3 Biggest Red Flags When Inspecting A Property

Mike DeHaan: [0:00] Hey, guys. Mike DeHaan here. And before the show, I just wanted to take a moment to talk about our most recent partner, Ballpoint Marketing. Direct mail is a common way for people to start marketing for off market deals. But standing out from all the other investors out there is never easy. That's where Ballpoint Marketing comes in. Ballpoint marketing allows you to send actual pen written letters to your marketing list. They legit have warehouses full of robots using ballpoint pens to write your letters. This comes along with all the smudges and pressure points of a handwritten letter, which gives the same effect as if you had written them yourself at your kitchen table. If you go to ballpointmarketing.com, you can use our code m d five, and you will get 5% off your next order. 5% might not sound like a lot, but when you're sending thousand dollars of letters like you need to be doing to get deals, that will add up very quickly. For example, if you're sending $5,000 of mailers next month, that's gonna be $250 in savings. Anyways, go to ballpoint marketing dot com and use our code m d five. That's m like Mike, d like Dahan, and the number five for 5% off your next order. Thanks, and enjoy the show.

Speaker 2: [1:01] Welcome to the Collecting Keys Real Estate Investing Podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [1:24] What's going on, everybody? Welcome to episode 17 of the real estate oh, sorry. The Collecting Keys Real Estate Investing podcast. The the Mike and Dan show as my both of our wives have referred to any conversation that we have.

Dan Austin: [1:40] Yeah. Buddy.

Mike DeHaan: [1:41] Back. Yeah. It's most even my mom started saying that too.

Dan Austin: [1:44] Two most important people when you're at a party. I know. Yeah.

Mike DeHaan: [1:49] Definitely definitely at our party. I don't know. I don't think my wife's a big fan of the wife and Dan show. I think she would change the channel almost immediately if she can.

Dan Austin: [1:57] The Mike and Dan show? Come on.

Mike DeHaan: [1:58] Yeah. We're

Dan Austin: [1:59] cool. I mean, I don't know.

Mike DeHaan: [2:01] We've both been there as our they're, like, you know, rolling their eyes and just you know, because they're both kind of introverted as well. They kinda just sit there and want us to stop talking so that I know. We can you know, each person can go back to their respective houses and do their own thing. Pretty much. Yeah. But you and I will sit there and talk about whatever random business thing is currently on the mind for this next three hours, which is why we started this podcast so we can Right. Turn that into content that maybe one other person will find interesting.

Dan Austin: [2:32] At least one other person. Maybe not in my household, but somebody's house. They're like, yeah. These these guys are cool.

Mike DeHaan: [2:38] Yeah. Like a man. We we got some fans. You know? I got I got a couple people who I know list on a regular basis. Well, I know we have several people because I can see our our stats, but I have people that reach out and comment and, you know, I know my mom listens. Well, she used to. She stopped she stopped listening because she said that we we bragged too much and I was sounding a little arrogant about talking about how our our business is having moderate success. But also the

Dan Austin: [3:07] we're bragging. Are we bragging? Or are just talking about what we're doing?

Mike DeHaan: [3:10] I just think we're talking about what we're doing. And also, when I think about all that stuff, like, sure, we talk about making revenue and those sort of things. They don't know the books. They don't know what we're actually making. I mean, because anybody can go and talk about making a $100,000. But if it takes you a $101,000 to do that Yeah. But not saying that's state of our business. We definitely are profitable. But

Dan Austin: [3:31] This is what you tell your mom, make her feel better.

Mike DeHaan: [3:33] Exactly. Because she

Dan Austin: [3:34] buys you Christmas gifts.

Mike DeHaan: [3:35] Yeah. Exactly. So she doesn't doesn't kick me out for disgracing the family by being too open about what we're doing.

Dan Austin: [3:42] I thought you're gonna say because you cursed on it or something. She said she wouldn't well, it's new work.

Mike DeHaan: [3:45] So she did say that. She did say that I say the f word too much, which I also which, I mean, I I I had one episode where I went a little bit overboard, but we were talking about some kind of, like I I think it was, like, one of, like, our motivational ones about, like, how to get started. So I was getting pumped up.

