have millions of private capital sitting on the sidelines not making anything, and it's actually easy actually easier to find money than it is to find the deal. Oh, yeah. You could everybody could go to their county records right now, like the county appraisal district, and, like, type in Equity Trust or Quest Trust as, like, property owners, and it'll give you a whole list of people who've used their IRA to buy a property. Well, those people are the people you're targeting. They're investors, so you understand real estate. They've used their IRA, which has gotta be on a passive level. They can't be active investing and living in this property. It's gotta be like rentals or stuff like that. And three, they've got money to invest. Mhmm. And we found that sixty seven percent of people that have an IRA have at least $150 or more in

Mike DeHaan: [48:31] it. Yeah.

Scott Carson: [48:32] So learn marketing, get out and talk, get networking, make more offers. The more offers you'll make, the better the offer you can get into it, and that's often the hardest thing. I don't wanna say it's fire ready aim, but kind of it is that way. Make offers, start networking, and the more you can learn about marketing, it'll help you in this business for a long run because it's like you're not gonna be just a real estate for a year. So don't put off that the marketing skills and developing that thing and raising capital because you're gonna be doing this for a long time. Mhmm.

Mike DeHaan: [48:58] And I think that last bit right there too, the long time, that is something that so many people do not take into consideration. And I think the big thing with all this as you're learning marketing, you're going through these processes, make sure you're doing it with a long term time horizon.

Scott Carson: [49:13] Amen. It's all about planting seeds, man. Best time to plant a tree was thirty years ago. The next best time is today.

Mike DeHaan: [49:18] Exactly. Yeah. And I think where a lot of people get caught in real estate, especially on the wholesale side, it gets sold as like a get rich quick scheme. I can't tell you how many people we talk to that are like, I send a batch of direct mail and get didn't get a deal. The wholesaling's dead. I'm like, well, deal for another three or four months, work your leads, and I promise you'll get something. Like, it's gonna happen.

Scott Carson: [49:35] Well, that's the thing is they don't teach that. This one thing we harp on consistently. Mhmm. 80% of sales are made after the fifth contact. Yep. Fifth contact. That means you gotta follow-up. And most people don't understand that it's w o r k. But you're right. You have a lot of people, oh, this is get rich quickly. Somebody's telling you, run. Run, run, run, tell and say, how many times do I have to contact somebody? How many times do have to follow-up? Show me your call list or show me whatever you're unless you're working. That's the thing. And you know what? Work is a four letter word, but work pays really good.

Mike DeHaan: [50:02] It does. Yeah. Yeah, exactly. Awesome. So last question, where can people find you, follow you, and reach out to you if they'd like to do so?

Scott Carson: [50:11] Yeah. Really easy. You can go to our mothership of website, weclosenotes.com. You'll find out our classes there, our podcast, The Note Closer Show is also there, 745 episodes and a couple million downloads, stuff like that. But yeah, weclosenotes.com, and you can connect me there. If you wanna book a call with me, pick my brain, you can do so by going to talkwithscottcarson.com, and they'll take you directly to my calendar, and you can book a thirty minute call with me.

Mike DeHaan: [50:35] Perfect. Good stuff. Awesome, Scott. Well, I really appreciate you coming on. Really appreciate you coming on. My words there. And seriously guys, you should reach out to Scott. He's spitting some like straight just knowledge bombs here and something that is, you know, very unique part of the business that tends to get overlooked. So you should absolutely reach out to Scott. Check out his show too. There's tons of opportunity here. And I will say, I have a feeling that it is a lot less saturated than a lot of the other niches that you see out there in the real estate space right now. So yeah. I mean, I'm sure it is. Awesome, Scott. Well, thanks so much for coming on the show, man. We really appreciate it. And if you guys enjoyed this show, please share it with everyone that you know that has any interest in real estate finance business, or you know, just likes listening to an interesting conversation that might open their eyes to the world of finance. So please share it with everybody. And also leave me a five star review, wherever you listen to your podcast. If you do that and you take a screenshot and you send it to me on Instagram at Mike underscore invest, I'll send you a free Collect e Keys t shirt. So please do that. And aside from that, guys, thanks so much for listening,

Scott Carson: [51:37] and we'll talk

Mike DeHaan: [51:38] to y'all next week.

Speaker 2: [51:39] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.