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Find Private Investors In Your Local Market… Quickly! With Scott Carson

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Scott Carson (aka “the Note Guy”) is the host of the popular Note Closers Show Podcast and a nationally syndicated radio host with millions of listeners each month. He has been an active real estate investor and entrepreneur since 2002, focused on the niche of distressed mortgage and notes industry since 2008. For the past ten years, he has helped real estate investors and entrepreneurs create wealth through his teachings and strategies. In this episode, he joins Moneeka Sawyer to talk about finding investors to fund your deals in your local market in 10 minutes and how to utilize this private money in your investment without getting in trouble.

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Find Private Investors In Your Local Market… Quickly! With Scott Carson

Scott, we are in EXTRA. I am excited to talk about finding investment capital. I’m going to turn this over to you.

One of the biggest things that I see a lot of real estate investors struggle with is raising private capital. They don’t know who to talk to, they don’t know how to market. They’re afraid to talk to a lot of people and have those money conversations or as I like to say, they get diarrhea of the mouth where they come out and throw up on everybody. You don’t want to do that. You don’t want to throw up on your friends and family. One of the easiest ways to raise capital is to connect with other investors who have closed on deals. It’s hard to find investors a lot of the time unless you go to your local real estate club. I like dealing with people who have pulled the trigger on a deal. They’ve got money to do things or they’re looking and they’re all excited and they want to close on some more deals. They’re going to applaud you for making deals.

I like connecting with local self-directed IRA investors. People that have a self-directed IRA through Quest or Equity Trust or PENSCO. There are about 50-plus different self-directed IRA companies. If you google self-directed IRA custodians or trustees, it will give you a whole list. One of the ways that we raise capital is we’ll go to the county appraisal district or the county clerk on a particular county, either where we’re investing or where I’m located. For example, I’m in Texas. I can go to the Travis County appraisal district, pull up the appraisal district. You type in your name or your address and it tells you the property details. When somebody uses their self-directed IRA to fund the purchase of a rental property or a second home, it’s not titled Moneeka Sawyer. It’s titled Equity Trust for the Benefit of Moneeka Sawyer.

I go on there, I’ll type in Equity Trust or I’ll type in Quest Trust. It’ll give me a whole list of about 100 to 135 properties being titled that way. I can click on the property detail to say it’s Quest Trust Company for the Benefit of Scott Carson. I know Scott Carson, the investor, because most people don’t know about a self-directed IRA company unless you’re an investor. They’ve pulled the trigger, as I said. They got a deal. One of the most beautiful things about self-directed IRAs is that money’s got to be handled by a third party. It can’t be them self-dealing with deals. They’re often looking for not only for money to invest with their self-directed IRA. They also have funds outside of their IRA.

If you were to send out 500 contacts, all you need is one person to respond to make it worth your entire while. Click To Tweet

That’s the first thing. You go to the county appraisal district and look for properties where the title is owned by a self-directed custodian in five minutes. A lot of people will lend money to their self-directed IRA. A lot of the custodians or trustees will tell me that roughly somewhere between 50% and 60% of their funds on deposit with them are lent out in notes, private lending and things like that. We’ll go to the deed records and we’ll do a name search for the same 50 names to find out who lent money out. We also will find the names of the investors that they lent the money to. It’s a 2 for 1 on that aspect of things. That works well. We can pull that full list. What we’ll do is we’ll search on the appraisal districts to see if they own a house, a primary residence in that county

A lot of times, the mailing address will be the home mailing address for that investor either way. We’ll send out a simple one-page letter and say, “Moneeka, I saw that you bought this property with your self-directed IRA. Was it for a real estate investment?” “I would love to talk with you. I’m a fellow real estate investor focused on this. I would like to connect with you. I’ve got deals that I’m looking to move all the time. I think you might be looking for some more deals, so let’s talk. Let’s jump on a phone call or Zoom or meet for coffee at Starbucks.” That’s a great way that we do to raise capital that way. If it’s an out-of-state investor like if I’m in Austin but I’m buying in Columbus, Ohio, I do the same thing, but then I’ll send them a Zoom link or a link to my calendar to book a one-on-one.