Dan Austin: [4:02] Getting pumped up. Yeah. Yeah. I get it. I get it.

Mike DeHaan: [4:04] So but that one that one stuck with her. So so, mom, if if you don't comment on this, I'll know that you're actually not listening anymore.

Dan Austin: [4:12] There you go. Oh, that's great. Hi. Yeah.

Mike DeHaan: [4:17] Yeah. Right. But, yeah, I've had a you know, just dealing with this this post postal service thing that we chatted about last week with all these letters coming back. It's just such a weird deal because, you know, coincidentally, a news headline came out locally today about issues with the post office in Spokane where people and especially in areas outside of Spokane have been not getting mail for, like, weeks sometime. Like, they just haven't been getting anything at all because they're understaffed and they're overwhelmed. So I'm highly convinced now that this is a conspiracy where if they have surplus mail instead of trying to sort it, they just, like, straight are attacking it and being like, yeah. Right. I don't know. Sorry. And then also too talking to people in our masterminds, people around the country are experiencing the same issues. And it's, you know, it makes such a challenging thing when you have these different marketing tactics that you're doing that are absolutely key to running your business, but you rely on the third party. And if the third party has problems, it kind of can put a big hiccup in everything.

Dan Austin: [5:20] Right. And it's tough because you can't control this third party because they're the government.

Mike DeHaan: [5:25] Yeah. Right. There's not much

Dan Austin: [5:26] you can do. And not not categorizing all postal workers as this, but, like, you know, the the stigma around it is that they're not working real hard. Right? And so It's like the

Mike DeHaan: [5:37] DMV, you know? Yeah. Like, they have like, the kind of people that work at the DMV are typically the same people that work in the post office. Right. And if that's offensive to anybody, that's just obvious to me you've never been to a post office or to a DMV before. Right. Otherwise, you would know exactly what I'm

Dan Austin: [5:53] talking about. Grumpy, slow, don't care about their work, don't care about their job, don't care about the company because it's the government. But, yeah, it doesn't surprise me. I mean, I would I would go I would have to guess that, you know, going through another batch of return to sender mail this week, and there was there was some legit return to senders in there, but still sampling, there's a lot that weren't. I I would imagine if I had to guess throughout our whole system of operating for the last, you know, two, three years, probably 10 or 20% were like that anyways, where they're actually good, but they're just machine or their mechanism is, I don't know, calibrated incorrectly or something is going on. And now it's definitely ramped up to where, like you said, you get three boxes of the exact same postcard, and you're like, gosh. I don't really wanna do these. I'm gonna put them in the return to sender category. Yeah. Right? Because we're not gonna be able to deliver these. That's just junk mail, and people don't need junk mail.

Mike DeHaan: [6:46] I mean, honestly, it's not a bad conspiracy at all.

Dan Austin: [6:49] It's not a conspiracy if it's fact.

Mike DeHaan: [6:51] That's true. Right? I mean, and when it happens so many times, you can't not get suspicious.

Dan Austin: [6:55] Right.

Mike DeHaan: [6:56] Exactly. Especially because when they and it specifically says cannot be delivered as addressed. And then you pull up the county website that has everyone's information on it, and it is letter for letter, space for space, exactly the same as what's on the letter. Well And it's a professionally printed thing. Like, there's no question that they can read it. It makes no sense.

Dan Austin: [7:20] And that's what I was about to say. I've sent handwritten mail to people, like, outside of our business, right, where I, like, address the the envelope. And I have terrible handwriting, and I've never had a piece of mail come back to me because it wasn't address. They couldn't read the address. Mhmm. And I'm bad at it. Like, I'll cross shit out and, like, rewrite it. Like, it's messy. Right? Like but they figure out how to read it.

