1% Down Home Loans, When a Tenant Pulls a Gun, Making an Extra $100k/year with Retail Leads

Mike DeHaan: [0:00] Either way, all I know is when they're pushing these sort of subsidized slash low cost mortgage options, if you're like a flipper or an investor, you should be doing everything you can to be getting as many properties as you can in the starter home price point because that's where all the money is gonna be made right now. What's going on, guys? Welcome to this episode of the Collecting Keys real estate investing podcast. Today, it is end of May, May 23 at time of recording. Typically record these, what, a week or so early. This is the Mike and Dan show where I, Mike DeHaan

Dan Austin: [0:38] I'm supposed to share our secrets, dude. We record these live on Wednesdays.

Mike DeHaan: [0:42] Record these live every Wednesday. But this is the show where I, Mike DeHaan, and my cohost here, Dan Austin, talk about real estate investing, business, and everything in between. And it is sunshine in here, man. Stuff is moving. I feel like we are kind of in prime real estate season right now. I've been noticing, even talking to our sales guys in the morning, no one's really had any, I would say, stories about angry sellers or weird stuff. Everyone's just been cordial. People are more than happy to be doing business right now. They're not worried of spring. Everyone's in a

Dan Austin: [1:17] good Spring, man. Everybody's happy. Yeah.

Mike DeHaan: [1:19] Stuff's been moving pretty well. We do have some breaking

Dan Austin: [1:22] news coming out of North Dakota, however.

Mike DeHaan: [1:23] What happened in North Dakota?

Dan Austin: [1:25] Out of North Dakota, one of our instant investor clients had posted in our group chat that North Dakota starting August 1 will require wholesalers to hold a license.

Mike DeHaan: [1:35] Yeah, I mean there's several markets I think that are already like that though, aren't there?

Dan Austin: [1:39] There are. I think it's creeping in. There's quite a few different markets that have this. I'm trying to remember who, we've worked with some folks before that have worked in The States where that's at, there's a handful, maybe a dozen or so, maybe half a dozen, I don't remember. But it's not uncommon. I think there was, maybe Pennsylvania was one of them, or New Jersey or something, I don't remember. Somewhere there on the East Coast, somebody we were working with that had that.

Mike DeHaan: [2:00] Yeah, mean, so I know that how it's typically technically defined is that you need to have a license to hold equitable interest in a real estate transaction if you're not representing a buyer or seller. But to, you know, you essentially have to have someone involved, right, that is licensed in some way. You can't do direct one to one transactions.

Dan Austin: [2:24] You're saying you need a professional licensure, and probably along with that is an ethics. Usually all these professional licensing, whether that's engineering, real estate license, they just want you to have some ethics exam and some standard to hold you to.

Mike DeHaan: [2:37] Yeah. So very basically what they do in a lot of these different places is if you were going to facilitate a transaction at all, you have to have some kind of license. Right? Whether you're gonna be the realtor or you're gonna be the wholesaler, you're gonna do an assignment. And then if you are going to do a direct purchase, you just have to be able to have the seller, I guess all parties involved, sign off on something saying that you that they all agree that the middle person has an equitable interest to be making money on the transaction. So there's different ways that they, I guess, have to structure it to actually make it enforceable because you can't just say wholesalers have to be licensed because a wholesaler is not recognized as an actual person. Right? Because they can't necessarily prove that you're not gonna buy the property directly. So typically, it's like if you're going to be a BINO person, you're going to assign a contract, you're going to have multiple parties involved. You're not gonna be the direct purchaser. They'll require you to have a license of some kind or get basically something signed so that everyone understands that you're going to do that. So it's not that big of a deal. Right.

Dan Austin: [3:40] Which is on our contracts anyways.

Mike DeHaan: [3:42] It is. Yeah. I mean, we we literally have that in our contracts that they understand that we are an investment company and that we are looking to make money off of the deal, and it's never really caused any issues.

Dan Austin: [3:52] Yeah. Yeah. The quotation here from Otto, shout out, starting August 1, we'll be requiring wholesalers to have a license and include a written disclosure to all parties that, in quotes, the wholesaler holds an equitable interest in the party, may not be able to convey title to the property, and intends to make a profit or income from the transfer of equitable interest. Which again, I think our contract says that word for word, we've had that for a while, and they haven't required that in most of the states we operate.

Mike DeHaan: [4:19] Yeah. I mean, there's never been any issues. And I mean, so like Yeah. Even a big thing that you see here in Washington with a lot of I guess when you go through the process, you don't necessarily have to tell the seller anything. It can be non disclosed. But a lot of escrow companies here will make at closing the seller sign a document saying, hey, I understand that this property is being assigned to a different person. And I remember when they started making that change and a lot of people got really upset about it, but it's literally never caused a problem. I mean, and ultimately too, I think the way you should go about it is you need to be transparent with people in general.

Dan Austin: [4:56] Right. You should be.

Mike DeHaan: [4:58] Yeah. That you don't know what you're gonna do with it. If you are going around and sneaking around behind their back and they're fully not aware that there's other parties involved at all and you're lying to people and making things weird to get a deal done, yeah, you're part of the problem. Just don't be that person.

Dan Austin: [5:14] Yeah. That should be a general rule in life, I Yeah.

Mike DeHaan: [5:16] And I will say if there are situations where the seller is like, I'm not okay with other people being involved, I'm misled by this, all that sort of stuff, you still wanna do the deal. Just double close on it and do something different. Yeah. Then actually follow through with your arrangement to be the end buyer yourself. Go get a transactional lender and then sell it to your end party afterwards. That's fine. Mhmm. Then you flip the house. Yep. Exactly the same thing.

Dan Austin: [5:39] There's options, and the more difficult things are, the more barriers to entry there are, the better it is for the folks that are ready to rock the roll and be creative and work hard and get shit done.

Mike DeHaan: [5:48] Yeah, and they're following the rules. People always get up in arms whenever there's regulations and things put in place. And sometimes, you know, they do some dumb stuff. Like, if you look at the rental policies and things that the city of Seattle has put in, for example, there's a lot of crazy stuff out there that's going on. Yeah.