I will often include a couple of case studies of deals that we’ve closed on, an executive summary about me and my company and send them a resource of some sort. It might be an article on note investing. It might be an eBook. It’s a little bit thicker, but it does well because suddenly an investor is like giving a letter that’s customized to them and say, “Moneeka, who is this Scott Carson? What did they know about 123 Main Street that was an investment property?” That works for good conversations. If you were to send out 500 contacts, all you would need is one person to respond to make it worth your entire while. We’ve done this. Most of the counties are available to search by owner’s name. They’re a little tricky there in California.

If you go down to the local county offices directly, they should allow you to search versus doing the online version, but there’s a free website. It’s NETR Online. NETROnline.com will allow you to search public records and about every county in every state out there. That’s one thing that we do. We’ve got a system we’ve put together for our virtual assistants to go out there and harvest names and then put it into simple direct mail. We’ll do a search for the person’s name and often find their LinkedIn profile, their Facebook profile, or their company and contact them directly as well too.

I’ve got two questions that I’ve been dying to ask, and I’m not sure you’re going to know the answer to these, but I’m going to tell you what they are. Let’s have a conversation or whatever we can about it. The first one is when you get private money, do you pay an interest rate on their money as well as equity on the property or do you do the interest rate? The second question is, do you pool a bunch of investors together? What’s involved in that? Is that complicated?

The first one, the answer is it depends. What I do when an investor shows interest, I always like to interview them. It’s the ex-financial advisor in me. What are you looking for? What’s your experience? What does that money been working for you? I see a lot of investors make mistakes when they come in and say, “I’ll pay 12% or 15% and give you a couple of points,” because they’re used to the hard money side. You can find a lot of investors with money that’s making 0%. They had a 401(k) that’s now a 101(k) or they get a certificate of disappointment making 0.5%. Why would you tell them, “I’ll give you 12%,” when they’ve been trained like, “That’s aggressive, that’s risky?”

If your money is getting a 1% and I can offer you a 4% or 5% for a short period of time of 12 to 24 months, would this be something you’re interested in? A lot of times people will say yes. More sophisticated investors, if you need to get a deal done, then you may offer up a split, a flat preferred interest rate and maybe a portion of the backend. A lot of times, I’ll do either/or, especially if I’m buying nonperforming notes. There’s no type of guarantee on how fast the borrower will get re-performing. It’s going to be either a flat interest rate on the frontend or you’re going to get a split of the profits on the backend.

It all depends on your comfort level. Either way, you do that, you’re obviously going to want to set it up with attorneys to make sure your agreements are in place. If you’ve got to put a lien on the property or a joint venture agreement, always follow through with counsel and make sure you’re not doing something illegal. In the second aspect, you should never pool money together. I’m going to tell you that right now, unless you’re a financial advisor, you’ve got securities license or you’ve put together a private placement memorandum or you have an attorney put together an offering of some sort. A 506(c), 506(d) or Reg A. When you start putting together a fund like that, there are some costs. They can range from $5,000 to $50,000 depending on what you want to focus on.

Most people are going to start off buying one property here, 1 or 2 properties here. If you’re going to buy a property for $100,000 and you’ve got four people that have $25,000 each, don’t take the money from the four. Make the four go create an LLC and then you borrow money from that LLC so you’re only borrowing from one entity. Never put 2 or 3 people in on the same property. That’s illegal. You don’t want to go to the Great Park Motel when the SEC comes and says, “You pooled funds when you’re not a financial advisor.” Always seek counsel, not advice. Don’t listen to your best buddy or Uncle Billy, Bob, or Joe down the road. They have no experience. Go get counsel from somebody who’s done it before.

Jillian Sidoti is a great friend of mine and an attorney out of Temecula, California. She puts together a lot of private placements. There’s a whole bunch of securities attorneys that you can help you out there. I know, Moneeka, that you probably know somebody. I’ve got friends if you need a referral. If you’re wanting to do some big things, then by all means give us a phone call and I’m glad to direct you in the right direction, but never pool funds. It’s a recipe for destruction in the long-term.