Mike DeHaan: [7:42] Yeah. Yeah. Yeah. I know. It's yeah. It's it's interesting. So, you know, trying to navigate those, those are kind of the the risks of the being a business owner, I guess. You know, you spend all this money on that. And then, you know, our our VA has been going through trying to figure out parallels between any of those. He said there's been quite a lot now as he's been going through that are the same address. They keep coming back as well. Mhmm. So my thought though is if they're like the one off ones, I'm not as concerned about those because those tell me those are flukes. It's the ones that were they're getting the same ones back two or three times. It's like, okay. Well, obviously, there is a problem with that address. You know, if those because, like like, numbers wise, we're getting, let's say, 10% of our 20,000 mailers we send a month back. Right? That's 2,000 mailers. In that 2,000, the ones that we're getting back repeatedly, like, that's not that's more than just a coincidence that those same ones are always falling into that same category. Mhmm. So my plan is to try and figure out which those which ones those are, do a little more of a deep dive, and see if we can get in front of these people that potentially no one else is getting in front of because they're likely experiencing the same issue.

Dan Austin: [8:54] Sure. Yeah. Yeah. It it do you think it has something to do with a bad address in the county record or that the mail post office doesn't like that address? Because it's just a, you know, maybe a weird PO box.

Mike DeHaan: [9:08] Yeah. And that's something we'll figure out. You know, I haven't had a chance to actually look at them yet, but he just sent me a a message just before we started saying that he's working on those. He's noticing a lot of repeated addresses. So it'd be kinda interesting to see.

Dan Austin: [9:21] That's what I noticed in this last batch, A lot of more PO boxes.

Mike DeHaan: [9:24] Mhmm. For sure. I mean, so that's possible. Right? They don't have that PO box anymore or the PO box isn't correct. You know, those sort of little details like that, people always say, you know, wholesaling saturated, direct mail saturated, cold calling saturated, marketing, froth marketing saturated. You're completely right. But the things that you can do that are gonna make you make money over everyone else are these little details that are extremely cumbersome, extremely boring, and, you know, you're not necessarily gonna hear about on a YouTube video or a podcast unless it's one that's run by people who are actually being successful in this business. Those are the things that are gonna make you successful.

Dan Austin: [10:08] Yep. The the industry is professionalized. Right? I mean, that's that is as it's become more competitive, there's some rock stars out there that know how to make run a professional business and to do what you're talking about and looking at the little details because that's what's gonna make you a big difference from you being a wholesaler that makes a $100,000 a year to a wholesaler that makes a million dollars a year.

Mike DeHaan: [10:28] Exactly. Yep. And and, you know, if you think about any task that you do in this business, if you are able to, you know, pay a subscription for some sort of service and get information or get a process done and it all it takes is thirty seconds to do, there's a ton of other people that are willing and able to do that for that period of time. It's the things that are more labor intensive or more cumbersome that less people are gonna do because especially when you're starting out and that is also to say, like, the easy stuff is still how we find most of our deals. Mhmm. You know, less like pulling giant lists and sort of going through the traditional process everyone else does. But it's, you know, if you can take these little steps that, you know, take a little bit longer and a little bit more, the more complex something gets, the less people that are going to go through that process and the less competition you're gonna have. And if that leads to, you know, like a three or 4% higher conversion on your deals, that's gonna add up to 6 figures a year in any sort of volume operation at a minimum. You know? So it's a it's, you

Dan Austin: [11:35] know, it's one of the

Mike DeHaan: [11:36] reasons that makes things because especially when you're starting out, it can feel like the the subscription and stuff like that can be an area barrier to entry just like the processes. But there's a lot of people out there with a lot of resources who wanna buy houses for 60¢ on the dollar. So, you know, the things that feel like a major barrier when you're first getting started really aren't a barrier for most people once they sort of have an attraction. So, I mean, even even like right now, it's funny where I'm starting to add in some more online marketing. And we did that a number of years ago when we started, and I remember, like, being online. I was like, man, it was so freaking expensive. Like, there's no way that anyone actually does this. And I was chatting with the same outfit we were working with before. We're gonna start working with them again. And we have, like, our they have, like, our notes from what they like, what our ad spend was before. Wonder what our ad spend was that was too expensive, Dan?

Dan Austin: [12:29] I'm gonna guess it was like less than $500.

Mike DeHaan: [12:33] No. It was more than that. So it's $1,400 a month. Okay. Right? I remember being so stressed about that back in the day. I'm thinking like it was so much money. And it's like now I'm $1,400 for like our marketing spend. That's less than 10% of our marketing spend every month.

Dan Austin: [12:49] Yeah. No. You're right.