Dan Austin: [6:04] Like paying your tenant to leave.

Mike DeHaan: [6:06] Well, yeah. Stuff like that, or like in California where you literally can't evict people.

Dan Austin: [6:09] Yeah. Yeah. You know, there's a

Mike DeHaan: [6:11] whole bunch of weird things that get out of hand. But for the most part, when there are rules and regulations like that that are put in place, if you follow the rules and you do stuff correctly, it's not the end of the world. I mean, even here, we have had to evict several people over the past few years from different things, And it was always this big uproar amongst the local landlord association every time they go to make policies. And the funny thing is is we found out well, I found this out recently. One of the worst property management companies in town is owned by the Landlord Association's president. So I'm like, well, no wonder he's upset about it. He's actually gonna have to do his freaking job now and run a Yeah. That's hilarious. Business. And the second thing is is if you actually follow the process, they're actually very supportive of you as a landlord as long as you

Dan Austin: [6:57] don't do weird stuff. Yeah. Well, you've gotta toe the line on some things, and rightfully so. If you're gonna own a property, don't be a slumlord. That's number one. If you're gonna be a real estate investor, and you're not making money or losing money, that doesn't mean that your tenants should be affected. Means you should get out of the business, because you're not doing it right. Yeah. And for a general rule of thumb, this is my belief, the regulation does and can take profits out of your pocket because somebody has to pay for the regulation. Regulation's just a cost, it's like a tax. Nobody wants to pay it, but it's a tax. It's part of the system, and so you have to generally work around that, and oftentimes, in regulated business, the people that get hurt the most from a cost standpoint is not the business owner, it's not like the landlord, it's the people that the costs trickle down to, which is the general population, which makes renting unaffordable for them. However, regulation is what it is. When people flee, because you and I run into a lot of people in our state, again, I don't really love the regulations that they come up with, but there's people fleeing the state saying, Oh, I'm not gonna, I'm selling all my properties, and I'm like, So, wait. Yeah.

Dan Austin: [8:01] I'm here to buy them. Because they still have value, right? And there's, for us, they're putting regulation in place because people do desire to live here, so we're in a desirable area, which means there is reason for values to go up, and we have become, Washington State in general has become a pretty big appreciation market, which has been very valuable to us. So if you're willing to sell to me at a discount because you're fleeing to a less regulated state, totally makes sense, great decision, I'm gonna profit from

Mike DeHaan: [8:28] that. I think that is a great thing about the Northwest, that a lot of people discount when they're trying to flee and go to other places. Is the reason properties and stuff are so expensive here is because it is a sweet place to live. There's a huge desire for people to move here. It's pretty desirable. And people will pay good money for that. Right? And now, people are leaving, rental properties are getting more and more expensive. Property prices have like, what, doubled over the past five years. Yeah. But thanks to the federal government too, they're always trying to make real estate more and more affordable. So now, well, like, and lenders and different things. Now we have, like, this loan program from Rocket Mortgage. I just saw this this morning that they announced that they're gonna start doing 1% down conventional loans, which is insane. The details of it as well, not only are they doing 1% down conventional loans, and not even FHA loans, but conventional loans, which typically have primary mortgage insurance and these other of gotchas associated with it. They're doing these 1% down loans. They are only for people who make 80% or less of the average income for an area. So basically, only for lower income people. They will give you the 2% needed. So basically, to get a normal conventional loan, have to have at least 3% down.

Mike DeHaan: [9:43] They will give you the extra 2% as like a gift, right, to I don't know if they

Dan Austin: [9:49] name it a gift.

Mike DeHaan: [9:50] Are they wrapping it alone? I don't know.

Dan Austin: [9:51] A credit. Yeah. No. They probably give you a credit, and then, yeah, that's interesting. I wonder what the APR looks

Mike DeHaan: [9:57] like. Yeah. Have no idea.

Dan Austin: [9:58] Because, know, banks aren't in the business of just giving things to people for free.

Mike DeHaan: [10:01] Yeah. So they give you the 2% so you can meet the 3% requirements. They can still sell their loan to Fannie and Freddie, and then they will waive the primary mortgage insurance. Right? They waive the PMI, which is a huge expense for people to put less than 20% down on their homes. K? So all of a sudden, it's gonna make things significantly more affordable for people potentially.

Dan Austin: [10:21] Yeah. God, I don't know, does it? Because the affordability is the monthly. Yeah. That's the monthly payment, right? So anybody can walk into a car dealership and put $2,500 down on their next Range Rover. Correct. But it's that $1,500 a month payment that's gonna kill you.

Mike DeHaan: [10:35] Exactly. So that's why I think them waiving the PMI is such a key thing, because all of a sudden, the monthly payment, which is what's gonna disqualify most people

Dan Austin: [10:43] Can they waive the PMI, how do they do Because I feel like that PMI, if they're gonna get it rolled up, people are gonna want that insurance as part of their additional profit margin.

Mike DeHaan: [10:51] Yeah, don't know. The PMI's usually run by the banks, right? By the lenders themselves. So they can do whatever they want. If they say, We're not gonna charge you PMI, they're not gonna charge you PMI.

Dan Austin: [11:02] Yeah, I just thought, this is my ignorance maybe, that when they sell the loans, they would wrap up that PMI payment with it. I have no idea. Because that's just extra margin, right? Yeah. If it's $100 or $200 a month, say they're, Hey, I'm gonna sell you a loan that's at 4%, but I'm throwing in this extra couple $100, it is what it is, it's just profit, extra cream on top. I mean, I can see why they would do that, because yeah, it's an affordability issue, and you and I were talking, and it's like right now, the affordability to own is way out of whack with rent, so it's way cheaper to rent right now because of interest rates. And so if you can get people to not need to save up as much money to buy a house, so say, I think $250,000, right, would be like an average, I don't know, maybe purchase price.

Mike DeHaan: [11:45] Mhmm.

Dan Austin: [11:46] 1% down is $2,500. Most Most Americans that are employed or have a dual income household of some sort, even if they're not making a lot, can come out with $2,500. Because if you're renting, let's be honest, first and last in deposit, what a lot of landlords require, is more than $2,500.

