Insights From The Note Business with Scott Carson

Scott Carson, an old-time friend, entrepreneur, and host of The Note Closers Show podcast, joins us for some fun stories and insights from the note business. Laying it down simple, Scott explains what nonperforming notes are and how you should be on the right side of the payment stream. While some of us find it hard to get started with making deals, Scott assures us that with the right people to talk to and equip you with information, you can close good deals. He also talks about his journey of becoming a note investor while leaving inspiring wisdom about striving to continue to learn and not be the smartest person in the room as well as helping others with their journey as well.

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Insights From The Note Business with Scott Carson

The Note Closer

I’ve got a special friend here, Scott Carson. I wanted Scott to come on for two reasons. Number one, he’s a very successful professional in his industry. He’s all over the internet. If you’re looking at anything about the note business and don’t find Scott Carson, then you’re blind. It’s because he’s truly an expert. He’s good at it. Number two, Scott is probably the oldest friend I have. We met when we were nine years old. We have been friends ever since. I love him like a brother. I don’t get to see him very often. I don’t talk to him like I should. I still love him. He’s a fun and interesting guy. I hope you enjoy Scott and me here. Welcome, Scott.

It’s the same here. I’m honored to be here. If you think back years ago, there are two ingle dings from Ingleside. You walk into my dad’s hardware store and then us playing around, getting in trouble in high school. He’s the oldest friend in my Rolodex. We sure don’t talk as often as we should but when we do, it’s always a good time. We have a tendency to crack up.

Scott is the host of the Note Closers Podcast. He’s the owner of We Close Notes and WeCloseNotes.com. It’s been pretty fun to watch from afar. Scott is one of the big reasons I started this podcast because it looks like you have fun when you do yours. Do you or is that all an act?

When you called me up and were asking about it and you said you were doing it, I was like, “Yes, awesome.” I enjoy this. I’ve always had a bit of personality. I went to school originally for radio, TV and that change to journalism. I thought I’m going to be the next Dan Patrick on Sports Center is what I wanted to be originally. I remember one of the first things that we did was that TV shows our senior year that you were the host of. It’s some cable access show exactly for high school football.

It was supposed to be for high school related interests. We would get my football buddies to come on and talk about football.

I’ve been doing a podcast for several months now, so not that long. I have been doing a lot of videos, a lot of online webinars all over YouTube and Facebook with our company because it was a way for us to reach out and communicate with our network. I’m in a niche aspect of real estate investing in the note space, specifically nonperforming notes. There’s maybe 15,000, 20,000 people across the country that are investing in it. There’s even fewer of those, four or five of us that teach it. I was doing webinars. I started this podcast months ago. It’s been crazy to see a blowup like this. We went over 270,000 downloads. I’ve been asked to speak at conferences because we do a good job of marking it and using our audio or the video because we do live streaming across the board.

I’m getting people from 80 countries who are listening to our podcast and 40 states. We’ve had investors reach out to us to invest with us. People to sign up for our workshops and things like that. We completely revamped what we do and how we structure it to be more focused on the podcast because it’s been amazing to see people reaching out. People like it because if they listen to on a regular basis, they get a chance to get to know you. You’re big into relationships too. That’s the beauty here. What you see is what you get. You like it or you don’t. If you don’t, scare off. Keep going on your way. If you like it, it’s a great way to build relationships with people, whether it’s here in your backyard or halfway across the world too.

I’ve gotten to that point in life. If you don’t like me, that’s fine. I’m going to keep doing what I do and try and treat people right. I’ll move on from that. I wanted to ask you because my audience may be a little different. You mentioned that you have about 15,000 people in your industry. If you could dumb it down for a lawyer like me because in my law practice, I don’t deal with nonperforming notes. I understand the terminology. How would you explain it to a guy on the street?

Everybody is in the note game. If you’ve got a mortgage payment, a car payment, credit cards, student loans or whatever. If you’re making a payment out to somebody, you’re in the note game, you’re on the wrong side of the payment stream. I become the bank, basically. What I focus on is I buy nonperforming notes or mortgages from banks and hedge funds from anywhere like Wells Fargo to the small little real estate investment trusts that financed the property for somebody. We buy the mortgages where people aren’t paying. The fact that they’re not paying allows for us to buy that debt at a big discount. It’s a receivable. The bank sells that debt to us at a discount, $0.30, $0.40 on the dollar of what’s owed. I then become the bank and I make my money by rehabbing the borrower for the most part.

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People watch HGTV Flip This House or they’d been a landlord and they understand the rental side. I’m not that. I’m the bank. My big goal is we’ll reach out to the homeowner, the borrower and try to work out a win-win scenario, whether it’s a loan modification with them or trying to get them back on time again. You’ve been out of work for two years. We’ll take these two years of payments and put it on the face amount of the loan or you owe $150,000 and your house is only worth $75,000. Let’s get you on time for six to twelve months and then we’ll forgive you a big chunk of that debt because it’s not worth that. Reduce your debt down at $75,000 and make it a win-win across the board. If I paid $20,000 for that note and your mortgage payment is say $800 a month, I’m doing pretty good if you pay on time for twelve months and then I can do a permanent modification. If you pay on time for six to twelve months, it’s not a nonperforming note now. It’s not considered re-performing. I could sell that loan back to Wall Street.

