We Close Notes: How to Buy Real Estate for 40% Off By Breaking Into the Secret World of Real Estate Note Investing with Scott Carson on Episode #0230

Scott Carson [0:00]
Hi, this is Scott Carson. Weclosednotes.com and you’re listening to EA Interviews.

Intro [0:05]
EA interviews, Episode 230. inspiration, transformation, success stories and the imperfect action round seven days a week. Join Mario Fachini for today’s Expert Authority Effect Interview.

Mario Fachini [0:18]
Invest in real estate. I bet you do. Because you know real estate is not going anywhere. Everyone needs a home to live in. They need commercial buildings, they need this. So if you’re thinking about investing, how do you do it? What’s the best way to do it? Well, that’s why I’m excited to have bestselling author, speaker and CEO Scott Carson on the show today, because he’s going to explain how he helps investors, close deals with notes and how you can too, I’m going to bring them up right after we thank our sponsor.

Sponsor – Free Business Book Publishing Course [0:45]
Every business needs a book, including yours, visit freebusinessbookpublishingcourse.com today to learn the seven steps to publish and promote your nonfiction lead and profit generating business book in eight weeks. Once again, that’s freebusinessbookpublishingcourse.com.

Mario Fachini [1:00]
Here he is. Ladies and gentlemen, Scott Carson. Scott, how are you feeling today?

Scott Carson [1:04]
I’m doing wonderful Mario honor to be here. Excited to be here, I should say and just blessed. I’ll put it that way. That sounds like a blessed day. Everybody’s having a great time out there today.

Mario Fachini [1:15]
I will take that. And I know we’re gonna have fun, we could talk about anything, and it’s gonna go great. But I am wanting to know, why should someone get into real estate investing? Is that a word? Whatever. I said, why should anyone get into real estate investing? And why should they do it with notes?

Scott Carson [1:35]
So that’s a really great question. So right now, with so many defaults, and people not paying their mortgage, it’s a great time to be buying real estate, it’s a great time to be buying distressed assets. And the reason I love note investing has been my primary niche of focus for the last decade plus the last 12 years, is the fact that in the note investing side, when you buy the note, you’re really not buying the property, you’re buying the receivables. And so when I buy a note, or in my case, a non performing mortgage where somebody hasn’t paid their payment in 90 days, at least if not longer, we are buying that receivable from the bank at a big discount. It’s like a clearance rack, I guess you could say we’re buying that now that shirt still looks good in the clearance rack, it’s just that it didn’t fit with the right thing with the bank. So we buy that debt, that mortgage at a big discount, we then become the bank and have all the same rights that a bank does. And we make our money by working to keep the borrower actually in their house. And so we love to buy the debt, since we bought it at a discount because it’s a lot of flexibility to reach out to the homeowner and say, hey, what happened? Tell us your country western song, do you lose your job? Did you get divorced? Did grandma get run over by a reindeer you know, whatever it might be?

Mario Fachini [2:51]
Okay, forgot the dog. There’s always a dog.

Scott Carson [2:53]
There is the dog. But I love dogs. So yes, the dog ran away with the ex wife. How’s that sound? But you bought identidades can give you a lot of flexibility to work, to keep the people in the house. And so if you’re going to reperform or modify the loan, that’s usually a really good return on investment as far as monthly cash flow. And then if you get them performing for a while, for 12 months, then if you bought the note at a big discount, usually 30, 50, 60 cents off, you could then turn around and sell it at 30, 40, 50 cents on the dollar profit after 12 months. So everybody’s in the note game, whether you believe it or not. If you’ve got a car loan, a student loan, credit card, you owe Baba Joe down their street, 500 bucks, or a mortgage. You’re the note game, you’re just on the wrong side of the payment stream. And our goal has been to help make America great again, one defaulted borrower at a time for the last 12 years.

Mario Fachini [3:48]
And how well has it been going for you?

Scott Carson [3:50]
It’s been going well, I mean, obviously, the country went through a bit of a shake up in 2008, nine and 10 with a great recession. But we bought a tremendous amount of notes over the last 12 years over a billion dollars in distressed debt on single family homes, apartments and commercial property. And we buy debt on just about every type of residential commercial asset. And when we buy the debt, we’re seeing deals directly from banks. And we usually assume bigger discounts. And we usually will take these deals down six to 12 months before your conventional investors. The people that love to watch flip this house or you know Flip or Flop or your landlords will see deals that they’ll never have seen because we bought the debt became the bank and then worked out some sort of win-win with the borrower.

Mario Fachini [4:37]
So you’re saying at a deep discount early on, and I heard you say 30, 40. 50 cents on the dollar. So it sounds like there’s a pretty substantial margin in there. What are you doing to help the people get back into it? How do you structure it if they still owe 23 years on a 30 year mortgage? How do you get them to get back on track, and then get caught up again, because I’m sure you and them don’t want it to take longer. Do you keep that note for the next 20 years? Or is there a point where you can sell it back to the bank and you take your profit?

Scott Carson [5:13]
Yeah. So yes, basically, we don’t hold on to stuff for 20, 30 years, for the most part, usually, it’s 12 to 24 months.

Mario Fachini [5:21]
Okay.

Scott Carson [5:22]
And our biggest goal is, let’s give some numbers to it. So I’ll actually give you a deal in Detroit, Michigan, I love Michigan, okay. But a lot of real estate up in Michigan, from Bay City down to Michigan, I buy a lot in Flint, you know, I just don’t drink the water, you know, out west to Jackson, or Kalamazoo and all over Michigan, I love Michigan. But anyway, we bought a note. A borrower owed 120,000 on a $100,000 house, they were upside down, they hadn’t paid in a while. Okay. Or the end of the property value dropped a little bit because of their foreclosure. So they owe 100, they owed 120 $100,000 house

Mario Fachini [6:00]
Was the house worth like a buck and a half originally or something that…

Scott Carson [6:04]
Well, it was originally worth about 110 back in the day, but it dropped off in value because of foreclosures and things.

Mario Fachini [6:09]
So either way, they are really not in the right direction.