Mike DeHaan: [12:03] Yeah. Well, mean, it is interesting though, right? Because you're saying now it's cheaper to rent than it is to

Dan Austin: [12:09] Far cheaper to rent, which doesn't even take into account the cost of ownership like repairs.

Mike DeHaan: [12:14] The But funny thing is, it's traditionally always been that way. It's only in the last ten years that it's been cheaper to own versus rent.

Dan Austin: [12:20] Right.

Mike DeHaan: [12:21] Right? And there's that chart from Zillow that you can see that sort of tracks it. That came out a little long ago as well. And the kind of the challenge we have right now is the primary home buying population, right, the 25 to 35 year olds, we always remember like, like, can look at that and say, oh, shit. It's always been cheaper to own versus rent. So we've been alive. But if you go back basically from, like, 2012 until the seventies, you know, the previous fifty years, forty years, it's always been cheaper to rent versus own the property. Right? But now, we had that low interest grace period that made everything, just skewed all the expectations everyone has.

Dan Austin: [12:57] Right, and the interesting thing about affordability is, or this chart anyways, is that it's a steady climb for rent. Like rent, regardless of what's going on in the housing market from an ownership standpoint, it's funny because rent has kinda just steadily climbed, which is pretty dang good as for a landlord, but the cost of ownership is kind of so up and down because it's going up with interest rates. Right? Which is funny though because that means that landlords aren't directly able to pass that on to their tenants because you would think if that was the case, every year rents would be bouncing up and down like interest rates, but they don't. And that's because real estate's a long game.

Mike DeHaan: [13:32] Yep.

Dan Austin: [13:32] And it all averages out, which is what this graph shows. And I think the only unique thing between now and the history, because you're right, homeownership has historically always been above the rental line, as far as cost goes, is it's magnitudes high right So it's $2,700 a month cost to buy, which I think this is just like the principal and insurance payment. I don't know that it wraps up much else. And then the cost to rent, because I think it would have to be like a one to one. The cost to rent is $18.50. So that's, dang, there almost a thousand dollars difference.

Mike DeHaan: [14:06] Yeah. I mean, and that's a that's a huge difference. What that means for long term, I'm not sure. But anyway, going back to the 1% down though, it's really interesting. I'm trying to figure out what their sort of spin is out of that. So I kinda have two theories. One is that they have some sort of subsidy from the government that isn't fully disclosed, that's basically heavily incentivizing banks. Something probably along the lines of, if you can get x amount of people that make less than 80% of the average income into a home, you're gonna get some sort of incentives, sort of tax write off, things like that. Maybe. That's one theory that I have that maybe we don't know about. The second theory I would have is it's all marketing, and they're basically to pull in the old bait and switch. Right? So people are gonna reach out about the 1% down mortgage, and they're gonna say, oh, well, you don't qualify for that because, you know, it's gonna be a $3,000 a month mortgage, and you only make $1,800 a month, so there's no way you could pay that. But we have this other program that we can sell you instead, that actually makes, is the real thing they're trying to sell.

Dan Austin: [15:06] Yeah, that's probably somewhere in the middle, to be honest. Yeah. So I guarantee you that they do have some other upsell or downsell, however they look at it. They get you in, and it's pretty specific qualifications, No more than 80% of the income, so you can't be a great earner, and most people don't know what that number is, and that number could be subjective, right, a little bit.

Mike DeHaan: [15:26] It is subjective, it's based on the market. They do market analysis based on where you live, and they determine that. I know, they do

Dan Austin: [15:32] market analysis though. Right, they might, we exclude some of these extreme points, right, to make it different for you. But then they upsell them into a second position down payment, like, hey, we can't do this program, but we can do this where you still only need 1%, but what we're gonna do is we're gonna wrap up that other 2% in your mortgage, in your loan, or and so it basically just increases the APR, or we're gonna do what they used to do during before the last financial crisis was the second position down payment. Lot of people were doing the eightytwenty loans, so maybe it's like a 19 a 98 or ninety seven two loan or I don't know what it would be like. Yeah. But they put you in that second position loan so that they're still getting people that can't afford to own into a a house. They're making it more affordable up front, but the banks are reaping their rewards because a, they're doing something with wrapping the costs up into another loan or in their loan, so they're increasing their profits, but b, they're able to do some sort of actual loans right now when nobody's getting loans. Yeah. Which is key, right? Rocket Mortgage is

Mike DeHaan: [16:37] the name of their company, right?

Dan Austin: [16:38] They need to do mortgages to make money. Yeah. They need to originate them, because I guarantee you, up until maybe this last year, every mortgage they did, they probably wrapped up and sold pretty quickly.

Mike DeHaan: [16:49] I mean, they still do that. Right? Especially Rocket Mortgage. That's notoriously what they're known for. No. I know that's what they do, but

Dan Austin: [16:54] I mean, they might not have many to wrap up and sell. Yeah. So I guess it's like But

Mike DeHaan: [16:57] that's why I'm thinking it must be some sort of marketing. Right? Because they're just trying desperately to drum up as much business as they can. Right. Business. Either way, all I know is when they're pushing these sort of subsidized slash low cost mortgage options, if you're like a flipper or an investor, you should be doing everything you can to be getting as many properties as you can to start a home price point because that's where all the money's gonna be made right now.

Dan Austin: [17:22] Yeah. Absolutely. Yeah. And then as a person, like, there's some house hackers out there. This is getting close to the opportunity that veterans have, which is a zero down loan, which for a lot of people out there that are in this space, in the house hacking space, they love veterans because they can get those zero down loans so you can you can start investing with very little money, your ROI goes up because you have no money into the deal, or very little, and so this gets kinda closer to that benefit from, you know, what's being stated. Again, there's gotta read between the lines on a lot of this stuff. So it could help, I guess it could be a helpful situation, not just for flippers selling into the new house and into the first time buyer market, but also helpful to those that wanna house hack. Yeah. Maybe you can get into a house or a duplex for 1% down. Maybe you really actually can.

