The first few conversations are crucial when it comes to selling. You have to get them to your side and convince them to give you the time to show the value you could offer. In this episode of Note Night in America, Scott Carson discusses what you need to focus on when having initial phone call conversations with potential future investors you are looking to fund your deal with. Scott discusses what to and what not to say, along with what “assets” you need to have to help you build trust and confidence with your investors, no matter your experience level. He also talks with investor and 1:1 coaching student Larry Hoffman from LJH Investments LLC, who has raised over $1 million in private capital in his first six months as a note investor. Scott and Larry role-play a phone call, and Larry shares his tactics and tools for closing investors.
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Investor Conversations: Role-Playing Phone Calls For Potential Investors With Larry Hoffman
I hope that you are all doing well. It is hard to believe that the year has flown. I am glad to have each and every one of you joining us here on the show. If it is your first time, welcome. It is hard to believe that it has been many years since we started doing these things. We have been doing this for quite a while.
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This talk has been a couple of weeks in the making. We had a similar call with my WCN crew and my one-on-one coaching students. We usually do at least half an hour to an hour every Monday as part of the WCN membership. We have been working on this for a couple of weeks to talk about role playing because a lot of those students are sending out postcards or sending out letters to IRA investors.
Some people are hesitant to do that. They are a little nervous. They are nervous Nelly, “What do I say? What do I do? How do I get people to talk with me? Am I going to screw up and say something wrong?” The number one issue with most people is, “I am going to say something stupid.” That stops people from taking action.
That is the wrong way to look at it. We will get to that and the reason why that is the wrong reason, but the only way you are going to get good at talking with people, especially about using their capital to fund your deals or to fund potential deals that you have, is talking with people. It is not going to come naturally to you at first.
It is going to seem a little awkward, but here is the thing to keep in mind. It is just a conversation. It is just a conversation with an individual like yourself or a husband and wife or wife and husband. It is a conversation between two people. You are talking to a person. You are talking about what you are working on. It can be a pretty long conversation if it is a brand new person you have not talked to.
You sent them something for them to reach out. You sent them a letter or a postcard that you pulled from county records, identifying them as a potential investor who has funded a deal for their own portfolio or they funded somebody else’s deal. The stuff that we go through the county records is a slam dunk. They either called you off that postcard or a letter that you sent and started that direct a direct mail campaign or they watched a video of yours online or you sent them a link to a video. Whatever it might be, they got referred to you by somebody else. It is a warm phone call. One thing to keep in mind is that they are reaching out to you via phone, email or smoke signal. They want to talk to you.
It is not that they do not want to see, hear, or listen. They want to talk with you. The only way you are going to get good at talking to people is to practice. Practice makes perfect. No one is a born salesman when it comes to talking with people about potential sales. You guys are in sales. You are in the sales aspect. You are selling yourself. You are selling your deal. You are selling the opportunity to invest. All you got to do is look at the market. Look at what is going on in the market. The stock market has been down seven weeks in a row. Costs of goods are increasing. It is getting more expensive for a house or car. Interest rates are probably going to go up again.
You have an opportunity to give them the elixir of life by giving them something they can invest in and make an above-average return that is going to stay solid for a period of time. The most important thing is you do not want to throw up on them. By throwing up on them, I do not mean vomiting. It is a conversation. It is not meant that you got to tell them everything about note investing in 5 minutes or 10 minutes.
I had a conversation with somebody who was like, “I going to market to people in my niche.” What is your niche? It is not real estate investing in nature. You are looking for people that have never invested in real estate before. You are going to have to throw up on them and you do not want to throw up on them.
A confused mind is a no-mind. Part of the reason why we target IRA investors is they are already going to be somewhat knowledgeable. The fact that they have reached out to you is already a yes. They understand a little bit what you do and they want to find more information about it. It intrigued them enough to pick up the phone or drop you an email and go from there. Do not, “I got to share everything to show how smart I am.” That is what a lot of people do at first when they are nervous. You do not have to share everything. People do not want to know how sausage is made. They just want to know that the sausage tastes good and it is not going to kill them. Do not throw up on them. It is an important thing.
You are going to have to have some specific questions. You got to have some stuff lined up to answer those questions, and going from there and then leading to a second or third conversation. This is not how you got to close and fund in 24 hours. Part of the reason you do this ahead of needing the funding is you have got to start this process. It takes a while to get there. It takes people at their own timeframe, their own need to respond back to you.
Ladies and gentlemen, all the news media is doing a great job. They are doing all the work you need to get people to reach out to you. You have got to do the first part and send out that letter, that executive summary from the sample case, and these things that we have gone through in our three-day workshop multiple times.
If you do not know where to begin, you are knowledgeable and you understand how notes work, obviously, because you are here or if you are one of my students, you’ve got to keep in mind that if you do not know what to say, the easiest way to start a conversation off is to FORM them. FORM them does not mean go out and form tackle them like a linebacker. FORM stands for F, “Where are you From?” That is the question. When I get a phone call, somebody says, “Scott, I got your letter about IRA investing. Can you tell me more?” “Yes, but let ask you some questions first, so I get a better feeling for what you are looking for.”
You want to pull out a piece of paper here and take some notes on, “Where are you from? Are you here locally?” “I am from Cincinnati, but I moved to Houston.” The idea is to start building rapport with this on the phone. I will talk about some things you need to do specifically when calling and what you need to do to eliminate a lot of distractions. The first thing is to remember that FORM. The first one is, “Scott, where are you from?” The next one is, “What do you do? Are you a full-time real estate investor or do you have a day job? What do you do for work?” O stands for the Occupation, “What do you do? What do you do during the day?”
The next step is when they tell you what they do. I always say, “How long have you done that for? Do you enjoy that? Do you love your job? Are you looking to leave it?” It is to get in that conversation of building rapport. That leads us to the next letter. R stands for Recreation, “What do you do for fun? What did you do for fun this weekend? It is hot this weekend or it was a cool weekend. What did you do for fun this weekend?” Get them talking about their fun. These three questions right here, FOR, helps knock down that wall because people have to call or email you. It takes bravery for them to do that.
We know direct mail has a 1% to 4% response rate. What you are doing here with IRA investors is going to have a lot higher response rate. You are going to be dealing with a lot more educated people. Part of the important thing is building rapport. You are not going to start going, “How much do you have to invest?” That will turn them off and they will hang up the phone and say, “Do not ever call me again.”
Do not get me wrong. You are going to get some people that are angry. They call you up, “Please remove my name from your list. Screw off. Send me direct mail.” This is not a big deal, but the whole thing is you got to ask these questions first. FORM them, “Where are you from? What do you do for work? What do you do for recreation?” You are ready for the M. The M stands for Message.
That is getting into, “That is great. Let me tell you all about what I do.” That is your message. “Did you read the letter I sent you? Did you watch the video link along with it? Yes or no?” If they watched the video, that is great. It goes into, “What kind of do you have right off the bat or do you want me to kind of give you my little two-minute pitch for you until I can tell you a little bit about what I do in a nutshell and see if it lines up with what you are thinking? How does that sound?” That is what I always ask them, “It will take a couple of minutes to tell you who I am, what I do, and a little more of my background before we dive into answering your questions. Is that okay?”
