Taking notes? That’s okay if you’re not, but you should at least buy notes! You’ll hear all about it in this episode! Good debt, bad debt, whatever… Notes are extremely profitable and if purchased correctly, may be one of the most ideal passive wealth generators in investments.
Best Ever Tweet:
Scott Carson Real Estate Background:
– CEO of WeCloseNotes.com and the creator of the Note Buying for Dummies workshop
– Purchased over half a billion dollars in distressed debt for his portfolio and assets in over 30 states
– Note Buying Workshop focuses on the 3 F’s of Note Buying…The Find, Fund and Flip
– Speaker on distressed debt, the 2014 Note Educator of the Year, and featured in The Wall Street Journal
– Active real estate investor since 2002 and solely focused on the note industry since 2008
– Based in Austin, Texas
– Say hi to him at http://www.weclosenotes.com
Made Possible Because of Our Best Ever Sponsors:
Want an inbox full of online leads? Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.
Go to adwordsnerds.com/joe to schedule the appointment.
Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Scott Carson. How are you doing, Scott?
Scott Carson: I’m doing great, Joe. Thanks for having me.
Joe Fairless: Nice to have you on the show, my friend. A little bit about Scott – he is the CEO of WeCloseNotes.com and the creator of the Note Buying For Dummies workshop. He is a speaker on distressed debt, and the 2014 Note Educator Of The Year; he’s been featured in the Wall-Street Journal, he’s an active real estate investor, been one since 2002, and has solely been focused on the note industry since 2008… So guess what, Best Ever listeners? I think you know what we’re gonna be talking about, don’t ya?
You can say hi to him at his website, WeCloseNotes.com. With that being said, Scott, do you wanna give the Best Ever listeners a little bit more about your background and your focus?
Scott Carson: We focus directly on buying distressed debt, only non-performing and first liens on residential and commercial properties all across the country, from banks and hedge funds. We’re buying for our own portfolio, we buy for students, but we’ve been doing that since everything hit the fan in 2007-2009.
My background – I started off like a lot of real estate investors, [unintelligible [00:03:24].15] Flip This House on AMC TV, we decided we could be landlords; I thought that was a cool idea. We bought our first investment property in 2002, the second one in late 2002 as well, and then the market changed here in Austin, Texas.
Dell Computers laid a lot of people off who were ideal tenants, and the market went South for a little bit. [unintelligible [00:03:45].11] and I was a distressed borrower very quickly. I was pretty lucky enough to get rid of those deals and get hooked up with a couple real estate investors here locally, who taught investing, taught the traditional way of doing things, and I was pretty lucky there to learn real estate the right way – options, subject to deals… They also taught [unintelligible [00:04:06].10] owner financing, things like that. So for 3-4 years I got to work as basically an apprentice and sponge up so much quality information from them.
Then when the market went South again with everything in the mortgage industry, I saw the opportunity and stopped focusing on short sales and subject to deals and fix and flips here in Austin, and I started buying debt all across the country.
Joe Fairless: You’ve been focused on note buying since 2008… What are the pros and cons of note buying, compare to buying rental properties, adding those into your portfolio? Because you’ve been on both sides.
Scott Carson: Yeah, I’ve been on both sides… It’s a great question; we get that a lot. First off, there’s a lot more inventory out there. There are still 6-7 million defaulted loans out there right now. Second, we’re often getting better pricing on the distressed debt than people are buying for rental properties. And then the third thing, you don’t deal with toilets and tenants. When was the last time you called Bank of America (if you got a Bank of America mortgage) for them to come unclog your toilet, or to fix your water if it goes out? You don’t have to do that with a bank, and that’s the beautiful thing about buying debt. We’re buying at a fraction of what most people are buying properties, at 50% of value or less.
We’re working to create win/win scenarios with the borrowers, trying to keep them in their properties by modifying the loan, doing a forbearance plan, and we’ve got a lot of exit strategies, but our biggest bang for the buck is when we can modify the loans, keep them in the property, and they start paying on time for 12-18 months and then we just either keep it for cash flow at a high ROI, or sell that loan off to another investor who’s looking for cash flow.
