Robert Howell 0:02

Welcome to the Purpose-Driven Investor, where we build more than portfolios. We build communities. I'm your host, Robert Howell, a real estate investor and founder of Define Communities. Each week we'll explore how purpose and profit connect through affordable housing, land home packages, and impact-driven investing. If you're a lender, land seller, or a partner who believes money should move with meaning, you're in the right place. Welcome back to the Purpose-Driven Investor Podcast where we talk with investors and entrepreneurs about building wealth with purpose. Today's guest is Scott Carson. He's the founder of WeCloseNotes.com and the host of the Note Closer Show. Scott has built a business around buying, selling, and educating investors about performing and non-performing real estate notes. He's facilitated more than a billion dollars of distressed debt and residential and commercial real estate transactions. Scott, welcome to the show. Happy you're here. Robert, glad to be here, buddy.

Scott Carson 1:08

Good morning. And good morning, everybody listen to this, or good evening or good afternoon. I'm honored to be here, man.

Robert Howell 1:13

Love your show. Awesome. Good deal. Well, hey, Scott, let's start at the beginning. You know, maybe some people have heard of you, maybe some people haven't. But tell us a little bit about yourself. Where'd you grow up? Where'd you start? And then how'd you get into real estate? I was born a poor black man in a cab.

Scott Carson 1:30

I'm just joking. You know, the jerk with Steve Martin there. But no, uh, I grew up in South Texas, a little small town, Ingleside, Texas. Dad owned owned the local hardware store. Originally born in Minnesota. That's why I'm wearing a Minnesota twins cap because all my aunts and uncles are up in the land of 10,000 lakes. But uh, entrepreneurship was kind of in my blood. Parents did a lot of things, um, you know, graduated, was good enough to get an athletic football scholarship and an academic scholarship, played, you know, college football, got into business, you know, went into the workforce, uh, was successful at just about every place I went, you know, in sales and stuff like that. But the entrepreneur bug always was trying to do something you know a little bit different on the side, like many folks. And uh, you know, I got interested in finance at an early age after reading Rich Dad, Poor Dad, and all those good things, and got my securities license and then started working for a uh investment company and was doing well there, but then got laid off. You know, I bought my primary residence, you know, our first home, two investment properties, and then I get laid off, and then my two uh renters get laid off. So my wife and I at the time were trying to make six mortgage payments on a private school teacher salary. Okay, so I got introduced to the distress side of notes and distressed side of real estate really quite quickly within the first 12 months of owning my first property. So, lucky for me, we worked our asses off. I got rid of the two investment properties. I think the only person made any money on that deal was the actual realtor because they bought and helped us buy and sell it. Um, kept our primary, you know, came down like 24 hours before the foreclosure auction, was able to save it and uh you know, licked my wounds for about six months, like a lot of people, and went back into working for a job. I was working at W-2 in the high-tech industry here in Austin, hated that job. He was making good money, but I absolutely hated it. Very over-analytical. You know, you gotta have a meeting to have a meeting, to talk about a meeting. I hate that. I'm a very much straight to the point, let's get things done kind of guy. And a buddy of mine that I'd worked with beforehand started a mortgage company with a couple real estate investors here in Austin who are traveling the country on the Ron LeGrand circuit, teaching about creative financing, you know, uh buying and selling on terms, you know. And uh, you know, I went to lunch with him, and that's what I wanted to do. You know, I had always you know thought I would be the, you know, the landlord buying those two investment properties early on and failed. And I said, hey, here's an opportunity to really learn and get some mentoring along the way. And that's what I did July 4th, 2004, was my last day at JP Morgan Chase. Uh and uh I left that and uh was talking about mortgages. And so I spent the next four years with my buddy Boyd and I doing a lot of originations, doing a lot of the creative side of things, you know, finance side. But then this four-year period I had, Robert, was an amazing like apprenticeship, being able to learn from all these real estate investors, taking home classes and books and tapes and learning how to you know get into the creative side of real estate versus just going out and buying traditionally. And uh I started wholesaling and flipping, and then when everything hit the fan in 2008, I left the origination side and took what I'd learned from Bob Leonini, Jamie Kayla, and uh I started contacting the banks and started buying notes, buying mortgages, first liens from them at huge, huge discounts. And with the goal being in mind, like I'm gonna buy this debt and either get the borrowed back on track or I'll finish the foreclosure and either sell the property at the auction or take the property back and keep it. And you know, you fast forward it's been that was 19 years ago. Um yeah, 19 years ago, I bought my first note in 2007, and that's all I've really focused on uh for the most part in buying debt from banks and hedge funds. And uh I always say we're making America great again, one distressed borrower at a time.

Robert Howell 5:14

There you go. That's awesome. Well, let's let's back up to 2007. I I think that's a great, great history, and I think 2007 is is really the start of what you're doing today, right? Yeah. So what clicked for you in 2007 to say, hey, I'm in the mortgage industry, but I want to I want to pivot and and go over here to note buying.