What’s interesting is that in California, a lot of reasons why people won’t invest in real estate, at least in the Silicon Valley in LA, the property values are so high. You do have people that are like, “I’ve got $50,000. What can I do with that?” They can’t do anything on their own. What I’ve heard is that you could do and some people teach this. I think it’s different in different states how this works. You could do someone who has the first, second, third, and fourth liens. You can do that, but it gets complicated and people will say, “I don’t want to be the fourth lien on the property.” I like this idea of doing an LLC. Do you help guide them through that or is that a conflict of interest?

It’s a conflict of interest. I will refer to them. I’m not an attorney. Let me clear that up. I’ve stayed at a Holiday Inn Express before. There are attorneys you need to talk to about that. Here’s a story. I bought a note one time where there were ten liens on the property and a lady owned $1 million assets in LA. She had a first lien of $300,000 that she’d finance from a bank. She would borrow $100,000 from her friends and family every time she ran out of money. The most recent person she borrowed from was in the tenth lien position, a very risky spot. She was never going to recover any of the funds. That’s why you always want to either A) Have a fund in place or private placement memorandum. That’s pretty easy to do. It doesn’t have to be too difficult. B) In a first or second lien position for the worst part. Maybe a third lien if there’s a lot of equity, a lot of value above what the underlying liens are. I prefer to be first. That’s why I’m only usually buying first liens because I don’t want to get wiped out by anything besides taxes.

Thank you for even answering that question because I know you’re not an attorney. I know you can’t give this advice, but I’ve been curious, especially here in California. It’s a question we have to deal with all the time. In New York, they deal with it. In a lot of the big cities, they deal with that.

 

There’s a lot of money out there sitting on the sidelines. There’s $9 trillion in retirement funds sitting out there. I know you want to invest in your backyard. Everybody wants to do that. Go out and set up some things. It doesn’t mean you can’t do syndication. A lot of my friends will do apartments. They are buying apartment complex for $2 or $3 million and they’ll put the paperwork in place. Somebody that does have $50,000 or $100,000 can come in and be a part of that. You only get a fractional share of the property. For those of you that are reading this and you’re dealing with people that have $5,000 or $10,000 and it’s their last investment, do yourself and do them both a favor. Don’t take their last $5,000 or $10,000. It will drive you bonkers. It’s a recipe for failure and stress in the long run. Deal with people a little bit more sophisticated. It doesn’t mean you can’t bring somebody on who’s got $50,000 or $100,000. Maybe in the second lien position for rehab costs once you’ve taken down the first lien, but always talk with your attorneys when you’re going to come to the money discussions and when you’re going to fund a deal.

Thank you so much. Do you have any advice you want to close with?

Go take action. All the videos and podcast episodes and classes are great, but you’re going to learn more than any book will ever teach you by pulling the trigger and taking action. I don’t even care if it’s a rental property, an Airbnb, a subject-to deal, owner finance, my favorite notes, or wholesaling. Do yourself a favor, get out there, take action and pull the trigger. In the long run, you’ll learn more from that. Many people are waiting for the perfect deal. There is no perfect deal out there. The perfect deal is the one that you do and you’ll learn from it and you make money from it or you make mistakes. That school of hard knocks is around for every one of us. You try to limit that by surrounding yourself with a team and people and experts that you network with but take action. You are going to learn more than any other book or class will ever teach by getting in the trenches and getting your fingernails and your heels dirty.

Thank you so much. That was great. Thank you for taking this extra step towards your financial freedom. Always remember, you do have control over your success. We’ll see you soon.

Important Links:

• NETROnline.com
• Jillian Sidoti

To see this program in video:

Search on Roku for Real Estate Investing 4 Women or go to this link: https://blissfulinvestor.com/biroku

On YouTube go to Real Estate Investing for Women (link:  https://www.youtube.com/channel/UC4FF7vwqQI1HsZ1uXln4-uQ/videos)

To watch the EXTRA portion of this show go to RealEstateInvestingForWomenExtra.com  (link to https://glow.fm/realestateforwomen/ )

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