Something everybody struggles with is the aspect of going bigger in your business. We all want to go big and do big things. A lot of the real estate seminars or gurus don’t prepare you to do big things. They prepare you for the one-off asset and they’re not helping you in the long run to really go big. They’re not helping you scale your business. Scaling is very important and you need to be focused on it initially from the get go because you should start with the end in mind. If you want to build a business, you have to build a big foundation. Challenge yourself to do bigger things because if you miss, you can still do amazing things with some big stuff and you’re still going to grow a much more exponentially larger than if you’re just willing to do a little bit. Scott discusses the importance of growing your note game bigger to take advantage of opportunities.
Listen to the podcast here:
Go Big Or Go Home
This topic is something I think everybody struggles with for the most part. It’s all about the aspect of going bigger in your business. Go big, that’s what we want to do. First and foremost, I’m always excited that you’re paying attention. That’s one of the big things that is very humbling to me. We’re so excited to provide this on a daily basis for you. It’s just overwhelming. What we want to do is the topic that’s something that I think everybody struggles with. We all want to do big things. I don’t think we get into real estate or entrepreneurship to do something and that we want to make $15 an hour or we want to make $30,000 or we want to work so hard to make less than minimum wage. I know it’s foreign ground. It’s new territory. What do we do? What do we say? We’re like brand new puppies. Everything is exciting, we don’t know which way to go.
Unfortunately, I’m a big believer that a lot of the real estate seminars or the gurus out there don’t prepare you to do big things. They prepare you for the one-off asset. They’ll fix and flip, they try to do everything yourself aspect of things and they’re not helping you in the long run to really go big. They’re not helping you do bigger things because they’re so used about giving the one-off asset. It’s a singular focus. It’s not about scaling your business, it’s about individual asset. Scaling is a very important part and I think you need to be focused on it initially from the get-go because like my good buddy, Aaron Young, says, “Start with the end in mind.” If you want to build a business, you have got to build a big foundation. To build a big building you’ve got to have a good foundation.
Unfortunately, most people are building very small foundations and they wonder why they struggle when they try to go big because they’re not set up or prepared for that big jump. If I could look back at anything over my last fourteen years as a true note investor, true real estate entrepreneur, I started investing in real estate in 2001, 2002. I fell flat on my face, messed up tragically, got up, licked my wounds and went in a different direction than where I went before. I was fortunate enough to get some really good mentors and get some great people out there that really helped me out. Starting off with Bob Leonetti and Jayme Kahla, started a mortgage company. Those guys helped set me off in a good direction. They gave me some great coaching mentorship on where I needed to go and they were able to help me do things bigger and better than what I originally had thought before.
Everybody Is Struggling To Find Assets
I see this on a daily basis. I know that sounds like a broken record sometimes but I do pay attention to what people are posting. I do pay attention to where people are posting as well, whether it’s on Facebook and the groups or a bigger podcast. I may not always respond but I do keep my nose to the grindstone, ear to the rail, to see exactly and listen into where everybody is struggling, where everyone is getting bogged down. The biggest thing I see people getting bogged down these days is much about, “Why can’t I find assets? I’m having a hard time finding decent one-off assets.” You have to realize that the market has evolved. Especially the market in the last twelve months has evolved dramatically to the point that the one-off buyer, the one-off investor, if you’re buying three assets or less, you’re probably not going to get a lot of stuff accepted. You’re not going to be in a spot to really make things happen.
Most people are looking at what they have in savings and they’re having their IRA and that’s how they are valuing the amount of assets that they can buy, the amount of assets they can fund. That is so reverse. It’s so bad because it becomes not a plentiful mindset but a scarcity mindset at that point, “I can only bid on these two assets because I only have $25,000,” or “I can only bid on these three because I’ve got $50,000, and that’s all I’ve got.” They don’t realize that the wealth of information out there, the wealth of people with assets or money sitting on the sidelines, just waiting for something to happen, they don’t get that.
They don’t believe in themselves and I see this happen over and over and over again. I’ve talked to a lot of people recently, they were like, “I made four offers or I made three offers.” “How many bids did you submit?” They said, “I submitted in three.” What happened? They told me that it got bought up as part of a mini bulk or bulk. It’s been sold. If I could look back, if I have one regret in this note business is that I didn’t buy a lot more earlier on. Yes, we’re talking as a decade. Hardly ten years has gone by since 2008 to almost 2009 with everything going on.