That’s what I like about it – instead of it being mailbox money, it’s wire money. I get an invoice every month from our servicing company telling me who has paid, and if they don’t pay, they don’t stay.
Joe Fairless: Cool. I wanna talk more about the pros, but then I also want to have – as objectively as you can look at it – the pros and the cons. Obviously, there are cons compared to buying rental properties. What are the cons?
Scott Carson: The cons is you’re the bank. There’s a lot more that goes into a distressed note than buying a property that you can put a renter in. When you buy a rental property, you own the real estate, so you can put a renter in there, you deal with all the management stuff or hire a property management company… When you buy the note, you don’t own the property. Now, you control it, but if you’ve got people that won’t pay, the biggest con is gonna be basically that you’re either gonna have to foreclose, or hire an attorney to reach out to that borrower to try to get him to do something.
Like I said before, they don’t pay, they don’t stay, but in some states it can take a little while to foreclose. In Florida it can take 12+ months to foreclose; in New York/New Jersey you’re looking at 2-3 years sometimes. There are states that are fast foreclosures, states like Texas, Georgia, Arizona, Nevada – they are easier to buy notes in, because you can foreclose so quickly.
I always tell people to expect to probably have to put 3k-5k in expenses along for attorney fees, servicing costs when you’re buying a note, because you’re gonna have to take over that bank’s nightmare.
That’s really the biggest con – you don’t know exactly which way the deal is gonna go. We’ve had deals that we thought would be easy modifications that turned into extended foreclosures of 12-18+ months. We’ve had others that we were getting ready to foreclose on that turned into the borrower just signing the property over to us and walked away, and left the property in clean conditions.
It’s the biggest frustration, but some people dealing with notes try to have one business model “I’m gonna foreclose all the time.” Well, it doesn’t always work that way. That was the biggest mistake I made early on – I started buying notes, Joe… I planned to foreclose in everything, and I left a lot of money on the table and spent a lot of money, when I could have modified loans initially, had cash flow coming in, not had to put up repair costs, not had to put up foreclosure attorney costs, and start making money immediately.
Joe Fairless: Can you walk through an example of what a foreclosure process would look like, compared to a loan modification process? Just trying to get an idea of the costs and the people involved in each of those.
Scott Carson: Okay, well let’s start with a loan modification. Once you’re buying out, you’re reaching out to the borrower. Half the states will let you do that yourself if you want to, other states wand you to be a licensed mortgage broker. I always recommend that you have a licensed servicing company do this; you don’t wanna do this yourself. So you have your servicer, they’re making 4-8 phone calls to reach out to the borrower; hopefully the borrower responds. If they don’t respond, they’re also sending direct mail campaigns out – certified letters, “Hey, give us a phone call.”
We’ll hire a realtor or a door-knocking service to go out and make contact with the borrower. Our biggest goal is within the first 30 days to make right party contact with the borrower and find out what their plan is. If they’re gonna tell us to pound sand or go do something else, that’s fine, we’ll send it straight to the attorney and start the foreclosure process.
If they decide to modify, then it’s a matter of figuring out “Okay, what was [unintelligible [00:09:03].02] payment?” What’s market rent for that same type of property is what I like to look at, because that’s gonna basically be what the borrowers are looking at – “Can I move out and rent something similar?”
We use the market rent rates of the property to figure out, “Okay, your mortgage payment is $1,500, market rent rate is $1,800. You should probably just start making your payments on time. We’re not really gonna adjust that down much for you, because if you moved out, you’re gonna go pay more, so it’s better for you to work with us.”
Then we’re sending the documents for him to sign and send back in. The trial payment plans will be anywhere from 3, 6 to 12 months, depending on what the borrower and we can come to an agreement. Sometimes we’ll reduce the interest rate, sometimes we’ll make them pay 6-12 months on time before we reduce principal [unintelligible [00:09:48].00] but there’s all sorts of creativity with those modifications of trial payment plans to really get some home runs as far as ROI.
We’ve had borrowers bringing anywhere from $500 to the table or $10,000 to modify that loan.