Mike DeHaan: [18:05] So this is actually a really interesting conversation now if you think about this. So you look at the house hacker. Let's say if they're a real estate person that's a house hacker, or they own some rental properties, you could absolutely fudge your tax returns so that you make no money even though you make fat money, right? Because you're a real estate person. We all do this. We all use depreciation, right? All real estate people use depreciation and not make any money on paper. See, I see. Now this becomes almost an advantage because all of a sudden you can be a real estate person that makes no money on your tax returns. Yeah. And go to these people and say, hey, look, so the average household income in Spokane is $77,000. I only make $30,000 a year, even though you actually make five times more than that because you depreciate all of it. Mhmm. And say, like, I need this 1% down mortgage. And all of a sudden, you're buying highly, highly levered real estate

Dan Austin: [18:57] Yep.

Mike DeHaan: [18:58] With very low money down. I mean, that's actually a pretty soon play right there. I wonder what the rules are around occupancy and that sort of stuff. Like, if it's something that it has to be a single family home or if they would consider a small multifamily or what?

Dan Austin: [19:11] If it's conventional, I I think they'll definitely make you occupy, but they may not require I bet you you could still get under four units

Mike DeHaan: [19:18] Yeah.

Dan Austin: [19:18] With a conventional loan.

Mike DeHaan: [19:19] Maybe. Yeah. That that'd be interesting. Yeah. Either way, something to look into if you're in that boat. You know, Rocket Mortgage. I mean and I'm sure that they won't be the only one that's doing this style of deal. Especially if it works for them, you're gonna start seeing it come out from every lender. And then as all these banks do, they'll start competing with each other, they'll start throwing in all sorts of other stuff to make it even sweeter for you.

Dan Austin: [19:40] So You get a free toaster.

Mike DeHaan: [19:42] Right. That's always the stuff that they do too. They're always like, oh Yeah. You could save an extra $300 a year. It's like, yeah, but they don't tell you the fact that it's gonna cost you an extra $80,000 over the next ten years, you know?

Dan Austin: [19:56] I know, right? Yeah. They have to make money.

Mike DeHaan: [19:58] Do some of these banks, just especially the way that for the lay person, the way they do their marketing, because it's like, to the average person, your bank doesn't really matter, you know, honestly. Right. There's a billboard down the street from us right now, dude, that literally, it's like open an account, get $12 a month.

Dan Austin: [20:12] Is it a credit union advertising?

Mike DeHaan: [20:14] It's a credit union, a local bank. I don't even know what is. But I'm like, can you imagine moving your accounts over to somewhere so you can get $12 a month?

Dan Austin: [20:22] Hell yeah. Let's do it. Let's rock and roll. Well, Here's the thing though. Cost of a coffee. So credit unions in particular are very incentivized to have they they have to grow depositors because that looks good. Just like with anything, you're like, I have 10,000 depositors in here, people that have bank accounts. Now they can basically, in a roll up strategy, other credit unions. You always see credit unions buying other credit unions because they're trying to grow their membership, and membership is the key piece to that. And so, yeah, I'm gonna give away $12 for you to be a person who doesn't put any money in my bank.

Mike DeHaan: [20:52] You could come and use my high yield savings account that get pays you point 9%, yeah.

Dan Austin: [20:58] Yeah, yeah. I go to our banks so often, I have good relationships with people, because I have to go down there probably once a week to deposit checks, because some stuff just gets mailed. There's a limit, we can't just deposit big checks on the phone. And so just, but like, you say high yield CDs, so I just get to see different things that go on in our bank, and I really respect people that are bank tellers, because one lady was in there, and the lady asked her, she's like, Hey, how are you doing today? And she's like, just immediately download. She's like, my husband just died, this and that, and all these things, and I was like, damn, that was a rhetorical question. But then this other dude comes in, he's like, yeah. So I'd I really wanna buy a CD. Can I get a a high yield c the exact words, high yield CD? Because they advertise this stuff to the lay people, and they you know, people are like, I gotta put my money somewhere. So it's just kinda funny. It's kinda funny the things that go down in banks. Yeah. When you don't go to one very often, you don't think about it.

Mike DeHaan: [21:55] I like our our bank too, our credit union. If you go down there, they have great customer service. And the funny thing is Fantastic. It's pretty small. It's like every person's like one person removed from everybody else. And so like, we have our banker that we work with, and you guys like, oh, yeah, you know, I'm I'm one of mass clients. I was like, oh, I know, Matt. And then so you immediately get better service.

Dan Austin: [22:12] Oh, immediately.

Mike DeHaan: [22:12] And if you ever like need something there, I just text Matt, and he's like, cool. So and so will be down there to take care of it for you. And you show up, and they have like a table set up, like, just waiting for you to come and like sign documents. Right. It's great.

Dan Austin: [22:24] I will say that, like, this is a weird tangent for us to go on, but if you're not banking at a local credit union, you're doing real estate, because you're doing transactions, like getting loans, you have kind of big tickets, big checks moving to your bank account because you're doing real estate, you better be at a credit union because they're so much better on the customer service side of things, and they will help you. If you go to a big bank, there's some advantages, like their app's a little bit better, but they're not gonna do that. You're not gonna roll into Wells Fargo and then be like, oh, hey. How's it going, Mike? Let me just actually go out of my way to help you.

Mike DeHaan: [22:52] You know, one of my favorite things is there's this current especially since the SVB stuff, there's this current kind of trend of all these people that have high net worth, quote unquote, but really not that high, that are now trying to make all these bank decisions where they're gonna put their $3,000,000 really matters. They're like, I'm spreading it out among 12 banks. Yeah. Bro, you have $3,000,000 They don't give shit about you, these large banks. Wells Fargo, I'm gonna do $3,000,000. They're like, awesome. Thank you. Let's put this into our little back pocket You over

Dan Austin: [23:23] might get somebody over there that's your special assigned person at Wells Fargo because now you meet the requirement, but they're not helping you out.

Mike DeHaan: [23:30] Yeah. Exactly. Yeah. You know what I mean? But anyways, that's a weird pain. We have finance show now, maybe.