We’re at the ten-year mark and we’ve been talking about this for ten years that we thought that this was going to last three years and it’s still here. I thought somebody else posted about the fact that all these companies are creating non-prime loans are doing the same shenanigans in the mortgage just like they were doing over a decade ago. We’re going to see this stuff again. It just that at that peak where we’re at right now, the people that are getting the most amount of deals accepted are those that are going big. They’re going big. They’re buying in bulk. By bulk, I’m not talking 100 assets. Going big is a little bit different than going up there and buying 100 assets and not having any clue. I understand you’ve got to cut your teeth. You’ve got to get your systems in place, if you’re going to go big. You’ve got to have the time because it takes time. You’ve got to have the vendors.
Social Media Gives You The Ability To Go Big Much Faster Than Before
You’ve got to have the people available to help you out whether it’s for sourcing company set up, your attorneys. There are some things that you’ve got to set up, but you’ve never been able to go as big or grow a bigger business than you have in this society and the world we’re at today. With social media, with the marketing, with the ability to connect with people in an unparalleled fashion. With the way that social media works and Facebook groups and meet up groups, you have the availability to go big much faster than before.
I wish that I would have bought a lot more earlier on because it is a lot cheaper pricing ten years ago, literally pennies on the dollar. The thing you look at is I was in that same mindset, “I only got little bit of this money. I’ve got to find a buyer to this before I close my deal,” and that’s not what you want to keep in mind. What you want to look at is starting off right off the bat. The whole go big mentality starts with the offers that you make.
I talked to probably four people who have called me and said, “I’ve got my bids. I’ve got this tape of 100. I narrowed down the three that I really wanted. I spent a lot of time on due diligence on this stuff. I’ve spent day, day and a half. I really dove into it, submitted by bids, and I came back and found that they were already bought or they were just closed to somebody else.” I hear that over and over again and I have really changed my focus on how we see that offers, did not spend in much time on the front end. I see some people commenting online.
One of the most liberating and the most unshackling of things was when I really started to give less of a shit about due diligence on the front end. I know that’s going to sound, “What? You mean you don’t know everything about the asset before we make an offering?” The thing is no. When we get pools in, my goal is I want to try to control that pool. I want to get an offering almost immediately. Sorting those assets by just a couple things to help me identify the bulk of the stuff I’m looking. Maybe 400 assets would take, but I’m going to look to send an offering of at least 30, 60, maybe even 100 assets at a time. It’s going big and some people are like, “You couldn’t pass gas or pass a PVB too if you thought about that.” How do I know this? Because my whole staff freaked out when we told them that’s what we’re doing. They’re like, “What?”
I laughed and when we send in 100 offers, I guarantee you we’re not going to get 100 accepted. There’s going to be some that are sold off, some that collaterals are missing. There’s some that we’re going to kill once we get and accepted offer, price point or they countered back that we ended up killing anyway. If they accept our price on some of these, great. Maybe we overbid on a few but I guarantee they’re going to be excited more than anything else to deal with somebody who’s got 100 offers, one person with 100 offers versus dealing with 100 people with one offering. If they go big mentality. That has happened every time we submitted a large pool bulk offering. 100 offers in, 60 came back countered, some had been sold at 40. That’s okay, we still found some really good one.
We have a really good question, “When you are bidding on 30 for example, are you making one large price bid or 30 individual IDs?”
I think that means JV doesn’t have to be off. Basically, what I do when I submit a bulk offering is I give loan level pricing. That’s what they’re usually going to want, this loan level pricing. That means each loan has an offer. I run some formulas. Usually what we’re doing is we’re bidding on assets where the borrower has made a payment the last year, especially in the last six months, depending on the size of the portfolio. If that’s the case, especially if it’s a contract for deeds, they’re evictions. They’re fast stuff. I can get half of those that we end up buying modified and easily going to sit at somewhere between 25% and 30% yield just based off the numbers alone. I run my numbers down. Twelve months of payments. What’s that number? Divide that by a 30% yield divided by point three. There’s my bid.
I make sure that number, whatever that calculation, is obviously less than the unpaid balance and less than the fair market, but I don’t want to be above 50% of rough market value. I’m not having a realtor drive out and look at all 30 assets. I’m not even jumping on to start pulling title on those 30 assets. We’ll look at some of the photos online, which doesn’t take long to do. Literally, you can drop all 30 in a BatchGeo and get photos relatively quickly. You can also drop all 30 into Noteproz.com/ScottCarson and I’ll pull up rough numbers. High, medium, low, that kind of stuff for the most part. I’m not getting bent out of shape on the front end because if I submit 30, I know I probably only end up with counters on twenty. Why am I going to spend all my time on assets I know that I’m probably going to kill half the time?