Scott Carson [6:13]
No. And when you add in the head made mortgage payments in over a year that went into that $120,000 balance do they’ve been laid off? You know, or working part time, it was a variety of things. So we bought that debt at 50 grand. So they owed 120 plus and change, we bought it for $50,000 because we usually pay 50% of value. His value was 100. Borrower we reached out to him immediately and said, hey, what’s going on? The beautiful thing is, when we buy this debt, we see a lot of the behind the scenes numbers, we get a look at the loan documents, the paperwork, the call history between the borrower and the bank, if they were friendly, if they’re not friendly. If the borrower mailed in hardship letters or tried to try to do a variety of things we get those to look at, and this bar has been trying to do a loan log for a couple years. And so we knew immediately, they wanted to stay in the house, when we had our realtor drive by the property to take a look at it was in good condition. They had the flag out for a holiday for little kids toys. They had some emotional equity in the house, but not any equity or negative equity. So when we bought the note, we reached out to the mainland, we used third party servicing companies. I’m not the one calling and mainly takes third parties. Third party people do it. They’re licensed to do that. So they reached out the bar and picked up the phone. They said they want to stay in a house. And we found out what happened, you know, job losses in their businesses shut down. And they like to stay, my servicing company, well, could you start making your existing payment? And there’s like, yeah, I could do that. But I’m upside down. I’m like, well give us a list, if you start making your existing payment, I think it was like 575 a month, sir, make an existing payment of 575 a month, after 12 months, we’ll recast the loan and will remodify the loan. Okay. So what that means is after 12 months of payment, we would forgive, we would reevaluate their property. And so if they say went up to 110, instead of 100, and they still 120. Well, we would forgive that 10 grand in debt. So that they were basically fixed or in some cases, we bought loans where they had like 9% interest rates where we said, okay, pay for 12 months on time, and then we’ll reduce your interest rate down to 6% or 8%. In one case, the lady who lived in a house for 18 years refinanced, put some equity out of the property back in 2006. Her husband had a heart attack and was out of work for two years. And they’ve been trying to do a loan mod for four years after this refi took place. And I reached out to her. And when I actually reached out because she had literally written this long letter trying to do I mean, there’s four letters trying to do a short sale because her loan had been sold four times from one bank to another bank before it came across us. And the bank that we’re buying from basically wrote this debt off, basically, you know, they owed 60, we paid 12 grand for the note, and the house was worth like 35. Okay, but she had lived in it for 18 years, okay. Raised her three kids husband, it was getting back to work after the heart attack. But so I said, Okay, I said, Sheila, what’s her name Sheila. And I said, could you start making your $400 month payment? And they’re like, yeah, I could do that. I said, okay, could you bring it? I mean, you haven’t paid for a couple years. Could you bring something to bring five grand to the table? She’s like, No, I can’t do that. So what could you do, 2500? She said, Yeah, I can do 2500. Okay, 2500, could you make $200 extra a month on top of your existing payments? To get that five grand the first year, she’s like, yeah, I could do that. Okay, if you do that 2500 at the table, your existing payment plus $200 a month at the end of the year, I’ll go and drop your interest rate to 0%. Okay, I’ll drop it down from eight and a half to 0%. And I’ll drop the balance of what’s owed from 60 down to the 35 the value of the house and if you make your payments with a little bit extra you’ll have the house, since you’re gonna be paying 0% interest, every penny you pay is gonna work with principal, you’ll have the house paid off in six years versus 23 years. Okay? And she was like, Oh my god, yes, her and her husband showed up the attorney’s office about a week later, they signed everything, he cried the closing table, okay, because they were trying to do that four years of stress, can you imagine that four years of stress worrying about if it wasn’t before close, and you’re doing all this work the mail on these documents, and then the loan gets sold to somebody else, and you start all over again. And we came, I talked to her for 30 minutes, we had this basically arranged just like this, and she just paid off her loan last month with me. So I bought this loan six years ago and we were about six months into payments. And I get a letter from her around Christmas, a Christmas card from her. And it was basically they looking to say, Hey, thank you, we’re so thankful. And like I said she had three kids. Well, her eldest daughter had just had a baby. And they named the baby Carson after me for helping them stay in their house. So we love to do a lot of good if we can. I want to keep people in their houses. I’m not the big bad bank that wants to foreclose, I actually make more money and get a higher return on investment by keeping somebody in their house, keeping the property up to date, keeping the neighborhood values high, because a foreclosure will depreciate the neighborhoods. And then there are people that won’t work with us that we do have to go the legal route and foreclose. But I would rather always give borrowers the opportunity. Hey, let’s keep you in the house. What can we do to make it a win-win?

Mario Fachini [11:26]
Yeah, and I think most people want to do that. But it’s just, you know, it doesn’t take much to have one thing go wrong. And then this thing goes, I mean, you change just those numbers, you change the interest rate, like you said, from nine down to six, or if you’re at six, and magically, it goes to nine, and then you get behind on one. Now it’s harder to know, it’s just like, what do you do? You need some, you need the people like you that are helping out. So did you say you kept hers for six years?

Scott Carson [11:56]
Here’s the thing, I paid 12 grand for the note it was and she paid five grand, basically, in the first in the first 60, six months. And then everything after that was gravy. So I’ve made galleywood, I made five grand a year for six years, 30 grand plus the six. So I made almost 40 grand on a $12,000 investment over basically five and a half, six years.

Mario Fachini [12:19]
So but normally, when you’re doing 100, grand or 150-200, whatever the case is, you’ll give it back to the bank after.

Scott Carson [12:26]
I don’t give it back, I will sell it on the open market, I’ll sell it at the bars when paying on time. If we bought it at 50, we go off and sell it at 85, 90 cents on the dollar back to lending institutions looking for performing paper. Okay, real estate investors that want to use their self directed IRA for a good, six to 12% return on investment without having to do a lot of work. So that’s usually where we sell it to other investors and other funds.

Mario Fachini [12:49]
So they’re looking for basically customers and you say I have one that I’ve basically been coaching for 12 to 24 months, here you go.

Scott Carson [12:57]
Well, no, I won’t say coach. I’m actually the bank. I said, I have a borrower, I have a note here that I can sell you now.

Mario Fachini [13:04]
Well, maybe I was meaning coaching in the sense where it’s like, they don’t need to fight with the person you’ve trained them on. Here’s how you make the payments. I mean…

Scott Carson [13:12]
Yeah, and you’re right, you have to retrain them because a lot of times people are used to not making a payment for a while it’s hard to get them back on track.

Mario Fachini [13:20]
Well, there’s no hope. But you give them that hope. And you’re going hey, can you do 2500 with an extra 200 bump? I mean, there’s your 2400 over the first 12 months.

Scott Carson [13:31]
Yeah, exactly. And so that’s, it’s a numbers game. And I didn’t get creative in a variety of ways, you know, and we can usually work out a situation that makes sense with a bar if they’re just willing to work with us. And that’s the magic in the note business is actually a lot of real estate investors chase the property. And do me wrong, real estate’s very important because if I do have to foreclose, I am gonna take that property back. And so the value is got to be there, it’s got to be in a spot that’s not a two gun alley or anything like that can’t be in like a below Eight Mile Road there in Detroit or other places that are rough South Columbus, I know the area man, I know, trust me, I do a lot of research and when we’re buying distressed debt, but that’s the thing is before COVID hit one in 10 americans is already 30 days behind their mortgage, before all this chaos, okay. And right now we’re looking at one in one in 11 borrowers in America here who are at least 90 days behind on their mortgage. And the banks and the government keep kicking the can down the road with, allowing delays, forbearance agreements, if I can, that’s a good thing. But you have to look at the flip side of the coin. It’s just not the borrowers that they’re trying to have. It’s also the investors behind it. The people that bought the property, maybe financed it or landlords that have tenants that aren’t paying it’s two sides to every coin, and we’re gonna see a huge wave of defaults hit the open market here in 2021, not only in residential, but also commercial. So it’s a great time to be an investor because you can often pick up a lot of real estate at a steep steep discount that nobody else sees.

Mario Fachini [15:01]
Now, when you’re saying there’s gonna be a lot of defaults hitting, do you? Do you feel 2008 and nine are gonna happen again.

Scott Carson [15:08]
I had a crystal ball, I’d be in Vegas at the casino. I think it’s not going to be as extreme in 2010. At the worst point, we had 15 million Americans that were underwater, their mortgage, 15 million. Okay. Right now, we’re at about a 9% default rate. So one out of 11 bars is really in trouble. Okay. Now in trouble, we’ll have difference of opinion on what bank they’re with, what kind of loan if they’re an FHA loan, or a Jimmy Mac loan, or Fannie Mae loan or stuff like that those government insured loans, they’ll probably just delay say, okay, we’ll give you another six months to forbearance another six months. I just read an article yesterday, and one of the things that we track is that roughly about 85% of those in forbearance have done really well. And a big chunk of them but half and have gone off a forbearance, but then they had to get back on forbearance 60 to 90 days later. And so UCP like going back to work, we’re going to tighten up the city. Okay, you’re laid off again. And that we’re going to…

Mario Fachini [16:09]
It sounds like a different kind of uncertainty, because you’re saying, we were at 15% last time, and now it sounds like 9.1%

Scott Carson [16:17]
Yeah, nine to 10% have been talked to.

Mario Fachini [16:21]
Do you think the institutions back in the day, though, were a large part of the problem. It just wasn’t the volatility and all that or I mean..