Dan Austin: [23:36] Yeah. We should talk about finance. Finance. Banking. We're a banking show.

Mike DeHaan: [23:40] I mean, it's relevant to real estate. Yeah. It is. But let's talk wholesale, though. We finally had we've had our fur I guess, I started saying everyone's been cordial. We had a trademark wholesale experience in this past week with one of our our instant investor partners. Oh, yeah.

Dan Austin: [23:57] Our our

Mike DeHaan: [23:57] our sales guy had a deal that was closed there. Went to do some due diligence on it. And, basically, the the contractor that went and walked the property said, hey. So they pointed a gun at me when I was at the property. Like, I'm super sketched out by situation. Understandably, someone pointed a weapon at you. I don't know. Think about it. Yep. So it caused all this turmoil. Anyway, so this is a deal that we had assigned. Things got weird. Biden wanna move forward with it, all this sort stuff. Trying to figure out what exactly happened. Did you ever hear, like, the full conclusion to this?

Dan Austin: [24:30] I don't know that I heard the end to end of it. I heard who did what and what happened. I don't know what the actual outcome was because I thought the last time I talked about it was that they might not move forward.

Mike DeHaan: [24:39] Well, they're not moving forward. So all of the misunderstandings and bullshit that go through this whole situation and about how it just takes one person's poor judgment to ruin an entire deal. And it wasn't on our team. Our team did great. And same with the buyers. Same with our client. All sorts of stuff was fine. So the contractor, someone pointed a gun at him. Contacted the tenants. Tenants were just like, what? No. I didn't point a gun. Mean I mean,

Dan Austin: [25:03] the initial thing was the tenants. Yeah. The tenants

Mike DeHaan: [25:04] pointing guns were super

Dan Austin: [25:05] I like, yeah. That happens.

Mike DeHaan: [25:06] I was like, yeah. Yeah. Anyway, we went through this whole scenario, wraparound. The owner of the property was also there to walk the property. And the owner of the property had a driver. I don't know if it was a friend or the dudes in the mafia or what. But I guess when the contractor got there, they, like, had some weird vibes on each other, and the dude did not point the gun at him, but just had to show him that he was carrying underneath his coat or his shirt or whatever. Had some weird vibes. Had some weird fucking

Dan Austin: [25:36] contractor look like a homeless squatter or something like that?

Mike DeHaan: [25:38] But all of a sudden, you have this fifth party, not even like a third party, like several parties removed, who blows up the entire thing because they lightly threaten the life of one of the people on our team. And now no one wants to do the And I'm like, what is Wow. Why does

Dan Austin: [25:56] this matter? Was was the owner, like, upset about

Mike DeHaan: [25:59] the situation like, you guys are being dumb. It's my driver that doesn't wanna do this. And they're like, I don't care. You threatened my life.

Dan Austin: [26:06] Fuck this.

Mike DeHaan: [26:07] That's what I agree with too, but I don't know. People are

Dan Austin: [26:10] You never had a gun pointed at you before? Come on.

Mike DeHaan: [26:13] I thought all of us went to The Middle East seven times, Dan.

Dan Austin: [26:16] You know my stories, like, you know my stories. It wasn't even at war. Yeah. That's true.

Mike DeHaan: [26:21] It was in it was in Montana where I grew up.

Dan Austin: [26:23] See? You go to hillbilly country, people have guns and they brandish them quite often.

Mike DeHaan: [26:28] Years when that happened, I was probably, like, in town.

Dan Austin: [26:31] Oh, yeah. You were definitely nearby.

Mike DeHaan: [26:33] Yeah. I mean, it's not a big area. Was probably I probably heard about it the next day

Dan Austin: [26:37] and didn't even think about it. Probably.

Mike DeHaan: [26:41] No. So the point being, is the this is the primary lesson that occurs over and over and over again with wholesaling and just real estate investing in general. You cannot count your checks until the money is in your bank account because everything looked good. We had the initial walkthrough was good. We were literally just allowing the buyer to do another walkthrough with their contract so they can get an official quoting for it. Everyone was cool. People knew about the situation. They knew that we were gonna be assigning it. They didn't care. And then for some reason, this dumb freaking driver decides to go and pack heat and blow up the whole goddamn thing.

Dan Austin: [27:20] Ugh. My question is, when do I get a driver that packs heat? I want a security driver.

Mike DeHaan: [27:24] You want. I'm sure you could find someone here that would do it for less than

Dan Austin: [27:27] Can we put that on payroll?

Mike DeHaan: [27:30] Just like have someone that drives you around? Like, where do you even go? Like, the Trader Joe's? I mean, you don't even go to Trader Joe's. I don't even do the grocery

Dan Austin: [27:36] shopping. I don't know where I'd go. The bank is Yeah. Where I

Mike DeHaan: [27:40] You run up to the bank with your guy that stands outside and just waits

Dan Austin: [27:43] for you

Mike DeHaan: [27:44] to come out. Absolutely. While you go and you cash your checks and And just

Dan Austin: [27:47] like he whips his jacket open anytime anybody walks in. So it's like his gun just kind of shows a little bit.

Mike DeHaan: [27:53] That would fly really well. Dude, can you imagine, because especially everyone knows that, I just like to think of what the text from Matt to both of us would be like, hey.

Dan Austin: [28:05] Hey, guys. Did you have Kinda like when we forget to pay something, he'll be like, hey guys, just so you know, I took care of I know,

Mike DeHaan: [28:13] yeah, right. Every time we have a new loan with them, they're like, hey, you didn't pay the first month, it's like, well the other 17 are on auto pay, why is this one not? Yeah, exactly.

Dan Austin: [28:21] Set it up, please. Hey, guys. Just so you know, you can't have your person with a gun come down to the branch anymore. I mean, I liked it. It's cool. I took care of it. I calmed them down, but they're kind of upset.

Mike DeHaan: [28:32] Dude, I mean, thought here's the thing. As you get that going, you get you like some obnoxious like Escalade or Hummer or something, and you start rolling around and just walking through properties like that, dude, you're a guru. You're basically now a Phoenix based guru that is selling Yes. You know, some sort of bullshit.