Mike DeHaan: [12:50] You know? And that wasn't even doing all of the that was like very specified areas that we were doing. You know? So now I'm like, we're gonna be doing the entire area, you know, like, larger birth, more, like, high level stuff, and it's gonna be a little bit more expensive. But I'm like, yeah. It's like a no brainer if we can just set it and forget it. Yep. You know? And we have like a way to measure it to make sure it's actually returning value. But, you know, this funny because there's a lot of people that they sort of start in that route because it feels easy. And they're like, okay, I can put $1,500 a month in this thing. It's like, well, here's what I hate to say. Now as the business attraction, we're gonna be putting five times that into this, and who's gonna have more success with that? So if you're trying to do that easy to set up route, you're now competing with us who has more resources than you.

Dan Austin: [13:35] Sure. Yep.

Mike DeHaan: [13:36] You know? So yeah. Lots of you know, the optimizations of things is kind of like the zone. That was my, my theme on my one sheet at GoBundance was optimization this year. Interesting. Because I wanna, you know, I wanna get out of the the frantic forward and back like we've had the past couple

Dan Austin: [13:56] of

Mike DeHaan: [13:57] years as we've been trying to figure out the best processes.

Dan Austin: [14:00] Yeah. Yeah. My my theme was place the foundational blocks. So it's funny you're talking about optimization. I'm this so this was more personal, not necessarily business, but, like, placing the foundational blocks to grow something much bigger. So it's kind of interesting because those roles that we just explained are the opposite of our roles in the business.

Mike DeHaan: [14:22] You're right, actually. That's funny.

Dan Austin: [14:24] You mean optimizing shit. Yeah,

Mike DeHaan: [14:26] you're right. That's true. That's true. And I'm definitely, like, the growth person.

Dan Austin: [14:30] Yeah.

Mike DeHaan: [14:30] But may and it's funny maybe that we both see that because, you know, from our individual views, we see that as the parts that are kind of out of our control

Dan Austin: [14:40] Right. A little bit.

Mike DeHaan: [14:41] Yeah. So, you know, we're like, that's obviously why we're not strong, but it's funny because you're completely right. I'm definitely the the visionary. You're more the integrator.

Dan Austin: [14:50] Yep.

Mike DeHaan: [14:50] So interesting. But, yeah, besides that, Icar, we're in the optimization portion. We're looking at hiring a second sales guy right now. And it's funny as I've started as I I've just posted on Facebook that we're looking for somebody. And it's always interesting, the people that reach out when you do things like that. And you quickly realize how few people actually know what you do, even though you feel like you're pretty open about it.

Dan Austin: [15:21] Yeah. Yeah.

Mike DeHaan: [15:22] You know? Like, I I've had people reach out that have, like, you know, kids that, like, work in retail. And they're like, oh, they do sales? I'm like, they're a cashier at, like, a retail store. Like, that's not what we do at all. Or, like, a lot of people who are like, do I need to be licensed to do this? I'm like, actually, definitely, please don't do license. Right. Yeah. Yeah. We don't

Dan Austin: [15:45] need that skill set.

Mike DeHaan: [15:46] Yeah. So, you know, it's just gonna be an interesting process going to find somebody, but my goal is to find a true professional salesperson. So we need to figure out if that person exists in Spokane and also if they need to exist in Spokane too. As I was having a Zoom with somebody this morning and they were I was telling about that, and they're like, well, does it matter if they're actually there? Like, if you're being honest? I'm like, no.

Dan Austin: [16:11] No. No. Doesn't. Yeah. Absolutely. We've done we've closed deals virtually Mhmm. Plenty of times. And then you and I both closed deals virtually, so to speak. Right? We have our sales guys doing it, but we're in the background not looking at them, not locking them, all that sort of stuff. And so what if you could pull that salesperson and they're just a hard closer Yeah. Doing it virtually? I mean, I'm willing to try anything out with that.

Mike DeHaan: [16:36] Yeah. For sure. You know what I mean? Risk reward, it's relatively small.