Scott Carson [16:30]
So what you had happening is you had a lot of banks back in the day, they were giving all these subprime mortgages, okay, subprime did anything but you had a lot of a paper pristine credit buyers too, that when default, you had a big fork, you had a big property value drop that was affected back in 2008, nine and 10. As well, we don’t have the same property reductions right now. Because the markets are really strong by keeping interest rates, basically zero for the most part. So it’s a good time to go borrow money, but what we see is the biggest difference these days is the haves and the have nots right now. Those that have good credit, those that are paying their trucking along like normal, it’s that first time homebuyer, it’s those that are you’re employed in like your service industries, your waiters, your bartenders, your travel agents, hotel, concierge, service, industry stuff, those are the ones that are struggling the most, to stay on top of this. So we researched about 50 of the major cities across the country over the summer. And it’s consistently in that $200,000 value house and below, that’s where we see the biggest trouble, that 200,000 can mean a whole lot of difference whether you’re in LA or in Detroit, you know what I mean? In LA that might buy you Lebron’s doghouse in Detroit or buy your really nice property or like six really nice properties, depending where you’re at. So it’s really come down to a microeconomic level, what’s going on in that state? What’s going on in that city? And looking at the price points, I think we are going to see a lot of defaults, it’s already out there. And you also look, we have record defaults and student loans, credit cards, auto debt and medical debt is also kind of that paper house or I said to say that your stack of cards is kind of tumbling in on itself right now as people are running out of resources to charge the card or the $600 month check they’re getting from the government yet hasn’t showed up in a while. It’s gonna be an interesting time here over the next 90 days.

Mario Fachini [18:28]
If someone’s thinking about getting into it, how long would you say it would reasonably take for them to understand it enough where they could start making some traction? And then when they get to a point of competency, how long do you have to wait before you’re seeing profits with it?

Scott Carson [18:46]
This is not a big thing here. This is not a get rich, quick thing and all it takes time like anything else, you’ve got to do your due diligence. You can’t watch HGTV and become a note investor because you’ll end up overpaying for deals. Okay? So you got to get some learning and get some education. We teach classes on a regular basis on this stuff. And literally about 2000 YouTube videos and podcast episodes out there going through specific stuff. So roughly, we allow students to come over that in 30 to 60 days and start grasping the concept and start making some offers. And then when you buy a note, it could take you 30 days or 60 days to get the bar back on track. But then if you’ve got to foreclose, it’ll depend on which state it’s in because every state has different foreclosure time frames, like New York, New Jersey, two years to foreclose, at least Texas we do everything fast here, fast highways, fast foreclosures and fast execute 21 days to foreclose here in in Texas. So it’s a little bit faster here. But it’s also a bit more expensive because the banks realize, oh, you can foreclose fast. We want a premium on that debt. Whereas if you’re selling in New York or New Jersey, they’ll give you a much bigger discount, because you’ve got that 12 to 24 months to foreclose.

Mario Fachini [19:54]
Now where would the sweet spot be with maybe three months to six months or maybe a year where it’s a little bit lower and what is the premium for Texas? I mean, are you paying like a large premium because I’d always rather go to the speed but if it’s cutting into profits substantially.

Scott Carson [20:15]
So here’s the thing. It’s all about the bar in this case. So I like them here. I love Texas because it’s fast to foreclose here, but I buy a lot in you know, I’m in Michigan, because it’s still a relatively fast non judicial foreclosure state. I buy…

Mario Fachini [20:28]
How long is it?

Scott Carson [20:30]
Michigan’s like 90 days to foreclose.

Mario Fachini [20:32]
Not horrible.

Scott Carson [20:33]
Not horrible at all. Ohio could take nine months to foreclose, but it all comes down to the bar. And that’s why we do so much due diligence on the bar, because a lot of times with one phone call one letter, just at the bar, having somebody new to talk to can result in about a 50% success rate with them getting back on track, like okay, hey, I’m not the guy that gave you this loan. I understand you’ve been through a country western song. Your dog is crying, I get it, but let’s not make you cry. Let’s get you back on track. And let’s do a fresh start here. For what can you pay? Do you want to stay and you no pay, you no stay.

Mario Fachini [21:07]
What if they say I don’t want to stay? Then you just foreclose and you’re done?

Scott Carson [21:11]
No, no, we’ll give them a straight line, sign the property over to us, we’ll forgive you that 120 grand debt and let you walk.

Mario Fachini [21:17]
Okay, but you just got a property that’s worth 120 for how much?

Scott Carson [21:23]
For 50 grand or 30? grand? Okay, so I got it. But now I’ve got to probably repair it a little bit, clean it up and then sell it. But still, I get …

Mario Fachini [21:31]
In BFD, that’s like 110% profit.

Scott Carson [21:35]
Yeah, I don’t like to give away those type of results because people get too excited. But yeah, if you could get a deed loan or even cash for…

Mario Fachini [21:41]
Allegedly there. Now we’re good.

Scott Carson [21:44]
There we go. Where I can give somebody sensitive information that it costs me three grand to foreclose, I’ll give him three grand to the bar to walk. And I’ll cash in and have an area that I can sell and make some good money on MLS or I keep it as a rental or I could offer up that property and offer something for owner financing as well, too.

Mario Fachini [22:02]
I was trying to see on the full screen for me what you’re doing there if I could see it. That’s awesome. Oh, you got one of them.

Scott Carson [22:12]
A little noisemaker here, best 10 bucks I’ve ever spent in San Francisco. And I’ve used like, I’ve probably gone through like six of these. But it’s the easiest sound machine or any for my podcast for years.

Mario Fachini [22:23]
That is killer.

Scott Carson [22:25]
Next time I see you. I’ll have one for you. How’s that sound?

Mario Fachini [22:27]
That sounds really good. Because I’m like, what does he use? And I’m like, Is it the x keys? Is it an Elgato, stream deck? He’s got something there. I’m gonna peek to see what it is. So let’s talk about money. Does someone need 100% of the cash up front? Do they borrow from the bank? If you say, hey, I can get this property for 50 grand? That’s 100, 110 or it’s a 200 grand for 100? Where do you get the financing from? Are you always fronting the money? Or do you have partnerships with banks?

Scott Carson [22:56]
Very good question, you’re not going to get a loan from a bank to go buy a non performing note, they’re not going to do that. So it’s got to be cash. Okay,

Mario Fachini [23:03]
I guess that makes sense. If they’re the one given you the non performing note, they’re probably not going to fund you too.

Scott Carson [23:13]
You will be on commercial, if it’s a commercial note, a lot of times a million or greater, you might be able to have them negotiate them financing the purchase, especially if the operator or the business or the property owner has walked away and you’re stepping in.

Mario Fachini [23:26]
Why commercial and not residential?

Scott Carson [23:29]
They don’t want to do it. It’s not worth their time to do it on a $50,000 asset or a $75,000 asset. But it is a million dollar loan, it’s nice to have them a book, so they don’t want to lose. So okay, it all comes down to that number size. Now, for residential, if you’re buying residential loans, then you’re gonna have to bring cash to the table. And we leverage a lot of people’s other people’s money through other people’s IRAs, we’ll use some of our own funds. We’ve got a fund that we’re putting together to raise capital from a bunch of people. And then we can go buy portfolios, like we’ve done in the past. And that’s where it comes down. We tell people like, look, there’s so much money sitting out there. And we see that roughly about 75% of if you look at people that have an IRA have some sort of individual retirement account. 75% of those that have an IRA account have more than 150 grand sitting on the sidelines, and most of the time, it’s making less than 4% interest zero in most cases. So like you said, If I you know, if I got a deal that’s worth 100, I pick it up for 50. I’ll market it to real estate clubs, or I’ll jump online and market that to investors in my groups or I’ll jump on LinkedIn and join and say hey, I’ve got a deal. Anybody interested in putting some lazy assets to work? You know, do you have a CV, a certificate, a disappointment that you want to get an above average return or you have a 401k that’s now a 101 K.