Dan Austin: [28:50] You just explained to me, like, instant when you said that, that popped my head with a Hummer is Kimbo Slice. I'm getting Kimbo Slice's driver, and that's where we're gonna go. We're gonna go to people's backyards and piss. That's what we're doing, dude. And then we're gonna buy their houses.

Mike DeHaan: [29:07] Oh my gosh. Fist fighting for property.

Dan Austin: [29:10] Oh my god.

Mike DeHaan: [29:11] That's trash. And the the thing is too, like we're joking about that, It's not far off from what a lot of these weird Instagram people portray. Like, there's the one with the real estate monster guy down in San Antonio that is always just posting like dumb shit. Like, he had one of like, oh, here's my guy doing cold calling while holding an AR 15. And he's playing with it while he's on the phone with sellers allegedly. I'm like, no one does that. That's a psychopathic thing to do.

Dan Austin: [29:40] Yeah. Nobody just has an AR 15 while they're doing sales

Mike DeHaan: [29:43] calls. No. That's stupid. There's no point.

Dan Austin: [29:44] It'd be awkward. It wouldn't be comfortable. It's stupid.

Mike DeHaan: [29:47] Yeah. It's it's the same. I don't know. He's got all sorts of stuff. But I don't I don't know what that is with those those different people. Speaking of of fake gurus that we just have to do our our weekly jab. So I I did a podcast this past week with one of the guys. He's a he's like a OG investor. Never heard of him before, and I looked him up after after I chatted with him. A super nice guy. He's coming on our show here in a few weeks. He's on the BiggerPockets panel about off market investing. Oh. And like, you know, marketing systems and all sort of stuff. He's been on Probably best friends with Jamil. So that's funny thing is he's he's never he's never met Jamil before.

Dan Austin: [30:20] Okay.

Mike DeHaan: [30:20] But like basically to organize stuff for the panel, bigger pockets put them all into a group conversation, and they've been going back and forth. And he was like, he has Jamil, was it Henry Washington, up at one of the guys named is based out of

Dan Austin: [30:35] He's a flipper.

Mike DeHaan: [30:36] Yeah. He's a flipper guy.

Dan Austin: [30:37] Nice guy. Seems like a

Mike DeHaan: [30:39] other names there that he dropped. But he was like, yeah. He was going back and forth. And Jamil's like, oh, that's cool. You have a podcast, whatever. And he was asking him all these questions about podcasts. He's like, oh, maybe Jamil wants to come on. So he asked him, and Jamila was like, oh, well, you have to book through my assistant, and my cost is $2,500 to be on any show. And he was like, okay, we were just having a friendly conversation. You're trying to upsell me to have you come on my show when you're not even a real investor?

Dan Austin: [31:04] Yeah. People don't pay to have people on

Mike DeHaan: [31:06] their show. No. So here's my thought. Here's my thought. We have a successful business. Why don't we pay $2,500 to bring Teach

Dan Austin: [31:13] and Me Along and Connecting Keys?

Mike DeHaan: [31:14] And then we could just roast Let's it the entire do

Dan Austin: [31:17] it. Let's do it. We could ask him about the Dave, have you seen the Jumanji challenge?

Mike DeHaan: [31:22] All I wanna hear is about how to become the best, most ethical wholesaler in the country.

Dan Austin: [31:27] Biggest wholesaler in the country? I'm Astro Flipper, bro. Yeah.

Mike DeHaan: [31:31] What's the Jumanji Chaplin show?

Dan Austin: [31:33] Yeah. He's got I saw just recently, god, we're shitty people sometimes, but you know what? Screw it. I don't know. I just had an advertisement, the Jumanji Challenge. I think it's where you pay him, and I think his claim is that he will make you the best wholesaler in the country in two days or twenty minutes or two hours or something like that. I can't remember what it is. That's the Jumanji challenge.

Mike DeHaan: [31:52] Why is it Jumanji? Because it sounds like Jamil? That's I

Dan Austin: [31:55] think he's trying to rip off like that.

Mike DeHaan: [31:57] Yeah. Think he's trying to that. He's to do the elephant challenge and the koala bear.

Dan Austin: [32:00] Yeah. Whatever. Whatever.

Mike DeHaan: [32:02] Pace Morby does.

Dan Austin: [32:03] Yeah. God.

Mike DeHaan: [32:04] Amen. I know that well, that I'll

Dan Austin: [32:08] pay $2,500 and have him come on in.

Mike DeHaan: [32:09] Right? That'd be great.

Dan Austin: [32:10] Yeah. Absolutely.

Mike DeHaan: [32:11] No. It's just the whole thing just drives me. And the whole thing is just so stupid, because he sees the most ethical person. But then now he has this company where you can buy proof of funds that are fake

Dan Austin: [32:22] Yeah.

Mike DeHaan: [32:22] For, like, 11. Like, it's not even real. And our buddy, Aaron, he's he's gonna you're gonna be here.

Dan Austin: [32:29] Didn't he get one of those? Didn't he get a profane?

Mike DeHaan: [32:32] So so he he was trying to they were wholesaling a deal, and he started getting all these wannabe daisy chainers. You know, not credible buyers who were just trying to daisy chain this deal, putting in offers and accepting proof of funds from Jamil's company that they bought for $11. Right? First off, just buy one and then change the numbers, you dumbasses. Don't keep buying them. And Cause it's not real anyway. It's not like it's actually backed by anything.

Dan Austin: [32:55] If you're gonna go to that length, just go the full length, just do it yourself. Just do some fraud.

Mike DeHaan: [33:00] Yeah, just be fraudulent, instead of paying somebody else $11 to be fraudulent for you. Yeah. And the most hilarious thing to me was it was called flip funds, and this is how unseriously he's taken it. He didn't even have the Flip Funds email on it as the contact. It was literally like He

Dan Austin: [33:17] didn't buy didn't go No. To

Mike DeHaan: [33:18] Namecheap It's like and buyfunds@gmail.com. Oh my god. Wonder how to immediately look illegitimate as a lender? Don't have a real business.