In some ways, you’re playing the spread. Let’s say you buy a hundred of these at $0.30 on the dollar. You get 70 of them performing at a level at which traditional underwriters would buy the paper. You sell it at $0.70 or $0.80 on the dollar. They’re happy because they’ve got a performing note that they bought at a discount and you made the spread between the $0.30 and the $0.80. Is that oversimplifying it?

That’s what we do. That’s the note business in a small five minutes aspect of things. Unfortunately, a lot of people overcomplicate it and try to use bigger terms, but that’s what it comes down to. We buy the debt at a discount. We want to keep the borrowers in the property because if I have to take the property back, then I’m dealing with paying attorneys. I have to go through the foreclosure time frames, which can be six months to two years. I’ve got to then fix the property up to sell it. I don’t want to do that. I want to buy a note, incentivize the bar in some fashion to start paying on time. I got cash flow coming in 90 days versus waiting nine months. In a year now, it’s re-performing. I sell at $80,000, $85,000. I made a nice chunk of change along the way and at the end. I’m taking that money now instead of buying one asset. I’m doubling down buying two or buying four.

You’re able to grow it exponentially. You said paying attorneys like it was a bad thing.

It’s not a bad thing. I love my attorneys. Don’t get me wrong. There’s nothing wrong with it. They do a great job for us. We’re not the ones doing the foreclosure. We’re not the ones making the call outs. I liked the velocity of capital. I like my money increasing. If I know I’ve got to pay an attorney, I know it’s probably going to go in the foreclosure route. It’s a pain point for me for the most part. I love our professionals. We’ve got attorneys.

I say that mostly in jest because I like to tell people, “If you call me or you’re in my office, it’s probably not your best day.” You have a problem. In my practice in particular, although it’s fairly diverse, it’s all litigation based, so it’s different than what your lawyers do for you. There may be technically some litigation, but nothing like what I do. If I’m doing that, then you probably should have called me a couple of months before you did show up. It’s a lot of stress for people. I get it. You don’t want to be in my office. I said that, but I try to say, “What’s your problem and let’s help fix it.” That’s what you do with your borrowers.

We have borrowers that have been in the house for years. Maybe their mortgage has been sold three or four times, a lot of them don’t know who to mail a payment into or they’ve made some payments and then their loan got sold and they don’t know who to send it to. We’ve even had some deals where we bought the assets and the borrower was like, “Thank God I’ve got a year of payment saved to pay to you. It’s that the new person that bought my loan never reached out to me and never sent me a letter.” We see some weird situations out there.

All mortgage service companies or mortgage companies are built equally. They’re good and responsive when they’re producing the loan. In the service side, it’s always like that. Frankly, I’ve experienced that in my house. I have an indemnity payment I’ve received from insurance. I went ahead and did all the work out of my pocket. I can’t get them to send me my money. It’s been months. I’ve sent them four letters from the law office saying, “Please release it. Here’s the info, here’s all the stuff,” and nothing.

You didn’t let me know who that company is. I might have an internal phone number, internal email for you to reach out to.

TBC 5 | Note Business — Note Business: If you’re making a payment out to somebody, then you’re in the note game. The only thing is you’re just on the wrong side of the payment stream.

It’s already fine now. It’s not. I filed a suit. My statement shows they’re not holding the money anymore, so I assume that means that they’ve issued a check. I’ve yet to see the check. I went ahead and filed suit and now they’re going to pay me for all the time I had to deal with it. It’s going to cost them an extra $10,000 for someone not picking up the phone.

You said something very important there. On the origination side, they’re all about service. Once they get your pay in, then “We’ll take our time. We’re not worried about it.” The servicing side, they’re hiring people in some case it would make more flipping burgers at McDonald’s to handle the workouts or handle the phone calls. It’s what we ran into. I hired away my asset manager at my servicer away from the company to work for me full-time because she wasn’t making much money there. She was going to leave. I was like, “No. You do a great job. I want to hire you. Let me bring you on board. You’re going to work remotely in New Jersey from home. I’ll send you a computer and everything like that.”

She was like, “Awesome.” She does an amazing job. She’s on the phone communicating with our borrowers, talking with our attorneys, communicating back with the servicing company and making sure things are sent out in a timely fashion. That’s the biggest frustration to me here is when they’re talking to mortgage companies or the servicing company. They don’t give a rat’s ass especially if you’re behind and try and negotiate a mod or a short sale. There’s nothing short timeframe about a short sale and maybe faster than it used to be. It’s that these people have these stacks of files. They’re not paid to care and they go off the top one. If everything’s there, great. If it’s not there, it gets put to the bottom. They go on to the next one.

Years ago, I sued Countrywide when they were still around. There were three statewide class actions in three different states against them. I basically decided to look at all of it that the people were all similarly affected, but it could meet these technical legal requirements for a class. I ended up representing about 450, 500 individual people and filed them as individual lawsuit cases. We were playing the class against them and playing them against the class. Ultimately, all got resolved. Our group of people got at a minimum three times what the class relief was and some ten to twenty times. We got paid more than the class lawyers do.