Control The Assets
What I want to do though is I want to control the assets. I want to get that asset manager on the other side thinking he’s really in a big fish. We’re going to go big but bulk offering a 30, bulk offering a 60, bulk offering a 100 is much more attractive than a lone asset. A lone asset isn’t that sexy to your seller. Thirty assets, 60 assets, even five is more sexy than one asset. Especially when you look at what these sellers have. What do they have? Do they have 100, they’re moving? Do they have 70, they’re moving in to there?
Whatever they have that they’re moving, what do they have available to move and how can you position yourself to be more attractive? How do you do that? You go big. You go bigger on the front end. Yes, you still kill assets off. They countered back. You’ve got hard numbers to work with. If their number counters back or they accept my offer and it countered back and it makes sense based on our due diligence and everything like that, great. We’re getting ready to rock and roll or moving into the next phase. We’re either going to accept or counter.
Even if they accepted it and I find out in due diligence, it needs this, it’s missing this or there’s a lien on it or whatever, I still have countered back. The thing to keep in mind, we’re still in bulk offering so they’re still more willing to do that because the fact is that I can move 30 assets instead of one. I’ll say, “I don’t really want this asset, if you want to, I’ll take it. You throw it in for free. As far as what’s it worth, I value it at zero,” and then I’ll still get my assets starting for free sometimes.
That makes sense for us because we’ve got them for free versus one off. That’s what you have to realize, a lot of buyers and note investors out there are all worried about the individual deal, not the bulk deal. Because in a bulk deal you’ve got some leeway, even if you end up with 30 out of 100 or even ten out of that 30, you’ve got a little leeway there. You’re adding, especially when you’re raising capital from your investors. That’s on the next phase. It’s a $600,000 trade or it’s $1 million trade.
Submit The Bid
I’ve had my staff flip out because I was somewhere and I said, “Let’s just split the bid.” They’re like, “It’s $1.3 million.” “Yes, split the bid.” When it gets approved, it’s not going to be the whole thing. It’s going to be substantial. Does it give you the whole thing? We’re having fun. They’d be like, “How are you going to raise capital for that? Don’t they want you to close in three days?” No. When you go big, you have more time for due diligence. You have more time for your marketing. You have more time to raise capital for the closing. If I have to close on 30 assets, it doesn’t mean I’m going to fund with one investor. Sometimes I have, other times I have broken up. “You’re going to fund these three, you’re going to fund these four, you’re going to fund these five.” They’re on individual deals with me. It’s not pulling money.
Rank The Assets
The thing to keep in mind is most of them are on the spreadsheet so I can see what it is and somebody says, “I’ve got $50,000 and I’ve got $75,000.” “Let me take that $75,000. Let me carve you out a chunk of this and we’ll join venture on these three or joint venture on these four.” What I’ll do when I have people come to me with money like that is I use it to rank the assets. We’ve got 30 assets, I’ll rank them one to 30. The number one will be the one that’s probably the highest ROI with a decent value. 30 maybe has 24% yield because I’m not going to usually do anything in less than 25% yield. 25% yield, maybe been a little bit higher on the investment devalue, which is okay, it’s one to 30.
If it’s $8,000 divide that one, $10,000 to buy this one, the bottom one. That’s what I did. I’ve got people bring me 50/50. Take top one, take the bottom one, that’s going to you. Second one and 29, that’s going to investor two. Number three and 28 is going to investors three. You get how we’re random and awesome, but it’s leveraging now so that if they do in a way to net average this ratio so you still yield a pretty good, decent return. Then 1% I’m getting all the best of the asset and notes or the bundle. They’re getting me a nice mixed batch to it.
We have a question, “When we submit bids, what do we say bids are contingent on?”
First and foremost, most of your bids that are submitted into these hedge funds are contingent on value being there, true value. Especially they give you a value, they give you an estimate. The taxes aren’t doing. You don’t have to be over analytical. Submit a bid on good conditions, decent title, taxes being up to date or even, “Here’s my bid minus taxes owed, sometimes it will work.” The idea here isn’t overthinking. It makes it difficult for your seller. You want the seller to get turned on by your bid. Get notely aroused, not sexually, notely aroused, entrepreneurially aroused.