Joe Fairless: One question about that process… Who’s doing the negotiations with them? You said “Hire a licensed servicing company to reach out to the borrower.” Are they also negotiating with them on your behalf?
Scott Carson: They are. They’re notifying us, “Hey, I spoke to John Smith today. Here’s what they would like to try to do. Does that make sense for you?” and we’re going back and forth either via phone call, conference call or e-mails.
When I buy notes, I tell the services what I’d like to do, then I give them some guidelines of what I’m looking for.
Joe Fairless: For example?
Scott Carson: For example if the borrower can’t bring at least four months of back payments to the table, we’re not gonna modify. We’re gonna offer cash for keys at that point. If they bring four months to the table, great, we’ll look to keep them in the property. But if they can’t bring that, they don’t have any skin in the game… Any time that you modify a loan or do a trial payment plan and the borrower doesn’t bring any skin into the game, they end up defaulting later on and you’re on to foreclosing.
So I’d rather just “Hey, instead of us fighting over this, let’s just make this a win/win. If you can’t really afford it based on what you’re telling me your financials are, let me just give you some cash to walk from the property and let you start over.”
Joe Fairless: Okay. That’s helpful, thank you. So you said if they decide to modify, then you figure out what the market rent is and then you either charge them that, or if their principal payment and interest and everything is lower than that, then they might as well just pay that, versus the market rent, because they’re gonna have to pay higher if they were to leave. Then what’s the process?
Scott Carson: If they decide to leave, Joe?
Joe Fairless: Yeah, if they decide to leave.
Scott Carson: Yeah, if they decide to leave, then it’s basically just getting to one of our local attorneys in that state or that city, deciding over documents — we always run title reports to make sure there’s not any other junior liens behind ours. If there is liens, then we may have to do a foreclosure, or we’ll get the bar to agree to a consent to judgment to speed up the foreclosure timeframe.
If there’s no other liens behind the property that we don’t wanna negotiate down or are glad to pay off, like weed liens or even some credit card debt, stuff like that – we’ll just pay those liens off to take the property back, depending on what we paid for the property.
It’s a pretty simple process. They show up [unintelligible [00:12:07].00] they leave the keys with our attorney, then our real estate agent goes by and changes the locks to the property, and we follow documents, now it’s an REO to us and we do whatever we want with the property at that point.
Joe Fairless: I know this is gonna be a tough question because it depends on the particular opportunity, but roughly what are the costs involved with the loan modification process? And I’m gonna ask the same question about process and cost for the foreclosure process.
Scott Carson: Right. Modification – I’ll say you’re probably gonna pay about $1,500 in servicing fees and paperwork. You have to pay an attorney to create the modification documents, to get that filed… You’re probably gonna see $1,500 roughly. If you’re gonna foreclose, you’re probably gonna see somewhere between $1,000 to foreclose in a state like Texas, all the way up to $5,000 on average in Florida, which is like 12-18 months to foreclose.
We have had situations where it took longer… I’ve had one asset take two years to foreclose in Florida. It cost me 6k in foreclosure fees, and then I also paid 10k to the borrower to expedite it and quit fighting with him. I was buying the asset at 35k, it was worth 100k, so it made sense for me to pay him 10k to walk away.
Joe Fairless: In that case… In Florida, as you mentioned, it does take longer, but how does it get strung out to two years?
Scott Carson: [laughs] That’s a good thing. One is sometimes they hire attorneys that will drag stuff out. Now, Florida was taking about 12 months or this timeframe, which is you’re just waiting on a judicial foreclosure timeframe. The attorney for the borrower filed a couple delays. My attorney showed up to court one day and didn’t have all the original documents that she needed to have to proceed, so that delayed it 90 days.