Dan Austin: [16:40] I just wonder too, like, I don't know if you get this way. You get out of the house a little bit more often than I do just for different things. But I'm like, gosh, I have to go to the store? Like, after the whole pandemic, I'm like, that's a whole it's like a thing. Or like, if I have to go somewhere, I'm like, man, that's like a thing. It's not like that I'm not ready or can't go out of the house, but it's just like, oh my gosh, that's a burden. So why why do I wanna leave my house?

Mike DeHaan: [17:02] That's funny that you became like a recluse. Yeah. I've had the opposite. I used to be like that. I mean, you know me back in the day when I was like, going to my basement for a kid playing World of Warcraft, you know, living in your your rental that you're living.

Dan Austin: [17:15] Oh, you're playing wow in there. Jeez, dork.

Mike DeHaan: [17:17] Yeah. Yeah. You know, that that was what I did. But now that I they were kind of restricted. I'm like, man, I just want to go everywhere all

Dan Austin: [17:24] the time. Right. Yeah. Yeah. We've changed roles there.

Mike DeHaan: [17:26] Yeah. Anti established. But I mean,

Dan Austin: [17:28] the point being is, like, I think just people are more open to doing virtual things from a customer standpoint of like, where they maybe want to be comfortable selling their house over the phone or virtually with somebody, they're much more likely to do that nowadays, because they just see how the world works virtually. And it's just kind of like, oh, of course, you work virtually. There's a pandemic.

Mike DeHaan: [17:46] Yeah. Absolutely. Yeah. I mean, it it's definitely a challenge with certain demographics still, particularly older people. People don't use the Internet very well, which, you know, in terms of our typical sellers, surprisingly common.

Dan Austin: [17:59] Very high rate.

Mike DeHaan: [18:00] Very high rate, especially a lot of the rural places that we go. I mean, our poor sales guy now, he drove 2.5 out to a lead. So it was like a very hot lead because she had a phone line, no cell phone, no way to send photos, no Internet, no anything. You know? But it's like a 17 acre parcel out in Idaho and like a great location. And I was like, yeah, that's a great lead. Like, you know, the price that she wants is great. Like, go figure out. And so it goes, you know, we're in two and a half hours each way to go out and do that because she doesn't have anything that we can do to, like, verify any sort of condition. Because he went out there with a contract hoping to get it signed around, you know, and then what happened, she's like, oh. She's like, well, I'm not quite ready yet. He was like, I definitely wanna talk to you, but I gotta get my stuff figured out first. So that means that when she is ready to go, he's gonna have to do that again.

Dan Austin: [18:55] We need to hire a runner by that point.

Mike DeHaan: [18:57] I know. Right? No kidding. Wow. But, yeah. It's, you know, it's a challenging deal. But, yeah. We've, yeah, we've had just a handful of, like, weird ones over the last last little bit. I mean, so we have, like, one right now even I was talking to our closer earlier. It's funny. We we have the closer that we're working with right now. She works for a legit title company. She's awesome. She's a total workhorse for us. But the major bummer about working for a a title like, working with a legit title company like that that actually has policies as opposed to a lot of investors will work with lawyers, like closing attorneys, because they'll just kinda like do whatever. You know, you don't have to have any ethics or anything with them. So I was trying to be above board. It comes up with the hurdles of things like, we have this deal right now. So the seller lives with her ex husband, and the seller is, like, kinda like a nervous person. And it's this weird situation of whenever you talk to them on the phone, basically, you're talking to her and you can hear the ex husband in the background, like, telling her what to say. Oh god. Right? It's a total red flag. Right? Like, that's the weird stuff going on.

Mike DeHaan: [20:12] So we've been dealing with this and, like, I was trying to get worried the deal wasn't gonna go through because our closer is like like, hey. It's like, I just need to make sure that she's not being, like, persuaded that she actually knows what she's going through with and all this sort of stuff. And so she's especially, like, you know, female to female as well. I think there's, like, a concern there. So she's been going through all this, I was like as I'm starting to get nervous, I'm like, man, if we just had, like, one of these attorneys in town, they wouldn't care at all. They wouldn't even know. They could just get it done. Like, they're just like, just show up, sign it, whatever. Get out. Totally. You know? I mean I mean, we one of the attorneys here in town, when we had the guy get kidnapped, the dude, like but I told him that it was fraudulent over the phone. He freaking closed it a week later. Didn't even care. You know? Because all he knows is that he got paid to do the transaction. His $1,600 or whatever.