I always ask, “Does that sound all right? Is that okay?” They are always going to usually say yes to those questions. The idea of this is to get them to say yes, “Does this make sense? Does this sound familiar? Does this sound interesting?” Those are very easy questions for them to say yes to. That is the point, guys. You got to remember that God and His greatness made us with 2 ears and 1 mouth.
You should be in a conversation. You should be listening twice as much as you are speaking. Ask questions. Do not just start talking rattling off. If people are giving you one word, “Yes,” “No,” “I am not asking any questions,” you are not asking the right types of questions. You are talking too much. You are throwing up on them.
Especially if they have asked you a question that you have already answered, they are not listening because they blurred out because you regurgitated them. Ask questions. That is why we start off with the FORM, “Where are you from? What do you do for a living? What do you do for fun? Is it alright if I take a couple of minutes to tell you a little about me?” You should have a piece of paper or something that you can take notes on. I do not care if you are on your phone and you got Bluetooth and you are taking messages on your notepad. The idea is to listen.
Ask questions and listen because people will tell you their hot buttons. They will go through and tell you what they are looking for, what they have invested in, what kind of returns they want to get. That will help you and closing them or booking a second phone call or in-person meeting if you are with them locally. I think it’s always a great thing to meet with them personally, locally, because that is going to build more rapport.
Those means could get you twenty minutes to an hour or two. The idea here is to ask questions and listen, but it is not to close them on the first phone call. It is just to have a conversation. Here are some easy questions that you have got to ask. In some sort of fashion, you have got to ask these questions because otherwise, you are beating around the bush and it is not going to get you anywhere. It is also going to frustrate the people on the phone if you are not asking questions. If they called you off your letter, your postcard, they expect to be sold on something they expect.
They are calling to find out the opportunity. That is the question I ask, “You responded to my letter. It looks like you bought this property at 123 Main Street, which is what we sent you about. What have you invested in previously? What else are you invested in?” Ask that question and listen, “I have a rental that I do not like. I have got CDs. I have got some mutual funds. I have more of my 401(k) from work.” “What have you invested in previously? Have you done other real estate investing?” Listen to what they say because my next question when I ask them what they have invested in previously, I ask, “How is that going for you? Is your CD good or is it a certificate of disappointment? Is your 401(k) still a 401(k) or is it a 101(k)?”
I say those things. I know they are corny, but they get people laughing. If you get them laughing, it is a good rapport builder. They are like, “This guy or this gal is funny.” “How is that going for you?” They tell you, “It is going great. It is awesome. I am really doing well. I am in private money. I am laying my money at 12%, 13%. I am doing good.” That is great. If they start rattling off high returns and it is very active, they may not be the investor for you and that is okay. I always like to ask, “What do you like most about that flip? What do you dislike the most? What do you like the most about investing and do you dislike the most?” You should shut up.
“What do you like about the rental you have?” “They pay pretty much on time.” “What do you dislike about it?” “I do not like dealing with toilets and tenants. I do not like having to find a tenant. I do not want to pay a 30% commission to a realtor. I do not want to deal with all that crap. I do not like getting phone calls about that.” “What do you like or dislike about that?” That is always the question I ask. “What do you like about your 401(k)?” “My company matches it.” “That is great. How is it doing?” “It is not doing very good.” Or, “How do you like your CD?” “It is in the bag, but it is not making anything at all.” Ladies and gentlemen, if you have ever been a serial dater, if you have ever dated somebody, and I am willing to bet everybody is dated somebody on here. Some of you have been married.
One of the most valuable things you can do on a date is to ask questions and truly listen to your date. You want to seem attractive to the person sitting across from you from your glass of wine or your margarita or you are old-fashioned, ask questions and listen. “He is such a wonderful listener. She is such a wonderful listener.” It will build rapport. That is the thing you have to do. “What do you like about your job? What do you dislike about your job?” Ask these not yes or no questions. Ask them questions that they have to think about and respond back. That is the thing.
“What have you invested in other types of real estate besides using your self-directed IRA? Have you gone out and bought other rental properties? Have you flipped properties?” What we find is we get a lot of people like, “I bought a property. I got that one, but I had to pay full price for it.” “How is that working for you?” “It is doing okay. It is making it about a 5% return.” When they start talking returns like, “It is doing okay or it is vacant or I am tired of dealing with it.” Those are all questions that are emotionally based. “I make a 10% return on this deal, but I got to go do all this work to find the right deal, then I got to pay for it. I got to jump through hoops to qualify.”
These are all questions, especially the ones, “I dislike or do not like that. When you ask them a hot button question, they will tell you what they dislike. I always like to ask, “Let me ask you a question. What did you like about the letter or postcard that I sent you?” Some people have said, “I like the smell of it. It made me think it was from a female. My wife thought I had a girlfriend who sent me a letter.”
Those are funny. That is why we spray perfume on it. “I like the idea of doing something passively or I like the idea of investing in real estate. I just do not know where to begin. I like the fact that you are helping people stay in their houses. I liked the fact that you made it easy to watch a short video that answered most of my questions.”
Ask them “What did you like the most? What made you pick up the phone and give me a phone call? What made you drop an email?” I always ask that question because those are good things people like or dislike. You can ask them about that. Okay. Now another question you got to get to, “If you are thinking about investing in real estate, how much are you looking to put the work? You had these three deals that you funded with your IRA. I am sure that money is tied up for a while.” “It is getting ready to get paid off or no, we are getting ready to sell the property.” “How much are you looking for it?” That will often lead to the question, “What is the minimum to invest with you?”
Always say back, “The minimum is at least $50,000.” Most people will put in $100,000 to $150,000, but we can always get started with $50,000 as a starting point to see if it is a good fit. That is a question. You have to ask that question. “How much in funds are you looking to put on?” If someone comes and says they only have $5,000 or $10,000, you cannot really do much with that. That is not the ideal person for you. “That is my last $5,000 or $10,000.” It does not have to be in funds. You do not have to be with an IRA if they have enough checking, savings, or other types of funds. They can use other funds, but it does have to come from a self-directed IRA or 401(k).
If it is self-directed, that is great. If they got money sitting in a checking or savings or business discount, they want to put the work, that is fine. “How much are you looking to put to work?” Starting off, if you got a small deal and you need $25,000, say $30,000. You got to start somewhere. Sometimes people who do not have $50,000 that are interested but are really motivated and sophisticated and understand it. Do that. I always like to say, “We usually try to have at least $50,000 minimum to start working with because that allows us to put you in 1 to 2 deals.”
Let me ask you a question, “What are your goals for those funds? What are you looking to accomplish with your money?” “I want to make a return or I am looking to save for future retirement or I am looking to actually do something that I do not have to work.” If you listen and ask some questions, they will tell you the hot buttons of how you can respond back to that.
“Are you looking to make money passively without having to do with toilet stains and trash outs?” “Yes.” “Are you looking to make an above-average return than what your 401(k) is returning or your IRA is making right now? Are you looking to invest in the stock market? Are you looking to make something a little more solid stable versus the ups and downs of crypto or whatever it might be? What are your goals?”
They will always say, “I want to make the most as possible.” “Were you looking to be more active or more passive in your investments? It sounds like with what you do with your career, working 40, 50 hours a week, you do not have a lot of time to go out and find deals. You do not have a lot of extra time to market. You are looking for something a little more passive that if I could show you an above-average return than what you are getting in your CD or checking account or savings accounts for a short period of time, would that interest you?”