Joe Fairless: Oh, gosh…
Scott Carson: Yeah, especially they requested me to fly out there and show up as a witness. So it was a little frustrating, because I had some airfare costs and hotel fees, but it was still a win/win, because we bought the note at such a cheaper price. But you have delays that happen like this… Sometimes you’ve gotta re-file assignments. Now, we’re foreclosing a couple properties in Chicago right now… I call it Crook County, because it’s just taking forever to foreclose, the judges have given the tenants and the borrowers extra time upon extra time upon extra time, the sheriff doesn’t want to enforce the evictions of the tenants… I will never buy another note in Chicago. I’ll buy in other areas in Illinois, but never in Crook County again.
Joe Fairless: Yeah, it’s interesting how different counties and states approach this process.
Scott Carson: It is. Some are really easy, some will do everything online, show up, bam! It’s easy, done. Other times you’ve gotta show up in person and drag stuff out… But that’s what keeps it so interesting, Joe. There’s a lot of great things. I always tell people to start investing in five states, pick up five states. You’ll learn a lot about the different foreclosure laws and things like that, but you also have plenty of opportunity with deal flow, as well.
Joe Fairless: I believe you have access to distressed notes, and you mentioned earlier that you have people who invest, or your students, who go in the process… But let’s just assume your program doesn’t exist. For an investor who’s listening to this and they wanted to do distressed note investing, where do they go to find those notes, and where do they go to get the licensed servicing company?
Scott Carson: Really easy – there’s specific departments inside of banks and mortgage companies all across the country. That’s what I started off doing – calling these banks, and real estate funds and mortgage companies. If people get one thing out of this podcast with you today, they should get this – the individuals inside of the banks, they go by the names of either special asset managers, or secondary marketing managers. They also have a chief credit risk officer… It’s often sometimes the name of the department. So those three names: special assets, secondary marketing and chief credit risk officer.
You’re not going to call customer services. You can go to LinkedIn and search for special assets managers or secondary marketing, and literally, LinkedIn will show you close to 8,500-9,000 special assets managers from banks and lending institutions all across the country.
I like reaching out to those guys and gals because they are the people who handle the portfolio, they know what’s performing, what’s non-performing, they know the nightmares, loans that the bank is looking to get rid of, and that’s a great source to find assets. We do it on a regular basis here, and it’s actually helped us build a large database of bank asset managers that we reach out to on a regular basis.
Servicing companies – all you have to do is google “loan servicing companies.” You’ll find them all across the country, there’s hundreds of small companies that will service loans just in that state, or other larger companies that will service loans all across the country. They’re there to help assist you in getting your loans performing; they’ll also handle performing loans, if you set up on payment plans.
Those charges will run you from $20-$75/month/loan. If you’ve got a performing loan, the servicing company will charge you $15-$20 just to collect the payments and set up the statements. If it’s a non-performing loan, they’re gonna charge you somewhere between $75-$100/month to handle [unintelligible [00:17:11].23]
Joe Fairless: It seems really inexpensive.
Scott Carson: It is when you consider what your time is worth. [laughs] Some people – I won’t say a lot – try to do that themselves, and when the CFPB and the Dodd-Frank laws and all that stuff — you don’t wanna mess around with it. So if you’re not a licensed mortgage broker or a licensed debt collector in a state, your time is better spent finding assets or raising capital and closing deals.
Joe Fairless: What questions should you ask a loan servicing company that you reach out to about doing this for your distressed note?
Scott Carson: Good question. 1) What states are you licensed in? There are some services out there that aren’t licensed in all the states, but they’re still trying to service loans, which is a big, messy thing. 2) Do they have a list of real estate attorneys across the country that you can use? 3) Can you speak to the real estate attorneys that they recommend? Some servicing companies wanna be the go-through, where you’ve gotta deal with an account rep and they’re the middle man to give any information. I will not deal with servicing companies that want to be that filter. I wanna speak to the real estate attorneys directly. I’ll often hire my own real estate attorneys; I use attorneys I’ve been using for years, and the servicing company will just charge me $35/month to board their loan and wing in all the loss mitigations to our attorney’s offices.
Joe Fairless: Do you still look for new loan servicing companies?