Mario Fachini [24:53]
So they can pull money out of what they have. And they might say here’s 20 grand, 30 maybe here’s the full 50 and then they don’t need to do anything, you’re taking care of the note you do it, but you say, give me 50 grand and a year from now, I’ll give you 55, 60?

Scott Carson [25:08]
Well, it all depends what are they looking for? So that’s kind of what we do. If somebody is making zero, they might be happy making 4%. Because otherwise…

Mario Fachini [25:16]
If they’re at four, you might put them at six or eight.

Scott Carson [25:18]
Exactly.

Mario Fachini [25:19]
Gotcha.

Scott Carson [25:21]
In some cases, we have some investors that bring larger chunks, we might split with them, and go 50-50 on the deal, okay, it just varies on the situation on the individual deal and what it’ll hold.

Mario Fachini [25:31]
So realistically, whether someone has a pile of money sitting around, they want to do this great all the better. But if they don’t, they’re still solutions, do it, if they have the desire to, you know, you can help people and obviously, it sounds like it’s profitable.

Scott Carson [25:44]
Well, it is. If you know what you’re doing, you got to have your vendors like anything else. You’re not if you’re a jack of all trades, like if you want to be the guy out there that’s ripping up carpet and paint in the house, and in trying to sell yourself, this is not the business for you.

Mario Fachini [25:57]
Yeah. That’s the flipping.

Scott Carson [25:58]
Yeah, that’s the fix and flipping or if you’re a lazy landlord, who’s tired of toilets, tenants and trash outs, and termites, we get a lot of landlords that come in, in the note business, because it’s still a cash flow business without even having to do all the work. And so the biggest thing I could tell people out there is if you don’t have the money, or don’t have credit, that’s fine, because the bank doesn’t care what your credit score is. When I started doing this back in 2008, I was in bad shape, with everything that hit the fan in 2008, 9, 10. So I just started dialing for dollars calling banks, getting these lists sent to me doing some due diligence and then marketing them out to people in my local meetup groups, my local real estate investment clubs, people that I know, and said, hey, here’s the deal, here’s what we’re doing. You want to partner with the on it. And that’s how we raised a lot of capital and flash forward 10 years now we’ve closed on over a billion dollars in distressed debt. And I was educated the year in my field back in 2014. And we’ve helped a lot of people do a lot of good not only for the borrowers across the country, but for themselves, ourselves as well. A lot of people that we’ve taught have left their jobs to do this full time because they love it. Other people, they take this up as a side hustle, you know, they love what they do, and they want to invest a little bit here and there. And so this is an opportunity for those that are interested.

Mario Fachini [27:15]
And it sounds very long term to you can make a career of it. It’s not just oh, I’m doing it for this year just to get by or something. I mean, you could, but it sounds like it’s actually better long term.

Scott Carson [27:25]
Yeah. Well, that’s the thing is if we always say in real estate, as a real estate investor, the evolution people ever, you know, it becomes from the chimpanzee, you know, as a starting off new investor to somebody at the end, who is a banker, the banker always wins, okay. And that’s really what you are as a note investor, you become the bank. And that’s why the banks are the biggest buildings and nobody calls the bank. Because Bank of America at midnight when Little Timmy flushes his rubber ducky down the toilet, okay? It’ll call the bank. The bank, though, when you look at how banks arbitrage funds, they take in and give you a half of 1/10 of 1% and then lend it out at 6% for car loans, or mortgages or 18% on credit cards. If they’re giving you a half a percent, they’re not making 17 and a half percent, they’re making 3600% on that, so if you know how to arbitrage it, and you can really work it out. Yeah, we like to tell people don’t do skinny deals. There’s a lot of deals across the country that can be better bang for your buck. You know, we get a lot of California investors like I want to buy in California, you know, the land of fruit nuts with all the droughts is just a bunch of nuts now, because the fruits all dried up. We were priced like what I would pay for a one note and cut in San Diego. I can buy almost a whole block in Flint, Michigan. And just knowing how to leverage your money, looking at deals, working with local professionals like realtor servicing companies, attorneys, if you have to foreclose and kind of trying to put this thing on autopilot as best you can.

Mario Fachini [28:54]
What would you say is the better deal or does it depend on what you want? Is that the block and Flint or is it the one property and Kelly.

Scott Carson [29:01]
I would say it when you look at how you can leverage your investment over eight or 10 properties. I would pick Flint all day long, because the rent rates if you had to take the property back and keep it as a rental is going to come out strong, very strong, and I’ve done the work. I have driven Flint. I stayed in Lansing last summer. Two summers ago, I flew up into Michigan and looked at 16 notes that we either owned or bought in a three day period. So I’ve been through that neck of the woods. I’ve always loved the North. I’m originally born in Minnesota. So I have ice in my blood. I go down to get some loose covers, you know pop. I just think where you can leverage anytime you leverage your money across multiple doors, it’s better than having just one door because if something goes wrong, I get example, let’s say the San Diego homeowner who’s you know got a $250,000 or a half a million dollar house there, they’re gonna be a little more sophisticated. And you know what they’re gonna do? They’re gonna hire an attorney to drag out the foreclosure process as best they can. Because it’s cheaper for them to pay their attorney 1500 dollars a month to delay delay versus, you know, 10 grand a month mortgage payment. So, I like doing it because if I buy 10 assets, I’m probably gonna have six, you know, five, six, maybe seven of them start performing pretty easy for me that I can make start making money in 90 days, whereas that one asset it’s like a flip of the coin whether it’s gonna go my way, or it’s the go deal that I wish was on the highway.

Mario Fachini [30:26]
Are there any other states that are really good?

Scott Carson [30:29]
Oh, well,let’s see here. My favorite is Michigan, Ohio, Indiana, you know, they’re all six to nine months to foreclose. I do love Texas, but it’s overpriced here for the most part because of the fast foreclosure state. I am a big fan of God’s waiting room, Florida. Okay. In Florida back 12 years ago, it took forever to foreclose there but it was on sale. I was buying a lot of stuff at pennies on the dollar that it took a year to two years to foreclose. But by the time I got around to foreclosing and going through the legal process, that property had really accelerated in value. So I was really making a killing on it. So I like God’s waiting room. As I say, Missouri is a great state, we get a lot of California investors like Missouri because it’s roughly 90 days to foreclose. The way I look at things as if you’re two hours away, you know, from like, I’m in Austin. So I’m about two to three hours away from 90% of the country. So it works really well for me, but the states you do want to avoid. You don’t want to buy new york because it’s roughly three years to foreclose. New Jersey’s at least two years. Kentucky, while it may be cheap to buy real estate there, for the most part, the state requires a million dollar bond. And that’s not cheap to get so I don’t buy in Kentucky. Illinois is a good state except for Cook County. Okay, Shire rack aka Cook County takes forever to foreclose. And it’s such a messed up legal system there that if you’re an out of state investor who’s trying to foreclose on a local borrower, the judge will always side with the local borrower and give them time after time after time again, so it takes forever to evict to foreclose in Chicago. So I like other parts of Chicago, Illinois, I just don’t like Chicago, as you can tell. But for the most part, just you know, where the deals are in the rust belt, the big 10 conference, part of the United States is where you can see the most amount.

Mario Fachini [32:17]
It sounds a lot like if the numbers make sense. And it’s not too long. Anything over a year sounds like it’s, you’d better have a high profit margin.