Scott Carson 5:35

Well, it it was you know, they always say the mortgage industry, the music stopped. It stopped a little bit. You know what I mean? I you know I'm doing wrong. I was we were making great money as mortgage brokers, doing stuff in multiple states, but I always liked the the real estate side of things. I'd bought, done a couple wholesale deals, I had a couple subject two deals back in 2006 and 2007. I was like, okay, this is getting like well, you're the first subject two guy, huh? Well, yeah, right? Yeah, uh yeah, exactly. Let me start a whole mastermind about that and with one deal, but no, uh, but it was interesting. I mean, like I started doing starting, like my eyes opened up all the different ways of doing it. And you know, I didn't need I realized I didn't need to have my own money to do it. I started raising capital from other investors. I started going out and networking, and I was like, oh, this is a huge opportunity. Let me just do this. And I had a couple banks send me a list of notes, like Wells Fargo Financial back in the day, you know, that neighborhood subprime lender that was on every neighborhood for the most part. They sent me a list of stuff that was in like 75 different markets. Nothing in Austin. And that's okay. Austin's kind of a competitive market, but there was a couple in Dallas. There was a one in Houston, there's one up in uh uh Elkhart, Indiana. There was one in Anderson, South Carolina, actually a little small one, you know, Jacksonville, Florida. And so I started you know taking advice of Bob and Jane, but I also had a private money lender who made a lot of money in the 80s during the uh you know savings and loan crisis who bought a lot of debt back then. He's like, Scott, this is coming. This is coming with all the subprime mortgages and all this stuff starting to default. You need to be prepared. So that's that's literally what I did is I stopped doing everything else. And once I got this list in and started calling a few other banks and getting other lists sent to me, I was like, wow, I don't have to send out like direct mail postcards, I don't have to go knock on doors.

Robert Howell 7:19

That's huge.

Scott Carson 7:20

You know, I don't have to, you know, fight all these other foreclosure investors and stuff like that. I'm literally having lists sent to me. You know, it was like, you know, hello, you know, I was like, I'm onto something here, and I'm getting bigger discounts than I would see normally. And yes, it's a different asset class when you buy the mortgage, you don't own the real estate, but it was like I can work this out and make $400, $500 in cash flow and not have to deal with toilets, tants, and trash outs. You know, nobody calls the lender when the AC breaks, you know, that kind of stuff. And so that's kind of what I did. I just stopped doing everything else and just started targeting banks, making 50 to 100 phone calls a day. This is all well before LinkedIn was really around and a tool these days, but that's it. Started you know, buying debt and then you know, wholesale and stuff, you know, making 35 to 50 to 100,000 flipping apartment loans and then buying one-off notes that I could either A, work out with the homeowners if they wanted to work something out. If they didn't want to work out, then we would just go through the foreclosure process and either sell at the auction or take the asset back. And so, you know, a billion dollars is we're a couple billion dollars now, but uh it's been a it's been an interesting ride because one of the big things I think that um I'm in the lending business, I guess you could say, but I'm not a lender. Right. You know, we buy that debt from banks and then we become the bank and the lender. Um, is that a lot of people are surprised by this, but us foreclosing is not the biggest bang for our buck most of the time. You know what I mean? It's actually let's try to work something out and and turn that non-performing note into a performing note within 90 days of getting the borrower, start making payments, bring some skin in the game because there's a lot of people hurting out there financially who have lost a job or the hours reduced or just things are more expensive at the gas pump or food or whatever. And so it's a way for us to step like I hey, I know you haven't paid in a year or two, let's work something out. Can you start making payments on time? Can you pay a little bit extra? Great. Let's go that route. Because if I'm buying debt at huge discounts and I can get that bar back on track and on time for 12 plus months, I could turn around and resell it back to Wall Street at a much higher profit without the headaches of toilet stance, trash shots, rehabs, or foreclosure. So I know that was a lot, but that's kind of my my mentality is trying to help people as best we can uh for the most part.

Robert Howell 9:40

That's great. I like that. Let's talk. Um, I had a uh a question I wanted to ask you. Um, well, two as a follow-up to that. The first one, um your first note in 2007, when did you realize hey, there's something here, this is the business?

Scott Carson 9:56

So it was honestly the first note I got, I'd been making phone calls. Like I'd called 50 banks on a Thursday afternoon. And I I I'd gotten 50 notes, right? And I said, Well, let me make a couple more phone calls. I got another hour before I leave the office at five o'clock. Well, at 4 45 on a Thursday afternoon, I call this bank in this mortgage company in Houston called Aegis Mortgage, A-E-G-I-S. And this lady named Kim answers the phone, right? And she's just hello, you know, sound like she's smoking two packs a day. And I go, hi, is this Aegis Mortgage? Yes, it is. I said, Hi, my name is Scott Carson, and I'm a note buyer. You know, I didn't bought anything yet. And I said, I wanted to see if you had anything non-performing on your book so I can get rid of it. She's like, Yeah, I got something. I'm like, you know, yes. Well, yeah. I go, oh, are I I said, Are you? How's your day going? Not so good. I'm like, oh, I'm so sorry, what's wrong? She's well, I'm about to get laid off. I've got this one portfolio of mortgages that if I sell it off, then I'm out of a job. I'm like, Well, I'm sorry to hear that, but maybe I can help you get fired faster. She didn't find that funny a little bit, but she's like, Yeah, yeah, I've got something. So it was literally a five million dollar portfolio of mortgages in Houston in the time, right? We were able to flip that and make five points off the deal. It was a five million dollar closing. And I met my cut off that 30 days later was 50 grand. And I was like, whoa, I guess I just made basically I got every no I got was worth a thousand bucks, if you think about it. You know what I mean? So I was like, I I can do this, I can dial for dollars all day long if I don't have to, you know, go out and fix it myself or view it because I had people that went out and looked at these properties. We've, you know, and that's when I really like, law, you know, I bought another little note from Wells Fargo Financial, flipped that for six grand. I got into Capital One, um, their commercial side and flipped a couple apartment complex, $35,000, $50,000, $25, and $100,000 profits over the next few months. And so that's where it was taking off. I was like, I'm making six figures in a year, you know, and one or two deals on some of this bigger stuff, like, and I don't have to do any of the work, it's great. And I'm accumulating other smaller ones for cash flow along the way. So it was kind of the perfect mix of assets and and cash flow, if you know what I mean. Or cash and assets, you know.