Dan Austin: [21:00] Exactly. Done. Easiest day of his life. Didn't care.

Mike DeHaan: [21:03] Yeah. And it's always like a weird thing because like, I wanna do right by people. And us as a business, we are in the role of helping people. But at the same time, I mean, we gotta get paid. We got we gotta get paid.

Dan Austin: [21:15] We spent a lot of money on that lead.

Mike DeHaan: [21:17] I know. Right? And it's like, it seems like a done deal. And then like these weird red flags pop up and it's like, oh my god. Especially because like, it's also not really our business.

Dan Austin: [21:26] Right. You know? But, like Exactly. It's like their business. It's private matter.

Mike DeHaan: [21:29] Yeah. Exactly. But I don't wanna know

Dan Austin: [21:31] if she's tied up in the basement.

Mike DeHaan: [21:33] Yeah. But, like, the nature of our stuff is we kinda get sort of more intimately involved in these people's lives because they are in distressed situations.

Dan Austin: [21:41] Yep. Yeah. You get wrapped up in their drama just because a, they're very forthright with it, but b, you kinda gotta get involved a little bit to understand the situation. But the next thing you know, you're their shoulder to cry on and you're hearing all sorts of stuff.

Mike DeHaan: [21:54] Yeah. Exactly. But, I mean, that's that's the value add, though, that we offer is we do give people those opportunities to work through some of those more complex situations if they need to.

Dan Austin: [22:04] Yep. But, you know, whereas, like, a realtor is not

Mike DeHaan: [22:07] gonna do that. They'll be like, oh, this isn't an easy listing. I actually have to do some work. It's like, yeah. I'm not gonna do that for my 3% on your on your property that's so beat to hell. It's only worth $90,000 or whatever.

Dan Austin: [22:19] Yeah. I can't post this one on my Instagram.

Mike DeHaan: [22:22] Yeah. Right. Yeah. What what what do my my followers think? Yeah. So, yeah, it's been it's been interesting. But what else you got, Dan?

Dan Austin: [22:34] It's been a good week. Very productive. You and I, I think, which is great for the partnership, kinda started going over some accountability stuff and what our most important next steps are. And, you know, what I've been trying to do is just optimize our construction stuff, our project stuff, our property management stuff the last couple weeks and really starting to go forward with it, you know, full scale to open up my schedule a little bit more. But then also, like, how do we squeeze more profit out of all of our deals? And part of that is engaging suppliers. So meeting with, you know, multiple different suppliers for different, you know, materials because materials are a challenge right now. And like Home Depot isn't the greatest place, especially right now. They've, I mean, screwed up so much on this most recent project that we're we're involved in just on materials and broken materials and missing materials. Usually, can work with somebody there to get a whole package put together, but it's that's not the case right now. But also, we just have a lot of other things where we didn't start out this way, but now we're at this point to where we do do a lot more throughput than the average person, which is kinda hard to think. But, you know, just paint alone, you know, the the sales rep saw our contractor go in there to get paint, and he pulled up our account. And he's like, oh, I need to talk to these guys, right Mhmm. For pricing and all that sort of stuff because we're at that point in our community where we're doing enough that it turns, I guess, turns heads for in in the supplier side. And so how do we renegotiate some of those prices?

Dan Austin: [24:10] Mhmm. So cabinets and countertops, we're working on that this week to renegotiate those prices from our supplier, paint, flooring, those those tick big ticket items that we're always using, where we can at least if we can save 10% margin on all of those, that's overall on a project, saves us, you know, $56,000.

Mike DeHaan: [24:28] Yeah.