Scott Carson [32:26]
Exactly right. And or in an appreciating market and getting it at a big discount. And then you’ve got cheap money, that your investors looking for 6% they’re fine, not getting money for a year return. But that they want to be returned to the end that works out fine for that.

Mario Fachini [32:41]
What would you say for someone that’s looking to do 50 to 100 grand deals versus 500? a half a mil? It sounds like there’s more smaller ones, and you can maybe turn them quicker, get positive with them quicker. But what can you expect, if you’re looking at a half a million dollar to a million dollar plus deal.

Scott Carson [32:59]
So I’m a half million dollar plus, you’re still you’re probably going to pay? Well, not probably you are going to pay a higher percentage, because the banks will look at you’re probably paying somewhere in the high 50s, a high 60s of value. Okay, a lower value property below 50, you’re gonna probably be paying somewhere between 30 to 25 and 30, 40 cents on the dollar. Okay, so that’s a big difference, it all depends on the asset to you know, where that where is the bank in the foreclosure process, if it’s already done, great, then go with the higher end value, you’re gonna have a higher payday, you know, big checks are always nice. But slow, all depends on the bar, you know, it’s slower, they may file bankruptcy, which they’re probably going to do that they’ve got some emotional equity on a bigger property, and then that can drag that out, for either a chapter 13, which is like a loan mod, that gives them five years to work out and get back on track. So that’s like you buy a performing note. And keep that in mind, you better bought that at a good price and make sure that the principal interest payment that’s coming in makes a good ROI for you. Whereas if you bought 10 at 50, now you’ve got like I said, that leverage across the board for security, if you do have a bad apple, it doesn’t screw up your whole return.

Mario Fachini [34:09]
Is there an amount that you just don’t advise going over like two or three mil because it’s just almost never in your favor.

Scott Carson [34:16]
So I yeah, if I’m gonna end up….if my goal is to buy the note to get it re performing. And the bar back on track, I don’t usually go above 200 grand as the value I took her 150 and below cuz that’s, that’s probably about 90%

Mario Fachini [34:30]
You can turn them around and get them back on track. If you know, it’s already foreclosed. Now you have some other factors.

Scott Carson [34:39]
Well, if it’s just a property, yeah, but when you get that higher value, they’re always gonna fight you. The borrowers are always gonna fight you. They’re just going to give a little bit of money to their attorney each month versus paying the 10 grand or 20 grand a month. I bought a note, I’ll give you an example on a property worth 2 million. Okay, the borrower I’ve built a house and a ton of equity. Okay, he went to the bank and took out a refinance loan where he pulled half a million dollars in equity out. He went down the street, bought a half million dollar house and moved into it, and then never paid another mortgage payment on his main house again. So you have to keep that in mind, what’s the bargain to do? And that’s why we look at so much due diligence on…

Mario Fachini [35:27]
Do the cities play a role in the type of people because for someone to do that on 100 grand half a mil or mil, that’s a personality? I mean, you can’t just say everyone that has a half a million dollar house acts like that. But that’s kind of… I’m trying to behave but shame on them.

Scott Carson [35:49]
You’re trying to be PC here. So let’s just say that it’s like Miami Beach. Okay. High end condos in Miami Beach. They a lot. There’s always difficulties there. And I’ll just say the big three parts of California, San Francisco, LA, and San Diego is where those troubles happen the most.

Mario Fachini [36:07]
So don’t do it. Wow, that’s astonishing. But I’m glad you narrowed it down. Because I mean, everyone’s got pita customers, the trick is identifying them and not having them come back.

Scott Carson [36:22]
Well, that’s the truth. I mean, I’ve had great borrowers in high end homes and worked with me but it’s just you have that when you start working that higher end, people have friends with the initials of a squire after them, and they’re willing to just drag this out as best they can. And that’s why you get an attorney and burn people, we do the most amount of good wins that first time home buyer, like I said, we I love keeping people in their houses.

Mario Fachini [36:44]
Yeah, and I like the transformation story that you’re sharing too, because it’s like, the goal isn’t to kick them out, you just want to turn it around. And you can help them. I mean, if someone that’s clearly someone with the half a mil buy a new home, that’s clearly someone that doesn’t really care or want to help or do the right thing. But when you have someone who ‘s just Hey, we got behind 200 a month, good for them for keeping the home for 18 years.

Scott Carson [37:12]
Well, and that’s the thing that showed a lot of them, that’s a thing that you don’t see on a spreadsheet, you don’t take that into consideration. A lot of times, I look at it like this person has been there for a long time, if they’ve got little kids, they don’t want to move them into new school districts. For them to move out of that house and move into an apartment, they got to put first and last month’s rent utility deposits, that’s three to five grand, and a lot of cases, look, I would say let’s keep that three to five grand with you or put it with me and stay in your house without having to move.

Mario Fachini [37:41]
And you got them in terms of paying off the house in six years instead of 23.

Scott Carson [37:46]
Yeah, exactly. But let’s hear about such a financially illiterate society these days, people just don’t know their options.

Mario Fachini [37:52]
And it’s sad, because what you’re saying, it sounds like, just simple money management. I mean, I’m glad you’re helping them because those are the people it’s like if they’re willing to help themselves, yet do everything you can to help them but the sad thing is, the person with that half million dollar place, probably just has a little bit more financial literacy and knows what to do. And you know, so not saying it’s right, but…

Scott Carson [38:19]
When you look back, there’s a lot of people, we try to be good people but there’s a lot of people 10 years ago that were approved mortgages and houses that they should never have been into. You know, you can fog a mirror and get financed on a mortgage. And so you had a lot of people take advantage of the situation, which is fine if you can afford it and keep it up great. But if you’re a stripper who’s got four mortgages and trying to pay the bills every month that doesn’t work so well after a while and you look at these you know, a lot of people want to blame the adjustable rate mortgages the arms after their well or the subprime mortgage, all those have been gone. Ladies and gentlemen, arms have been back for a while. The back for several years now. Subprime mortgages have been back for at least five years now. They just call them non prime now. So it’s not, I hate to say it, but you asked me do I think a lot of what’s gonna happen. I was like what happened a decade ago, there’s a lot of similarities. For the last six months, my spidey senses, I’m like, or actually six months prior to COVID. I was like, oh, we see I’m seeing history repeat itself. I’m like, oh…

Mario Fachini [39:19]
Because there’s still unfortunately a lot of people making so much money from it. They don’t care who they screw over. We’ll just rename it.

Scott Carson [39:27]
Here’s the spend on it, you bring that up. Yeah, here’s the thing.

Mario Fachini [39:30]
No, it’s something totally different.

Scott Carson [39:33]
Okay, it’s totally something different, what to put a different name or slap a different sticker on it. But you had all these guys that live through, the executives and stuff like those banks that lived through the Great Recession 10 years ago, and they’ve retired, we got these new guys that are coming up and gals who want to give good returns to the investors. So they start bringing back these same types of options, these lenders and these debts, young cmbs, medium MBs mortgages, mortgage backed securities and all that stuff to get hired. returns and you start seeing defaults again you start seeing stuff come up and Bank of America has been one of the biggest guiltiest parties out there. The big four, big five Chase city, Wells Fargo have all been there. But like the four COVID kicks in, I was talking to a guy over at Bank of America mortgage. And they were doing FHA loans, which is your first time homeowners, basically ones that usually bring three and a half percent as a downpayment? Well, Bank of America is donating the downpayment and then paying up to 10 grand towards closing costs. So people that when they definitely don’t use the great scores, they get into a first time home without having any skin in the game. They lose their job, or they get reduced in hours and a lot of cases, now they’re in default, and that FHA product, the first time homebuyer, is the largest percentage of defaulted mortgages across the country. Last month, it was like 15, 16% of all FHA loans. Originally, the last two years are already in default, that means they are already 90 days or later on their mortgage.