Robert Howell 12:12

Yeah, so you figured out pretty quickly. All right. Well, um, let's simplify it for for a guy like me who's never bought a note. Um, I've sold a note, but I've never bought a note. Well, you're in the note business. Come on now. Um, let's simplify it. Because honestly, it sounds real complex to me. And I know it's not. Uh, but simplify it. Let me let me run it. Give me one example.

Scott Carson 12:35

So your house that you're living in, do you do you have a mortgage on it right now?

Robert Howell 12:39

I do.

Scott Carson 12:39

Okay. Uh, how long have you lived in the house? Uh I've only lived in it a year. Okay. Great, great point. So when you bought it, you use a mortgage company or lender or bank to finance it? Okay. Did yep. And is that same lender, whoever you finance it through, still your mortgage company?

Robert Howell 12:58

Same servicer, yeah. Well, probably not, no. I mean, servicer, Shellpoint is the servicer, right?

Scott Carson 13:04

Right, but it's probably a different lender on it, right? Right. So, yeah. So that's what happens a lot of times. People get, you know, go get a mortgage and like close it, mortgage company, and then that mortgage gets sold off to somebody a servicing company or a bigger bank. You get a lender that says, hey, you know, thanks, your mortgage has been sold, and this is how this is who you make your payments to, or you make it to a servicing company on behalf of the lender, right?

Robert Howell 13:24

Yeah.

Scott Carson 13:25

That's the same. I'm literally the bank of Scott Carson, if you think about it. So, what we do though is when banks uh have this uh portfolios of lenders or borrowers who haven't paid in like six months to six years, they send these lists out to people like me. And I can cherry pick this list. I don't have to buy the whole thing. Now, if I was to try to buy a portfolio from Chase or Bank of America or Wells Fargo, they would want me to buy a $50 million portfolio. And the price is not good. But there's still 20,000 plus lending institutions across the country out there that have paper or mortgages, right? So they send these lists to me of first liens. That's what I only buy. I only buy first liens, don't buy seconds, don't invest in seconds or thirds. It's just too risky right now. Uh, you never want to invest in a note behind a non-performing first two because you're gonna get foreclosed and wiped out very easily. But so I can cherry pick this list, and it's the same thing of going through due diligence. Like I'm gonna check property values, you know, making sure the value is there. I'm gonna look at the the balance of the note, what's owed, the legal balance. I'm gonna look at um the collateral files. You know, I got one right here that we're working at right now. You know, this is a this is actually what I'm buying. Truly, this is what I'm buying, you know, is the loan file, not the property, but this controls the property being the lender, right? This is the hey, you don't pay, you don't stay kind of thing, right?

Robert Howell 14:39

Yep.

Scott Carson 14:39

So they'll send these out to me in in PDFs, and I'll look at those files, I'll look at the payment history, I'll look at the servicing notes of the borrower, you know, have they been responsive? Like, hey, I can't pay, I lost my job, you know, look at all that stuff. Um, look at the legal notes, you know, making sure that the collateral file. And the great thing is you don't have to do this all yourself. There are experts out there, vendors that will evaluate your collateral file. You type if there's anything missing from it, or attorneys will review it. You know, same thing we send out realtors or agents to go drive by and take pictures of a property. You know, if it's vacant, they'll tell us, you know, if it's maybe vacant for a while, there may be a lockbox on it where the bank has already secured it. So we'll go somewhat times look inside, but a lot of times we're peeking through the windows. Um, and so we do our own due diligence, same thing. I don't have to put up any earnest money. You know, I may bid on 20 and then end up settling on two or three. You know, it just depends if the numbers make sense with what we're looking for. And then when we buy that note, the bar still owes the full amount. Okay, so if a bar took out a loan for $100,000, but they haven't paid in a year, and maybe they owe $125, well, that house is still worth $100,000, $110, something like that, depending on where they're at. And if I can buy that note, especially if they haven't paid in a year, I may only pay like 50 cents of a dollar of what's owed. So I might pay $50,000 to $60,000 for that first lien for the right to collect on $125, right? Yeah. And so that's the thing is that if I can get that bar back on track, it's using servicing companies or third-party vendors, they're doing the borrow outreach. Like, hey, you know, your mortgage has been sold, that letter goes out, you, you know, and then we're reaching like, hey, I know you fell behind by a year, Robert. What happened? What's your country western song? You know, you got mama get run over by a reindeer, you know what I mean? We're coming up on the holidays or lose your job or whatever, you know what I mean? Um you don't can you start paying, you know, start working on a payment plan with them. And so we'll often allow them to start making payments and bring a little bit to the table, not the full year or two years or three years or behind. But that turns into really great cash flow. You know, I mean, if you look at like a hundred thousand dollar mortgage at six percent interest rate, that's six thousand dollars a year that's supposed to come in, you know, on it. Well, if I buy that at 50 cents of a dollar at five at 50 grand, six grand in on a fifty thousand dollar investment is a basically a 12% cash and cash return just off of that. If they bring an extra, now my returns going upwards of 20%. And if I hold on to that for a year, I bought it at 50, I got six grand along the way in cash flow or more, I could turn around and sell it at 80, 90 cents on the dollar back to Wall Street and make 20, 30% on the back end in 12 to 18 months and never have to lift a finger, never have to swing a hammer, never have to deal with uh uh toilets and tenants. You know, of course, if they don't pay, then I have the right as a lender to start the foreclosure process. And or and then now I take the asset back, um, you know, they owe 125. I could sell at the auction for 80 if I wanted to, you know, or just take it back, fix it up, evict them, turn around and rent it, owner finance it, or turn around and sell on the MLS. So I've got a lot of I have all the same rights that the bank does. I just prefer to keep people in their houses for the cash flow because it works out a whole lot less work for me on the long run, if that makes sense.