Dan Austin: [33:27] So here's my question about that. That's interesting. So I don't know anything about his I haven't even Googled this. So does he have flipfunds.com? Is that like a thing?

Mike DeHaan: [33:35] I don't know. I don't care.

Dan Austin: [33:37] Okay. Yeah. Don't care either. I'm just saying is like, is he just selling the piece of paper or is he actually backing it up being like, no. I'll fund you. Like, is he like actually we have money in a bank account? Yeah. Okay. I didn't think about it.

Mike DeHaan: [33:49] All he has to do is he has to fund like five people, that then he can post their testimonial and be like, yeah, I used this thing, and then, know, he funded my deal when my other lender fell through last second, and he just has to have that, and then people will keep coming back, and then for every single one he can have an exception. Just like he does with everything else. Oh, and it's funny. We harp on this dude a lot. And the biggest pet peeve that I have with it is that, a, he's completely full of shit, but also to the fact that he has somehow weaseled his way to become the face of wholesaling at BiggerPockets, which is the pinnacle of real estate investing base community. That's where everyone starts.

Dan Austin: [34:31] Yeah, it's like the base, it's the blue. I'm not gonna say gold, I'm gonna say blue standard. It is. It's like BiggerPockets. If you know if you go there historically, probably maybe four years ago, three years ago, maybe now, historically you could go to BiggerPockets, and at least if it's coming from BP, be like, Okay, that person is legit, they've been screened, I trust. There's a certain level of trust, right, because they're producing that content, just like another institutional standard. Now it's just gone to hell. It is. And not just because of him, there's other folks

Mike DeHaan: [34:59] there There is, for sure. But that is the most obscene example of we do not care about credibility anymore, and we are literally just trying to grow our audience. Because they have taken someone that is 100% uncredible

Dan Austin: [35:14] We're trying to buy users.

Mike DeHaan: [35:16] To come and represent a part of the business that is already in the gray area, right, wholesaling, off market real estate, and they have now chosen somebody that is on the wrong side of it, 100%. There's so many other people that they could have picked that don't have as big of a following that would've done it, but they opted not to do that, and instead go with the worst possible choice. Yep. Crazy. Dummies. I don't understand.

Dan Austin: [35:40] Sorry, guys.

Mike DeHaan: [35:42] It's just something that I just can't deal with it. Anyways, we gotta we have to try something else. We can't finish with that.

Dan Austin: [35:49] Yeah. I know. Sorry. Sorry about that. We got it got our hate out. Got our weekly hate out for everybody to listen to. I don't know. What else is going on, Link?

Mike DeHaan: [35:57] I mean, big picture. I don't think anything

Dan Austin: [35:59] I picked up a quick little referral this week. That was cool. Did you? For what? For that Duplex deal here in Spokane. It's already listed, got a signed contract around on it. It was a deal. It was a deal.

Mike DeHaan: [36:11] Were you getting paid or you're getting paid?

Dan Austin: [36:13] Well, we're getting paid. Yeah. I mean, yeah. Like a realtor referral. Oh, sweet. So we basically, you know, just doing follow-up in our system and following up with sellers. We had one that needed to sell a duplex, is actually a super clean duplex, photos look great, and it's like there's no way we're going to be able to get it at a price that makes sense for us just because of the condition, what the lady needed, and her position. There wasn't a lot of just too much distress there. And so we connected it with the realtor, realtor listed it and already got a signed contract.

Mike DeHaan: [36:41] Oh, sweet. That's awesome.

Dan Austin: [36:43] Yeah. It closes in June. So fast.

Mike DeHaan: [36:46] Yeah. I mean, that's a great lesson, though, about what to do when you have those retail leads is if you can find that realtor that's willing to put in some work. Yep. And it's something that we've always struggled with. And, of course, ironically enough, as we've cooled down our stuff in Spokane a little bit, we connect with a realtor who's more than happy to work a lot of the

Dan Austin: [37:02] different We finally figured it out, got the right personality and the right person, and he's just Yeah. Which is cool, it's like, how do you, and you and I have always talked about this, how do you monetize the things that are not in your wholesale pipeline? If they don't qualify to be in the wholesale pipeline, there's still a lead, because if you're doing direct mail, there's still a lead that raised their hand and said, I am interested in selling to you, how can you help me?

Mike DeHaan: [37:23] Exactly, yeah. And that's something that so many people don't understand about this business is, like you said, every single person that chooses to engage with you, especially if you have inbound marketing where people pick up the phone and they go through that process, they are saying, I would like to sell. We just need to find any sort of solution. And what happens with most people is you end up with this massive graveyard where 80% of the calls that come in, you're like, I can't get this thing for $60.70 cents in the dollar, so it's not even gonna work for me. This And is why it's so important to be constantly working on your knowledge and your skills and your connections so that you can refer the retail leads. Right? When you get the people that are underwater, you know how to buy it with subject to. Right? When you have people that own it free and clear and are not willing to take a big haircut on it, you know how to negotiate seller finance. Yep. Right? You know, there's so many different options and a lot of people when they get into this, especially as they are starting to get like some reps in, I find that they get too comfortable or too faced on the mindset of cash buyer, and that really causes a lot of potential income to be missed.

Dan Austin: [38:29] Right. And it's not easy. It's not like they're like, okay, I'll list with you. There's still a process, so for those of you that have a real estate license, then you can maybe convert them yourself or refer them out, which is challenging, but refer them out to a real estate agent and just collect the referral fee, which is great when those happen, but that is another challenging sale process, anytime there's a human handoff.

Mike DeHaan: [38:48] Yeah, well, mean, that's one of the biggest things that we've taken away from working with our business coaches. Where everything messes up in business all the time is when it hands off from one person to the next. So one department to the next. Right? Mhmm. Solving that is gonna be challenging regardless. And so I think a big mistake that people make when they start trying to bring in a realtor that's gonna potentially convert somebody as listings is they say, oh, hey. Cool. I'm gonna refer you to my realtor. His name's Dan. He's gonna give you a call. And then Dan can never get them on the phone. They don't know who the hell Dan is. You have to treat it as a soft hand off. Like, you have to make the heart the introduction directly. Right? You need to do everything that you can to set up the stage for there to already be trust there for the thing to be successful. You know? And a lot of people don't understand that, so they'll just have this big list, they say, here you go realtor, just go call all these people.