Mario Fachini [41:00]
So essentially, the banks are the ones investing in their own notes. Going here will front you because there’s a 15% chance it’s going to really go in our favor, and if not, it’s still in our favor.

Scott Carson [41:14]
Well, banks don’t want to own real estate, so they make these loans with the idea that they’re gonna keep going, keep going keep going, but they get greedier and greedier and greedier. So usually, five years ago, they required you to pay that 3% down to bring that to the table, and a bank, they make their money on notes, they don’t make money on real estate, it’s a non performing asset to take the property back. And that’s it. But they’re very aggressive. If you start being late, like the minute you’re more than seven days late, your mortgage, they start calling you.

Mario Fachini [41:41]
I see. So it’s not so much to get the property, it’s just that we can increase revenue by 12%. If we get more aggressive.

Scott Carson [41:49]
That’s correct.

Mario Fachini [41:50]
And they’re so they’re looking more at the 84% or 85% of the new business, they’ll get not the 15 they’re losing.

Scott Carson [41:59]
Yeah, exactly. And that’s the thing is banks don’t want to be above 5% or 6% default rate, because then the federal government’s are stepping in and saying, okay, what are you doing? Are you doing predatory loans? Do you not have enough because you’ve got banks, when they start having non performing loans, they have to start pulling in cash reserves to offset those losses. And for every dollar they have to keep in house that costs them 10 to 15 times that and fees that are being charged by leverage in and out.

Mario Fachini [42:25]
Okay. Yeah, cuz they have a very unique lending model. That would be illegal for all of us. So they don’t want to lose.

Scott Carson [42:39]
That was the whole point. I mean, if you gave, it’d be like you give me $1, me lending that out 15 times…

Mario Fachini [42:43]
Or 20.

Scott Carson [42:44]
To people, or like right now, like back in 2008 the banks were leveraged for every dollar they had, and they hadn’t leveraged out 15 times for a variety of products. Well, prior to the beginning of this year, do you think that number was higher or lower?

Mario Fachini [43:00]
Oh, higher.

Scott Carson [43:00]
It was higher. It was 50 to 1.

Mario Fachini [43:04]
50?

Scott Carson [43:05]
So that’s…

Mario Fachini [43:06]
I remember when it was 19 to 20. I thought it was like 19 to 20 to one and now it’s 50 to one. So every dollar they lose, they’re losing 50. That’s the opposite of what you…

Scott Carson [43:20]
They get their leverage in that. They’re making 50 leveraged out 50 times different products.

Mario Fachini [43:25]
Well, that’s what I mean, if they’re having to go into their own reserves to cover their losses, they could just not have the losses, keep it and while that’s not.

Scott Carson [43:34]
They’ll start cutting out programs or stopping programs, we guess why? they’ll sell debt, they’ll sell non performing debt off to it as a big discount because they’d rather get that 50 cents on the dollar. And now that they can go lend out and make up versus trying to ride this out for six to 12 years, or six to 12 months additional. And then who knows how long beyond that.

Mario Fachini [43:53]
Wow.

Scott Carson [43:54]
That’s why banks would rather ask steps and take over the problem children and try to work it out. And that’s where we make our money is working out the problem children.

Mario Fachini [44:00]
Well, clearly you’re successful with this. I want to ask you real quick, how did you get into it? What were you doing prior to 2008? Because I heard you say dialing for dollars and you were already at a very intellectual point at that point. What were you doing prior?

Scott Carson [44:16]
So I graduated college, Southwest Texas State University south of Austin, Texas, same Marcus Brown the bobcat with a business degree I wanted to be actually I started off in college. I want to be the next sportscaster. You know the next Dan Patrick from ESPN that we got a business degree, went into finance. Yeah, I went into financial advisor work for Smith Barney for a little while. And then I went to work for JP Morgan Chase big bank, I became a mortgage banker with them and opened up about 20 different banks here in Central Texas. And a buddy of mine started a mortgage business with another real estate investor who was traveling the country teaching creative financing and other things. And I said that’s what I want to do. So 2004 put my notice in. And then for four years, I was basically originating loans, you know, new loans, refinances to real estate investors across the country every other weekend I was on a plane. And we were flying out to another real estate Expo of some sort. And these big events, I used that 500 to 1500 real estate investors that we were doing loans for a lot of them. And then, so I was very fortunate for that four year period, not only to make a lot of money in the mortgage space, but also had like an apprenticeship with the investor, who was our sponsor and broker, he taught me so many different things him and his business partner, he and she were just, I learned so much stuff about creative financing and the note business so that when everything changed in 2008, and the music stopped like that, I clearly said, okay, here’s, here’s $1, for my half of the mortgage company, and I just started calling banks and lending institutions 50 to 100, a day to start tracking down these lists of non performing notes that I knew that they had. And it just took a while to do it. But it was well worth it. It is easier.

Mario Fachini [45:59]
Is it easier now?

Scott Carson [46:02]
Oh, it’s so much easier now than it used to be. I mean, you look at all the tools that I’ve created in this new kind of secondary market over the last 12 years that we didn’t have 12 years ago. I mean, we had one thing I would pull a list and I would literally like Tuesday, Wednesday, Thursday, I would knock out 50 to 100 phone calls each day. So by Friday, I was talking like Emma five because my thoughts were so swollen for making so many calls, you know, something like the pursuit of happiness with Will Smith just dialing for dollars or boiler room, it was like that. And I got lucky enough that I knew that Capital One was selling some notes,some smaller commercial stuff, because I saw a deal here in Austin that I missed out on. And so I started dialing for dollars or Capital One, 70 phone calls over three weeks, I got hung up on or transferred to the wrong spot in India like 69 times. And I finally got the right spot and I talked to this lady in New York, she sent me a nondisclosure agreement to sign then she sent me over a 33 page PDF, and it had every small balance commercial loan, that capital on hand their books all across the country. And it was so small, like a six point font Mario, okay, so I like to get a magnifying glass to try to read it. But it was a million dollar relationship, I flipped the note. First I flipped in San Diego, it was an eight unit apartment complex that was worth 700, I got under contract for 375. I flipped it for 415 and 24 hours made 35 grand. And there was another 21 unit in Houston, Texas, I got under contract and flipped it for a $50,000 fee. You know, that led to a lot of great things happening here and there. And it’s just been an amazing wild ride. Since then, and along the way I’ve had a lot of investors have seen the deals that I want to do. And we started teaching people how to do this in 2010, as well.

Mario Fachini [47:48]
Wow, that’s fantastic. And I remember it wasn’t with notes back in the day. But I remember just the lead list. It’s like it was the yellow pages or whatever, and you just dial and then it was like oh my gosh, there’s online companies that aggregate lists that you can just buy. But it’s still just like spreadsheets, people don’t realize information and data. But yeah, I remember 10,15, 20 years ago, it’s like, what’s your excuse? Now, I don’t want to, well, that’s different, you’re lazy, go away.

Scott Carson [47:54]
That is it works as a four letter word note is a four letter word. So it’s still a lot of calling. It’s a lot of LinkedIn. LinkedIn is such a very powerful tool that we use to find and connect with bankers. And then it’s email. So it’s all marketing. Now, one of the biggest things that I tell people these days, it’s different than 10 years ago, is that everybody’s in the media business these days, I don’t care if your notes, real estate books, whatever. We’re all in the media space. And so you’ve got to get in front of people in some sort of fashion. So the three biggest tools that we use are still down for dollars, but we use LinkedIn, we use oh my gosh, email like MailChimp, or infuse something, you got to email on a regular basis, these asset managers. And the third thing is actually surprisingly, is video on our podcasts, we get a lot of people, we leverage the power of video, like I’ll film a short two minute pitch video but what I’m looking for, and then I’ll attach that video link in LinkedIn message direct to asset managers, and then they know what I’m looking for which video, they’ll call me a lot. You know, call me back. Oh, hey, I saw your video and here’s what I got. You seem to know what the hell you’re doing. And you talk like you know, you’re talking. So here you go. and go from there.

Mario Fachini [49:29]
Wow, that’s huge. You have great videos, but people don’t realize you can send it in emails and messages and it works just as great. It doesn’t mean it has to be on YouTube and for John Q. Public.

Scott Carson [49:40]
Well, and that’s the biggest thing if you record like I record one video two minutes, 10 seconds long. It saves me having to have that conversation a million times. I’ll jump on the octopus CRM and I can automate sending out 100 invites to asset managers the first of every morning and I’ll probably get a 10% open rate click through rate on the videos and out of those 10, I’ll get two or three people that will reach out, they have got something for you to take a look at.

Mario Fachini [50:03]
When did you start using the video?

Scott Carson [50:06]
I mean, I’ve been big on video, like training and stuff like that for years. But I just started using this about a year and a half ago.

Mario Fachini [50:12]
Okay.

Scott Carson [50:12]
With asset managers, the banks on LinkedIn. I’ve been doing a Monday night webinar via zoom for a couple years down to four or five years now. And I’ve done videos on my podcasts like yours, I do a lot of video with my podcast and leverage YouTube and Vimeo besides just the audio side of things, but that that helps, too when they see I’m a host of a podcast with 600 episodes and a million plus downloads, like oh, he might know what the heck he’s talking about. Let me send you what I have. I’m like…

Mario Fachini [50:39]
Oh, you didn’t start last night? Huh? Look at that.

Scott Carson [50:41]
Yeah, exactly. been around for a while, or, you know, like, I’m just talking to a banker today, who’s down in Fort Lauderdale. And he was talking about what it used to be. And I said, Well, do you know this guy or do you know where you’re at? Do you remember this? He’s like, Oh, my gosh, yes, I remember that event. You know, there’s a lot of smaller events.

Mario Fachini [50:57]
And that’s what’s great too, is the longer you’ve done it’s like, hey, remember that event in you know, spring of 2010 or so. And so it’s great to be on the cutting edge. But it’s also really great to be established where you don’t need to do every last little thing in the world.

Scott Carson [51:15]
Well, that’s the thing too. A lot of people ask me that same question. Well, I don’t have any experience. That’s okay. You don’t have any makeup. Exactly. But leverage your vendor’s experience. So like I’ve got an attorney and it’s done 60,000 loan modifications, I’ve got a servicing company that services 5000 other investors. So that’s the biggest thing on the note space is you’re not the person to go out and fix the door, like you wouldn’t a fixer flip or the roof or paint it. Hey, I got a servicing company that’s handling it, I just need to basically find the deals and raise the capital for it and market for it. I’ve got a team behind me as we take care of all the dirty work.

Mario Fachini [51:50]
Nice. Well, I have one last question for you before we thank our sponsor, and go to the Imperfect Action Round and it’s the Wheel of Whatever.

Scott Carson [51:59]
I love this. I love this good stuff. Yes. Bring it on. Ask me anything.

Mario Fachini [52:04]
So…

Scott Carson [52:11]
Got a nice flywheel on that one.

Mario Fachini [52:12]
Yeah, they’re back 12 bearings. Who was the company you would love to work with that you haven’t yet?

Scott Carson [52:25]
Oh, the company that I’d love to work with? I haven’t yet. Who?

Mario Fachini [52:31]
I mean, we can do that. Or who would you like to kick out of their house?

Scott Carson [52:37]
Well, let’s do this. I’ll give you a story.

Mario Fachini [52:40]
I love stories.

Scott Carson [52:41]
You’re gonna love this story. So back then, you’re not gonna buy a note from like Citibank, Chase Wells Fargo, Bank of America. They sell like $15 million portfolios and usually sell like Goldman Sachs. Okay. So 10 years ago, before I went behind me, I was dialing for dollars. I was calling Citibank every Friday, and I knew the guy who was in charge of this. Adam Rubenstein was still sitting back. Okay. And so I probably called him 60 times over like a two month period and left voicemail after voicemail. My business partner who called said let me try it. So she called in and said, no, there’s so and so he talked to my partner. Yeah, I loved it. We’d love to talk about bias and ask for notes for me. And then she thought she hung up our phones at Adam Rubenstein and Rubenstein University. I’d love that voice. I love that sound. It just flows off my lip Rubenstein, Rubenstein, Rubenstein, Rubenstein. And I said I was like listen, did you hang up the phone? Please let me hang on a sec. Yeah. And she looked at her cell phone. Oh, no, I did not. Click. I’m not shitting you. 30 seconds later, the caller ID said Citibank, Adam Rubinstein’s office and he was on the other line. He started laughing. He was literally laughing. I’m like, okay, okay, biggest bank at the time laughing at us. And he’s like, okay, what are you guys looking for us? Well, we’re looking for nonperformance. We buy like 50 cents on the dollar, we can go up like 20 million. And he’s like, that’s great. Call me back when you can fund $50 million. And we’ll talk then click. And I always laughed about that. Because you leave an impression. If you’re dialing for dollars or reaching out. It’s okay to be personal. You don’t have to be perfect. And to this day, I can still drop Adam an email every like once a quarter and he will respond back to me because I just said Rubenstein, Rubenstein, Rubenstein and he’ll say lol back at me. So it’s been a big goal for me to get our fund and get to the point where we can fund a portfolio from Citibank when you buy those big boat packages like that. You have to have a big team, a big network, but also, you get some pretty good discounts on some stuff. So that would be my biggest goal right there.

Mario Fachini [54:39]
You’re gonna do that.

Scott Carson [54:42]
I think I will do that this year, for sure.

Mario Fachini [54:44]
You for sure.

Scott Carson [54:45]
Yeah.

Mario Fachini [54:47]
Good for you. That’s awesome. Thank you for the story. We’re gonna thank our sponsor and come back for the Imperfect Action Round.

Sponsor – Free Business Book Publishing Course [54:53]
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Mario Fachini [56:24]
And we are back with the Imperfect Action Round. Scott, are you ready to take Imperfect Action?

Scott Carson [56:30]
Bring it on, baby. Bring it on.

Mario Fachini [56:33]
60 seconds or less answers the first question, what is the fastest path to the profits?

Scott Carson [56:40]
The fastest path of the profits will be buying actual performing notes at a big discount by performing out so to start performing for you, and get rocking and rolling using you know, your own funds, other people’s funds out there. And so that’s always what we tell people to listen to, buy some notes that you can start getting cash flow immediately to start covering your bills. If you can cover your bills, you’ll feel a lot better on that path process.

Mario Fachini [57:00]
That’s correct. Number two, what is your prospect’s biggest problem and the fastest way for them to fix it?

Scott Carson [57:09]
They’re the four inches between their ears, in my case, five inches. So it’s a mindset issue. Most of the time, a lot of people come from a corporate job, where they’re not having a market, they’re used to just doing what they used to do. And as an entrepreneur, you got to do a lot of things, you do a lot of marketing you got to do, you know reaching out on a regular basis. And a lot of people aren’t comfortable with that. And it’s not difficult to reach out to people. Everybody puts their pant legs on one leg at a time. Everybody has to, you know, wipe their ass with toilet paper. So you realize everybody is an average Joe just gotta get out and talk to people and have conversations.

Mario Fachini [57:44]
Number three, what is the best way to maximize customer lifetime value?