When you are brand new, I know you’re going to be scared shitless, “I’m going to submit 40 bids and not do all the due diligence on the front end?” I know that. What you have to realize is your time is worth something and I see so many people wasting so much time on, “I’m going to do my due diligence on three assets and then I’ll submit my bits.” No, don’t do that. Go bid a big deal, rest for a few days while they’re determining your bids. That gives you time to dive into a little bit more due diligence.
Dive Into More Due Diligence
tart looking at more of the online values, pulling taxes out. “This one’s got $5,000 in taxes out,” or “This one got tax sale,” make a mental note. “We need to kill that asset when it countered back in.” Start lining up your realtors to drive by the assets once you get accepted back. The worst thing you want to do is send realtors out to look at assets that you haven’t been on yet and they wasted their time. You paid them $50 and then you get the bid back and it’s gone.
I only say that because I was banging my head like a drum like so many other people. “I’ve got to get rid of the drive by.” You’re hustling. Screw that. Let’s not hustle so hard. Let’s not work so hard, but let’s just submit 100 bids on our numbers, run a couple of numbers. Make it simple and let’s see when they come back. You’ve heard the scene in negotiations, he who mentioned the number first loses. The big thing here is the idea that if I’m submitting a number, I’m not losing. I’m just throwing something out. I’m throwing a rough number out.
It’s not really a hell of this number but I want the seller to counter. I want them to give me their number. When they give me their number, then I can really see. “Does that make sense? No, that doesn’t make any sense,” because they come back and say, “Contract for deed for 50, borrower owes 48 plus back payments.” I think it’s worth 50 and they countered back at like 32. It’s a non-performing, that’s 60 cents of the value. I’m not buying it. I’ll just kill that.
My offer was fifteen for these reasons or twenty for these reasons. The whole idea is just to see what’s going on. It’s to get the numbers when they come back with a hard number. That is really the first number. Meet somebody in the bid in with running numbers across the board roughly to 25%, 30% yield. That’s where it makes sense.
We have a question, “How can I get started in notes brokering?”
No, I would not be a broker because there are too many joker brokers out there. If you want to get invested in notes, to start doing notes, you need to be an investor. You need to evaluate the deals like you’re going to buy the asset for your own portfolio. Too many people out there are throwing spaghetti against the wall trying to get something to stick but they don’t know even what they’re looking at. It doesn’t make sense or the pricing doesn’t make sense. If you really want to get started, you need to take and understand what’s going on in the business. You should probably check out one of our workshops. It’s online. You go to WeCloseNotes.com to check that out. Brokering isn’t good to wholesaling and it’s okay but you still need to know what you have.
Too many brokers, too many wholesalers out there are slinging shit that they have no clue if there’s any value to it. Here’s the deal, it only needs $500 and lipstick. It needs a touch up and it needs new carpets, it’s got holes in the wall, AC decided to take a break for a walkabout. You have to realize, if you’re going to go big in this business, you really need to go big. The people that are buying two, three assets, not only you’re paying through the nose because you’re buying probably the premium of a portfolio, but you’re overpaying.
You really don’t have a lot of room for any type of, “That can’t happen or you’re buying for one particular extra strategy.” I had somebody in Raleigh, Durham and I went to speak up at the Triangle Investment club. Talk about buying. Raleigh only buy for hardest hit fund estates. I’m like, “That’s a crock.” You should never ever count on the hardest hit funds to be your primary exit strategy. That’s just pure gravy on top. Always when you’re buying, look at the fact that you’re going to take down and work those assets if you have to.
We’ve bought a lot especially we’re coming on a year. We’ve got a lot of stuff that has been paying. We’ve got hit and misses. We’re getting some cancellations of contract to sell these assets off. In the next 90 days, we will be turning and burning a lot of our portfolio. We’ve got a lot that has been reinstated, a lot has been modified. A lot has gone from nonperforming to performing. We’re making some decisions on that stuff. “Do we keep this? Do we get rid of it? Do we sell this off to performing investor? Do we refinance out JV partners with cheaper money?”
There’s a whole variety of questions that we’re working through here. Talking to our servicers, stuff like that in the last couple of days on exactly where we are and how we stand on our portfolio in that stuff, you’re going to see some great stuff. Case studies, you can see us talking about some of these specific assets of why we went this way, what we did, how we sold that, how we marketed it, how we got it sold. What you have to realize is first and foremost more than anything else, you can’t be scared of going big.
You have to realize, “I’m going to buy a couple of states. I’m buying a couple of cities, not just one.” The more micro of a business you have, the worse off you’re going to be. You want to be bigger, you want to be macro, large size. Take anything down if you want to get from zero to twenty assets as soon as possible, but that also requires you having systems. You really do need a staff, whether it’s virtual assistant or somebody helping you to handle the paperwork. This is why you need good vendors to help you with most of the stuff. We’re doing a conference call for our WCN crew members and we’re rolling out a specific concierge. We’re rolling out something for our mastermind group. Last mastermind, those that were there took advantage of it.
We’ll talk a little bit more at the next mastermind, but this is someone talking about the WCN crew because those are the guys and gals that are going on buying assets and building their business up to the point where they go big. We’re also excited. We’ve got some great people coming in who are going to go big or going big already and working their way up to bigger and better things. The whole concept I’m trying to get at because I see people struggling, because the fact is they still have that self-employed mindset versus an entrepreneur mindset. When they’re still trying to do it with themselves, they give the excuse, “I can’t afford an assistant.” You can, you just don’t realize that you’re spending money on stuff that you should be paying somebody else to do. We’ve got some good people coming in. You have to wait and see. We’ve got some great stuff going on and we’re excited about this weekend.
If I can tell you anything else, go big. When I get a tape in like I did, we’ve got 400 plus assets, it has got a portfolio of different things on it. There are a lot of opportunities still out there that most people, you small fish people try and do one off assets. There’s still a lot of opportunity available in this industry for people to make money and do things big because right now, we’re going to see some major changes. I think we’ve already seeing it.
When you see the Dow pick a big hit like it did, you see these tariffs going up by China. You’re watching the news about the Soviet backed up. We’re going to hit some economic skids here. It’s the turn I was seeing and when I start seeing my fix and flippers, my friends are buying hundreds of houses a year in different parts of the country and they’re talking about 100% financing and people are putting zero down or the 3.5% being given or we see the creative loans coming back again.
Non-prime is a new sub-prime coming back. That’s not going to last long. You can’t build a foundation on sand. You can’t build a solid foundation on quicksand because eventually it will suck you in and it will blow things up. This is why it’s important for us as note investors, people investing in debt. Just put your systems in place, get things ready to go big because when that windfall hits again, you’re going to want to roll up your sleeves and you’re going to want to put on your napkin or your lobster bib like it’s Thanksgiving dinner and you’re at all you can eat turkey, dressing, mashed potatoes and cranberry sauce with gravy buffet. It’s going to be like that. I guarantee we’re going to see some major changes taking place.
We’re going to see some amazing things taking place in the industry and you count my word. If anything, I challenge you all to go big. Make things happen, go big in your business. Set some big goals for it because as you always heard the saying, if you shoot for the moon and miss, you’ll end up in the stars, you have still done some big things. Shoot for the moon, if you end up with the stars you’ll still do some amazing things because we’ve set big goals for yourself to do 100 deals and you end up with 30, that’s better than saying, “I want to do 30 out of ten.” We’re all capable of bigger things. I talked about this on Note Night in America about being able to reach up, reach a little bit higher, reach up, you can stand up and reach up.
You can tip on your toe, you can pull out something and try to reach a little bit higher. Challenge yourself to do bigger things because if you miss, you can still do amazing things with some big stuff. You’re still going to grow much more exponentially larger than if you’re just, “I’m willing to do a little bit.” Little bit didn’t get you anywhere. You can’t get wet by just sticking your toe in the water. You’ve got to dive in deep in the pool, it’s the only way you’re going to learn how to swim.
Those that are just dipping their toes in are so busy sitting on the sidelines complaining about how cold the water is or complaining how hot the water is. That’s fine, let them complain. In today’s society we have more negative people than we’ve ever had before, who have voices being in social media and other things going negative. That’s fine. Just be prepared to rid yourself of them and realize that when they’re going to sit up there and naysayers and call you things or do things or say, “You can’t do this business,” you can do this business. You can make things happen.
I believe in each and every one of you, as long as you have the right mindset and you’re coachable, that’s what it comes down to. Not being scared of success but embrace it. That’s all I’ve got for you. As I say, go out, go big or go home. We look forward to seeing you all at the top. Have a great day.