Robert Howell 17:47

Yeah. That makes sense. Okay. And how are you funding uh these transactions?

Scott Carson 17:53

You know, you know, there's two two different ways of kind of finding we use a lot of uh OPM, our own money. We use OPM, um, you know, financial friends, self-directed IRAs are great for this stuff. We work with a lot of investors out there who fund stuff on a kind of a servicing model. They'll fund it, we'll manage it, split the profits, give them or give them back a flat rate return. You know, I mean, if you're doing in the commercial side and you start getting a million-dollar plus loan, a lot of times those smaller banks will actually finance your note purchase and move it from the non-performing side to the performing side of the business. Okay. So it's uh, you know, you gotta have cash. You can't go out and get a, you know, usually a loan from the bank to buy a non-performing note. And that's why we've always been big on raising private capital and networking. You have to do that. Um, you know, that's that I think it's one of the biggest skills is being able to market your business because here's here's the thing that I really like about it that investors like about it is A, you know, especially these days, people have gotten burned in the apartment syndication game and stuff like that. You know, $50,000 might not buy you an apartment complex, that'll fund a note for you, you know, maybe two. Uh, and then now you're getting your money's leveraged across two or three doors, which you can get to, you know, buy some performing stuff right now and make a double-digit return, 10 to 12%. Buy some non-performing stuff at bigger discounts and go that route. Um, the big mistake we see a lot of people making is they come into it, think, oh, I'm gonna use notes to buy real estate in my backyard. And depending on where you live, if you're in Ohio or Michigan or Indiana or even Florida, you yes, you could do that. But the bit the best thing is that realizing that you're most of the country is your is your market, I'm not gonna fly out and look at everything. We're gonna leverage servicing companies and stuff like that. We're gonna avoid states like New York and New Jersey, which take forever to foreclose. We're gonna avoid non-lender-friendly states like the West Coast, like California, Oregon, Washington State. And we're gonna use a third-party servicing company that's licensed in the states that we're buying in as a debt collector so that we don't piss off Uncle Sam. You know what I mean? Yeah. So Love it.

Robert Howell 19:52

And I love the way you explain it. That really simplifies it, makes it easy to understand whether you're you you want to fund your deals, right? Or I want to somehow participate and get involved in note buying.

Scott Carson 20:03

And that's the thing, is we well, I've always liked that too. That was one thing that you know, we don't get me wrong. I went to I've go to done so many real estate seminars and gone to so many real real estate clubs and stuff like that. And it's I always think that a lot of uh real estate clubs do a lot of disservice for investors where they're always bringing stuff in, oh, here's another tool, here's another tool, here's another tool. Well, if you are if you're building a house, do you just hire one like handyman to build the whole damn thing? No, you hire a plumber, you hire an electrician, you hire a septic guy, you hire a roofer, right? You're hiring specialties and stuff like that. And that's what I've always liked about the note investors. Yes, it's it's good knowing a lot of these things, but I don't want to rehab property, especially right now with costs being through the roof, you know, labor's tough, getting people in. I want the bank is the biggest buildings out there because they understand the leverage of note investing. They leverage that, hey, I could borrow at 6% and make 12 to 18 and make it an infinite rate return, you know, and I'm in the most secure position of being the bank. The only thing that wiped me out would be God and taxes. And as long as I pay taxes, and as long as I make sure the insurance is paid on the property, I'm not getting wiped out.

Robert Howell 21:10

Love that. Love that. How's your how's your mailbox doing with tax season?

Scott Carson 21:15

You know, it's oh the great thing. I mean, here's here's the big difference. I'm glad you brought that up. There's there is a big difference between notes, owning notes, and owning property. Like with when you own property, you can do the cost segregation, you can do um, you know, um, you can write off a bunch of stuff, right? You know, we're you write off the interest, stuff like that. When you're in the note business, you don't get to write off that cost segregation. You can't do a 1031 exchange being the note business. But guess what? When we forgive debt, when we modify loans, we write off a ton of debt that offsets our our profits. So it's a different type of mindset on that. But cash flow is always king. You know, I never get upset when the fifth or the fifteenth shows up and it checks. Check shows up in my bank account automatically. I even gotta walk to the mailbox, you know what I mean? And then if somebody doesn't pay, we get alerted, and then a third party company's reaching out to the borrowers and saying, Hey, what's going on? You know, why are you behind? You know, can you start paying? Or if not, then we then we kick it to the foreclosure attorneys, let them do their job.

Robert Howell 22:18

I love that. So you're telling me just an example, and if I get this wrong, tell me, but you buy a house, the borrower has a hundred and twenty-five thousand dollar debt on it, you bought it for fifty, let's just say. Later the borrower doesn't uh you have to foreclose on them. So you got a 75k write-off of bad debt. No, no, that's not you you're getting a math.

