In this episode of Cash Flow Pro, we learn about the note buying a business with Scott Carson. Scott is the founder and CEO of We Close Notes, a Texas-based real estate investment company. We Close Notes’ goal is to buy distressed residential and...
In this episode of Cash Flow Pro, we learn about the note buying a business with Scott Carson. Scott is the founder and CEO of We Close Notes, a Texas-based real estate investment company. We Close Notes’ goal is to buy distressed residential and commercial properties from banks and hedge funds.
Scott has been doing this for 17 years, and together with his investors, they have managed to purchase over $50M in assets in the past 18 months. Today, we will understand what it takes to buy notes, the process, and how you could get started on this real estate path.
In this episode, we discuss:
• What is the note buying business, and how did COVID affect it?
• Tracking payments and working with servicing companies
• The process of buying notes
• Understanding what belongs to you and what belongs to the borrowerIf you are interested in learning how to start buying notes, tune in on this episode to find out more!
Find your flow,
Resources mentioned in this podcast:
Casey Brown 0:00
Nana, rock and roll Hey there and welcome to the cash flow pro podcast and channel, I want to welcome you today and I have got a treat because this is one of the subject matters that I had myself suddenly just took a deep dive into and learn that that even existed as far as like the profits and everything that were involved was involved in it. So I am here today with Scott Carson of we closed notes and Scott's going to go into it and he's going to tell us all about his note buying business, I hope and he's going to tell you how you can possibly invest or be profitable or learn or whatever he wants to help us learn about the note buying business. So Scott, how are you today?
Unknown Speaker 0:50
Casey? I am doing wonderful my friend honored to be here just honored to give the cashflow pro audience and family some good content they can use out there in their make their investing that much more profitable.
Casey Brown 1:03
We are certainly glad to have you. And like I said in the intro the the note buying business, of course, it's always one of those things that most people like myself, we've always heard of it. We know it's there. We know it's the person we don't want to hear from at some point. That's ever the case, you know, but But nevertheless, obviously, it's been a profitable and a good business model for you. Because I think we you told me before the show that you've been doing it was it 15 or 20 years, I can't remember weeks, I think
Unknown Speaker 1:29
17 years of suffer 17 years in some sort of new aspect of buying or originating and most people think of when they think about the note business, they're thinking about owner financing, I'm gonna take a property, I'm gonna offer up terms, and that's a facet of the business. But that is just a small, small facet, I actually don't really focus on that spark. But I focus on a niche where we buy the debt, actually, from banks and lending institutions, and we're usually buying the debt at a substantial discount, but we're way below value, usually buying non performing loans on residential commercial properties. And we make the biggest bang for our buck by then, like you said, reaching back out to the bars and say, Hey, man, you know, pay, you know, stay with us and kind of go from there.
Casey Brown 2:19
So I guess obviously, the first question I feel like would be burning in everybody's mind. I know it's burning in mind. Is, is it's cold? And just is how has How has COVID Obviously impacted? I don't want it to sound like I'm just saying how's it impact your business? Because we know that we know that the moratoriums in the non, you know, pay, you get to say lifestyle has kind of been of the norm lately. And so what's what has that? What specific new strategies maybe Are you kind of looking at or any kind of basics you can tell us about that.
Unknown Speaker 2:59
So the last two years with COVID did put a little bit of a hamper on things, we fortunately for us 85% of our portfolio of our performing portfolio where we've already worked with the bars before that, to get him back on track, actually continue to keep paying. They kept paying. And of course, we did have a chunk that like hey, I need a modification or I need a forbearance agreement, or I'm just not going to pay and good luck trying to get rid of me. And that's gonna happen. So we had that happen, but we still work through a lot of it. You know, the inventory did tighten up. I'm not gonna lie. During that two year, you had a lot of banks like, Oh, we don't want be the bad person. We're not willing to sell that stuff. Now wait till the end of the year or wait till the first of the year. Yep. Now, we still kept buying, we're still buying non performing. We were buying contract for deeds, we were buying performing stuff. You just had to hunt a little harder to find it. Yeah. And I think that's one thing that kind of separates, what we do we closed notes is a lot of investors, especially when they start thinking about new investing, they think of a couple there's a couple of different platforms out there that they can go and take a look at, make some offers on. But that's just, that's just a small drop in the bucket something like websites like paper stack or 10x, you know, for commercial loans or, you know, you look at like essence servicing last minutes available for sale or loan and the last but that's such a small small drop off, but we looked at billions and billions dollars of debt over the last two years and still bought quite a bit of stuff because they're still non performing stuff that's not government backed. And one of the big things about the note business is you got to know what's you know, obviously you're buying a note, a bar is not paying, you gotta know what's going on and what state it's in and what's going on with that state foreclosure like here in Texas, we do everything fast, you know, fast highway staff foreclosures, fast executions, you know what I mean? So it's the fastest in the nation. Now compare that to like New York, I don't buy in New York because it takes up to three years to foreclose. All right. So you got to know what's going on in that specific state. Now, the good thing is you're buying in a state that has a longer foreclosure timeframe, you get a bigger discount. That's right. Um, so that's we just adjusted some things. Okay. Okay, let's go to a little bit, you know, let's look at Florida, as I like to call it God's waiting room, you know, or Ohio or, you know, some people don't like
Casey Brown 5:11
it took me a second
Unknown Speaker 5:15
we apologize to all of our Florida listeners, they know it, you know, when you're out number by oxygen tanks and Cadillacs, it's, you know, it is what it is. But anyway, it did hurt us a little bit. But back on, you know, we've gotten most of our bars back on track in the last few months since the first year, it did lead to more inventory rolling in and it kind of trickles in, depending on what's going on in specific states. Like I said, with the faster foreclosure state, we're seeing inventory speed up in some of the states, it's a longer process gonna be a while till we see stuff in like, like New York, New Jersey, South Carolina, stuff like that rolls rolls through. So, you know, it's the beautiful thing. Is there are still banks out there originating? I think I did some research and right before, we haven't had the numbers come out yet for q1, but the end of q4, there was roughly about 82 million loans out there. Okay, 8180 80 million. And at the end of the q4, we're still sitting at roughly about a about a 3.4% 4.5% default rate, that still means there's somewhere roughly around 3.8 million homes where the borrowers are 90 days behind or greater. Wow. Now think about that. For you back here. 2010. At the peak of the last recession, we had 15 million homeowners that were you know, in default now. So now of that, it's about Yeah, it's about 20 25% of that just under that still means there's a lot of opportunity out there with what we do. So that's the thing to keep in mind, you just have to be more creative, we leverage a lot of our marketing isn't direct mail, it's a lot of LinkedIn, reaching out to asset managers at banks, direct mail, once we've got a bank contact, we'll just drop an email out once a month to them, and they'll send us a list of maybe want to be from like one note or maybe 900 notes.
Casey Brown 7:03
Sure. Size of the bank, I'm sure. Now one thing that that I've gotten an education in real estate over of course, as everybody else has over my career, and I came in, in oh seven. Now, with that being said, and I came in I came in real estate sales, real estate and as a real estate agent, real estate broker capacity. And we are really close to Fort Campbell military base. And one of the very first pieces of education that I got was a VA home owner or in this may even carry if he does, I don't know if it's it was specified to a VA mortgage or if it was if the soldier is deployed out of the country, he cannot be foreclosed on. And I don't know if that specifically goes towards if they're just a VA home loan, or if that's any home loan, if he's a soldier, he's deployed, he can't be foreclosed on. But either way, man that was it was such a sad, sad state of affairs to see so many people and families and everybody's struggling and wife's are running off and husbands who were stay behind her run and you know, everybody's just scattered it was such and I can only imagine then you having to kind of deal with a lot of the I don't want to call them family issues. But but the the domestic issues, let's say of that type of scenario.
Unknown Speaker 8:27
So to answer the first part of that question, it's it's active duty military, you cannot foreclose on active duty military employed, if they're deployed exactly no matter what. Doesn't matter. Okay, no, no, no judge is going to end up a proven and foreclosing out our military when they're deployed, it's just, that's bad. No banks can do it. If a bank does they do not want the bad press that would come from that, obviously. Okay. So yeah, there's always a thing we look forward to I use the ball or active duty or they deployed, if we're, if we think it might be a military. And we can see that stuff by looking at the actual collateral file the loan and the documents when they took out the loan of ffcs. a VA loan is kind of obvious, but half the time and all that stuff. Exactly, exactly. So yeah, I mean, you look back at what happened beforehand, you know, I don't talk to the borrowers per se myself, most of the time. Now, when you're a note investor, it's different than being like a landlord. Okay, you don't get a phone call at two o'clock in the morning when the AC stops working. When you're the bank. Yeah, the landlord does, you know, don't get a phone call when little Timmy flushes the rubber ducky down, and now they've got an indoor water feature. You know, the landlord does. The bank doesn't but we use servicing companies and we use attorneys kind of that buffer. So if something's going on with a borrower if you've ever been late on a mortgage, ever been in default, stuff like that, you know that the after once you're seven days late on your mortgage payment the the phone basically rings daily, and the mailman is tracking you down to deliver certified mail trying to keep you back on On Track, and that's the whole goal with the bank. And that's, we use servicing companies when you're buying debt. Some states have debt, buying licenses, you got to have more specific things in place, you're servicing companies got to be licensed in debt collection, because there's Fair Debt Collection Practices, like they don't call you threatening you. They don't send over you know, you know, the my in Bicycle Club banging on your door to collect on Yeah, that's right. Do that. Okay. Right. Yep. But there's still things that they can do a defy, they've got to, you know, tell them you know, anything you say, you know, we're debt collector, and then you use us collective debt, kind of like, you're right, read you your Miranda rights, almost the Miranda rights on deck, right. That's the thing. It's and I've always been a big, big advocate of working with homeowners. That's always our number one goal. Honestly, one of the biggest mistakes I made though, when I first got in the note business, before the Great Recession, I always tried to foreclose on everything like oh, they're dead beats, you know, they don't deserve to stay. And I would have made a lot more money if I'd have worked to modify and keep people in their houses, because that's actually a better ROI for us to keep somebody in the house getting back on track and a payment that makes sense for them. And both for us. Yep. We're not putting out legal fees, we're not having to reap, repair the house and try to list it. If we get a bar back on track, and they start paying on time for 12 months, well, that increases the value of that paper. So if we bought it at 50 cents on the dollar, in 12 months, we could probably sell it at 90 cents on the dollar without having to fix or flip it deal with contractors, the increased cost of wood and materials these days, we can sell it back to the back to Wall Street back to other investors at a nice profit plus we got cash flow along the way. Yeah, so that's that's the thing when I started Hey, what's going on? You know, some some investors are wanting to be really specific and picky. Let's get have you fill out a financial term sheet. I tell my servicing companies and my staff, like let's see if you can get them on the phone. Let's make something happen then.
Casey Brown 11:49
Yeah. Better opportunity.
Unknown Speaker 11:52
Yep, exactly. What are you? Oh, are you working? Just let's work with it. Can you start paying again? Yeah, you pay a little bit extra. You know? Can you if you are they can't Hey, we want to modify we will even paid in the year, you got to bring something to the table? Yep. Yeah, no. Exactly. Exactly.
Casey Brown 12:11
Towards the collectors, I'm sure.
Unknown Speaker 12:13
Exactly. And so that's the whole point of like, okay, what's the situation? What's your country western song that you're gonna tell us? You know what I mean? And I mean, we know a lot of times when we're buying non performing debt, we know what's going on with that ball, or, you know, through looking at the servicing notes, we can see if the borrower has been friendly or not friendly. We do a little social media sleuthing can tell if they're active, you know, you know, their weight one bar, say, Hey, I'm not gonna pay my mortgage this month, cuz I'm gonna go to Orlando and go to Disney World. You know, or another one that literally had his leg broken, he was self employed out of Chicago, I was like, okay, he's out of work for six months, let's just give them a six month forbearance agreement and get them back on track.
Casey Brown 12:50
Back? Yeah. And that's it. You know, and I think the world in general, especially the business world, I know, especially the corporate world. You know, it's like anything else, you're, you're basically providing a service, you're providing a service to in two different directions to the bank by buying the paper and to the to the borrower by saying, Hey, Mr. borrower, you know, you, we see that you've, whatever, whatever, whatever, and then, and then we're going to give you a forbearance, or like you said, of six months, or whatever the case is, now, I guess from a business standpoint, I, you know, we've got we've kind of covered the, the whole, the way, these things kind of relate to the personal situations, and, and how, excuse me, the abilities for you to try to work these things out and obviously become continued to be profitable. But from from a business standpoint, where, obviously, you said that you said pre show before we hit record that, that, you know, the trick is finding the finding the paper, and especially finding the good paper, I you know, Texas things happen fast and you want to buy a New York or California, you know, you might as well just hang up your money and wait, because you're going to be a while. Um, with that being said, what, what does what does the business standpoint when you're looking at saying, okay, hey, my investors need to return, it's time to start moving some of this paper out of here and getting our money getting our money back or getting our return, if we, I mean, how does how does all of that look? I mean, does it happen in an individual note basis? Or does it happen? Like, do you just pack up a box and say, here, here it is.
Unknown Speaker 14:35
How does that look? It's a little bit of both, honestly. So it all depends on on how we're buying the assets. We're buying an individual note, we often will determine that that note, if we get it back on track, it's going to have somewhere between 24 and 36 month lifespan with us. Okay, especially when we're buying in about 30 Different states because each state has a different foreclosure timeframe. So here's, here's the thing. We buy a nonperforming. We're usually targeting owner occupied stuffs because that gives us the most amount of flexibility get back on track. If we can't get the borrower to the table in the first 90 days, then we look to either foreclose and start the legal side to foreclose or will liquidate that asset and sell it off to somebody else who wants to take on the deal and foreclose deal with it. If it's a troll borrower, we bought at 50, we'll sell as a one off at 60. And we made a 10% return in 90 days, which is a pretty good annualized yield for those. Okay, yeah, if we get them back on track, they kind of move into a second portfolio that we have of our performing paper, which we're going to hold those notes for 12 to 24 months of performance. And then at the end of usually, that timeframe, we'll either A, pull them together and sell them off to a bank or a REIT, or individual investors and maybe do a onesie twosie or maybe doing a book, or will depend on what our money costs are specifically, with that portfolio. We may keep it for cash flow, we may go back to the investor the investors and say, listen, hey, there's been for three, two years, three years. Do you want to renew for another two years? Or three years? Yes, on that. Yeah. And just keep the cash flow going, you know, or dependent. You know, it may be a point where we've got cheap, cheaper capital, you know, when a few years ago, we're financing stuff at a pretty decent return, because we're getting bigger discounts. But as the price has gotten more competitive, our money costs need to be cheaper. Yeah. So if we had high expensive, like, you know, 10% interest rate money from an investor in an IRA, but we found investors to come in at 6%, we will go ahead and refinance out that investor for the cheaper, cheaper funds. And that way, we're seeing a bigger yield on the back end. That makes sense, Katie?
Casey Brown 16:36
Oh, makes perfect. I mean, it's, it's all about the Yeah, it's the it's the delta between, you're basically living off the delta between all of those different scenarios and, and, and figuring out how to go but so So walk me through, walk us through the process. So So So you call local, you call the bank downtown and bank downtown says, Hey, man, I've got this guy. It's a $200,000. House. He owes us one. He owes us 100. Or he owes us one fit. I don't even know what
Unknown Speaker 17:07
I mean. Let me go through an actual case study that I'm doing right now. Because it's so yes, perfect. We got a, you know, I've been doing this for years. So we've got a pretty good relationship with a bunch of different REITs real estate investment trusts and institutional companies and I get this one hedge fund calls me once a month with a tape and a tape is just an Excel spreadsheet. Right. And you know, it had 78 assets on it last month, and there was one asset we saw was in Houston, Texas. Okay, now don't buy a lot in Texas, because it's usually too overpriced. But this one caught my eye. It's the borrower borrows deceased, he owes 210. That's just total payoff back payments, stuff like that the house is worth somewhere between 202 30 Okay, a payment hasn't been made in two years. And so I looked at what's going on with this one, what do you want for it? And they came in said, well, we want somewhere between 95 and 109. And I'm like, okay, so you're opening the bid at 95. What's your strike now price? What can I buy it for me now? Not not worried about and I got 109? I said I'll take it. Okay. I'm like stupid not to it looks pretty good at three bedroom, two bath, 1600 square foot house, great neighborhood and he's APO on it. Then from there. Like I said, let's go ahead and order it. I mean, let's go ahead. We'll take it and I have basically three weeks to close on it. So yeah, then I order a BPO. Now, if it was occupied, I would only be able to get an exterior BPO.
Casey Brown 18:30
But the borrower's rights opinion, exactly. Can't
Unknown Speaker 18:33
have a realtor. I had a realtor goodbye and pull comps and he walked through it took photos and came back. And then I also paid 100 125 bucks for a BPO too. So I had to kind of price points. Well, they both came back at that 200 to 230 mark. So Mark, because it needs some work. It looked like somebody had just been evicted, you know, trash and stuff around there, not 90 structural damage, basically a cleanup crew and I could list the thing. So we bind that and on a closing this Friday on it, I reached out to my investors and said, Hey, I've got this deal. I'm looking for 125 to fund on this $200,000 asset. And it's gonna go one of two ways. The borrower's the estate, I should say now, I would have the point, the price point that makes it if I if they wanted to keep the property and come in and start making payments on time again, I'm at 50 cents on the dollar, the notes at 6%. So if they started paying on time, I'd be making at least a 12% cash on cash return right away, right away. And then if I sold it at 80 cents on the dollar, I bought it at 109. I sold it at 160. Yep. And a year. It's another $51,000 in profit. That's not a bad day at the office, you know? So but they're not so we're all going to offer up Cash for Keys. We'll give them two grand to sign the property over there in New York State. They don't want to own it here. Remember it? I bought it. I bought the debt at 109. They still owe the 200 over 200 plus they don't have any equity but the Buying the debt, I'd kind of control the equity value so, so the borrowers will give him a little bit of money to sign the property over to us, and then they'll walk away. So the minute they sign it over to do a deed in lieu, or a friendly foreclosure, I'll clean it up. The property is technically mine, it's now a foreclosure technically, in our real estate owned and REO don't typically the lender will just clean it up and then listed on the MLS for traditional sale. Now, if the borrower's won't play ball or the estate won't play ball with us, then we'll just go ahead. And, you know, follow the foreclosure documents. And we'll foreclose out the estate in 90 days or less here in Harris County, and then we'll sell it was to sell it at the auction for somewhere around 80 to 90 cents of what's the somewhere around 180 to 190. At the auction, because that would leave about $40,000 in equity for somebody to take down themselves and you leave that much equity, someone's gonna buy the auction, and then I get paid in 30 days later without ever having to fix it up or cleaning out or anything, and it's gonna cost me about 2000 bucks at that point in legal and servicing costs to foreclose if they want.
Casey Brown 21:08
That was my next question. How much does the foreclosure cost you from? From a standpoint of obviously, you've got to get an attorney that's there, I assume locally or somewhere one that services that local area?
Unknown Speaker 21:18
Yeah. It'll vary by state like Texas is fast about 1000 bucks to 1500. In Florida, it'll cost me about five in New York, 10. Chicago, who knows I don't like Cook County up there. It just if you don't live in Chicago or Cook County, they don't the judge does not side with you. So that's one area I avoid. Actually, Chicago, I love deep dish pizza in Chicago sports team do not like the foreclosure.
Casey Brown 21:43
I got a Bulls fan.
Unknown Speaker 21:45
That's right, doubles. For the win.
Casey Brown 21:49
Go. So, you know, all of that is, is it's one of those businesses that I've never talked to a note guy, I've never talked to a poor note guy. Let's just say that of all the times I've done business and all the stuff I've done, I mean, that the note business is huge. Now, I want to flip to the other side of this, you have made mention of the quote unquote, investors, you went to your investors. Now, I want you to tell us a little bit if you don't mind about what those investors look like, like, what does making that call look like? I mean, you're you just sent out an email, do you have a bank of people that routinely invest with you? Is it hedge fund money? Is it what what's the what's the what's the what does that
Unknown Speaker 22:36
look like? Great, very good questions. And we've done one of the things that I think separates ourselves that we closed notes from most of the other people in the note industries, we do a tremendous job marketing. I mean, we're doing webinars about basic information. And I've had a webinar every Monday night, almost every Monday night for 11 years, on a free webinar just on information, you know. And one of the things that we do is, that's a great way to get people in to learn about the note business, and they become either buyers, students of ours, or investors like, Oh, this looks too hard. I don't want to do I'd rather write a check. But at least I know what you're doing now.
Casey Brown 23:10
Because this facet of the business exists, yeah,
Unknown Speaker 23:12
if they'd like this interest me, but I don't have the time to do it. But you know, it's always easier to raise capital from an educated audience than a non educated app. So that's one facet of reaching out when and I can do an email blast, hey, I've got a deal who wants to make an above average return? You know, let's talk. And the same thing is, we also do a lot with mining county records. We'll go to the appraisal districts and we'll do a search for people who have used their self directed IRA to buy a property so I could go to I'm in Austin, Texas, Travis County, go to Travis County and do a search for equity trust FBO, you know, and that's if it shows up on the county pressors County Assessor's website, that's somebody who's use their IRA to buy property. Same thing I look for quest Trust Company. In five minutes, I can find about 500 people who have either used their IRA to buy a piece of property or if I go to the county clerk, I can do a deed search to see who have lent money out of their IRA account. Yep. And those Ira investors are, it's like shoot fish in the barrel because they're educated, they understand real estate, their IRA money for the self directed stuff. Exactly. And honestly, note investing is really, when you talk to the folks that question, over about 50% of the portfolio is either in notes of some sort where the borrowers are right. I mean, the lenders originated or they bought a note or purchased a note. Yeah. So it's a great, great conversation, you know, then it's all about providing the due diligence, the value of the property, making sure we have insurance on the property, protect ourselves and our
Casey Brown 24:40
borrower. I was just sitting there thinking the hour and I was like, I wonder you insured some. So
Unknown Speaker 24:46
Well, here's the thing. A lot of times the borrowers will have insurance on it, that's great. But if you don't, then you got to put force placed insurance on it to protect your investment. You know, and then then it's, you know, then we're checking the collateral files, which is West what we're really buying is the loan file the ability to be able to foreclose. And then, you know, looking at, you know, making sure there's no other outstanding liens on title that would stop us from foreclose and making sure we're in the first lien position, making sure that all the if that mortgage has been sold four times before we bought that there's the correct documentation at the county, on the loan file showing that transfer what's called an assignment of mortgage because if I buy a note, the deed doesn't change the deed still the borrower on the note? That's right, it just an assignment of mortgage is what shows up. If you've ever bought a house with a traditional bank, it's 30 days later, you got a letter saying, Hey, your notes been sold. It's that kind of same thing. We're saying that layers how your notes been sold, thank you for not paying KC bank. But now you have to pay Scott back.
Casey Brown 25:40
There you go. Now, so of course, there's my real estate background is got 1000. Other questions pop bounce around in my head. And I'm trying to I'm trying to organize those in order of what I think the listener is going to want to know about this book, because obviously somebody calls you and says, Hey, Scott, we want to we want to become investors, or we want to get in on this or we want to whatever. So the first question I have, I guess, is who? So? Where is the chain? Oh, do you have a title exam done? Because one thing that, especially here in here in Kentucky, is is judgment liens, judgment liens, from credit card companies and stuff like that. Now, obviously, they come after you, you're in the first place. But if that if that borrower files bankruptcy, how is the equity? How is your equity protected from the other creditors that could potentially be involved in that?
Unknown Speaker 27:13
Don't know if it was on my side or your side, I
Casey Brown 27:16
know mine. I don't think I could. But I couldn't hear you either. I couldn't hear anything. You were saying?
Unknown Speaker 27:20
Maybe it's my honor. My apology, man. I
Casey Brown 27:22
don't know just Oh, man. No, it is it's still going. We're all good.
Unknown Speaker 27:25
Okay. So you're I think you're asking the question is where does the chain of title come in? Or what was that question?
Casey Brown 27:31
Yeah, what? So the chain of title Where does? I know in the state of Kentucky, you have judgment liens? Yeah. And when you get judgment liens involved, they tend to they tend to kind of muddy the waters a little bit now not so much that you don't lose your position. But if then the borrower files bankruptcy, and then the trustee sells that property? I mean, it just seems to me like there's some there's just some, some and then these may be just nuanced thoughts that don't happen very often. But I guess I'm just saying if if a borrower files bankruptcy, and there's a ton of equity in the property, but you know, the equity would be between it, okay, that
Unknown Speaker 28:12
explain is I think I know where you're going where the first lien position, and that's when the safest thing is being on the taxes. Okay. So when we're in the first lien position, if there is equity, we're always buying discount that makes sense to what we can collect, I'm not going to pay 95 cents on the dollar. If there's a lot of equity deals, oftentimes, we don't even chase those because the banks are gonna want closer to 90 cents on the dollar, what's owed when there's a lot of equity, because if they foreclose is gonna be paid in full, okay? Now, if there's a judgment that gets placed on the property that's junior to our senior position, we still get paid any equity. You know, if the borrower goes out and sells a house, and we're owed 150, and they sell it for 200, but there's a $20,000 judgment, that judgment gets paid third taxes, if any tax still gets paid first, we get paid second, and then the judgment gets third.
Casey Brown 29:04
I see now where my question went arrived, because your your equity is in what you paid for the debt versus what, what's owed. I'm thinking I was thinking borrower equity versus versus where those judgments can come into play. So that makes perfect
Unknown Speaker 29:20
sense. But it's a good, that's a great question. Because a lot of people that get into the note business, they don't think that way. They think like the investor Oh, look at all this equity, I'm gonna take this property back and all this equity, well, that equity doesn't belong to us. It belongs to the borrower.
Casey Brown 29:34
That's right. For You is the difference in what you paid for the note versus what's
Unknown Speaker 29:38
exactly the reverse of the payoff, but a lot of people they get like, oh, it's worth 200 or 250, ARV, we'll pay 175 or 184. Well, the borrower only owes 150 Why am I going to pay 30 grand more than what's owed, you're not going to collect on it. And so we see that that's one of the biggest mistakes that people that get into the note space without understanding the nuances. You have to think like a banker First, like a fixin flipper, a traditional real realtor.
Casey Brown 30:03
That's right now I want to the the note exposure that I had was, like I told you before the show was was, or the learning curve that I had was a guy that was buying second mortgages. Now, the the second mortgage only moves to the first position if the first is paid off, is that correct?
Unknown Speaker 30:23
No, not quite. That's the here's a good thing. If there's a first and a second, if they first if they the bank on the first lender on the first accepts that deed in lieu, and doesn't check title to see the second than the minute that that deed in lieu is signed, the second now becomes the first. So one of the things that we do as a note investor, especially we're buying first things, we're always checking title, okay? And I don't care if there's a second because most of times, if they owe more than the property's worth, we're just gonna foreclose out that second, if there's no equity, but that's why you had checked out because if there is a second, you cannot accept the deed in lieu, then at that point. I mean, you can but you risk now the second going into the first lien position and controlling everything. So in that case, what we do is called a consent to judgment or, you know, whoever Cash for Keys, we do cash for consent, then we get a consent to judgment sign and just shows that the bar is contained to the what's owed in the first so that we can expedite the the foreclosure to wipe out the second and I'll offer 1500 bucks two seconds to go away. And I'm like, let's I'll give you 1500 If there's no equity, just to go away, because that's what it's gonna cost me to foreclose. If you want to play ball, get 1500 bucks a day, or you can wait six months, and you get nothing at that point. What do you want to do?
Casey Brown 31:39
Yeah, that makes sense. And it's all it's all relative to saying, hey, here, here's the best case scenario and the best case scenario as every day goes down. The best case scenario gets worse and worse and worse. And, and so anyway, but All right, well, listen, man, I want you to tell the listeners how they can reach out to you I know you said you had a class. And then there's there's just a number of different resources that you have, where you can be able to where somebody out there that's listening that might say, Hey, I either want to invest I want to get a part of this. I want to learn how to do it. One of those three scenarios, I want you to tell them how they can get in touch with you and what you have to offer.
Unknown Speaker 32:20
Yeah, the easiest thing was our website we closed notes.com We don't talk about notes. We close them alright, we're actually been over a billion dollars in debt closed over the last 17 years. You can go there's my web main website I've got the podcast the note close your show or note Night in America or note camps. I've got a couple different podcasts out there with over 1000 different episodes. We do have a special thing and I'm I love what you're doing. And so we offer up every third Saturday of the month a one day kind of a Cliff's Notes version of the note business, dip your toe in the water to one day class to kind of give you a a sound fundamental aspect to see if notes are something that you'd really like to pursue. We call it note weekend. third Saturday of the month, you can go to note weekend att.com and get signed up with it. It's about eight hours of me teaching you live let's buy another eight to 10 hours of training videos. Usually it's 99 bucks but if you use the code cashflow Pro, at note weekend.com cashflow pro nospace all caps cashflow pro.com I'll give you the class for free. And you don't have to wait to take the class once you get signed up and use the code cashflow pro you get it for free will actually send you a link with replays of the previous class you can start learning today. And so when the great thing is I always tell people like listen if you want to learn it but no business or you want to think it's exciting go through the one day class learn it's any investment is worth you spend at least one day to figure out if it's right for
Casey Brown 33:44
your work even in an investment of your time post learning I mean you have to you have to listen and as as as as niche down as this discussion has been and and as many little hot little hot points as we've hit I gotta imagine that you talking about it for a day is going to leave somebody pretty much just exactly where they want to be either they want to know more about it. Or they're like hey man, this is just too much too complicated, so on so forth. So it's we closed notes and that's notes is plural, right? So we closed.com And then the resource again or the class
Unknown Speaker 34:22
that's the classes if you go to note weekend.com weekend.com And it'll ask for your name and where to opt in and then they'll see a checkout page just use the code cash flow pro no spaces, all caps, it will knock that down to you for free and then you'll get a link with a replay and then I got to throw in one of the things if you're listening to this right now. Dude Casey is kicking ass and taking names here on the podcast you guys love it. So kick you wherever you're listening to. I want you to pull out your phone hit the subscribe button. And then I want you to make sure you leave a five star review because we as podcasters we love to hear from our audience. What if you like it great. If you don't like this episode, tell them we want to hear From you, like leave that five star review hit the subscribe button. So you are always up to date on what Casey's got cooking with the cashflow pro podcast
Casey Brown 35:06
awesome, Scott man, I can't tell you how much we appreciate your time and I know with with everything you got going on it's just it's it's it's it's hard to carve out I know it seems like everybody's like well just take 30 minutes well, that's 30 minutes of not doing something else that could potentially be profitable. But man i we so much appreciate your time and and listeners, please reach out to Scott there's anything he can do to help you get with him. Let him teach you how to do it. Let him show you and go to we go to note weekend.com And he said he set us up a special promo code cash flow pro all caps, no spaces, and you will get that for free Scott. Thanks, brother.
Unknown Speaker 35:44
Hey, Casey. Thank you, bud. Yeah, man.
Transcribed by https://otter.ai