You have already asked that question throughout and they have already answered. You already know the answer to that question based on the questions that you are asking. The question is, “Would you be comfortable? You talked about having that rental for two years that you are looking to get rid of or you talked about having an annuity, which has tied your money up for 7 years or CD with 3. Would you be comfortable tying your funds up for a short time of 2 to 3 years?” When investors hear about notes and mortgages, they automatically think that you are going to look to tie their money up for 30 years.
We all know that is not what you are going to do. You are not going to tie it up for 30 years. You are tying it up for 2 to 3 years. The reason you ask that question is yes or no. “How long are you looking at?” “I only want it tied for six months.” “That is great. It is probably not a fit for what we are doing.” You would be better off temporarily doing some hard money loans and going from there.
“You mentioned that you were looking that you did one deal in the last two years and then a deal in good, but you only end up making 18% over two years. You only made 9% annually, but I could show you that if I could pay you a 9% annually without you having to do any of the work, doing any rehab, or toilet stains and trash outs, would this something be valuable? You make the same without you having to do any of the work at any of the stress.”
The answer to that is often going to be yes, “I would definitely be. It does not have to be 9%. It can be 6% or 7%.” Do not go right in automatically doing 12%. “I have got stuff that would put people in passively for at 6% right now. It is performing notes. We pay on a quarterly basis. If you would like to get more information, we can talk more about that later on. Would you be comfortable tying it up for 2 to 3 years on these performing notes?” These are easy questions. You got to ask these of some sort, “Have you invested in real estate before?”
This is not going through an investor questionnaire and asking them, “What do you make per year?” We do not ask that. We ask them what their career is, “How long have you done that?” You can figure out what they are making. Where do they live? What is their address? You can tell how much their property is worth and get a rough idea of what they make on an annual basis, based on the value of the property.
These are all easy questions to ask. Are there any questions on here that you are uncomfortable with but you don’t like the idea of asking? The only way you are going to get better at asking these questions and talking with folks is to pick up the phone and talk to people. Maybe you meet with them in person or you cannot talk with them a lot on the phone because you are in the middle of the meeting, that is okay.
The idea here is like, “Let me give you a phone call and we will go from there.” Here are the things you want to have put together that will help you pre-close. You got to have a website these days, some sort of website that looks like you have two marbles together. Websites are pretty easy. You could get a Wix website, but take the time to go out there and create something that looks decent. If you need a website, we have got a guy that does website creation for note investors. He is affordable.
You got to have a website because that is where you are going to send people to. People go, “What?” They either look to see if your company has a website or they go to see if you are on social, LinkedIn, Facebook or whatever. You have got to have a website of some sort about your entity. It is good to have something that will help you answer those questions on the front end.
Frequently asked questions, having a pitch deck video of about ten minutes, not a short one, like 2 or 3, you need to have something that, “Here are the types of deals that we do.” You want your pitch deck video not only to go through who you are, what you do, what you focus on, and the types of deals that you do, and then you are asking, “We are always looking for more investors to fund our deals and projects because we are coming across phenomenal deals.”
It is not all about you. You got to have a spot in there, especially if you are new and focused on your vendors. If you have not closed on any deals, focus on our vendors. Our vendors have done thousands of these deals. These are the people that we use and rely on to help us get deals closed. Sample case studies are always good. Some fresh ones, “These are the types of deals that we do. These are the types of deals that we focus on. Here is our team. We have our servicing company and our attorney. We have our coach, Scott Carson, we have got our insurance, our legal side, Loughlin & Associates.” Put those in there.
You need to have an executive summary. An executive summary is about you. We have a one-page executive summary that talks about our business, what we focus on buying, and a little bit on our education. Your executive summary does not need to be long, but it does need to be a couple of paragraphs. Talk about your experience. If you look at your buying criteria, we focus on below-valued assets that are $50,000 to $500,000 that we can purchase directly and work to keep the bar in the house. Our biggest end goal is always to try to rehab the borrower, whatever it might be.
“I am a 2001 graduate of Southwest Texas State University. Now Texas State University, out of San Marcus, Texas, I have a Bachelor’s Degree in Business Administration and Marketing. I got my CFP certification. I have been an active real estate investor since 2002. I have closed over 100 deals. I have also been an active realtor and closed on over $35 million in real estate.”
Brag on yourself, talk about what you do, what you have been. “I have been an active investor.” If you do not have a lot of deal flow. “When did you buy your first house.” “I bought my first house two years ago.” “That is great. I have been an active investor since 2020 and we are doing well. We bought a house. The value went up.”
That is a good thing. Have your executive summary, your logo about your company, a little about your company, a little about you, and why they should do it. You got to have an active LinkedIn profile. That is where a lot of people go and look at. In active, that means you got to have it complete. There are some people that do not have a complete LinkedIn profile. I had an REO agent from Miami reach out to me and ask some questions. He does not have a profile that is active at all. There is hardly anything on his LinkedIn profile. I am like, “I do not think this guy is a full-time agent because this guy has no LinkedIn profile. There is nothing to support what he does. There is an old post.”
You have to look at your profile. I discovered when I was away in Vegas, I had a setting on my profile that did not show my face. I got to adjust the settings so that my face shows up for anybody who is looking for me. Having an active LinkedIn that is sharing information, maybe you are sharing articles, maybe you are posting deal flow, whatever it might be. You have to have an active LinkedIn profile because people will look at you on there, see if you have posted anything in a while, and then look at your connections. If it shows you have two connections, you need to work to get above 500 pretty fast.
We talked about your executive summary, which is important. Your website will outline this. Your pitch deck will outline what you are doing, an executive summary, which you need to have written, and then also video. Have it about you. What are you focused on? What is your journey as an investor? Have a session on your website about talking a little bit about you, either in print or video.
I think it is always good to put a video on there where you are talking about yourself, “Hi everybody. My name is Scott Carson. I have been an active real estate investor since 2002. Since 2007 and 2008, I have been focused predominantly on buying distressed debt from banks in different real estate hedge funds out there where we like to buy the distressed mortgage, become the lender, and then try to work things out with the borrower to keep them in-house.”
“We have been successful a ton of times where we are able to rehab the borrowers of the property. We like to make it a win-win scenario for ourselves, the borrowers, and our private investors. Some people love to find out how to make an above-average return. If you want lazy assets to work, we would love to visit with you.”
Feel free to schedule a phone call with me here on my link. I would love to talk and share with you my journey as an investor and how we can help make your journey as an investor just as profitable.” I am just pulling that out on my ass. Have it about you. Talk about you. Have something on there that shows.
If you have got a family, put your family, share your wife and you and your kids. Share something because that builds rapport with people when they are talking with you. Have a positive personality. If you are a negative Nancy who is always an Eeyore, we do not need Eeyores. Go do something else. Go back to your job and be an Eeyore to your boss.
Those people that are successful in raising capital have a positive mindset. They have a positive personality. Be friendly, “I do not think you would be interested in this.” If they are not, they are going to take it from you. If you are just a Debbie downer on the phone, they do not want to talk to you. You are just wasting time. Be excited. Somebody called you off a letter. If you have got phone calls, that is a success. Especially in the first round, I had a guy who sent out 50 postcards. He got three phone calls. He did not close on any of the three but at least talked to 2 out of the 3. He said, “It does not work.”
I am like, “It does not work because you have not followed up with him in three months. It does not work because you do not send a follow-up, schedule up with people, and keep drip marketing those 50 or adding 50 more.” This is like shooting fish in a barrel if you fall through on this, but you have to have a positive personality. This is all in the follow-up. You send out 50 letters and 50 people are going to call you with their checkbook in hand, ready to fund. It is all about the process. Eighty percent of sales are made in the fifth contact. You got to have that positive personality.
Here is my philosophy. I heard somebody else say this. I realized this had been my philosophy all along, whether I am talking with an investor, I am talking with somebody about being a student or coaching student, or I am talking about potentially being on a podcast. My philosophy with each and every call boils down to this, “The worst has already happened.” Before I walk into a room, before I pick up the phone, the worst thing has already happened and that they have not funded, especially if you are talking with a private investor. You are talking to somebody for the first time. They have not been funded.
The worst thing has already happened. The big thing is I am never disappointed if it is a no, because it is always a, “Not now.” If somebody tells me, “No, we are not ready to invest.” That is fine. It is a, “Not now.” I have an opportunity over the next 30, 60, 90 days to wow them over time that I am the expert. I am the person they want to deal with it. Think about this. If you walked into a meeting and you were positive, you answered to information. You would walk out closing a lot more information because you are not scared or dependent on that deal.
Sometimes when you have a deal that needs funding and you need to raise capital, you got to go in with a gunslinger or a gambler’s mindset because people can smell desperation. People can smell, “You have got to close on this.” I do not put that on me. I am really like, “If I have a phone call with somebody who wants to talk about it, let’s is talk about it.” There are three things that are going to happen.
Only three good things are coming from having this mentality. One is they decide to fund, “You decided to fund. I like it. Sounds good. Let’s do it.” That could happen. Two is they need to get more comfortable with the deal process, “I do not understand the deal. I do not understand it.” A confused mind is a no-mind. “That is fine. How about we do this? Let me explain it in a different way. How about we meet again and I bring it to the sample case studies that might be a little bit easier to understand? How is that sound? Let me share with you some closed deals that I can walk you through individually and we have more time to talk.”
I do not expect them to close on the first phone call. I imagine getting them interested and then I follow up with some case studies or sample deals, and then we talk after that. The most important thing is I make a new friend and contact. They end up doing something down the road. How many of you have been following me, watching videos, listening to my podcast, or seeing me speak for longer than six months? How many of you have been following me for over a year? You are still here, right? Some of you have never done anything. Some of you are taking a class. That is totally great, but some of you have not pulled the trigger on a deal or you are thinking about being a coach. It is totally fine. Everybody is on their own timeframe. We are still friends.
This is the point I am making. So many of us walk into meetings like, “I got to close this and they said no. I am horrible. People do not like me.” Here is the thing you do not realize. You are smart enough. You are valuable to those individuals and people will like you. People like you because they picked up the phone and called you. Part of why we talk about having a pitch deck video or this information. It gives them an opportunity to crush on you a little bit, like, “I really want to talk to this guy. I really want to talk to this gal and ladies.”
Ladies, it is much easier for you to raise capital because it comes across as a salesy way. Ladies, you have a huge mind block, a lot of people do and not just women, but guys do as well. You have to realize that you know more than the person calling you. You are smart. You are smart enough. You are good-looking enough. People like and trust you because you are not going to put them in a bad deal. You are not going to do something that is derogatory. You are leveraging these amazing vendors servicing thousands of notes and attorneys handling the legal side of things.
You just have to go find the deal. Those are the three things, “I am going to walk out of here. If they say now, that is fine. It is not a big deal because you are no further off. You are no worse off after that conversation than you were before you talked to him on the phone or you walked to the meeting.” This is why you go in with that, “I am just going to meet with you.” This is why you do not want to try and close them on a phone call unless they are really interested, “I got some money and I have been following you. I really want to do something with.” It is like, “I got this letter. Can you talk to me about it?”
“Would you like to meet for coffee or cocktails or lunch? My treat. It is to get to know each other.” I think it is always a good thing to get to know the person you are investing with or you are partnering with. Most people are going to say yes to that. That is the thing, ladies and gentlemen, most of us look into that. We go into defeated mode before we ever step in. We had made up their mind before we ever got into the conversation. No equals not now. That is what I think. “No? Okay. Not now. We will move on.” For most people, no means never, which is completely false. You have an opportunity to wow them over the next week or the next 30 days or the next 60 or the next 90 or the next 6 months by just being consistent.
You have gotten their name and email and phone number. If they are in email, you put them on your investor database that you drop it down and email, a podcast episode or a newsletter or you are sharing a video or the deal of the week that you are working on. That is the valuable thing. You build ground. You build rapport and trust by being consistent on what you deliver on a regular basis, but for those of you out there that say, “You give up.” That is what everybody does. Everybody gives up. Only 48% of people ever follow up with a sales prospect. If you follow up with a phone call or another email, that puts you in the top 52% of people. Most people never follow up, so you just got to realize that up process is so important.
Here is another thing too. This is a big pet peeve of me. When I get somebody who calls me up for a scheduled phone call or we schedule a time and they want to talk, I want to make sure to respect their time. I expect them to respect my time. I hate it when I get a phone call and somebody is driving. They are not paying attention. I get to travel. I get it. I understand that, but they have the radio on or are in their room or home. I hear the news. I hear the TV on. They cannot turn the TV off. There are a lot of people talking. That is not respectful. Let the message go to voicemail and call me back or shoot me a text message. You can call me back in five minutes in a quiet spot. This is my number one pet peeve.
Be in a quiet spot. If you are driving, I do not think it is professional, especially if the first phone call you have with an investor is to be driving down the road and have bad reception. I take a few phone calls when I drive. It is usually warm phone calls. If somebody is calling me off a postcard and I answered the phone call, I will look to immediately pull over somewhere like, “I am driving. Let me get you on Bluetooth. Give me a second here. Let me find a spot where I can pull over and talk with you.”
If that does not work, “Can I shoot you my calendar link, so we can book something a little bit later? Can I call you in 30 minutes when I get in a quiet spot.” Or, “Let me wrap up this phone call, can I call you back?” That is an easy thing to say. People are like, “It is no problem.” The question I ask them when they call my phone, the first thing is, “Did you happen to watch the video that I sent along the way? The ten-minute video about what we do at on our consulting or Carson Consultants?”
It is going to be a yes or no. If they did not watch that, you know it is going to be a longer phone call. If they did watch it, it is going to be a shorter phone call because they understand. I always ask them, what questions do you have after I FORM them? Where are you from? What do you do? What do you do for recreation? And then I get my message out and then I always say back, “What questions do you have that I can help answer?”
“I do not have any questions.” “Would you like to meet for coffee or does this sound like something you would be interested in doing?” “I am not in a spot right now, but how about this? How about we schedule a Zoom call,” or in a meeting, if they are local, “How about we schedule a quick Zoom phone call and I go through a couple of staple deals that we are working through right now? Does that sound good?” If they say yes, “How does Friday or Monday work for you or Monday or Tuesday at 12:00 PM or 2:00 PM?” When they schedule a meeting, always make sure you send them a follow-up email.
It is an important thing. Send a follow-up email or a text message, “It was great talking with you. I want to make sure that we are scheduled for Monday at 2:00 PM Central Standard Time, yes or no?” I put it in my Calendly. I have got a bucket for them that will they will get a reminder text message. They will get a reminder message or an email that comes in that they have got a meeting booked with me and then it gives a 24-hour notice and a one-hour notice too, which is great.
If they decline or do not show up, if it is a phone conversation, I get life being busy. I will always send him a text message, “Steve. It was great. We got a second phone call scheduled right now. Is it a bad time? Do we need to reschedule? Yes or no? Let me know. I can bump it on my calendar at a time that works better for you.” Most of the time, I get, “I am sorry. I got sidetracked and busy.” That is fine. It happens. I do not get mad. If they do not respond or no-show me totally and they do not give me any type of notice, I do not blacklist them because life happens, but I am going to make sure that the next time we book something, it is going to be on my schedule.
It is like if we are going to have coffee and they no-show me for coffee, the next schedule we are going to have is going to be worked to my schedule via Zoom or they are going to come to me at my office or someplace where I can still get some work done. The point here is life happens. Do not get so mad at people who no-show you because sometimes it is annoying. Are there any questions, comments or concerns about that before we do a couple of role-play scenarios? Anyone got any questions about the stuff there before we dive into bringing in one or two people on to kind of role-play a little bit?
Are people scared? Did I just throw up on you with too much information? I will introduce Larry Hoffman, who is gracious to be willing to jump on to do some role-playing with us. I am going to have Larry come on here. Melanie asked a question, “How do you show competence when you are brand new and have no experience to show?” Melanie, you have got competence in something. What have you done for years? What is your career? What are you doing right now? The reason I asked that question is we have all been doing something.
People knew me when I was in mortgages. I was a mortgage engineer for many years, but they did not know that I have been an investor as well. Part of the reason for how you show competence is by showing that you have vendors that are doing the work for you, like, “I have got a servicing company. This is who we use. They do the borrower outreach. They are doing the collections of payments. I am communicating with them on a monthly basis.”
I have my own asset manager over at Madison, who I talk with once a month about our portfolio of the assets. There are the attorneys that we use. We have attorneys in roughly 30 different states, but this is our main attorney that we use and then outsource as we need to go from it if we are buying a note in a state that we do not have an attorney, our servicing company helps us.
You rely on your vendors, Melanie. The beautiful thing about notes versus fix and flipping or being a private lender is that as a fix and flipper, people think about you going out and hammering nails, going out and fixing stuff. You are not doing that. Melanie, you direct people on how to do it. You have just started off. That is fine. We all have to start someplace. “I have the most experience in teaching.” “How long have you been a teacher? Do you own a home?” That is the question I like to ask folks who are brand new.
If you are brand new to real estate investing but you have owned a home for 5 years or 10 years, you have been an investor. For most people, their home is going to be the number one investment they do. “I have owned my home for 10 years. I have been a real estate investor for 10 years. I have been more of a teacher teaching in public schools or private schools and learning investing.
Now I am diving into the investing side of things.” That is okay. “I have never owned a home.” That is okay. We all have to start somewhere, Melanie, and say, “I am diving into this or I have been a teacher for 15 years. I must know what the hell I am talking about because I have held down a job for 15 years. People can stand me for 15 years.”
The whole point here is the most important thing is people want to know if they can trust you and if they will get their investment back. The fact that you are buying real estate, you are buying notes, no greater than 70% of value, huge discounts. You have got professionals to handle the heavy lifting. You are using attorneys and servicing companies to handle all that borrower outreach stuff. You have got insurance in case of an act of God and that you are buying only first liens.
Those are the five things that protect your investor’s time and money. You may want to put those things in your executive summary as you are talking to people: “These are five things that we focused on to protect your investment, protect your capital, Mr. and Mrs. Investor.” It just takes time to practice it. The only way I got good at raising capital by role-playing and practicing and going from there. Let me bring on Mr. Larry Hoffman. Larry, how is your day going?
Pretty good. How about yours?
I cannot complain. How much private capital have you raised so far?
I met with 3 gentlemen and 2 of 3 said that they are down with the $150,000.
That is not too shabby on raising $300,000. For those that are brand new on here, if you do not know, this is Larry Hoffman out of Cincinnati, Ohio. He has been an active real estate investor since 2006. You had ups and you had downs. You went through 2008, 2009, and 2010 and licked your wounds. You have been active. You have had rentals, you have had fix and flips, but you have been a note investor for not a long time. You got a dozen deals that you are working on closing. That is just what you have under contract. You have got pledges for how much in private capital?
All over $1 million.
You are also actively reaching out to banks because you have got deals that are now being sent to you. Other deals that banks have include an 84-unit apartment complex, RV Park, and other notes they are sending to you that nobody else is looking at from your marketing.
I am the exclusive person and nobody else on these guys. It is crazy insane. The stuff that you are teaching 100% works.
You were a little nervous when we first started talking about raising capital. I brought up the fact that the deals make sense if you just follow the path. We had you pull a couple of lists of IRA investors there around your area. You sent out a letter and then you had some case study sample deals, not that you closed. Sample deals are the types of deals that you are focused on and you had people that responded to you. One of the great things that I love about what you did is that when you sent out your first letter, you had a QR code that took them to what, Larry?
I sent them directly a pitch deck, the video on my website. It is interesting because a lot of the investors that I meet with or potential investors, they go and they say, “I watched your video. I like how you are structuring things.” Some of them made the comments, “I like the fact that you have been in the business for a little bit and that you have done single-family homes, multifamilies, and stuff like that, that I am not agreeing to it.”
That is occasional. We will have some people that are like that. They got money burning a hole in their pocket. They got to do something with it.
There were other people that said, “I do not care about your experience. I just care about the deal. If the deal makes sense, I am 100% in.”
That is one of the most important things. I think it goes back to Melanie’s question there. You are going to have some people like, “You are brand new. Call me when you have done a close,” but you are going to have other people out there, you find a deal. If the deal makes sense, they will fund it because the return makes sense. The numbers make sense. It is not all on you doing the deal. You have got vendors that are handling the heavy lifting to help you out.
Larry, Susan asked a question, “What do you put in the sample deals? Can you give some examples?” We put case studies. If you have ever gone through my three-day workshop, we will give you sample case studies to use. Also, if you are a one-on-one coaching student, we give you new deals that we have worked through to help you in reaching out to things. If you have ever been through the three-day workshop, there are several sample deals in there and case studies that we go through. I gave 20, 30 deals from different students and deals that we have closed for you to use. You picked three and ran with them.
I just picked three. Now I have my own case study.
Let’s talk about this. Let’s do role play here. That is what people are here for. They want us to talk about it. We will do one where you are and I am the investor who got your postcard. We will go from there. We will have where I am dialing. It is just a phone call and we will go from there. The phone is ringing.
This is Larry. May I help you?
Larry, this is Scott Carson. I got a letter from you. It is something about a deal on 123 Main Street here in Cincinnati, Ohio, that you sent me a letter about.
Yes, Scott. I sent that out the other day. Thanks for contacting me. What can I tell you about it?
First of all, how did you get my information?
First off, that is a really good question. I get that quite a bit. Your information is in the public record. I just did a search through the public record and isolated all the people that lent money out on a self-directed IRA. That is the reason for my mailing to you. It is to touch base with you and see if maybe you would be in the market. If you are looking to buy something or if you are looking to fund other deals, I wanted to talk to you.
That makes sense. I am going to have to change some stuff up there. It made me stand up and take notice when you added my name and the address. I watched your 10-minute video on here that you sent. It was very interesting. I liked how you shared the types of deals that you are doing and a little bit your experience. Let me ask you some questions if you do not mind. Is it okay to talk or do we need to schedule another time for you?
We are totally fine.
You talked about that you are buying. Can you clarify that a little bit? Are you buying first liens or second lies? Are you a hard money lender? Can you explain that a little bit better?
I am not a hard money lender. I only concentrate on first-lien mortgages and debt. People are familiar with mortgages on a property. This debt is actually sold on the secondary market. I and other note investors buy these notes.
Is this like the Big Short, where you are going to buy $5 million at a time or are you buying one-offs?
I buy one-offs, but the cool thing about it is the more notes I take down, the steeper discount I get.
I heard somebody talk about doing that years ago, and you need $10 million or something like that to do. Are you seeing a lot more of those types of assets on these deals with the market being like it is? Everybody’s property value is going up. Are you still seeing a lot of distressed stuff?
I am. Unfortunately, you will still have a lot of people that are going into foreclosure. Things happen. Divorce, death and people being laid off, this is just one of the many aspects of it. Unfortunately, there is still a large percentage of people in foreclosure.
I have friends who are realtors. They are always talking about, “I tried to sell.” This is something you do not see a lot of. I thought of the Big Short, the movie scene. You mentioned you have been buying this stuff for a while.
I have just bought notes since 2021. I have been investing in real estate since 2006. I have done over a couple of hundred homes. Real estate is not new to me, but I am more focusing on the note aspect of it and buying these debts. That is the little niche that I am focusing on. I became smarter with working and becoming the bank. My goal is to rehab the borrower, not rehab the properties anymore.
I toyed a little bit with fix and flip years back. It was always hard to find a deal that makes sense. It always seems that things are so expensive with a price of lumber and everything going up. I worked so much in IT. I worked 40, 50 hours a week. I have a hard time finding the time to do that stuff. It is interesting what you are doing.
Scott, let me ask you this. You mentioned that you have a hard time not having the time to invest. Are you looking for something passive or are you looking for something more that you can have more of a say in?
I do not have a lot of time, so if I can find something that is passive, that would work out really well for me. I have this one property where they called me on, which is a rental. I do not like toilet stains and trash-outs. I do not have the time to give it the attention that it needs. My job keeps me really busy. I make good money, but it is a pain in the ass to deal with people calling on weekends, especially in the summer here. It always seems that the AC goes out when I am at a barbecue with my family.
Been there, done that. It gets old really fast.
You are buying some resist stuff? Is it all stuff that people are not paying or is there some performing stuff? How does that work, Larry?
I have two sides of the business. I have performing and non-performing notes. The performing are people that are not behind on their payments. They make the payments and, believe it or not, these debts are sold as well on the performing side. The other half of my portfolio is not performing notes. These are people that are behind for one reason or the other. My main goal is to get them back on track, to help them stay in the house.
The foreclosing on the property is the very last thing that I want to do. I will try to get them back on track, do a trial payment plan with them, and then ultimately do a loan modification. Unfortunately, you do have people that bury their heads in the sand. I will have to do a foreclosure on them. If I do go that route, then I will try to do a Cash For Keys. I do not know if you are familiar with the cash for keys, it is basically me giving them the money to walk away and they just need the property over to me. That way, I own it now and sell it.
They do not end up with a foreclosure on their credit.
They do not end up in foreclosure. That way, I can just get it and sell it at a lower price. It also helps them, but my main goal is to try to help them stay in that property.
That makes sense. It is really nice, so you are able to do some good out there with people.
That is the why. That is what keeps me moving. It is being able to help people knowing that I am out there helping somebody with their house, not being able to go with down that foreclosure route.
Do you have to do all this work? Have you been collecting the payments and then doing the foreclosure stuff?
No. Within my video, I talk a little bit about that. I have a list of people who work with me, my servicing company, my attorneys, my BPO agents, and my title company. It is not just me. I have a whole group of a team behind me that helps me.
I remember you talking about it and how many they do. That is cool that you have. Do most people know that this stuff exists out there or not?
A lot of people do not. What is fascinating is I speak to other investors, not just you. Other investors are surprised that this little niche is there. That is one of the things that I love talking to people about. It is becoming the bank. I think that this is the best position to be in.
Why would the bank not go ahead and do the foreclosure on somebody who is behind? Why would they not go ahead and just do that themselves?
A lot of times, banks do not want the negative press on it. Oftentimes, they do not want to fool with it. When I am buying these properties from other individuals, they just want to be done with them. They do not want to fool with it. They do not want to shell out that money for foreclosing against them.
Is it expensive to foreclose?
It depends. On average, it is about $3,500 to foreclose. That is one of the things. You take all that into account. That is why, for me, that is the very last thing that I want to do. I want to keep them on the property.
If you are getting this stuff, are you buying this stuff at a big discount? I know that people are buying foreclosures and getting 30, 50 offers if you are selling a foreclosure. Is it that competitive? Do you get a price on this or do you get a bigger discount?
When you buy them in bigger bulk, I get a better discount, but for the one-offs, I am still getting them at a pretty steep discount. I am into it at no more than 65% to 70% loan to value.
I have to get a lot of work on these properties or is it just for no work?
It depends. It is one of those things where when I look at these properties. I do a lot of due diligence on them. I check the taxes, set out a BPO, and I have somebody drive by just to make sure. Oftentimes, there is not a lot of work involved.
You are able to check inside and see if it is in a good spot.
Some of them, you can. Some of them, you cannot.
This is all new to me. They do not have a TV show on this.
They need to have something.
Primarily, you say you are buying in bulk. You probably need a huge amount of money to get started on that stuff.
No, you do not. I have a minimum of $25,000. If you have $25,000, I can put you in an asset relatively quickly. It is up to you what you are looking to do. That brings me around. I know we were talking a little bit about this before. You did not have a lot of time. Are you doing anything else with any type of investments or your 401(k) savings?
I have got a 401(k) that we put away that my company matches dollar for dollar up to 6%. It is pretty good. It is hard to beat that. I dabbled in the crypto side. We have this rental here that we used to fund my IRA from a previous job. That is about it. It is not too much stuff like that. I was looking at trying to do something. I got some money sitting in my account and I am like, “I need to do something with it because it is sitting there. I do not want to put it into a bank savings account and make nothing.”
It is melting.
I am looking for something that will give me a consistent return. I think real estate is the best. I do not have the time or experience to focus on it. How does this pay? You are looking for investors. How does that work out as far as what you pay?
I offer a 6% simple interest. What I do is 6% simple interest for a length of 2 to 3 years.
I saw on some of your deals. It looked like you are getting a good return on those. Is there any way to get higher than 6%?
What I have is a two-tier system. One is anywhere between $25,000 to $200,000 and I give you a 6% return. Anything above $200,000, we will do a JV deal. That is where a lot of those higher returns come in on those JV deals.
I do not have that amount, but I do have got about $75,000 I am looking to do something with. It could be 2, 3 deals on stuff like that.
We can put you into several deals.
How does somebody secure their investment? Do we get a first lien on the property like even if I was not buying the property or no?
There are a couple of different ways. If we do a 6% simple interest, I have a promissory note. If you are going to use your self-directed IRA, when we meet, I can walk you through it. It is really simple or if you want, we can do an assignment of mortgage. That way, I can put you on the assignment or you can actually hold the collateral files yourself. It makes it a little bit more secure, but if we go the route of a joint venture agreement, then what we will do is we will structure an LLC where we are both partners within this LLC. We will have a PPM, Private Placement Memorandum, and then also an operating agreement. I am sure a lot of this stuff does not make sense, but that is fine. We will walk through it.
I want to stop something here real fast. If somebody has already said that I do not have the money for that. I got $75,000, $70,000. I would not even go that route. Just stick to the 6% and then, as you get more, we can talk about different options for you. That keeps it simple versus going down a path you really do not need to go. I think I have more options for me. More options mean a confused mind versus, “You have $75,000. That is a great starting point. We can start off at 6%. Do it for 2 to 3-year loan agreement at a flat 6%.”
Susan asked a question, “What if the investors want a straight 7% or 8%, even though you might be getting 10% to 12?” If you are getting 10% to 12%, that is great. That is what you do. You only pay them 6% to 7% because Larry is doing all the work. You are doing all the work. How many deals do you bid on, Larry? How many deals did you bid on before you closed your first deal?
20, 25, easily.
There is a cost of doing marketing. Here is what I want to bring up, Susan, because I appreciate you asking this question. If somebody comes to you and say, “I want a 15% return. I do not want to make 6%. I want 15% of my$75,000.” What would you say?
I would just tell them, “That is just too high. I cannot do that.”
If the list is too high, you are not doing any of the work. Here is the thing. I said, “I appreciate that. We are not a fit because I have so many other people reaching out to me. Money is cheap out there right now. I am doing all the work to find the deal, work it out, and control my vendors. Six percent is fair because you are not doing anything. You said earlier that you were not doing anything. If you want to make 15%, then I would suggest you study it more and be more active. If you are just a passive, that is all I can pay you on a passive return of 6%. If you want to invest more money, we could talk later on about bumping up your investment, but starting off 6% is as high as I go. I know you said that before because I have heard you say it before.
I had one guy. I was pitching him on the eight assets when I flew over there over into Austin with you. He was like, “I want you to put some money into the deal. I do not feel comfortable.” I am like, “I want out. I found these deals. I structured these deals. I am negotiating these deals. I am setting everything up. My time is worth way more than what you want me to put in here.” I was an ass. I said, “Either it is going to be the 50/50 split or we are not doing it.” He goes, “We are fine. We will not do it.” I was like, “That is fine,” but I found somebody else.
“What would the investors have to do to be more active?” If they are going to be more active, Susan, that means they need to go out and find the deals. They need to do the marketing and build relationships that Larry has in doing that or they are bringing $250,000 to the table, which makes it then, at that point, worth enough to go create a new LLC and structure that. Let’s take that conversation. Let’s go back and talk about that conversation. Let’s take it where you ask the question. How much are you looking at with the work?
Scott, how much are you looking to put in the work?
The asset you emailed me on, it’s funny that you called on it because we are selling it. It is appreciated value. It is a work settlement and we have only got to live into it. We will have about $500,000 to put in the work and to look to do something with that where we can make a good return on that. What options do you have for somebody who could put a chunk of change like that with you?
If you have $500,000, I actually have a program for anything above $250,000. We can do a joint venture agreement where we can split the profits 50/50, and that will get you the returns you are looking for.
Here is what I would add to that. We would create a special LLC. Do not forget to say that. I know you said it before, but I wanted to bring it up here because then that LLC is buying the assets. It is not creating security. We would create an LLC. You are funding the LLC and that LLC is going out buying, and then we are splitting profits in the LLC. The LLC is on the title, but I have 51% ownership to controlling interest in the LLC. You have got 49% because we need chiefs, not all Indians, when we are making decisions. That is perfect, but that should answer it. Is that still a 2-year or 3-year thing or what?
It is 2 to 3 years. If you are interested, we can meet for lunch and we can go over the paperwork and talk more about it.
That would be great. You are here in Cincinnati, right?
I am in Cincinnati. I’ve got your email address. I will go ahead and shoot everything out to you.
Make sure you got the right one. It is Scott@123InvestInItNow.com. I am looking forward to it.
Text me or email me. Reach out to me through my website. Scott, it was a pleasure talking to you.
You too, Larry. Thank you so much for your postcard. We will talk more soon.
I will see you soon. Thanks.
Susan asked a question, “Can you do the LLC in an IRA?” You can have your IRA fund the LLC. That would be, you could do an IRA/LLC, but if you are going to partner with somebody, if you want to just do an IRA/LLC, for users, if you had where you wanted to be active, you could do an IRA/LLC where your IRA funds your LLC. We talked about the situation here. You could have your IRA fund an LLC that you are a partner in.
Scott, and that is what I am doing with the eight mini assets for $250,000. He has taken his money out of the IRA to fund the new LLC, the special purpose LLC.
It is a direction of investment form where he is buying a 49% share of the LLC. It is simpler to fund a deal that way than it is to go buy a note. If you have to buy a note, you have to provide copies of all the documents and the new assignments. It is the easiest way to use IRA money when you are just funding into an LLC.
I have purchased a couple of notes out of other people’s IRAs. I am amazed at how simple the direction of investment and you pass in the promissory note. Within a couple of days, you have the money.
Versus it can be 2, 3, 4 weeks, in some cases, it depends what they are waiting on. Melanie asked a question, “Is there a way to do investor relations from all on Zoom if you do not want to have to go out for in-person meetings or is that not as effective?” It depends. If you are marketing to people outside of your area, I live in Austin, Texas, but I do not buy a lot of stuff here in Austin. I buy a lot of stuff in Ohio. It is a phone call or via Zoom.
One of the number one things for you to initially get warm is going out and talking to people. It is going out to your local real estate investor associations. Depending on where home is, you may have a self-directed IRA company that hosts a regular meeting in your area, which is great to go out and network with. Susan asked a question, “Does it have to be a self-directed IRA with a checkbook control?” Not at all. It does not have to be that at all. You could use your traditional IRA. It does not have to be that you have checkbook access to fund deals.
Scott, I was going to say, Melanie asked the question about the Zoom. I reached out to a woman on a Facebook group. She asked a question, I responded to it, and then she started chatting with me. She started asking me questions. She watched the video and was interested, “I have got money.” I had a Zoom call with her. She is interested in funding that 85-unit apartment complex all from a Zoom call.
How long did that Zoom call last you?
It was about an hour and a half.
Did you go through your pitch deck?
That perspective that you helped me put together. I sent that to her up to. I am telling you, that was gold.
That is a slam dunk. You only get that if you are a one-on-one coach and you have a portfolio. I spent four hours on that thing with you. Every time you showed it to somebody, it has been a slam dunk when they have the $250,000 or more to fund the deal. They understand. When you have more money burning a hole in your pocket, getting 6% to 8% when you do not have to do any of the marketing to find it and are passive, that is gold to a lot of people because then you are looking at inflation being at 8% to 12%. You had it posted on LinkedIn that it went down by 0.03%. A big drop on the national average. How many people comment on your LinkedIn stuff that has funded with you or have gone out and found you on there?
At least 3 or 4 people and then I get a ton of people like banks, hedge fund managers, and other investors reaching out to me. It is insane.
Susan, Melanie, hopefully, we answered your question there for you. Melanie has a question here, “For both of you, what are your main reasons for investing in notes over all the other real estate investing strategies?” Larry, I will let you answer that question first.
I do not like the toilets, tenants, and trash-outs. After owning a lot of rentals, I am 100% done with that. I swore I would never do that, but this 84-unit, I am only going to hold it for three years. I am not doing property management on it. I am never going to buy another single-family home in my life.
You may have some back through foreclosure, but you are not looking to hold it as a rental.
No, I want to move them right away.
Are you not doing fix and flips?
The rate of return that I get from these notes is about the same as what I am doing with the fix and flips, plus I do not have the headaches.
Here are three things that we always talk about that we love about notes, Melanie. First and foremost, you are getting more deals sent to you than going out and try to find it yourself. You do not have to do any direct marketing like mailing postcards, door knocking, and that kind of stuff. The only direct mail we do is IRA investors.
Secondly, we see deals 6 to 12 months ahead of most of the competition. It is better pricing, seeing deals a whole lot faster, and then not having a lot of upfront costs from market to find deals. The fourth thing is a return on investment is a lot higher, especially when you are looking at your return on time on that stuff. There are deals that drag out longer 12, 24, and 36 months, but the return on investment for that cashflow is much higher in value than toilets, tents, and trash-outs.
If you start comparing numbers to numbers, it is a lot higher return on investment. Here is the thing too. You are 6 to 12 months ahead of the investors out there who are going to fight at the REO market to pay $0.85, $0.90 to a dollar. That could take them a while, 90 days to try to get it back up and then try to sell it. If you buy something at a discount, that is great. Fix and flip mine at a discount, but we all know things at the foreclosure markets are not at a discount these days. We get a lot of investors that come up from the apartment side who do not have enough money to buy an apartment. You are looking at this apartment because the bank sent you the deal at a huge discount and they are willing to carry the financing on the rehab too.
You have got some really good terms, which is the beautiful thing about note investing. A lot of times, banks will carry the financing on either the note purchase or even the rehab in some cases. This is good. For me, I do not want to deal with tenants and toilets. I am buying about 30 states, so I want to streamline my business. You want to be a master of one niche, not trying to do twelve, be a Jack-of-all-trades. You are a Jack-of-all-trades. You are a master of none. That is how you fail as an investor, trying too many different things versus being focused.
It is that squirrel syndrome. That is why it is just strictly being concentrated on this one thing.
If you have learned it, you have understood the aspects of what you did not like about it. You still have some of your rentals. Those are the extra stuff you have had for years on autopilot. You are selling some of your other real estates off there to put more money into your note business. Susan asked here, “What was the job? Do you put in any money and who pays for the LLC?” We do not need to put in any money. We go out and find the deals, do the due diligence, and handle them. We are not putting any money in the deal because we are finding the deal and we are controlling.
If you want to be involved in it, your cost to place, putting the money in. That is your part. The number of deals we have to go through to find a good deal is important. Who pays for the LLC? That is the cost of doing business. It comes out of the expenses. It is not that big of a deal, depending on what state it is. You can always book a phone call at TalkWithScottCarson.com. Larry, what is the best way for people to reach out to you?
You can go to my website, LJHInvestments.com and check out my videos. I have a Contact Me form and I have all my information, so if you want to reach out to me, please feel free.
You can check out the pitch video that has helped Larry raise over $1 million in pledges from private capital out there. “With all the perks of note investing, why do more investors not do it?” Melanie asked a great question. People do not know about it. It has been around for years, but you know what? People love the idea of flipping houses. They fall in love with the idea of picking out paint and carpet for $5,000, where they both worked for Uber.
They could buy a million-dollar house and for $5,000, they could rehab the whole house. The stuff on TV should be a criminal activity in a lot of cases. People like the tangible side of note investing. If I fight to take a property back, I do not want to, and it is more of its marketing aspect. People fall in love because that was the idea, “I could go do this.” As a note investor, you are evolved. You have seen that shark evolving from a monkey all the way up to where you are at now. You are in the note business. You are in the paper business. You are the most evolved investor out there.
We all start off wholesale and try to figure things out. You get into light rehabbing or subject to deals, and you will have your rehabbing, toilets, and tenants. You just want to start making a passive return with the loss of capital. Banks are in the fix and flip business. They are not in the rental business. They are in the paper business.
That is why they are the biggest and most profitable out there. When you understand leveraging and how to take somebody else’s money out there, who do you pay 6%? If you go make 12%, you are not making 6%. You are making an infinite rate of return on that money. That is what banks are doing. They are lending money. They are taking the money and paying it 0.01% and then going out and making 4% to 5% mortgage. It is not a 4.9% difference. It is a 490% or 4,900% difference. Larry, do we see deals too saturated out there?
It is funny because I have other well-known note people that I am starting to get in contact with. They are telling me I am not able to find anything. I am like, “I am finding stuff left and right.” That is because of the stuff that you are teaching us to do. You teach a man to fish and that is exactly what I have been doing. I am developing these networks and I constantly have deals coming to me.
The big thing with that is that there are investors out there. It is still a smaller niche compared to fix and flippers and landlords. There are a lot of investors over the last number of years and they got very comfortable buying from just a couple of sources. There are a couple of funds that would buy on a regular basis and they would market those out. People would buy that. In the note business, it is marketing, more than anything, and reaching out to banks, either dialing for dollars and calling asset managers or jumping on LinkedIn and connecting with asset managers there.
People cannot mark it out of a paper bag, unfortunately. You have a lot of people that, “There are no deals.” When you ask them, “When was the last time you sent an email blast out to ask managers or when was the last time you picked up the phone and dialed for dollars or got on LinkedIn?” Ninety-five percent will say, “I have not done that in the last year.” That is the reason you cannot. If you do not market, you are not going to find deals. If you market, Larry does a great job and other people do a great job. You will find deals. It is proven.
This market is not saturated at all.
You just have to be coachable and do a little bit. If you are working full-time, you can do this. You work full-time from home, right, Larry? You started off part-time. That was a big concern for you when you first got started too. If you got a knack for marketing, you will like this business. Everyone, thank you so much for hanging around until the very end here. Once again, Larry, thank you for jumping on here, sharing the role-playing aspect, and being a sponge for everybody. See you, everybody.
See you. Thanks, Scott.
- Note Night In America Podcast
- The Note Closers Show Podcast
- Note Camp LIVE Podcast
- LinkedIn – Scott Carson
About Larry Hoffman
I’m the owner of LJH Investments LLC an Ohio-based real estate investment firm specializing in buying and selling distressed and toxic assets since 2006. My company focuses primarily on the purchase of performing & non-performing 1st and 2nd mortgages on residential and commercial properties across the United States in the 50 largest metroplexes. Our strategy is to purchase this mortgage debt and either negotiate with the homeowner or borrower to take control of the property or turn the loan back into a performing loan. Instead of rehabbing the property, our focus is to “rehab the borrower” and create a win, win scenario for our borrowers, the banks, and our investors.