Scott Carson: I actually have three different loan servicing companies right now that are managing our portfolio. I do get bombarded with new companies here and there… It depends on the situation. If I’m buying loans from a source that was with a new servicing company that I am not currently using, it depends on where it is in the foreclosure process. If it’s almost all the way through the process of being foreclosed on or less than 90 days out, I’ll just leave it with that existing servicing company.
Servicing companies are a lot like vendors – sometimes they’re good, sometimes they’re bad, like anything else. Sometimes you do start looking for other vendors, especially if your servicing company starts to lag behind, starts goofing up on sending out documents and notices and things like that.
I haven’t had to look for a new one in some time, because I’m pretty happy with the two out of three that I’m using right now. The third one, basically they’re just boarding our stuff and we handle everything with our attorneys on a direct basis.
Joe Fairless: Just to get a sense of the type of typical profits that you’ll make on a deal… Can you give us a case study of just not your best, not your worst, but a typical deal, and the amount of money you make?
Scott Carson: I’ll give you a very simple formula that we look at doing. We buy assets at — I don’t go above 50%-55% of value. 55% is when you add in taxes owed. If I’m gonna be at 55% and I’m gonna end up having to foreclose, I’m probably gonna see another 3-5% in fees, so I’m gonna be at somewhere around 60%.
If I sell it 90-95 cents on the dollar, either a foreclosure auction, or if I have to take it back and sell it, I’m gonna see somewhere around 15%-20% of fair market value profit. Now, that’s often a really good return, because a lot of times we’re doing this in six months or less, so it’s doubling up our ROI when you annualize it. That’s via the foreclose.
If I’m gonna modify, I’m always looking to see around 20%-25% yield on the payments that are coming in for 12 months. That’s what makes it worth my time, that’s what makes it worth my investor’s time, any joint venture partners that we work with, if we’re having to split payments on that stuff.
So we’re looking for a 20%-25% yield on a modified or a potential modification, all the way up to a 25%-30% yield on our money, if we have to foreclose in a 12-month timeframe.
Joe Fairless: You mentioned earlier 3-12 months of trial payments – why only 12 months? Why not 36 months, or something even longer?
Scott Carson: Usually after 12 months they’re gonna wanna change; borrowers are gonna want some change to happen. Either the market value of the property is gonna go back up, or the property value may decline. So anytime we try to do a 36-month trial payment plan, it never succeeds.
Another important thing is once you’ve gotten 12 months of payments on time, that loan is now considered a reperforming loan again, and the value of it is much better or higher now, it’s worth something more. You’ll have people that will pay 85-90 cents on the dollar for a reperforming loan with 12 months of seasoning. If it’s got 36 months of seasoning – that’s great, but after 12 months you can sell that note off at, like I said, 85%-90% of value, pretty fast. Plus, I’ve been in [unintelligible [00:21:42].01] I’ve helped plenty of people modify the loans; 12 months they’re paying on time, they’re taking care of the property, they like it now that they really kind of own that property again and the bank is working with them, especially if they brought some skin in the game; if they brought four months of payments or 5k down to reinstate that loan, then they’re much more willing to work with. They have some private ownership again and they’re taking care of the property, keeping the insurance paid on it, and dealing with some stuff.
If you start looking at three years of trial payment plan, that’s tough for people sometimes. I’m not saying people are always gonna be on time; there’s times people are gonna go late anyway, especially around Christmas or January… What we have built into our modifications is we [unintelligible [00:22:19].23] and forgive the December payment if they pay in advance for 12 months, and I tell them “Go have a Merry Christmas on us.”
Joe Fairless: I have found that with my properties also, with the apartments…
Scott Carson: Yeah, exactly.
Joe Fairless: And then in March the money all comes back, because they get a tax refund…
Scott Carson: Yeah, exactly. It’s always funny — that catch-up usually comes around the middle of February, after they gather their tax returns.
Joe Fairless: Yup, absolutely. Last question and then I’ll ask you the money question… When you have the 12 months of payments that was on a distressed, non-performing note and now it’s performing – okay, you’ve got it; where do you go to sell it?