Scott Carson [57:49]
Oh, just give, just give and give and give. You always want to add value. If you love books, I’m a big fan of What Would Google Do? It’s a great book that talks about how when Google launched their platform, they didn’t hide their coding, they actually opened it up to allow people and developers to go out and create things that would plug into their platform and chrome and stuff like that. And that’s one of the biggest things is we give a lot of information. And I think you should do that to give away your best stuff. You know, give away your best stuff to really help those out there that want to achieve big things. Listen, only 10% of people will do anything in a given time. And those are the 10% you want to work with. So give them the goodies. Trust me, they’ll pay you back tenfold if you make it a relationship where you’re giving and have a servant mindset leadership model.

Mario Fachini [58:38]
Love that. And if you don’t know Scott in person, you should think he is awesome. And he’s exemplified that since day one. And I’m excited that I was able to get him on the show. I have a couple more questions, but I just wanted to say that because you’re saying exactly what you live. I think sometimes people say sometimes people feel it’s like oh, you know, they know all the right answers. But there’s a stark difference from people I know that just have all the right answers. They can go good on camera, they can have all the right answers to do, they actually limit if there’s one thing I haven’t brought up a ton from doing the show, launching expert authority effect interviews, it’s I’ve seen the behind the scenes of how people do stuff. And frankly, I have a spreadsheet of all 200 plus episodes and notes on it all so…

Scott Carson [59:32]
Well. I’m gonna be the first one to tell you not every deal goes great in my neck of the woods. We have some deals that go south. It’s not taking care and doing and realizing you gotta take care of people. You’re in real estate at some point you’re gonna get sued. I’ve had borrowers sue me. I’ve had renters sue me I’ve invested assuming, but we’ve always worked our best to follow through.

Mario Fachini [59:52]
Yeah, you’re setting the bar too. I want to help you. And when you set it early on, you know, we’re not trying to kick people out and that’s why I’m joking with the wheel of whatever. But the reality is you’re setting the bar high, you’re not trying to screw people over, you’re trying to help them. But yeah, I’ve experienced in my, with hundreds of clients over the years myself, it’s about one to one and a half percent are just like absolute treacherous. And it’s like everyone’s, it’s nothing’s perfect but for the other 98 to 99% gain, you’d be stupid not to want to at least try and do it.

Scott Carson [1:00:30]
As I tell people, when you can come to the realization that not everybody is your client. And that people kind of fall into three categories. This is the best bit of advice I got from a mentor of mine, Greg Reed, who’s the author of Think And Grow Rich, Three Feet From Gold and, and a variety of other things. There are three buckets of people out there you have the people that love you, that’s the group that knows you, they love you, they adore you, they’re going to work with you. Yeah, that’s a great bucket, you have the opposite side, you have a bucket of people, they’re gonna hate you, no matter what you do with your age, your sex, your color, your skin, what you wear, they’re just gonna hate you because they have a dark hole for a soul. Unfortunately, for us, as marketers, a lot of times or marketing, we’ll get negative comments from that dark soul, a dark hole of our soul through it doesn’t mean anything, we get so many people that love what we’re doing here. We don’t focus on it, we focus on that one bad review, or that one person says something like about screwing that person, if they’re not writing your checks, or they’re not being responsible or living, just unfriend them, ignore them. And what you have to focus on to be happy is the group that loves you. And then that middle group that doesn’t know you.

Mario Fachini [1:01:37]
Get to know them.

Scott Carson [1:01:38]
Exactly get to know them, understand what their issues are, solve their problems. If you can save them time, or save the money or solve a problem, you’ve got something valuable there. And if you keep focused on those two groups over time, that third group will get tired of talking bad about you or saying ugly things. Eventually they’ll come into the middle or the one side will start saying Oh, yeah, I know your 10 years ago when you did that. Yeah, I remember you 10 years ago calling me an idiot. Yeah, exactly. All right, but a revenge is a sweet served cold and just keeps rocking and rolling.

Mario Fachini [1:02:09]
Yeah, and even I’ll add on this personally, even if it is someone closer to this and that. It’s like, no matter what they’re doing, even if they’re in a position of authority over you or something. Don’t let it continue kaput, don’t instigate it. But it doesn’t mean you need to accept it for 10 or 20 years either because if they’re just negative and toxic energy is negative and toxic.

Scott Carson [1:02:32]
That’s the thing too is most times people will say something they’ve got their own issues they’re dealing with.

Mario Fachini [1:02:36]
Yeah, they’re not even gonna remember until a decade later when their story in their mind is oh, I remember watching this and it’s like, okay, benefit of the doubt but yeah, he’s excellent. So you had mentioned one but I want to ask for Expert Authority World what other books would you recommend, actually mentioned three of them? What are the other books in addition, would you recommend that have made a difference in your life?

Scott Carson [1:02:59]
One I would give away a ton of copies is Outwitting The Devil, Thinking Grow Rich, Outwitting the Devil by Sharon Lechter in Napoleon Hill? Have you read that book?

Mario Fachini [1:03:09]
Great book.

Scott Carson [1:03:10]
Good. It’s like one of my top three. Love it Sharon. I’m actually Sharon Lechter, a friend of mine. I actually met her at an event and talked about it a few times and hung out. I was actually working to help buy a note from one of our relatives a few years back, which is kind of funny.

Mario Fachini [1:03:24]
Oh, no kidding.

Scott Carson [1:03:25]
That’s a great one, um, Tribes by Seth Godin is another one I think everybody needs to read. Just absolutely. I read just about anything that Seth puts out. So those are probably the two other ones that we probably give out the most of course. Think And Grow Rich is great. The Art of not giving an F is another great book they should read everybody out there Never Split The Difference is another one that if you’re in sales, or some sort of product that’s another great book everybody should read in negotiations.

Mario Fachini [1:03:54]
Excellent. Where would you like people to learn more Scott?

Scott Carson [1:03:57]
Easiest way is to go to our website weclosednotes.com, it’s weclosednotes.com. You can always catch me at Scott@WeClosedNotes.com and I’m on all the social media sites as at 1scottcarson and check out our podcast the note closers show if you like podcasts on real estate investing.

Mario Fachini [1:04:14]
Excellent. Well, I’ve thoroughly enjoyed this, appreciate you for sharing and glad we got the chance to connect again. Look forward to seeing you in person. And I appreciate it.

Scott Carson [1:04:24]
Mario, you are doing a great job, brother. And if you are watching this, go ahead and hit that subscribe button. If you’re watching us on YouTube. You’re listening to this on anywhere you get your podcasts hit that subscribe and leave him a five star review while you’re at it. You know, we love to hear that feedback. He didn’t pay me for that stuff. But I’ll tell you what you should do.

Mario Fachini [1:04:44]
Oh, I appreciate that. And you know what that little thing is. Love that. You’re awesome. It is better so appreciate

Scott Carson [1:04:53]
The time brother anytime.

Mario Fachini [1:04:57]
Alright, expert authority world. We’ll see you, we have another great episode here today, I’ll see you tomorrow. Have a great day. God bless.

Sponsor – Free Business Book Publishing Course [1:05:06]
You’re already an expert. But have you transformed your expertise into a tangible asset that will generate unqualified leads while increasing profit for you 24 Seven? And if so, how well are you promoting it? With the expert authority effect publishing method it’s easier and faster than ever. Visit freebusinessbookpublishingcourse.com today to learn the seven steps to publish and promote your nonfiction lead and profit generating business book in eight weeks. Visit freebusinessbookpublishingcourse.com to get started now, once again, that’s freebusinessbookpublishingcourse.com.

www.EAInterviews.com [1:05:39]
Hey, thanks for listening to today’s episode. I hope you got a lot out of it. I know I sure did. If you haven’t done so already, I invite you to subscribe to the show. And also be sure to check out EAInterviews.com for complete show notes, the full interview video experience links to the resources we mentioned in more. Have a blessed day and I’ll see you tomorrow.