That’s why it’s important to communicate. I’ve never found bad money when I paid either my attorneys or my asset protection people. My accountant and my attorney has always been good money. Sometimes I didn’t like to write that check, but it usually came back exponentially of what I was paying to either represent me or handle the foreclosure or to make sure our stuff was protected.

In my podcast, I call it The Byrd Chronicles where law meets life. We got to talk a little bit about law stuff. Don’t feel like you’re tied to it. Part of me doing this was through your encouragement. It was something to keep me engaged. I don’t know if you see this in your business, but part of my biggest impediment to success in my business continued over time is me. It’s mainly out of boredom. I can get bored with it easy and not that it’s not good work and not that I don’t like it, it just gets old. It’s not like you see on TV.

I totally agree with that. My note business is great. I enjoyed the teaching, but when you’re doing the same thing over and over again, especially wearing your extrovert personalities like you or me, you want to be doing something different. Instead of regurgitating, you don’t want to be the smartest person in the room. I still travel a ton for things, but I’ve turned down speaking engagements at different note conferences because I’m like, “I don’t want to be the smartest person in the room.” I appreciate that. You can get everything you need from a webinar or my website. I know everybody there. I don’t need to go. I’d rather stay at home in my flip flops and shorts and do a podcast episode or do a webinar from there and use the 21st Century technology to share that information. I can do without jumping on a plane, staying in a hotel room, eat my own food and sleeping in my own bed at night.

I try not to travel as much as I used to as well. You got the train rolling so to speak. That’s obvious. You know what you’re doing. You’re good at it. It probably hadn’t always been that one. I would think by you explaining your business that the first impediment is access. “How the hell do you find out who to talk to and where to find the note information that’s not performing?” Number two, the capital to close the deal when it’s a good deal. How do you start it?

The funny thing is I was a dead beat borrower for a while. I graduated college from Texas State University. I thought I’d be a real estate entrepreneur because I knew how to fix everything in our house because I grew up in my dad’s hardware store. I married my college sweetheart. I bought a couple of investment properties. I got laid off from my job. We were making basically six mortgage payments on a private school teacher salary, three first, three seconds. Dell in Round Rock where we live in and where our investment properties where, they laid off a lot of people. Our rental rates went below what we were paying in monthly mortgages to them. I didn’t have any income because when you were straight out of college, what do you do when you’re making good money?

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You spent it on toys. You spent it on the big screen TV. I was making good money as a financial advisor basically then, but it didn’t last long. Fortunately, I had a buddy that I’ve known. I got into banking. I started working for JPMorgan Chase for a couple of years. I was a top banker in Texas. My buddy that worked with the financial advisors started a mortgage company. I was like, “That’s where I wanted to go” when I talked to about what they were doing. For four years I got to travel the country and all these different real estate seminars and expos offering mortgages to investors. I also sat in the back of the classrooms and took all this free education that I had access to which was nice.

When everything hit the fan in 2008, I left the mortgage business and started dialing for dollars and calling banks and asset managers. What separated myself is I would make 50 to 100 phone calls to banks and get transferred. I can’t tell you how many times to the right department. It’s secondary marketing or the special assets department is a name that these institutions. It’s the people in these job classes that they handle the distressed asset sales and distressed mortgage sales. I make 50 phone calls, get four or five people on that send me a list and then I would dive in that list. One of the big turning points is when Wells Fargo Financial was around. It was one of the first tapes I got from them back in the day.

They sent me 72 property or 72 notes that I can buy from anywhere from $1,000 to $5,000. I bought a three-bedroom, two-bath house. I bought the mortgage on this house in Jacksonville, Florida for $6,000. I flipped it for $20,000 a month later. Capital One sent me a big list of stuff that I got from making 70 phone calls over three weeks and getting transferred. When I got their list, it was a 33-page PDF with all their assets in the country that were below $1 million in a commercial side and all it was in the six-point font. I almost need a magnifying glass to read it. I was like, “I can’t buy all this stuff.” Don’t just buy something.

You didn’t even know what they had on that list.

I found an eight-unit apartment complex in San Diego. It was worth $700,000. They wanted $375, 000 for it for the note. I found somebody who would pay me $425,000 for the note and they could take it. I made $50,000 that way. I started rinse and repeating and doing that for a couple of years scratching out. I had a business partner at the time. In 2010, we stopped working together. I said, “I’m going to get out of Austin for a little while.” I planned this massive 30-week tour across the country to go all of the ballparks. That 30-week trip turned into three and a half years of travel of me speaking or going and meeting with banks. I spent a lot of time in Florida. I would go door-to-door at banks. I’m not warming, but I felt like it a lot. We go and knock, “Let tell you about how I can save your distressed debt.” I’ve got short hair. I look a little younger than I am. I’d walk in these asset managers or bankers who are 60, 70 years old. They’re running these two or three community banks and like, “What do you know?” I’m like, “I know you’ve got $70 million in bad debt that’s over 180 days late that’s killing your books. Why don’t you let me take a look at it and see if I came to help you out with some of it?”

They would look at me and be scared. I’ve walked into their conference room and it would be stacked to the ceiling with loan files. From the floor to the ceiling, hundreds and hundreds and hundreds of loans. They’re like, “Here’s my assistant, please help us.” I flip through a file. It’s not quite as glamorous as like The Big Short to make it look like the movie, but it was a lot like that. I was flipping through lists and spreadsheets, looking at credit scores and payment streams. The value of the property and where I thought that property was going and I go from there. I started off living on crumbs and buying crumbs and moving them. I didn’t have a lot of the capital then because I had some investment property here that I bought to fix and flip and the market crashed. I wrote some big checks to my investors. I’d gotten divorced at the time too. As I joked, I lost 135 pounds overnight by getting divorced. It’s a joke grenade. I streamlined down to basically the bare minimums. We’ll go from a hotel or I have a buddy in Florida that knew I was coming to town and let me crash on his couch for a week or two.

During the day, I would dial for dollar. We’d get a lot of banks and buy something and flip it. We carved it out. In 2010 and 2014, that was what I was doing and the industry awarded me the Educator of the Year Award in 2014. I was pretty honored for that. It’s John Richards Note Educator of the Year Award in my industry. I’ve helped a lot of people. That’s one of the big things. I know you’ve got a big heart when you’re helping people out and help them overcome things. It’s how you’re raised. It’s the same thing here. We get students that take my classes. They start doing this on this side gig at nights, on the weekends and leave their job that they dislike doing it because they bought a few assets that are now paying that replaces their income and they can do what they want to do.

The biggest excitement is when I get a borrower that we’re doing something cool with. We keep them in their house. They were facing foreclosure and we came in, bought the note up and let them stay in there but created a payment plan or something like that. When I get letters or I get mail or Christmas cards from our borrowers that send us stuff that, “Thank you for allowing us to stay here.” That’s not funny. We make money in what we do. We have peaks and valleys like anybody else does with things that we’re buying. I wish to say it was always smooth sailing. I’ve bought some deals that have eaten my lunch too. I’ll never buy in Chicago again. It is totally Crook County. I lost over $250,000 in a couple of deals. I paid my investors back and it took a big juicy bite on my butt. Our biggest goal is if we can rehab the borrower and we can get that done 50% of the time with what we’re buying, we’re usually sitting in a pretty good spot.

What do you think is the one most significant factor or thing or break or anything has been in getting you on this long journey?

I’ve had good mentors. That’s a big thing that’s helped me out more than anything else is having good mentors that have given me great counsel. Everybody looks for advice out there. We’re going to do something now or going through several, we’ll ask anybody, what do you think about this? They’ll give us their opinion. It is all it is because I can’t give advice because I never walked in those shoes. I’ve been very blessed with some great mentors along the way that have helped me in this industry. The likes of Greg Reid. He was the author of Think and Grow Rich, Three Feet from Gold. Sharon Lechter, who’s a friend of mine who co-wrote Rich Dad Poor Dad with Robert Kiyosaki. That would be the biggest things. I’ve been coachable. I don’t like being the smartest person in the room. If that is, it’s not a very smart room. The biggest things too, especially my staff, I’m always telling my staff, “I’m not going to ask you to do something that I wouldn’t it do myself.” I’m willing to do a little more than most people weren’t able to. I’m always trying to stay productive. It’s the biggest thing too. It comes from my dad’s work ethic and teaching me always, “Keep going at it.”

It’s interesting you mentioned that last because I set you up with that question and this is the only because I knew you. I suspected you would say something about you’re a mixture of upbringing and people doing good things for you. You did mentoring. From knowing you, since we are nine years old, I guarantee the biggest factor is your work ethic. You’ve always been willing to work. Even when things were tough and I may be kicking your ass at football practice, you were willing to work.

The funny thing is those that don’t know is our coach had a nickname for us, chili con Carne, growing up, Coach John Robledo. Jason was the chili because he’s always the spice. I was the freaking meat, the carne.

By the time we got into high school, we played on the football team. We’re the two linebackers on the team. You can’t tell. I’ve always been better-looking, but he’s a bigger man than me. Even at seventeen, I was about 5’8”. I was eating everything I saw to get to 170 pounds. He was at 6’1”, 210 and ran like a deer. We’d have to go head to head every single day. He might get over on me a few times, but I never would let him know it. If I ever caught him slacking, I’d use that chance to bust his chops.

I remember a couple of times goofing off or something like that. It was a good thing. I get up and start and chuckle like, “Who the hell is that? “It was you. Let’s get back in the huddle.”

Some of those lessons in the work ethic have lasted for me. I know that’s what’s driven you and helped you out tremendously.

The biggest thing too is I don’t mind being the underdog. I like it when somebody tells me I can’t get something done. I hear my dad’s words in my ears all the time on different things. When you grew up in a small town, everybody knows everybody for the most part. If you’re in trouble or you’re not in trouble. I liked that aspect. A lot of that stuff has gone in this society and things like that. You and I were never afraid to call each other on our crap. That was the biggest thing. If we did something stupid, we fessed up to it. It was better to get it over with and move on or go on from there.

We’re still that way. I’m pretty frank with folks. I’ll tell you what you may not want to hear. I’ll tell myself what I don’t like too. I make mistakes. It’s about getting past those and learning from them. I make plenty of them in my practice, in my family life and everything.

Sometimes the buck stops with me. I screwed up. Here’s the solution. If I don’t have an answer now, I’ll have an answer for you tomorrow. This didn’t go the way we thought it was going to be. That’s the thing. In real estate, not every deal has been a home run. I’ve lost money into deals. I got some great deals. I’ve deals that have gone south. On the deals that go south, that you know what you’re going to do in case it happens and making sure to take care of people and have a solution because that’s the worst thing in anything. If somebody asks you a question and you don’t have a solution. It’s okay to say, “I don’t know.” It’s better than telling a lie.

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It’s hard sometimes though.

It totally is. It could go this route, but a lot of times you got to realize where that person is coming from. They may not have the experience you have. I’m not going to say dumb it down but put it in words that they will understand or any complications. Sometimes people don’t want to hear the bad. We all know that most people want to hear the good. They don’t read contracts. They don’t see the things in the contracts that this could go this way. This is an investment. Past experience is not an indicator of future performance. The thing is you share with people and be honest. There are enough smoke blowers in the world these days that make everything sound good. You and I both are not that way. I get that quite a bit from people who listen to the podcast are like “You’re pretty straight on” or somebody asks you a stupid question. I’m like, “You’ve asked me that question three times now. It’s not going to change anyway. Here’s what it is. Why are you asking me the question? You’re not going to do something anyway.” You got to be honest with people. Honesty and being direct is a lost art. We need it more across society instead of the political correctness crap that we have of everything. If you’re afraid to step on anybody’s toes, tell it like it is and let’s move on.

I’m glad to say that as well because you do a good job in internet marketing, but you’ve always had videos going. It things commemorating your hustle. I see guys like that in every industry. You can do fine. A lot of times, I dismiss them. I was like, “If this guy is out there this much, he is selling me a bag of bullshit.” I know that not to be the case because I’ve known you my whole life. I don’t know could change. You talk like that and that’s probably why your podcast is doing so well. Once they get to know you a little bit, they realize, “Scott is a real deal.”

That’s the thing. People out there want the truth. They want somebody to tell. That’s the thing I’ve always say, “It’s my dad in me.” I can hear it right now. Tell them what it is. It may not be pretty sometimes and it may not feel the greatest, but if you wanted me to sit here and baby to death, you’d go somewhere else. I don’t want to waste your time. I sure as hell don’t want to waste my time. Talking about internet marketing, the biggest thing I’ve always thought when I was sharing videos and things like that is I wanted to prove to people that if this idiot could do it, anybody else could do it. That has been the big stuff at times. What can we do to get the word out what we’re doing, but to share it with more people so that they can see that it’s not nearly as difficult as they think in their head?

Not everybody can do it because not everybody is going to work as hard as you will. It’s not going to happen. That’s what I say. In the past, I’ve filed literally thousands of cases against insurance companies. If I’m filing the suit, they’re probably not a good place. I’ve gone over it pretty strong. They’re trying to, the lack of a better term, cheat someone. That’s a bad thing. Thank God for them or I’d be sitting around with nothing to do half the time at least. Thank God that people aren’t willing to work as hard. I’ve heard someone say, “We may not all start in the same place but once the race starts, it’s every man for himself and we’ll see what happens.”

You and I got a lot of that growing up because I remember weekends where you’re at the car lot working. Mom and dad are there or not, you’re still at the car lot working. It’s the same way here. I do be working at the hardware store up mowing lawns and digging ditches or siphoning ostrich crap in our ostrich farm in South Texas. A lot of our friends, God bless them, weren’t doing that. They were off going to the beach or off having fun and stuff. They’re honking at us.

They honked at us and we’re out there working like indentured servants. Here they’re going to the beach. I’m like, “To hell with them.”

I think that led to us being not afraid to roll up our sleeves and get dirty. We’re not afraid to do that extra thing to get things done because that’s what happened. I look back to a lot of people. I love all the people we went to high school with. We went to a very small school. We have 65 people in our graduating class. If you look at the things that you and I have accomplished, being our own boss, calling our own shots and stuff like that. We’re not reporting to somebody. There’s nothing wrong with people who liked and loved what they do, that’s great. More power to them. I know a lot of people that we went to high school with before, during or after who do not like their life. It’s not that they want something to be handed to them. They didn’t have that work ethic that was instilled into us from our parents.

I hear you. I’ve got three kids and I say, “You are all are soft.” They don’t even realize how soft they are. You’re the kids I used to beat up. I know you work all the time, Scott. You’ve got all this going on, but you’ve got to do something to keep yourself sane. What else do you like to do?

I’m still an avid sports fan. Steph and I are not married. We’re happy. We like to take vacations. We’ll usually do one big vacation a year. We love to go to a lot of sporting events, baseball or basketball. We go to a lot of concerts. We do stuff a lot locally here. In Austin, Texas, our home, there are always some fun stuff going on here. We’re going to the ballet Friday night or go to the comedy clubs. I like to get out and relax and unwind. We go to a lot of movies. That’s a great way for me to turn my brain off and relax for an hour or two. We love to travel. We’ve been to 23 of the 30 Major League Baseball parks. We’ve been close to that many countries over the last couple of years of traveling via cruises and other things. That’s the biggest thing. Enjoying new experiences is one of the biggest things that I think is a great way. Because if you do the same thing over and over again, you can get numb and agitated. I have the big point, “Let’s turn it off or turn their phones off or let’s go somewhere and escape for a little while to have some fun and make a memory or two. Recharge your batteries and come back and get back to the salt lines.”

I know you don’t have any children. She doesn’t either though.

We’ve been together going on for several years. She’s got the four-legged freak on.

I hear you talk about travel. My oldest is fifteen, almost sixteen and then the boys are thirteen and eleven. We go places. They’ve always been young enough that we have to take them. If you need to take three kids somewhere, it’s not fun. That’s not my idea of fun. Sometimes I got to suck it up and do it.

Kids are great. Kids are awesome. What’s beautiful is they all have their different personalities. We’ve got a lot of friends that have kids. We’ve taken vacations with people with kids and stuff like that and then helped out and stuff like that. I don’t mind babysitting, but as long as I can give the kid back and walk away, I’m happier. Steph worked at Disney growing up. She went to the college program at Disneyland in Florida there. She’s a big Disney fan. I am not a fan of the ankle-biting rat land that I like to call it.

We choose not to participate in Disneyworld.

That’s smart, although a Disney cruise is worth every penny you pay for it. They still got some other things, not just the parks. They got the Aulani Resort in Hawaii, which is a lot of fun. The Disney cruise lines, we’ve taken on a variety of different times. You’d enjoy that stuff. The biggest thing too is that we try to make time. I was married beforehand for seven years. Stephanie was married before for about seven years. She’s been divorced for five. I’ve been divorced for ten now. The biggest thing that we have found and you do this with Jennifer a lot, is you try to make time for each other. You got to have that date night or that other thing to come back to. We’re blessed that she works with me.

Other people would kill each other, but we have different strengths. That’s the beauty of it. She used to work in the office here. I’m a loud person and she doesn’t. She works from home, which is still only less than five minutes away. Our students know us. Our coaching mastermind people know her. She does a great job working with those people. She’s an amazing ambassador for that aspect of things. She’s got a big heart for people. I have a big heart for people too. We come up with something and she goes and puts it together. I could not do what I do. It could not have grown my business as I have in the last five years without her.

It’s been nice. The important thing is that even though we do work together, we’ve got to learn to turn it off because we would talk about work all the time. It’s great having the pets. We have a lot of friends across the country that are pretty cool that we enjoy hanging out with when we travel. We find ourselves talking about working a lot, but then it’s also, “Let’s turn it off.” We have a lot of the same interests. One of the things I have found is it’s not about finding somebody that loves the same things that you do. It’s finding somebody who hates the same things that you hate, you love to hate. That’s perfect.

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I focused earlier about your business, on your actual note business, how you started and what you do, but that’s only a part of your business. There’s a myriad of different things that you’re doing. I know you’re still handling your notes. You’re buying paper and rehabbing the notes and selling them or holding them or whatever you’re doing with them, but that’s just a segment. I know you talked about webinars and classes. I know you’re talking all the time at places, what do you all got going on?

One of the best ways we found to raise capital, especially for this niche of real estate investing that people don’t always understand, is we’ll start teaching about it. I started teaching classes in 2010 and doing webinars on a regular basis in 2011. I look back at my account and I’ve had that account since April of 2011. I figured I’ve done somewhere around 1,000 webinars or somewhere around there. That’s a lot of talking. It’s a lot of educating and that’s the thing. We have our education platform that helps pay for our bills and some of the things. We do webinars. We do online conventions. I speak at different conventions across the country as well. We’ve got a pretty cool mastermind of our students that come together. They’ll come in and spend some time with us here in Austin. We’ll do some coaching with them one-on-one to help them to ramp their business up. It’s all note-focused. I’m in one lane of notes. We have the real estate stuff on the note side that’s generating income and we have the education side of what we do in the podcast, which feeds both of those things for the most part.

How do you monetize the teaching part of it? Is there like a paid membership? Are there these Tony Robbins-type seminars where you buy notes?

I’m not to blow smoke up. We have fun. I’ve got an online home study course that we created that have 40 hours of training videos that we sell for $1,000. That gets them a ticket to our online workshop. It’s live for three days. We’ll sell that for $600. We have our mastermind and coaching side of things that we’ll do where they come in and spend time and that’s $15,000 to come in and spend time with us. I’m a big believer everybody is a buyer or a seller or a funding source. We raise a lot of our capital from our education side. People are like, “I didn’t want to do the work. I don’t have the time, but I’d rather write you a check and let you run with it.”

That develops investors as well.

Especially if somebody who’s coming in wants to invest with me and they’ve never done anything to notes. The first thing I do is I send them a link to a workshop. I’m like, “Go watch these replays so that you understand what’s going on.” I don’t mind giving updates once a month. If this one is calling me every week for an update, that’s not the right type of investor for me. I don’t have the time for that. I want somebody who’s a little bit more sophisticated, who’s maybe done some real estate investing. They understand a little bit of that stuff. It takes time. We’re glad to educate them along the way. What’s funny is we’ve turned some dead beat borrowers into students and investors and mastermind members as well, which is fun. Some people we bought the note from, we’re able to let them walk from a house.

A guy in Orlando named Robby Woods bought a house with one of his best friends in college and the market tanked. I ended up buying his note, reaching out to him and let him sign the property over to us. Six months after, we let them walk from $140,000 in debt. He called me up, “I’ve been researching you and I see your videos on YouTube. I’d like to learn more about what you’re doing.” I’m like, “That’s great. I’m flying up to San Francisco, I’ll let you come to a class for free.” He came to a class and brought his dad. They’re like, “We want to do this.” They signed up for coaching with us. Six months later, he bought that house back from me for double what I paid. He’s a good friend now. He’s bought over $1 million in debt. He started a podcast a couple of years ago in the note space and let that go. It’s funny to think that this came from a small little two-bedroom, two-bath in Orlando at 2825 Hunt Club Lane. We were able to do some good stuff for the guy. He’s gone out and changed a lot of lives as well with what he’s doing, the deals that he’s doing and the people that he was educating and things like that. It’s a small world. It gets smaller every day. You never know who you’re going to talk to and who’s going to turn into what for you.

It’s those stories that make it worth doing. I’m going to guess you liked the education side the most, don’t you?

I enjoy the education. I’ve been doing it for a while. It’s fun. It pays a chunk of our bills and stuff like that. The podcasting side has gotten my niche. I like to be able to communicate. We’ve been doing it and seeing where people are coming from. People are coming into both the education and the investing side. I was very fortunate to have some mentors that gave me a lot of great education early on. I made a vow in one of my tough times that if I got to where I wanted to be, I’d help give back and help other people get there. I like education. We’ve tweaked some things up. When you do the same thing over and over again, it gets a little bit boring. We’re tweaking up some new things. The thing you’d have to be wary of and this is not just in the note space. This is an all real estate. When a market is at a peak, you start seeing a lot of people coming into the industry who haven’t had experience, but they want to be educators now, “I’ve done two or three deals. I’m now an expert.” That’s not the case.

We see that in real estate. We get all these fix and flippers and shows. When the market turns south, they’re going to get wiped out. If you’re going to talk to somebody and get educated, talk with someone who’s been through at least one or two upturns or downturns, one bear market and one bull market at least. If everything is on the way up, anybody can make money, but that’s not always the case. You got to have somebody who’s got experience in a down market or if the market changes, they’ll know what to do. I’m laughing when we’re looking at our chops expecting to see a downturn in the next twelve months from a lot of things. We’ll pull them back from the educational stuff and prepare for that downturn whenever it hits.

I was thinking about the last big downturn, you were starting out in a lot of ways and pulling in things. Many years later, you’re at a much different place. I was thinking, at least the note side of your business, you’d probably benefit at this point from a big downturn. It would provide opportunities in greater mass. You could be more discerning and cherry pick deals you thought you could do well.

That’s the thing. I looked back ten years ago and the biggest regret I have is I didn’t buy more then. You look at the calendar of ups and down markets, we’re due for a market correction. You look at what’s going on in the credit card space, the car space, the student loan space, medical bills and all the stuff that are at a higher than normal default rates. In America, one out of every ten Americans is at least one month behind already. 10% of the United States is a month behind. You look at what happened with all the government employees, they are all safe. “I’ve got to get a secure government job.” You’re not working for 60 days. You’re in default. That’s the thing to keep in mind. We’ll see a downturn. When that happens, we’ll have more inventory that we can cherry-pick from. We can buy cheaper than we are right now. We still see a lot of great deals.

When a downturn happens, you’ll see a lot of changes. You’ll see a lot of mortgage brokers get out of the business. You’ll see a lot of realtors get out of the business. I laughed in the last downturn right before 2008 happened. Austin, Texas had about 11,000 realtors. In 2010, that number was down to 4,000. We’re back up to 12,000 realtors in Austin. I was like, “It’s time for a shakeup because two-thirds of them are going to leave because they won’t know what to do.” That’s every industry that booms. You have a lot of people that come into it. When it goes bust, you have people that know how to market, know how to make money versus rising on the uprise to make money. Good or bad economies, we buy debt no matter what. When there is a downturn, we buy a whole lot more and a lot cheaper. It also leaves to like people scared to invest. What should they do? That’s why we like buying the debt because we’re getting cheaper and faster and more from a lot of the other people out there trying to shake a tree to have something fall on them.

You’ve been doing this for years. What do you see years from now or can you even think that far out? I know it’s hard for me to do so.

I’ll tell you where I see myself in ten years and then we’ll go from there. One of the biggest things I’ve had this dream and the image, I enjoyed the tropics. I enjoyed being around the water. I see myself not living in the United States in ten years. I’m living somewhere warm all the time, whether it’s in Central America, in Costa Rica or somewhere in the Caribbean. I will still be teaching. I still see myself doing a podcast or something else. Who knows what’s going to happen in ten years? I see this taking place in the next five years or less, moving out of the United States, moving somewhere. Maybe Puerto Rico with the tax advantages down there.

The local taxes are so high.

Whether it’s an increase in the cost of goods and pay $10 for a gallon of milk or whatever but somewhere. My biggest goal is to end up with 400 to 500 notes that are paying $250 a month to me. That’ll generate $1.2 million a year in cashflow. I’ll live off a fraction of that. Own those assets and then they sell off, they sell off stuff like that. That’s the biggest goal. We’re on our way there. I’m trying to add 20 to 50 to that long-term goal. There are going to be long-term payoffs every quarter to six months. That’s the goal. You do that, have a sunburn, walk around with a cap and khaki shorts and a dirty t-shirt. Who cares? As John Goodman said in The Gambler, you want to end up with FU money. You got $2 million in the bank and you own your house, you’ve got FU money, you only do what you want. You’re not going to do what anybody else wants.

That money doesn’t go as far as it used to, $2 million in FU money, at least from my perspective. I say that is because a lot of that’s probably because of the way I think about my business. I do 90% of my works on a contingency fee. I don’t carry huge lines of credit. It’s usually my money that I basically made after I paid taxes and reinvesting in cases. Even a small office like me, it’s nothing to have $1 million on the street in any given time. That’s in addition to having fun new stuff and the operating capital necessary. You can suck up $2 million really quick, at least in my industry.

That’s very truthful here too. You can do that as well. At the point, we try to streamline. Every six months, we come back and remove stuff. One of the biggest things I learned in the mortgage business is not to have a big overhead if you can. That’s the one thing I love about doing what I do. I can do what I do from anywhere in the world. I have an office, but if I didn’t want the office, I’ve closed deals in Spain. I’ve closed deals in the middle of the Pacific, traveling. If I got like a laptop and a cell phone, I can do my business for the most part. We rely on a lot of vendors and other people to get the stuff done. I don’t have to have a huge staff.

How much staff do you have?

I’ve got less than ten people. My sales staff, they’ve been long-term. We’ve got Shannon, our full-time marketing. Everyone in the office does a great job. We’ve got Hazel who works in New Jersey servicing the assets. I’ve got another intern that works in South Florida as well, time to time. I have different virtual assistants that jump in and do stuff for me. We have our vendors, our attorneys, our servicing company and then other people that jump in. We’re pretty small. We’ll bring in people periodically as we’re closing on larger portfolios that will work ten, twenty hours a week for us to review files or other things. We try to keep it streamlined.

I’ve done the same thing. My quality of life has improved by doing so. There’s a time which we had nine lawyers and twenty staff. In this multinational law firms and things like that, that’s very small. As far as a local, funding the whole deal operation, that’s a lot. In my industry, everything, even assistants and paralegals are fairly well-paid professionals. Salaries for lawyers and paralegals and 30 of them, that’s a lot. People got to get paid. It’s one other lawyer and me. Frankly, she works part time now. She’s got a whole lot of personal life, three kids and a husband help him with his business and things like that. She works on special projects and a couple of staff in the office and that’s it. It also has allowed me to do something. I’ve gotten way more selective.

I typically don’t take on your matter unless one of a couple of factors exists. Number one, I feel sorry for you. I’m always still a sucker for that. If I feel sorry for you and I think I can help you, then I’ll probably do it regardless of size. Number two, it’s pretty good. I can help. I can financially, but ultimately that’s all I can do is deliver dollars. Financially help the situation and make it worth my time doing. Number three, we have a relationship. We have our existing relationship, which if you called me up and said, “Send some letter to somebody,” that’s normally not what I do is randomly send out letters. I’ll send anything for Scott even if he’s wrong and try and counsel you to say, “What are you doing over here?” It makes my life a whole lot more pleasant. I make the same money too.

The older I get, I realize the days of thinking I was going to have a huge firm and all these huge offices are not what’s going to have to be. The bigger you get, the more personalities you had in your office, you’d end up becoming a lot of times an adult babysitter. The more that we’ve narrowed down and focused over the last few years, the happier that we have gotten because we’re not chasing so many squirrels. We’re able to stay in our lane. You may not be making as much in revenue, but you take home a lot more because you’ve got a lot of less of that overhead and expenses along the way.

I know some of our audience is going to want to know more about the note business and they might be intrigued by what you do if. If someone wants to hear your podcast and find you, where’s the easiest way to find you?

The easiest way is to go to our website, WeCloseNotes.com. It’s where you’ll find our training. You’ll find links to our podcasts, videos, YouTube account and you learn how to contact me there. That’s the easiest way. Just go onto the website or shoot me an email at Scott@WeCloseNotes.com. I’ll be glad to spend some time on the phone and talk with you. I’ll give you a 30 to 45 minutes of education and then go from there.

I assume we can find you on iTunes or Google Play and all of that?

Our podcast is across all the other different channels. I think you’re using Podetize as well, iTunes, Stitcher, iHeartRadio. Our podcast launched on sixteen different AM/FM radio stations across the country as well. Every Tuesday, Wednesday, Thursday at 9:00 AM from Tampa to Long Beach as well. I’m pretty stoked about that as well.

If I listen to the radio, I will check it out.

If you’re listening to the radio, I don’t listen to radio anymore.

There are probably some older folks who are checking it out.

We’re getting some heads off, but it’s that it didn’t cost me much to do so I was pretty excited to do it.

I want to thank you and tell you I love you. Thank you for being here. I’m certain your audience may actually enjoy this episode to get a different perspective about you.

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About Scott Carson

President & CEO
Scott has been in the mortgage, finance, and banking industry since 2001 and an active real estate investor since 2002. He has been actively buying notes on residential and commercial properties since 2005.