Scott Carson: Good question! There’s a variety of different hedge funds out there that are looking for just reperforming loans; they like the yield. There are banks that will buy reperforming loans, there’s a lot of IRA investors looking for a solid, steady return inside of their IRAs… We’ve sold our performing loans anywhere from like a self-directed IRA event, like Quest IRA or NewView, all the way to even listing it on Craigslist, say “Hey, we’ve got a performing note that’s been performing for 15 months. We’re looking to sell it at 50k. It would be a 15% return on investment based on the payment stream to an investor, if you’re interested. It’s pretty easy going to local real estate investment clubs, LinkedIn in the different real estate groups, Facebook groups… We’ve sold performing loans in a variety of places.
Joe Fairless: Based on your experience in real estate, what’s your best real estate investing advice ever?
Scott Carson: Best real estate investing advice ever – I would say be focused… [laughs] A lot of real estate investors go to different workshops and seminars and they’re trying to do 3, 4, 5 things, and they can never get any traction because they never focus on one thing. We see that a lot… We see people going “Oh, I like the idea of notes. I’m a landlord” or “I’m a fix and flipper, I wanna buy notes for fix and flips.” Well, they never get around to being focused on one thing to develop those relationships, develop those habits, develop the systems to find success. It’s the whole 80/20 rule – if 80% of your income is coming from 20% of your focus, well if you were to focus all your focus on it, your income would be basically 400-500 time what it is. I think that’s the best advice I can give anybody.
Notes aren’t always for everybody. If you like the tangible side of going out and using a hammer and a nail, you’re rehabbing a property, you like apartments, you like things like that – that’s great, stick to that. If you’re having trouble with that, notes might be a great way to do it if you don’t wanna deal with the headaches and toilets and tenants or the fix and flip aspect.
Joe Fairless: I love that advice. Alright, are you ready for the Best Ever Lightning Round?
Scott Carson: I am, hit me up, Big Ben! [laughter]
Joe Fairless: Alright, let’s do it! First though, a quick word from our Best Ever partners.
Joe Fairless: Alright, here we go – what’s the best ever book you’ve read?
Scott Carson: Very easy, Outwitting The Devil.
Joe Fairless: Really?
Scott Carson: Yes! Outwitting The Devil, by Napoleon Hill and Sharon Lechter. It is an amazing book. We give dozens and dozens of this book away to our friends and family [unintelligible [00:25:59].04] It goes in line with what I’ve talked about earlier, my best advice about being focused. The book talks about – if you’ve never read it before – how Napoleon is having a conversation with the devil, and why is he so successful at having people fail. The devil says, “Well, I’m successful because I get people to drift. They get the shiny object syndrome, they’re never focused… They’re never able to achieve that type of success if they aren’t focused.” That’s hands down my favorite book of all time, Outwitting The Devil.
Joe Fairless: Alright. I’ve read that, and there have been multiple people on the show who have mentioned that book. I just couldn’t get into it, but maybe I need to relook at it, because clearly some smart people are enjoying it.
What’s the best ever deal you’ve done?
Scott Carson: Best ever deal we’ve done… Man, I’ll say probably the biggest deal we’ve done individually – we bought a portfolio of 200+ assets that were worth about 12 million that we picked up for just over a million bucks. It’s been great, we’ve been modifying those loans, we had some that we foreclosed on, but it’s been a really growing period, going from buying one-off loans to small pools… That’s been one of our largest pools so far of assets that we’ve bought.
Joe Fairless: What’s the number one risk for an investor? Say you found another 12 million dollar portfolio, you bought it for a million and you brought in one investor with a million dollars. When she asks you “What’s the number one risk?”, what do you tell her?
Scott Carson: The number one risk is not knowing our property values or checking taxes. There’s three things with notes that you’ve always gotta double check. You’ve gotta make sure your property values are accurate – and that doesn’t mean going by Zillow photos; that means literally having somebody drive by the property.
We made a mistake early on in our business where we trusted a realtor to drive by. She took great photos of three sides of the property, but she missed the big, gaping hole on the other side… [unintelligible [00:27:50].18] So using realtors, making sure that we tell them, “Hey, please look at all sides.” We wanna make sure it’s a Blazing Saddles house. That’s the biggest thing, knowing your values.