Dan Austin: [39:36] Yep. That's how we did it our first time.

Mike DeHaan: [39:38] It is, yeah. Right? It didn't work for shit. Didn't work at all.

Dan Austin: [39:41] Yeah. Yep. Yeah, that's true, and then the other key to that is if you have staff doing that handoff, is putting key performance indicators out that handoff. So I don't know, maybe a KPI is like, what percentage of appointments were successfully set by the ACT manager as they were referring it out, then that during that warm transfer of because ideally, you'd say, okay, my friend so and so is going to call you at 10AM tomorrow. Are we good? Can we set that in place? Yes, okay. Maybe that's a KPI that helps improve whenever that person gets it that they can get them back on the phone.

Mike DeHaan: [40:15] Yeah, absolutely. I mean, would bet that if you have any sort of systems in this business in the form of regular lead generation, if you have that process figured out and you have a good person that you can make that stuff enough to, it's probably an extra $100,000 a year, at least, in an average market. Yeah. In income that be making that doesn't cost you anything. And I think too, a big mistake as well that a lot of wholesalers do make in this is they say, oh, I have all these utilities. I'm gonna go get a license. I'm gonna list these properties for people. Don't do that.

Dan Austin: [40:46] That's so much work.

Mike DeHaan: [40:48] So much work, and you're gonna make so much less money than if you're just wholesaling or you're just investing. Pass it off, take your 25% referral, and just take your free money for really doing nothing, honestly. And, yeah, you gotta remember, a lot

Dan Austin: [41:01] of the leads are coming in. Some of them are list ready. A lot of them are not. So then the work you're gonna put in to do the whole listing and then dealing with that, it's such a headache, it's such a distraction compared to the profits you can make wholesaling. Yeah. That's why we advocate to just refer them out. Yeah, don't let them turn into a graveyard. Definitely set up a great process to refer those listing leads out, and have some filtering, but I mean, there's a lot of leads in there that you can just, let's try to put that in this category, and have that process of handing them off to that realtor to capitalize on, and make another 6 figures doing very little. Yeah. Doing stuff you already did. Exactly.

Mike DeHaan: [41:33] Yeah. Mean, if you had to look back at we went to that phase where we were referring a lot of stuff to you, because you had your license. Big of a mistake was that? How much?

Dan Austin: [41:39] That was terrible. That was terrible.

Mike DeHaan: [41:41] Were working so much to make an extra $6,000 for the company, and it's like, what a freaking I

Dan Austin: [41:47] personally just don't love listing anyways, and it's stressful because you're trying to sell livelihood for these people. It's a big thing for them. That one four pack of properties I sold, that was a ton of work. The family, the mom and dad had finally passed away. They had a bunch of properties, and the kids wanted to sell them. And so I had five kids. They're all adults, great people, by the way, but five decision makers for across four properties. It was such a so much work. Yeah.

Mike DeHaan: [42:12] So I think if you are gonna be looking to make this connection with somebody, find someone that has an established real estate brand, so they can actually, you know, have that pitch. Like, don't just like find your friend or like your neighbor's kid and go, oh, they're a realtor. Maybe they'll do it. And then they'll give you 25%. It's a waste of time. You need a you need a good player. Right? So have a brand. They understand the realtor process. They enjoy the realtor process. And then they have their own processes in place to do all of that stuff. You know, they know how to get a property list ready. They know how to get a stage. They know how to take real photos. Because if you go and you start working with a janky realtor that doesn't know how to do any of that stuff Yeah. You're just wasting your time. Then if you do even happen to convert them for this guy, they're probably not gonna sell them anyway unless it's 2,021 and everything's sold. But that's not the reality for

Dan Austin: [43:02] That's not the reality. Most of humans. The realtor you're refer to is a certain persona because it's not the number one realtor in your town because, a, they don't want your leads, they have enough lead generation, but b, those folks are typically not doing all the cold calling and door knocking anymore, right? Or if they are, they're doing it in a certain demographic. They don't want your leads, even though they say they do. And then it's not the young, new, hungry person, because that agent's likely gonna quit anyways. So don't give your leads to this new, hungry agent that just started out thinking, well, they'll be hungry for anything I give them. It's like, yeah, they will, but again, they're probably not gonna do well

Mike DeHaan: [43:34] at it. They don't have work ethic yet.

Dan Austin: [43:36] Yeah. The chance of them being a successful realtor as a new young hungry agent is pretty low, honestly. So it's like that agent that's maybe moving markets, moving into your market, and has some established experience but knows how to scale up their business. It's that agent that has some experience, that is a hard worker, but isn't the top 5% of the agents, but they're good, and they're not new either. Perfect.

Mike DeHaan: [44:01] Easy. Right on. Well, there's some good actionable stuff to end on rather than me just Mhmm. Just Shitting on Jumanji. Shit. Whatever his name is. Jamil. Yeah. But the Jumanji challenge. So anyways, guys, thanks for listening to today's show episode of the Mike and Dan show. You should share this with your friends and go and have them subscribe and leave a five star review. It's a great way to help us continue to grow this. Outside of that, you should go to collectthekeyspodcast.com/free to get our free five step guide to start joining off market leads. We're also gonna start working on some more freebies for you guys here over the next little bit because you've had a few things people have asked for. So at some point, we'll get around to them. I say that right now. It'll probably be, like, months, but it'll come at some point.

Dan Austin: [44:41] We're gonna prioritize it.

Mike DeHaan: [44:42] Yeah. We're I mean, we need to pretty soon because we're we gotta start getting some more material out there. But in the meantime, go to collectingkeyspodcast.com/free. Get your free five step guide, and you can start buying off market deals just like we do every single month. Anyways, guys, thanks for listening, and we'll talk to y'all next week.

Dan Austin: [44:58] See y'all.