Scott Carson 22:42

I'm buying the mortgage note. So yes, so if they owe 125, yeah, and the house is worth 100, and I bought it at 50, and they pay on time for 12 months, and then I modify the loan and drop it from 125 down to 100 or the value of the house, I can write off that $25,000 loss. Okay, okay. It's a paper loss, there's not really any money loss, yeah. But I'll send the borrower a $1099, you know, and if they are they file IRS form 928, so they're insulting, they don't have to pay any taxes on that. I write it off my numbers, and it's a boom from there. Now, here's here's a couple caveats with it. We don't like to modify, permanently modify loans under 12 months because then it's considered a short-term capital gains. We all know that's expensive, so that's why we'll hold into what was called a trial payment plan for 12 months. Then we'll modify it, then it's considered a long-term capital gains, and obviously the taxes go down. But the the tricky caveat, too, is also every state's got a different foreclosure time frame, right? You're in South Carolina, I like South Carolina, but it's a year to foreclose there. You know, back in 2008, South Carolina was the first state out there that stopped foreclosures overnight for like 12 plus months. You know, and in COVID in 2020, when we couldn't foreclose for 18 months, that was a kind of a pain in the ass. You know, yeah. We had some folks that took advantage of that, you know, and you'll run into that from time to time. But this is why we invest in multiple states, some fast foreclosure states, like I live in Texas, which is the fastest in the country. It's great, it's a non-judicial foreclosure state. But I also like Indiana, nine months to foreclose, but you can evict in 14 days, you know. Um, Michigan, some people give Michigan a bad rap. I'm like, it's very affordable, you know, for folks. You can buy a lot with little um and uh foreclose quickly. Ohio State, you know, it's a nine-month foreclosure, but a lot of people like that area, a lot of opportunity up there. Rural State's a whole lot cheaper. I mean, for what I could pay for one house in, say, um, Miami, Florida, I can buy a dozen in Miami, Ohio. You know what I mean? And go that route.

Robert Howell 24:37

So true. All right. Well love that. Um, so you've you've obviously built a really successful business and a very niche market. Uh, talk about what do you think the biggest driver of your success is? Consistency. It's like with anything else.

Scott Carson 24:53

You gotta under um consistency in marketing. You know what I mean? I uh you know a lot of folks will get into different things and will never give it time to, you know, for your seeds to sprout, your leaves to sprout. Yeah, I've been doing this for almost 20 years, of course. I I better be good at what I'm doing if I've done it for 20 years. That doesn't mean I haven't had my peaks and valleys along the way. And I mentioned COVID was a difficult time. But the thing is, is just being consistent in the marketing side of the business. A lot of investors don't embrace that. And I know that you've uh I've listened to me a previous episode talking about, you know, if people want to do this full-time. I would tell you, don't go quit your job. You know, we got I would probably say that probably half our investors or half our students are still working full-time jobs and they do this on a part-time basis. You know, and you don't have to work 40 hours a week at doing this, but it's a whole lot less than you know, managing a mobile home park, you know, a small one, or managing an apartment complex, trying to deal with rent uh rentals. Right. You know, that's that's the great thing, is that it can be semi-passive, especially if you're targeting performing notes. That's pretty simple. Um, if you like a little high return and go in the non-performing sign, you're gonna have some stuff to work out, but that's gonna be leveraging other people to go do all the heavy lifting for you. But the thing is just marketing. I think so many real estate investors go to workshops, go to expos, go to conferences, they go to the local real stuff, and it's all about the nuts and bolts of how the track transaction works. You know, how do you how do you do this? How do you collect rent? How do you squeeze a little bit? But they don't get into the marketing side of how to find deals or how to leverage social media and AI these days to get things uh coming your way. And they don't focus a lot on how to raise private capital in a lot of places for you. You know, raising private capital is actually really, really easy. It's not, it's just the fact that you've got to be around for a period of time. You've got to follow up with people, and you can all pretty much go to your local county recorder appraisal districts and go to the like for most people, you go to the appraisal district, type in equity trust as the owner's name, it'll pull up a list of people who have an IRA account with money to invest. And that's the greatest tool that we've used to raise capital for years, is just targeting IRA investors, but sharing, continue to market to them, market to them, market to them till they're ready to say yes. It's not a yes, it's not on your schedule, it's yes, is always gonna be on that other person's schedule. That makes sense.

Robert Howell 27:06

Yeah, that makes sense. Now, I have a mobile home parts and I got a lot of gray hair. Um, am I gonna get gray hair uh doing note investing?

Scott Carson 27:15

Uh, if here's the thing. If you the biggest gray hair, when we see people get gray hair in the note world, it's because A, they try to do too much. Yeah, they don't want to foreclose on people. I'm I'm sorry, I don't run a charity. You know what I mean? I'm sorry if you're behind your mortgage. Let's what's happened? Can you start paying? I can be the best asset to you if you can't pay. Because I'm not gonna go after you, Robert. I'm like, listen, you can't pay, you know, pay, you know, stay. Let's have a come to Jesus meeting. Right. Just walk away. We'll give you cash for keys, we'll do a friendly foreclosure, let you get out of a bad situation. We won't report their the foreclosure or the short sale in your credit. So in 24 months, once those late pays fall off, you can go buy. And some people just need to have that. They get in over their head, you know what I mean? And so relying on servicing companies, not being afraid to pay the attorney to foreclose, you have to do that. You know, another thing that gives people gray hairs is they look at what's in their bank account. You know, I got a hundred grand in my IRA and I'm gonna use that, and that's all I'm gonna use. I'm not gonna go talk to anybody. Well, if you buy a non-performing note, you're gonna have to wait to go through the foreclosure process to sell that asset off before you get your money back to go do something. Go market, keep marketing for deals because a good deal will find you capital and you can keep making money. You know, you're gonna have some weird, like I had this one note down in uh in Cutler Bay, Florida, where the guy hadn't paid in four years, Robert. Okay. Nice area, million dollar property. We picked up the note for 440. Of course, then COVID kicked in. So it what we thought would take 12 months to foreclose, dragged on to close to 30 months, right? Right. You know, that's expensive. You know, we we had, you know, we jacked up about 100 grand, 200 grand in legal fees along the way. But our investor knew that that funded the deal, like, listen, this could take 24 months to foreclose, just prepping you, and they're like, I'm making 12% of my money, I'm happy. Yeah, the longer it stays in there, I'm fine. Of course, we made a quarter million on the deal of when it was done, you know what I mean? But we just knew that it's just a process. If I didn't have attorneys handling that or servicing handling that, it would have made a whole lot more difficult. Nine times out of 10, I mean 70% of the time, if somebody's living in a house and they want to make they want to make payments, they want to stay. So people go through financial hiccups all the time, right? So you can do use that to, hey, I'm acquiring at uh real estate or acquiring uh assets at a bigger discount, and I'm making cash flow, cash flows kink versus having to try to go all the way. Biggest mistake I made really uh early on in a lot of cases, I would buy something and try to foreclose for my own self, and that would drag out the the profitability margin. You know, I'm I'm paying rehab costs, I'm paying foreclosure costs. You know, I bought a lot of stuff down in God's waiting room, you know, your neighbor to the South Florida back in the day, you know, and it takes 18 months to foreclose. And I would buy it and foreclose. When I look back at the numbers, I could have modified a lot of those and turned into cash flow versus going through the long foreclosure process. So here's another thing, too. You're in a mobile home. Great, I love it. You can buy debt on commercial properties. We see distress stuff on um commercial properties, mobile homes, apartments, um, mixed-use industrial. I mean, if it's got a mortgage on it, we've seen distressed debt across the board in different things, you know. So, like I bought um I bought a mobile home park from a note on a mobile home park from Palmetto Bank there in South Carolina.