Second thing is double-checking taxes. You’ve always gotta double-check the taxes owed, and you wanna make sure that the borrowers’ name on the note matches up with who’s on the county records. If it’s a different name, that property was probably gonna [unintelligible [00:28:11].24] and your note is now worthless.
And third thing is checking title. That’s pulling a title report, or as we call it, an O&E report – Ownership and Encumbrance Report is kind of a watered down title report that just shows us what the condition of the lien history is and if there’s anything else on title that might be blocking our ability to foreclose. Those three things are the biggest things.
Having your vendors in place is also critical. If you buy a lot of notes, you wanna make sure you have your systems down, because you don’t wanna sit around for 6-12 months figuring things out while your fruit is [unintelligible [00:28:42].13]
Joe Fairless: The 12 million dollars worth of property, you said over 200 assets, so I assume over 200 homes…?
Scott Carson: Yeah.
Joe Fairless: How long did you have from when you were notified that there was a potential to buy to when you actually wired the money?
Scott Carson: We had 60 days. 60 days to do the due diligence, and then we also wrote into the contract a six-month buyback period. We had six months to finish up our due diligence. This was an end-of-year closing, so we had to fund by December 27th… And we had six months to review the assets. If they were trashed out, [unintelligible [00:29:19].17] We also got a credit for the taxes owed over that six-month period if we had to send them back. That was a really nice [unintelligible [00:29:26].29] this property is trashed out or just an empty lot now, we swapped it out with new assets.
Joe Fairless: And you said you’re still in the process of turning that thing around, so you don’t know what your returns are as of yet?
Scott Carson: Our returns have been very, very positive. The investor got their money back in the first six months after our six-month timeframe. So within 12 months we got their money back, and we’re splitting profits on this stuff. I still own some of the assets still to this day, and they’re performing; we’ve got some that have been performing for a while that we’ve sold off, others that we have taken down and foreclosed and kept them as rentals or turned them in REO sales. So it’s been a very phenomenal return.
The assets I still own are worth – on my side – four million, and I don’t have a penny into the game. It was all with private money when we funded the deal, so I got basically four million dollars worth of assets for nothing.
Joe Fairless: What’s the best ever way you like to give back?
Scott Carson: Best way I like to give back – we have a big, big passion for two sets of individuals: we work a lot with young kids, we always like to donate to Toys For Tots at the end of the year, along with different children’s charities. We do a lot with a [unintelligible [00:30:31].29] in San Diego where they go out and perform surgeries for children with face deformities, and we also have a big passion for helping past and present military and first responders. We love working with those guys, whether it’s Wounded Warriors or other charities that help out with our past and present military.
We provide education classes for free to those guys, and just really love helping those out because they’ve done a big job in helping us have the freedoms that we have today.
Joe Fairless: What is a mistake you’ve made on a deal, that you would do differently if presented the same opportunity?
Scott Carson: I think probably a couple of those would be with our Chicago deals. We bought stuff and we foreclosed on stuff in Chicago before, around Chicago, Illinois… I would probably have talked to my attorneys a little bit more [unintelligible [00:31:18].02] and what they expected the timeframes to be, and double that timeframe. If they said six months, plan on a year; if they said a year, plan on two years.
We’re still gonna come out making our money back and giving our investors a good return on their money, but some of the things that have happened up there have been outside of our control and outside of our trainees’ control. It’s just kind of ridiculous.
Joe Fairless: Where can the Best Ever listeners get in touch with you?
Scott Carson: The Best Ever listeners can get a hold of me at WeCloseNotes.com.
Joe Fairless: Well, I loved our conversation. I am always educated whenever I talk note buying with someone, and you certainly educated me a lot, from questions we ask loan servicing companies to the three primary things we look for during due diligence, which is the property values, the taxes and the title, as well as the cost implications and timing implications for loan modification versus a foreclosure, and then even sprinkling in some of the states that are more and less friendly to the process.
Thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Subscribe in iTunes and Stitcher so you don’t miss an episode! https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg