KSS Scott D. Brown | Note Investing


Everybody is familiar with real estate investing, but only a few find themselves venturing into note investing. Exploring this business even deeper with Kevin Shortle is Scott D. Brown, a new note investor. He explains how this allowed him to start from his exit strategy and work his way back into his business plan. Scott discusses how to harness the vast reach and influence of Facebook and other social media platforms to boost note investing strategies and results. He also talks about the different approaches between performing and non-performing notes, as well as the benefits of acquiring government assistance in this space.

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Interview With, New Note Investor, Scott D. Brown

Do appreciate you tuning in. Do appreciate you telling a friend. If you’re a part of a meetup group, a real estate investment club, and any investment club in general, I appreciate you sharing the show. Planning on ramping it up again in 2024. I’m off to a late start, I’ll admit that, but I do appreciate you tuning in and subscribing. The reason for the late start, we caught up through the holidays and had a lot of transactions going. The real estate note industry inventory levels have been extremely strong and extremely steady. I expect that to continue on, but we’re going to be putting together more of these shows for you.

If you know somebody who you might think is good to be on the show, shoot me an email. Let me know. Also, if you yourself might be a good guest on the show, please let me know for that. For those who are tuning in but not subscribed yet, please go ahead and hit subscribe. If you’re so inclined to rate me or if you like the show, please rate me a nice star on there, five stars, and I appreciate that. We’ll do our best to bring you more of these informative shows for you in the future here.

A couple of things before I introduce you to my guest. I’m talking about inventory levels. As I mentioned, they’ve been strong and they’ve been steady. What I’m still seeing overall is we’re looking at about 70% performing assets versus 30% non-performing assets, which is an interesting mix. I think the signs are showing that that is going to start to change. For example, yesterday about 300 and some-odd notes. Not all non-performing came across my desk, but that’s a small amount in a big industry. I’ve said this for a long time. I never was one of those people in our industry who said, we’re going to see this huge tsunami of non-performing loans. I never expected that because of the escrow levels of real estate. I didn’t see that happening. I figured it would be a trickle when and if it hits.

The things I’ve always said is, you need to look at the indicators. When somebody’s in trouble financially, think about it logically. First thing they’re going to stop paying is credit card debts, normally. Those go by the wayside. They then start thinking about, “We got to reprioritize our debt here. I want to keep a roof over our head,” so they stop making car payments. Those are two key indicators that I always look at to see what might be happening in that because the next thing to fall is going to be the mortgage payments. That’s where we’re going to start to see a lot more of these non-performing loans.

Right now, we are at historical highs on credit card debt and also auto debt. You can look that up in routers. They came out with new articles on that. More importantly, we’re also at decade highs for credit card and car loan delinquencies. Not only are the amounts going up, but the delinquency rates are also going up. That’s an indicator that things are not as rosy in the economy as some of our experts are telling us. The next logical thing is for people to fall behind on their mortgage payments.

Now, the good news for us in this industry is we have, as I said, strong and steady inventory right now. If the economy gets worse and if we see more people go into default, for us, that is an increase in inventory. You know what, it’s also a godsend, overall for people who are in delinquencies to deal with us, rather than dealing with Wall Street or rather than dealing with banks. It’s because banks and Wall Street have different motivators. That is to clean this out, get it off my books, get the property back, sell it, go through foreclosure, and those sorts of things.

With us, when we buy these notes or these non-performing assets, we work with people more. We have the opportunity to help people stay in their homes. That is what you’re going to see, because different than the last crash that we had where people owed a lot substantially more than what their house was worth, now we see houses with a lot of equity. Just because of that equity, there’s a motivator for us to work with them more to keep them in their home.

Even if things go worse, for us, it’ll be more opportunities, but also in helping people stay in their homes, which is a nice aspect of this business. Yes, we’re in it for profit. We’re not non-profit entities, but to be able to buy these notes, add a good discount, be able to work with people, and give them another chance which a lot of banks wouldn’t do, then that’s overall a great thing.

Most of these notes, by the way, are not owned by banks. That’s a misrepresentation. The banks become the servicing companies because banks originate loans, and then they sell that paper to Fannie Mae, Freddie Mac and Ginnie Mae. Those are the entities that would be pushing towards foreclosure. You know what? They don’t foreclose as much as you think. If you look at the foreclosure rates right now, the mortgage monitor from Black Knight Financial, February is out. Their report is showing that the delinquency rate nationally right now for first-lien mortgages is 3.57%. That’s it. That’s all. It’s starting to tick up.

What happens is, these entities that I mentioned, the quasi-government entities private, part public, Fannie Mae, Freddie Mac, and Ginnie Mae, they have a tendency to not foreclose. What they do instead is they bundle up the bad paper and they sell it. That becomes our note inventory that trickles down. Again, good inventory levels right now, nobody wants the economy to go down the tubes, but if it does, if you’re investing in this area, you are in a great position to not only profit from it but also for those who like the social aspect of this business where we can help people is a great thing.

A little bit of an update for you there, but I want to get to our guest because I’m always intrigued of the people who are attracted to this industry. This industry, although it is huge financially, it has a small imprint, meaning it’s more of a niche industry. Everybody’s familiar with real estate, real estate investing, and renting, but they rarely find out about the notes. When they do, some people latch onto it. I see a lot of engineers. I see a lot of tech people that are attracted to this. I see a lot of frustrated real estate investors and landlords that are attracted to this industry. I’m always inquisitive as to why people are intrigued with this business and how they heard about it. I think our guest, Scott, is a great example of that.

Scott Brown who’s my guest here I wanted to introduce to you. He comes from a very high-tech field that deals in all kinds of aspects with the metaverse. I’m probably saying that the wrong way, but he’ll correct me on that. Dealing in social media, all these aspects that are so important now that I have a deficit in my knowledge base. He’s been with me for a short period of time now, very interested in the business, and structuring a business plan around this from the get-go that I find pretty intriguing as well. Welcome, Scott, to the program.

Thank you, Kevin. I appreciate that. I do have a background in real estate, and it’s very similar to what you had doing bridge loans and hard money lending. You and I have that in common. I did that before the Obama administration. We shut down Lehman Brothers and some of these liar loans out there. We did well with gentrifying properties, loaning, and working with investment groups.

I was living in Florida at the time, and I had somebody on the ground in Decatur. There was a lot of property that was bank-owned properties that we would buy, and then we’d bring somebody in and gentrify the property for the investor, get the investor on the paperwork, and they were paying us 15% for short-term bridge loans. They were pulling back into a relationship that I had with Bank of America out of Atlanta.

Things were running great, fantastic, and all right, and then all of a sudden, 2008 or 2009, it hit. We did so great. We were living in high life, having a good time. I was driving up, flying up Atlanta, looking at property, working with a woman names Susan, she brought me some good properties. The main investment group was out of Los Angeles. They were doing some things first in Las Vegas because there was a big pushback then for leaving California to Nevada and buying property there.

Investors. These investors were then putting section eight people in these properties. That was that. Everything fell apart because Todd Schumacher, who my contact was at Bank of America, had to tell me, “I can’t move them.” I said, “What are you talking about? You already pre-approved them.” “That was before. This is now.” We had what saved us, the term deed in lieu of foreclosure. We ended up getting the deeds instead of foreclosing and these investors were happy to walk. Instead of being a bridge lender, I became a landlord. That is something I didn’t want to do. I had to hire a management company because I was living in Florida, in Tampa Bay. If you’re going to be a landlord, you’ve got to be in the area where you have your property. It doesn’t make any sense.

I then had a management company that was stealing from me. It was a mess. I ended up having ten properties at the time. I had a couple of properties because of Katrina and what happened in Mobile, Alabama. I bought some properties there. I got some good deals on that. The thing that killed me was Decatur. I had eight properties. I didn’t like section eight. They skip out in the middle of the night. It was bad. We ended up losing some money on there. Fortunately, the years before that, we made quite a bit of money. It probably ended up a wash, but it almost drove me crazy dealing as a renter.

I was introduced to you, Kevin, through a mutual friend. I’ve always thought it was intriguing to get back in. I liked this market. I don’t even own my primary home anymore. I live in California. In Northern California. It’s very expensive. I live in an area 50 miles north of San Francisco called Santa Rosa right in Sonoma County. Very expensive. I don’t even own. What I want to do is own notes.

It’s very intriguing for me because I don’t want renters who’s perfect for what I want to do and the investments that I want to make. The return on those investments are pretty amazing for this day and time to be able to do that. If it’s done right with the numbers and doing the due diligence on the background like you’ve taught me, this is basically the time that we normally get together. We’ve been getting together once a week since the beginning of January. It’s been great getting your brain and picking your brain.

KSS Scott D. Brown | Note Investing

Note Investing: Instead of focusing on getting renters, focus on securing return on your investments. It is pretty amazing for this day and time to be able to do it if it’s done right with the numbers.


As a marketer, I’ve been using LinkedIn to set the stage for, what I ultimately want to do that’s to put together an investment group for this, and then pretty much put these deals together and do my favorite thing, which is OPM and use other people’s money to make money. I’m going to put my own money, like we talked about in my strategy through that business plan you were talking about.

Starting with a real estate background is helpful for sure, especially you were originating loans. For my audience, the bulk of what we do, I help people originate loans as well because that’s a note business also. Most people don’t think of that as a note business. They think of that as the lending business, which is a subcategory of the notes. For the most part, in the note investing industry, we’re going back and looking at a note that somebody else has already created. The fact that you have a knowledge base on how to create a note and do it the right way is certainly a transferrable skill set.

For those tuning in who aren’t in the business yet or knew the business, you don’t have to have a background in that, because basically you’ll learn how to go back and dissect that deal and figure out, “Did they create it the right way? If so, what it’s worth?” It’s very similar to looking at real estate in that manner where you’re looking at a property and going, “That’s what these properties are worth, but this one needs work on it. This one wasn’t done quite properly. It has some issues with it.” You have to be able to come out to a valuation on that.

The landlording aspect is always interesting too because as a landlord, there’s a lot of money to be made in that, but it does come with a price. With your story, you came out pretty unscathed feeling like it was a hassle and a burden. You’ve been stressed out, but you came out pretty unscathed because there were a lot of people who owned the property. You were lucky in the fact that you owned the debt on the property and were able to get the property back where a lot of people who owned real estate got blown away because they owed so much money on that. It’s an interesting cycle.

I like the fact that you’ve got a marketing skill that is extremely useful in this world, of course, through all the technology and to put these deals together. In that background, I’ve got a lot of people started with the groups. Your idea is setting up groups online and having people join that group and listen. How does that ultimately work for you?

What I’m thinking of first of all is, even though I have the background, what I’m looking at is performing first. Get in performing notes and that’s the lower-hanging fruit and the easier one to get into where you don’t change the servicer that then contacts the end user of the mortgage and says, “You got a new bank.” I’m the new bank and I pay the takeover as the bank for the remainder of the term of the loan, which is great. That’ll give me an opportunity to learn all that, do the research, and run the numbers. You’re big on our weekly meetings with pulling out your calculator that’s bigger than my head and running your numbers.

It’s all about the numbers, and then it’s about what’s the background, what’s the reason that they’re upside down. On the performing, it’s not going to be a problem, but on the non-performing that’s a different story. Still understanding, if it’s a divorce, if it’s a bankruptcy, what is it in the public records? Plus, I’m looking for cashflow and I want a long-term monthly cashflow which gives me a better return, obviously, than a CD or any other annuity vehicle or whatever the other vehicles would be. I’m looking at performing first, and I’m probably going to do a couple of a quarter.

The next step would be non-performing, which takes more research and there’s more risk, but the reward is going to be better. At that point, I’ll probably hire in a virtual assistant to do the public records research for me while I’m sleeping. They’ll be in the Philippines or somewhere, and then the next morning I get a report that says what I want to see and what’s going on. The things that I’m going to learn from you that say to me, “Don’t touch that one, it’s a divorce. Don’t touch this because it’s this or that.” Even though the numbers make sense, sometimes the reality of the situation makes no sense at all to take it on.

Even though the numbers make sense in your investments, the reality of the situation sometimes makes no sense at all to take it on. Click To Tweet

The skills that you learned on the lending and the involuntary landlording that you had, it’s still different when you get into the note side. I think that’s what you’re expressing there. There are still some things that you have to learn and those are great to have, but as long as you don’t come in, not that you are, but to the audience, I’ve had real estate investors who are extremely sharp, very good at real estate investing, come in and think that they know everything about the note side because they’ve been to closings. No, you have to go back and reprogram a few things here, take it from the debtor side, and look at it from that aspect.

Part of what I like to teach is the very foundational skills of this business. What I’ve found is a lot of real estate investors lack those fundamental skills of what these documents mean. They’ve signed a bunch of them. I used to make the joke in trainings all the time, “I’m sure you all have been to a real estate closing. Of course, everybody in the room raises their hands. I’m sure you read every single document that you were signing at the closing. No, you didn’t read anything. In the note business, that’s what you’re buying. You’ve got to be able to look at that.” It makes sense to start out and not complicate things by having a distressed borrower in there by performing notes. That’s a great path to be on there.

You recommended that. Through your mentorship training, that’s what you recommend. I asked you, then you said, “The performing first, basically cut your teeth on it.” You’re right about the whole thing. with the real estate foundation, I look at it. What we’re building here is the walls are different than what I was building before and the elements are different than what I was building before. I’ve come to this with you as the mentor to help me out. I pretty much have a blank slate. Coming here, as they say, tabula rasa. Blank slate, and I’m going to be a sponge and absorb everything because I’m investing in this. I’m investing in you to teach me how to do this and the ongoing is great. So far, it’s been great. I appreciate everything that you’re doing. Dwayne’s been excellent in helping you out. I’m excited about doing this.

You’ll find that systematic approach, by the way. I think you’re already seeing that at times that we’ve been able to meet on Zoom and review some things. I think the hiring of assistant is a fine way, virtual assistant. Once you show them, “I want you to take this information, put it here, run through those calculations.” That way, you can look and go, “Yes, yes, yes, no” just by looking at the numbers. I think that’s a great way to automate the business.

I’m going to have them do the raw numbers probably, and then do the public record background checks and things like that. They’re not going to do my due diligence. They’re going to give me data. They’re giving me the data. I’m the guy who analyzes it. I’m not going to let anybody analyze my money. Maybe you.

Numbers and story.

Maybe I’ll let you, Kevin, analyze my money, but I’m not going to let somebody in the Philippines do that who doesn’t even understand the market here. I don’t mind doing that. My long-term goal and you’re asking me about that too, is to put together an investment group for people who are interested in another alternative investment. I think you’re right about the different people that would be interested. People who have investments.

Real estate investors now would probably be fairly good. Like you mentioned, engineers, people who have additional money, who want to do something, who don’t want to have a CD, they don’t know what to do. They have all these insurance companies saying, “Get this annuity, put it in your 401k.” You can fund some of this with a 401(k) or K1 or IRA.

Yeah, any of that. Any self-corrected account.

Roth or a traditional would be fine, That’s something. What I’m looking for and I’m already thinking about it, I’m going to create a website because I always do that and attract people to it. That would be my perfect investor. I can paint a picture of the perfect investor in words and put it out there in Google land and get what I want. I’m already setting the stage for that. I’ve got a couple of people who are interesting and then some people that are interested here in the Bay Area where I live in San Francisco. There’s a group of investors that are using insurance vehicles. I mentioned the annuities and some other things. This is a great alternative.

I do know somebody who has rental property in San Diego. Her son happens to be the guy who is on A&E Flip, San Diego. I learned a lot from him, but she has property. You know what she does? She carries a gun with her to collect rent. Crazy. She has to do that because she buys distressed property in bad areas of San Diego, California. Believe it or not, there are bad areas in San Diego.

Anyway, it’s interesting. I don’t want to do that. I don’t want to get into that. I like the aspect too of helping somebody. I’m big on profit things and giving back. If I can turn somebody around and it had a little bit of bad luck, they got a little behind on their loans, and the bank’s not being forgiving, I’ll consider continuing or restructuring their loan and getting them caught up. Build that in and make it comfortable for them. A lot of these loans compared to what I’m used to in California, $500 million loans, a lot of these, what can you start out with? What are some of the lower-price-cost loans that are out there that you see?

KSS Scott D. Brown | Note Investing

Note Investing: Someone getting behind on their loans and dealing with an unforgiving bank will benefit from a restructuring of their loan. This will help them catch up.


In the Midwest. We see a ton of notes right now under $30,000. It makes sense. Let’s say you had $100,000, you’re better off buying three of those smaller notes. Less risk, higher returns, diversification, versus buying a big note on one property.

There’s no way I’m going to buy any notes in California or even anywhere in the West. Maybe more parts of Nevada possibly, but you’re talking maybe in Wyoming. It doesn’t matter where the note is. That’s the beauty of this.

You have to know where the deals are.

You’ve got to be near your rental property. This is all deal-based, like you have, and it’s being serviced. You’ve got everything from A to Z. The beauty of working with you as the mentor, A to Z. I have a cheat sheet and I have links to everything that I would need. When I put together an investment group, I’m not going to train them, you’re the one who’s going to train them. I’m not going to work with anybody unless they go through the Kevin Shortle training program. Period. It’ll be good for you.

There’s a trend there because a couple of things to go back and clarify real quickly. When Scott was saying, he’ll work with people to do this. It’s all outsourced. Don’t think that you’re going to have to be calling delinquent borrowers and trying to work with them. You’re going to outsource that. You have to direct the people to go out and reach out what your plan is on that. There is a frustration in the industry right now that you hit the nail on the head of, you’ve got these companies that are in the business of buying notes and selling notes. It’s one of the inventory funnels that I talk about.

Their frustration point is somebody saying they’re going to pay X number of dollars for a particular note, dragging that out, and then backing out of the deal not closing on it. That’s driving some of these companies absolutely crazy, as it would. Imagine you have a house, you’re trying to sell your house, you take it off the marketplace, now it’s tied up for several months, and then the people back out of the deal. We see that in real estate all the time and lawsuits are a result of that. Now, in the note business, you’re not going to get sued if you don’t go through on a note, but it does cause frustration to that, to the point where a lot of these companies are saying, “You’ve got to have a mentor. You’ve got to have somebody who’s working with you on this.”

There’s always that piece and that piece is contingency. Talk about this deal’s going to happen. If there’s a contingency to close that deal down, you always want to have a contract with a contingency. If you don’t have a contingency, sometimes you do get stuck and you end up having to buy that note or property, whatever the case may be.

That’s why real estate falls through. That’s why people get multiple offers on property with their selling because maybe somebody can’t come to the table, they do a cash deal and they can’t come up with cash or they’re trying to sell their property and they can’t sell their property, so they can’t close on the property. There are still some contingencies in the notes. I’ve only been doing this for a month and a half, but I think we talked a little bit about contingencies. You’ve talked about that in meetings.

I use one clause that I’ve used for 20-plus years in this business and I always have that in every offer that I do. It gives you the legal, moral, and ethical out. Should a deal not be what it was supposed to be or expected to be? As you’re learning sometimes in this industry, you do have to make an offer before you have all the facts. Certainly, when you’re in a case like that, you want to make sure that you make the offer, but it’s contingent or subject to certain items.

There’s the hot market too. If you’re in a hot market and you’re in a bidding situation, that’s when you make mistakes. You get those contingency. I’ve seen that happen with other people that I know that get caught with a property. After they close on the property, they think, “Why did I do that? What was I thinking? I didn’t do my due diligence. I didn’t have a contingency, and I’ve got this dog of a property. What am I doing?” You’ve got to be careful, even in a hot market. You act when other people are fearful, and then you start acting when everybody else is in a hurry.

You act on your investments when people are fearful. You stop acting when everybody else is in a hurry. Click To Tweet

It goes along with Warren Buffet’s, “Buy when people are selling or fearful, and sell when people are confident.” Something like that. I’m talking with Scott Brown. Interesting background starting in real estate, and then in the marketing aspect. A lot of people who entered this business and start to look at it as a full-time and growth, which is what you’re doing. You do have to think about other people’s money. I didn’t mean to derail you on the direction you were going there, so we’ll get back to that.

With other people’s money, it’s an important aspect of this business because at some point in time, you deploy all your capital, and then what? You either start doing partials, you start partnering with people, or you take it next level. Partnership is part of other people’s money, but then you also get to other aspects. Some people look at building funds and everything else. A great way to do that is through the social media. That’s the direction you’re ultimately long-term going.

I’m still back at, I want to meet the people, I want to know the people, and I’m going to have exclusive groups and limit it to the number of people that I have. I’m not going to mass-produce this. I don’t need to. In this industry, I don’t think you do need to. If you’re getting cashflow and multiple streams of cashflow, managing that, helping other people, and then getting cash flow on a percentage of whatever they’re managing, and then they bring a friend in. I don’t have to do mass media on this at all if I pony up with the right people.

That works on the other side as well. For example, this morning on a one-on-one session with another client, there’s a lot of times when you start to look at these deals and you go, “I’ll point out to you and say the person who created this note, this is what they do. They buy real estate and they sell the real estate with financing, and then they move on to the next one. You then start to build a relationship with that one client. The next thing you know, you’re buying 6 to 7 deals from that one person.” It can be a complete game changer.

The guy this morning I was talking with, I think he’s bought seven notes from the same seller. It becomes easier on there. When you got deals coming in on that relationship level, and then you’ve got the relationship level on the other side where they tell their friend and they tell their friend, that’s a winning mix. I would have to agree with you. It doesn’t take you don’t need hundreds of people to be on there. That’s a great point.

It all comes down to credibility too. By you being in this industry for 20-plus years, you’re probably pushing 30, but we’re not going to tell everybody.

No, I always remember, because I was either just married or about to get married and that’s 32 years. I track it by my marriage.

This is not my career. This is my investment. I have a career. I have an investment. Believe it or not, I’m 61 years old and I’m thinking of another 6 years. What do I do after that if I’m living in another country or whatever? I can still make money on this note investment. Especially, if I’m doing a non-performing and restructure that loan for fifteen years. My kids will get the money. I’ll have to leave the cashflow to my kids or somebody else. I’m not married right now, but I am seeing somebody. She can have the money on the cashflow. I’ll say, “You can have that whopping $200 from that particular client. The servicer on that is $20 or $30, like 10% of whatever is the monthly income from the mortgage.”

Definitely though, Kevin, what you’re doing is amazing because you’re not taking any piece of it. You’re doing the training and you’re helping guys like me to find a better investment vehicle than I can find at in an investment if I had a broker. I still do. I have 401(k) and all that stuff, but I have a broker, I’ve got Fidelity, I have others. They’re not performing. They perform even at this time about 5% to 7%. I can’t give numbers here, but we’re talking about at least lower double-digit returns if I do it right.

Average return is 10% to 12%. That’s without doing any exit strategy partialing or partnering or anything like that. That’s just buying a performing note. The great thing about it too is the risk. You’ve got a property. I’ve had people go, “What happens if property values drop by 10% to 20%?” I said, “Not a single client of mine would be in trouble if property values do drop by 10%.”

The property value doesn’t matter. Even if you do a non-performing and you do deed in lieu foreclosure on it, you get the asset back like you were talking about. I learned that obviously in my previous client. You get the asset back, then you sit on that asset, and you rent that asset out until it appreciates. It’s a cycle. Everybody has to understand. You don’t get rid of things in a cycle because it’s bad. You hang in there. It’s an investment. They call it an investment. It’s not a guarantee. It’s an investment. It’s a risk. It’s a reward. You want to be diversified.

I have other investments too. I’m part of a venture capital group out of Cambridge from college days. You’ve got to be diversified. This is a great way to diversify. You can even diversify in the note diversification. Diversification and note diversification. Like you said, don’t buy $100,000 when you can buy 3 of them. It’s $33,000 a piece. If one goes tank, then you’re okay. If you’ve got $100,000 one and it goes tank, you’re in trouble with $100,000. You’ve got to be willing to use money that you’re willing to lose. Don’t use your rent money. That’s one of the reasons too, I’m looking at an investment group. I don’t have to use my money. I use my expertise at that point because I’ve learned from the best. Kevin, you’re the best at the note business.

I appreciate it. You’re right. Always look at risk first, then we look at reward. You got to protect your money. When you go buy a note for $30,000 backed by something worth $100,000, that property could drop to $80,000. Now, you got a $30,000 investment backed by an $80,000 property. The other crazy thing about this is, when you think about it, especially in an appreciating market, your risk goes down every month because they’re paying back principal and they’re paying you back interest. If the property value’s going up and the amount of money you have in the deal is going down, it’s an interesting concept and you don’t have all the same headaches with the landlording and those aspects there.

You pushed to the numbers and the ratios on the numbers and getting it to 80% or higher. Working the risk numbers and lending the numbers. Numbers don’t lie. People do, but numbers don’t lie. That’s why you have to do a double risk assessment. The numbers first. If the numbers don’t make sense, it doesn’t matter what anything else is. The numbers have to make sense before you go to the next step, which is the due diligence on the human factor, and then you can make a good solid decision.

KSS Scott D. Brown | Note Investing

Note Investing: Numbers don’t lie, but people do. That’s why you have to do a double risk assessment when the numbers do not make sense.


You still may mess up. It still can go south on you, but if you diversify, it goes south on one deal and maybe not another. If you write it correctly, you end up getting the asset back anyway, sit on it, and then rent it yourself. You hate to kick somebody out of their home after they’ve been there for a while. You don’t want to do that, but if you have to last resort, you do it, unfortunately.

I’ve never had to do it. That’s the thing. I’ve had to threaten it. Sometimes people need the wake up call. You give them the wake-up call and they communicate. Like I said, options, when you’re able to buy these things at such a good price, you’ve got options that previous lenders simply didn’t have.

Another thing that popped in my mind is, instead of kicking them out of the house, what you do is you own the home and you lease it to them, and maybe you do a lease option for them to buy the house back. That could be an option.

We’re in the creative world. I’ve made the argument before too with, we won’t run into people that also declare bankruptcy. For most real estate investors, bankruptcy, they run the other way. For us, we gravitate towards it because that means something has happened. If it’s a case where someone has declared chapter seven bankruptcy, but all their debt’s gone, bankruptcy doesn’t mean that that person doesn’t have any money or any income. They could still be making the same $50,000 a year, but if $100,000 is gone, they could be a good candidate to stay in there.

Somebody who has bad credit doesn’t even matter either, but somebody who lost a job, one source of income, that’s terrible. You’ve got to have multiple streams of income because if you lose your job, then what do you do? Six months later, you’re still looking.

You need to have multiple streams of income. This way, if you lose your job, you still have something to depend on for a few months later. Click To Tweet

I think part of this is because I’ve done it so much and I’ve had enough trial and error where I have a direct approach to every asset that I look at. When you build a repeatable process, it becomes more muscle memory where it’s easy for people to ask for, “Do you have a checklist for this and that?” They don’t all work on checklist. Sometimes you have to go, yes or no. You have to think about all these different aspects here, but there is an approach and you divide your due diligence into layers because you don’t want to waste a lot of time in the business. It starts with that surface-level due diligence.

Government assistance, that’s important because you could have somebody who could qualify to get government assistance. We can help them and we get the money from the government for their loan. Do you want to explain that a little bit?

That’s a huge program and underutilized because most people don’t know about it. The same thing happens. This program used to be called Hardest Hit Funds in its initial version. That’s the one that was around after the last crash. It got established in 2009. It only applied to thirteen states in Washington DC. This time around, they changed the name of it to homeowner financial assistance, but they broadened it where every state was allocated money. They left it up to the states as to what that money could be used for and how much per family and that sort of thing. Now, there’s a handful of states that have already spent that money. We haven’t had a crisis yet, but we’ve had enough of defaults where some states have already used up all their money.

We’re talking $50 to $60 million worth of capital that they had. Let’s run the scenario down the road. I started off talking about stats and things like that. What if the economy does get worse? What if all of a sudden the foreclosure rates start going up multiple highs? What if that happens? Think about it. I don’t talk about politics and those sorts of things, but there is a political flame in the country now. I don’t care who’s in office, we’re in an election year. If foreclosure rates start to go up, it’s logical to go, “They’re going to throw more money at this program.” It’s because no administration, I don’t care who you are, wants to have all these people in foreclosures. For the economy, it’s certainly not good for politics.

We already have a homeless crisis already. You don’t need more people on the streets who lose their homes. With rents going up and there are several programs even for rents, if you put your head together with somebody who’s in “crisis” with their mortgage, there’s always a solution. It’s willing to get it and be able to bird dog it. With the information, it’s not hard to figure out what programs are out there that will give you assistance to help you with your mortgage. Again, guys like you and I will benefit because the government will be paying us, not them.

KSS Scott D. Brown | Note Investing

Note Investing: It is not hard to figure out what programs out there can help with your mortgage that will be paid by the government.


All we have to do is contact them. We’ve done that typically through a door knocker. It costs you $75. Send a door knocker out there and hand deliver, “This government program can help you.” That government program, they are the ones who have to apply but they don’t know about the program. We inform them about the program. Hand delivery. You could also mail it off. The point is, you get the information in front of them, they make a phone call or they get on their computer and they fill out the paperwork.

Ninety days later, they’re states that will pay up to $100,000 to catch that person up on their loan, so their loan goes from default to current overnight, and then some programs even will pay monthly payments on behalf of that borrower for the next year. You’re right, all that money, it doesn’t go to them, it goes to the note holder. By the way, it doesn’t matter what you pay for the note. You could pay $20,000 for a note and get $50,000 back from the government to bring that person’s loan current.

Right, because there’s the arrears. You got to cover the arrears.

I think that there’s, in the states, that have already allocated their money again, I think they’re going to get more money. I’m basing that on experience because years ago when it was called hardest hit fund, guess what they did? After four years when the program was supposed to expire by then, they  gave another couple billion dollars because it was working and it was helping people.

Not to be political, but it’s an election year. The house is a marginal majority in the house. Who knows what’s going to happen in the White House? As far as the Senate and the House of Representatives, and even in the state capitals, a lot of these funding you’re talking about are run by the states, but they’re federal assistance.

Federally funded.

I don’t want to get into politics, but we are a socialist country in many ways. The government comes to rescue and they’ll bail out Chrysler, which is funny because the government had an opportunity to bail out Lehman Brothers and they didn’t. Lehman Brothers is the dodo bird, but Chrysler through, he went to the government and, got money. Chrysler survived. Lehman Brothers didn’t.

There will be more money in these programs or different versions of these programs. That’s one of the things. As you mentioned, this is not a full-time thing for you, and it’s not for a lot of my clients but it is for me. I’m the one always reading these reports and getting back to you all and letting you know about where these programs are.

I think we’re in a great industry. We’re perfectly suited as we are. Things get worse. Our opportunities increase, but again, on a positive mission to help people stay in their homes as well. I think that’ll show again for us. It’s a matter of mastering some skills. It does take working with someone like myself who can guide you through these steps. You had a feel that your learning curve is going to be so much shorter. You’ve already seen that.

I followed you on LinkedIn, so I see your videos. I subscribed to your video and all the podcasts you have. You’re always on the move. In every video you do, you’re walking, so you get your exercise in and communicate at the same time. You mentioned at the beginning of this show about a business plan. I know my end game now. I know where I’m going with this. I start from my exit strategy and work my way back into my business plan. With this, and especially with non-performing enough, I restructured like fifteen years or something like that. I’m 61. It’s going to eventually outlive me and I’ll leave a legacy for my kids whether they like it or not. At least they’re not going to be landlords.

Real estate without renters.

Who needs a renter there?

There you go.

I am a renter. I rent, which is interesting. I’ll buy notes and own property notes, but I rent.

That’s a great way to leave it. I appreciate it. I look forward to working with you throughout this plan. because I think you, you’re going to have some great success in doing this, but thanks for coming on and sharing your thoughts on the show.

Sure. Anytime. I’m working. Dwayne’s been great. He’s like your right-hand man or something, I don’t know.

He’s helping me out quite a bit and it’s good to have him on board. By the way, I do have a training coming up. If you’re interested in an introductory training to the note business, I’ve got one coming up. It’s going to be February 21st and 22nd. It’s only $49. You’ll spend 4 hours over 2 nights, the 21st and 22nd, with me. I’ll be able to spend enough time to see if this is the right investment for you or not.

There are plenty of free trainings out there and videos. I make some myself, but not enough in the free stuff to know. Ultimately, is this the right investment for you? You spend four hours with me, I guarantee you, you’ll know if this is the right industry for you or not. It will be well worth your time and effort to do that. Again, that’s February 21st and 22nd. Look for the links on that as well. Thanks again, everybody for tuning in to the show. Please share it with a friend and go ahead and subscribe. I do appreciate it. Thank you, everybody.


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