Robert Howell 30:33

Okay.

Scott Carson 30:34

Years ago, I bought a mixed-use self-storage notes from them on their commercial side. And uh that's what like I mentioned on if you're buying commercial notes, sometimes the banks will finance the purchase of your note.

Robert Howell 30:46

Yeah.

Scott Carson 30:46

And uh if you you know you're not gonna bring the full money down, you may only have to bring 10, 20% down or zero, depending on what the situation is in the asset.

Robert Howell 30:55

Love it, love it. All right, let's talk. Uh let's say somebody's listening, they got a little bit of money to invest, they're interested in learning about notes, but they've never done a deal. Where should they start? What should they learn before putting any money at risk? I think you teach people how to do this.

Scott Carson 31:09

I do, I have I yeah, I have classes. I've got uh a weekend class that I teach online, and we'll do uh occasionally one in person here in Austin, Texas, but we do it online once about once a quarter to Saturday, Sunday. We call it Note Buying for Dummies. We go how we find these deals, how we fund them, how we flip them, and how we get them to flow. Um, you can go to my website, we close notes.com. That's the mothership for our podcast and stuff like that. Um, you know, if you I I always tell people like, listen, before you buy anything, talk to the person. And I make it very easy for people to talk to me to pick my brain. You can always go to talkwithscottcarson.com and then allow you to book a 30-minute phone call with me. We'll talk about what you've done. For some people, it's not a fit. For other people, it is a fit. It just matters of like where are you at, what are you trying to do, and what do you want to accomplish. So if you're looking and you want to be active, okay, then maybe the non-performing side is great. Depending on what you're looking for. Like if somebody comes to, hey, I just want to buy notes in Austin, Texas, I was like, well, see you later, go do something else. You know what I mean? You got to understand it's a different market. Um, and um the most successful folks are the ones that are looking and chasing really occupied assets where the borrower has made some sort of payment in the last 24 months. You know, but then also like if you're, you know, oh, I'm busy, I'm working 50, 60 hours a week, but I want to get notes, and let's do the performing stuff, and then maybe non-performing later on and go from there, you know, or hey, worst case, invest with us, we'll make sure you make a good return on your money for you for a short period of time.

Robert Howell 32:35

That's great. Yeah, it's almost like you could, if you're not quite ready, you could invest with with Scott, right? And uh we have the whole like the process and then exactly learn is what we say, you know.

Scott Carson 32:46

And that's the great thing is we've got servicing companies, most of the time we'll put the actual assets in your entity, your LLC, so you have full vision of it, you see what's going on, you know, you're learning it and we're holding your hand along the process, you know, and that works really well for folks. They're like, oh, okay, I got what does this mean? I got an email. This is what it means. Hey, they paid made a payment, or you know, oh, they want to pay off your loan. That's a good thing. You know, that kind of oh, they didn't pay. Let's start the, you know, let's get the attorney involved, start the foreclosure process. So you can be passive or aggressive, active if you want. We've got different ways to do it. The note business is a great place because when the world's in distress, we see a lot of opportunities. And the world's distress right now. Don't let, I mean, the media always says, oh, foreclosures are at an all-time low compared to what they've been before. Yeah, foreclosures are low, but the distress debt is up. And what happens is people like me, banks are selling at non-performing notes. They don't want to foreclose, they're selling it to people, investors like me, come in and work it out with a homeowner, or avoid a foreclosure and just give them cash for keys to walk. Now we can sell the asset traditionally without it going through a negative process of foreclosure and affecting the community, affecting the neighborhood values and stuff like that. You know, or we'll just keep the bar in the property and it never goes to foreclosure, and we're still making a double-digit return by just turning lemon uh lemons into lemonade.

Robert Howell 34:05

Love it. That's great. All right, we got one more question, then we're gonna go rapid fire. Um, the the title of this is all around purpose, right? And um, you touched on it, I think, uh, a bit before, but how do you balance in this note business? How do you balance uh you know treating people fairly and operating with purpose versus, like you said, you got a profitable business to run? Yeah, I mean, that's the thing is you you you I let the math dictate, right?

Scott Carson 34:31

And then I look at the collateral file, and I'm always willing to give people an opportunity. Because I think me early on, Robert, being in distress, really built me for this to have some empathy for people. Like, I can understand people getting laid off, I can understand people having a death in the family. I mean, um, we're we're buying a portfolio of like 20 reverse mortgages, the bars have all deceased, and the house has been vacant for two years. You know, you're you know, I don't have a hard time foreclosing on the dead. They don't want to pay. You know what I mean? Um, but I also, somebody who's living in a house with kids, stuff like that, like what's what's going on? I mean, there's been times where we've, you know, let a I forgave debt and just gave the property back to the little old lady or the mother of four, you know, who couldn't pay anything, you know. And so I run the numbers. I'm always willing to help somebody. If they if they're willing to meet me halfway, I'll I'm willing to meet them. But I like I said, I don't run a charity. If you're not willing to play ball or you can't get back on track, let's let's have a conversation. I'm not gonna treat you think you're an evil person, but let's figure something out that's gonna be a win-win for you. You know, now if you want to try to drag this out and lie to me and try to commit fraud, which we we have that happen from time to people like saying things, I'm like, no, no, no, I'll be your worst enemy. You'll have to deal with my attorneys. But it's the thing is the great thing is that I'm going to win one way or another. I'm either gonna A win with cash flow, B, I'm the bank in first lien, the bank always wins the foreclosure process, stuff like that. I'm really gonna win. But I I can help you win along the way too. Stay in your house. And I'll I'll give you a great example of a story on a deal. Um, I was buying a portfolio of uh of 18 non-performing notes all across the country, and they had this one little one in South Beloy, Illinois, right? A little small town. And uh William and Sheila, they've lived in the house for 18 years, okay? And it was only it was a small bounce, like they owed 60 on the house, and the value dropped was like maybe anywhere 35 to 40. All right, it's a rural, rural little asset. And I'm like, okay. And I I'm looking at it and I'm seeing that they haven't paid in like four years. And I look at the collateral file and the docs they sent me, and this borrower had been trying to do a loan mod for four years, Robert. Four years they've been trying to do a loan mod. Their loan had been sold four times, okay? And every time it had been sold, Sheila had taken two years of bank statements, a hardship letter, and all this stuff, and sent it in to the lender. So the collateral file was like the biggest collateral file I've ever seen. If I would have printed it out, it would have been about yay, two bankers' boxes of just this one little small loan. And in it, every time she had said, literally, her husband had a heart attack, was out of work for a year. You know, they were trying to get back on track. And she said, like, we could start making our existing payments, like $400 a month, you know, and they lived in the house for 18 years. I'm like, well, that's not her fault the market crashed. Not her fault that the husband passed away, but she's trying to find a solution here, right?

Robert Howell 37:16

Right.

Scott Carson 37:16

So, and the lender only won like 12 grand for this note. It was a little small, little rinky dink note. Like I said, probably was only worth about $35.40 that she owed $60. I said, but if she starts making payments of $400 a month, that's a pretty good return.

unknown 37:28

Yeah.

Scott Carson 37:29

You know, that's about a 30% return to first year. So we bought the note. As soon as the servicing got transferred to our server serve, I picked up the phone and actually called the borrower. And I called up uh you know on the phone one night, and uh Sheila picked up. And I go, uh I go, hi Sheila, my name is Scott Carson. You may have gotten a letter in the mail that I purchased your note, and I'm and I now you're now your lender. She's like, Yeah, I got it. I'm like, whoa, whoa. This is a good call. She goes, What do you mean? I said, I've seen the fact that you've been trying to do a loan mod for four years and you've faxed in all this stuff. And I go, first, the question I have to ask for is William okay. And you hear her voice like break uh uh yeah, he's he he's back to work now. I'm like, well, that's great, that's awesome. And I said, How are your three daughters? Are they still all living there? Yeah, yeah. Our youngest one, our youngest one is 18 now, is pregnant. Like, congratulations. It's gonna be the first grandchild, just having a conversation because these people are normal people like you and me, right, Robert? Yep, 100%. And I said, Look, I see what's happened. I said, Can you bring anything to the table? Could you bring five grand to the table? One year of payments. She's like, No, I could not do that. I said, Okay, could you bring half of that, $2,500? She's like, Yes, we could do $2,500. Great. Could you make your existing payment? Yes. Could you bring $200 extra per month? So instead of paying just $400 or $450, it's like $650. She's like, Yes, we could do that. I'm like, great. Here's what I'm gonna do for you. You bring $2,500 to the table and you start paying $200 extra a month, and you do that for 12 months. What I will do after 12 months, Sheila, is we'll pull cops on your property. If your your hot your property's worth 40, you owe 65, I'll drop the balance of the mortgage from 65 down to 40. I'll forgive you 25 grand. All right? Oh my goodness. And this is what I'm gonna do, one thing for you. I will drop your interest rate from the 11.5%, that's it, down to zero. So that every penny you make goes towards your principal and interest. We're gonna keep the payment at 450, but you'll have your house paid off in six years now versus 30 years. And you could hear her like choking up on the phone, right? I said, you just gotta go buy my attorney who's in, you know, a couple hours north of you there. Go show up with it. Can you show up later this week? You know, cashier's check. She's like, Yes. Well, they showed up, and my attorney was there, they brought a check in, they signed on the trial payment plan right there. And William started breaking down crying in the the attorney's office. I found out. You know, they were just all this stress. Can you imagine facing foreclosure and not being able to provide for your family a period of time? And the stress on him and her, you know what I mean?

Robert Howell 40:00

Yeah, what a relief.

Scott Carson 40:01

What a relief, exactly. Six months goes by, I get a uh Christmas card in the mail from them, right? It shows up standing outside their house, and they're very um just really, really great people. And the daughter had a kid, and they named the kid Carson after me.

Robert Howell 40:18

Oh, wow.

Scott Carson 40:19

And I mean anytime she looks, they were gonna be like a day late, I was like, that's fine, just pay it in seven days. They paid off the house faster, they own the house, and that was just that that's a good thing. You can help people. Now, don't be wrong, there's I gotta foreclose on people some of the time, but that's the what we always try to shoot for. How can we help people stay in their houses? Because I don't really want to own real estate in South Beloy, Illinois. I would, because I bought it the right price. But the point is, if I can own stuff across the country, right? I mean, biggest portfolio I've ever bought was 700 notes. That's a pain in the ass. I prefer much buying onesie, twosie, or 10 to 15 at a time, but it's a great way to build cash flow and wealth and help people and be able to do it from wherever you live in the country.

Robert Howell 41:01

Love that. What a great story, and you know, a great impact. And that's just one story. And I imagine you could sit here on Zoom for hours and hours telling stories uh of how I mean doing it for 19 years.

Scott Carson 41:12

I've got a ton of stories, and that one always, you know, that's always a good one, you know. And people when we get into real estate, especially depending on where we live to, you know, prices are expensive, and when it's like, oh, I can't buy anything. Well, look, you can do a lot of good, you know, buying your first note at 25,000, 50, you know, to $100,000. There's a lot of opportunities out there for folks and people need our help.

Robert Howell 41:34

Man, you got me hooked. Let's go. Let's go, baby. I'll shoot you one in your backyard. You can drive by it for me. How's that sound? I'll go. Hey, send that Anderson one over to me. I'll go look at it. All right, let's um let's get into the rapid fire questions here. Uh, so what's one book that every real estate investor or note buyer should read?

Scott Carson 41:53

Oh, that's so easy. Uh, Outwitting the Devil. Think and Grow Rich, Outwitting the Devil by Sharon Lenctor. Uh well, it was originally written by Napoleon Hill, you know, think uh Think and Grow Rich, right? But he wrote this book back in 1938. Uh his wife would not let him publish it because it's a conversation between him and the devil, talking with the devil about what allows the devil to be successful. And the devil in the book talks about how he gets people to drift. Shiny object syndrome. You do you're trying to do too much instead of once, right? And the more you drift, the less successful, the less impact you have in the world. And oh, about 10 years ago, and I know Sharon Lecter, she's a friend of mine. Uh, Napoleon Hill Foundation brought her the manuscript. They found it in in his office in Virginia and asked her to uh rewrite it. Well, she didn't rewrite it, she left it as it was, she just added a paragraph or two at the end of each chapter. And it's one of those books that every investor should read because it talks about being focused. Sometimes saying no to things says yes to long-term success. And that's why I say, you know, pick one or two lanes and stick in that one or two lanes. Say no to other things and give those two lanes six months at least as a minimum if you're getting off rock and roll.

Robert Howell 43:01

Yeah, that's such a great reminder. And I think going into this economy that that we're going into, I think it's even even a better reminder, right? Because it's so easy to get distracted, right? As things what's your favorite investment you've ever made?

Scott Carson 43:19

I would say that note by in South Balloy, Illinois. You know, I didn't think much about it, but it turned into an amazing story and an amazing way to help stuff. And that's one thing we love doing on a regular basis, is helping people. Um you got another Carson in the world, right? Well, uh, yeah, not my kid. I don't have any kids that I know of, but yeah, another Carson in the world. But and that's that that's that's the big thing, is it's um that's all great, and money's great, so it's great, but the investment in yourself, I think, is one of the bigger things people have to realize too out there if you're an entrepreneur. Coming out of a JOB of a different mindset uh than you do as a full-time entrepreneur. And so you got to invest in yourself too. If you want to make six figures, you got to get your brain to six-figure mindset and be doing different things as a six-figure entrepreneur would do versus a forty, fifty thousand dollar you know, W-2 employee. It's a different mindset. So keep that in mind. Best investment I've remained has been been myself and sticking with what I'm doing.

Robert Howell 44:10

Love it. All right, last one. If you had $100,000, or maybe let's just make it $50,000. If you had a hundred or had a fifty thousand dollars to invest today, what would you do with it?

Scott Carson 44:20

If I was working full-time at $50,000, I'd go put it in a uh performing note or reperforming note, make 10 to 12%. Like we get, we see a lot of hard money lenders have short-term loans, six to twelve months that they're trying to sell off and make twelve to fourteen percent. That's what I would do. Put it in short term, build the capital with my own funding, but also market for private capital for bigger things. That's exactly what I would do. Something performing short term in Texas that the bar didn't pay, I could foreclose, but put it with a third-party servicing company. Don't, if you're in the note business, by all means, get a third-party servicer. Don't self-service anything. I'm sorry, ladies and gentlemen, don't self-service anything. It's worth the 15, 25, 30 bucks a month per loan to have a third party to service stuff for you. You are not an expert in every state, and you do not want to be doing $15 an hour chasing stuff. Let a servicing company do that for you.

Robert Howell 45:09

Got it. All right, Scott. Really appreciate you joining. Uh, really great conversation. Uh, shared a lot of great new knowledge uh for the audience. If people want to talk to you, want to find you, where do they find you?

Scott Carson 45:22

Well, the first thing anybody needs to do is they need to go over here and leave a five-star review for the podcast. You are doing an amazing job. You're kicking ass and taking names. I was just binging the show the last couple days, getting prepared for this episode. And they need to do that. You're doing a tremendous job. We as podcasters, we'd love to see their responses. And it's a small little cost of five minutes to go leave a review and a five-star review. But other than that, after you do that, then you can go to talk with Scott Carson, book a phone call with me, or go to we close notes.com or go listen to the note closure show podcast, which is the number one podcast for note and distress real estate investing out there.

Robert Howell 45:58

Love it. All right, appreciate it. Thanks everybody for listening. Reach out to Scott and uh everybody have a great day. Thanks for listening to the Purpose Driven Investor. If today's episode sparked an idea or inspired you to make an impact, connect with me at howellandsons.com. Join our community of purpose driven investors who are helping families find stable homes while building real returns. Because when we invest with purpose, everyone wins.