Dan Austin: [24:29] That's that's that adds up when you're doing a handful of projects at a time. So that's been that's been big and then also engaging with our contractor and trying to understand where he wants to grow versus where we wanna grow and how do we grow together because we don't we don't have contractors in house. We don't have a full time crew like some folks do. We do, but they're just ten ninety nine. And we kinda pulled him back out of, I would call it, like, corporate construction where he's doing big big giant jobs all over the country, commercial side of things. And, he he quit that to come work for us, so he's building his business back up, which I wanna see him grow. And the problem is is people in the neighborhood see his work and then they want his referral. And I'm like, I don't want to refer him, but I also wanna see him be successful. Right? Yeah. Because he is a very good contractor. We pay a good price for him, but he could also, charge us way more Mhmm. Doing higher end projects. Right? Most of the contractors that I hire, I wouldn't let them work in my own house just because their quality is, you know, okay, but it's, you know, not what I want in my home. Mhmm. But this guy, I would, and I've had him do work in my home. So he he definitely can demand a higher price. And so trying to understand how I can help him grow, but also engage with him to make sure he knows that we still wanna grow. Yeah.

Dan Austin: [25:48] And we can't do that if his goals and our goals aren't aligned. Yeah. So engaging with him and working through that and it sounds cool. He he really likes working with us, wants to keep working with us, so that's really good. And he has some pretty big visions for his business. And I we're just trying to stay in alignment. So it's like, hey, man. I want I'm gonna help you grow, but you also need to make sure you take care of me kind of attitude. And it and it's mutual. Right? Both ways.

Mike DeHaan: [26:13] So Yeah. Yeah. That I mean, that's good. And that's always one of the challenging things about running our operation where we have volume, but we don't have a crew, You know? But, like, at the same time, the businesses that we know that do have crews, they typically have a volume problem, or they have a money problem, or, you know, volume problem sometimes even is, like, too much. You know? Like like, one of our main competitors, they have some two crews that they rely on, but then they're always trying to anticipate their workloads. They'll buy, like, surplus houses Mhmm. To the point that then they're having to, like, liquidate some of those houses because they're like, we don't even have time to get to this one anymore because Yep. We bought it, a, too high, and b, it's too big of a project that we don't wanna do. So now they're selling at a loss. Mhmm. Right? And they're just doing yeah. It's it's a weird weird deal for something like that. Yeah. And then also too, the problem is and you have to manage them because those people aren't paid that incredibly well for it to make sense for them to be full time.

Dan Austin: [27:09] Yeah. Absolutely. Especially now with the you know, there's just it's tough to get good trades in into your business. And once you have them, you're gonna have to pay them well. And then if you're having to pay them well and keep them on staff, you know, forty hours a week or more, that adds up and you gotta find those deals. And like you and I came into this business with no intention to run a construction business, but we kinda do run a construction business without having the overhead of the construction business. And so how do we continue to optimize that? Because at some point, like we've done flips virtually where we never even stepped foot on ground, never had to work with a contractor on the ground. And so that to me is a great solution. But looking back last year as as we looked over our numbers, we're super profitable on our flips too.

Mike DeHaan: [27:51] Mhmm.

Dan Austin: [27:52] So if you're super profitable on your flips, you kinda wanna keep doing those because that's a great that's a great profit center for us. And so it's finding the balance of what scale do you want before it just becomes another business with a similar profit margin.

Mike DeHaan: [28:07] Yeah. And I think that was a pretty eye opening thing for us as well when we ran through those numbers is I mean, we made similar I mean, we make more no. I think it was, like, not quite more money than we did on our wholesales versus our flips. But, like, at least for me, mean, I I know you're kinda more involved with the flips. The stress level on that flip revenue is much lower than having to chase around all this BS with doing the wholesale deals all the time.

Dan Austin: [28:32] Yeah. Mean, we're running higher risk doing flips. Right? And so what I mean by running higher risk is that you're you're carrying a property, you're putting your capital out there, and you're you're getting a note of some sort on this property, some leverage. And so if the market does start to tip over one way, now you're carrying a depreciating something that's a depreciating profit. Yeah. Because the market's going down. And so if you get to a point to where you're holding through your five, five to seven, however many, you're taking that risk. So the profit should be a little bit higher with wholesale side of the business. The only risk you're taking is that next month's marketing

Mike DeHaan: [29:08] Mhmm.

Dan Austin: [29:08] In my opinion. Right? There's other there's other legal risks and that sort of stuff that you have to mitigate. But Flip has a little bit little bit more risk. I'm not saying it's a risk. A lot of people, especially when we started, it's like, god, what if we open up the wall and something happens? Like, buy a lot of properties sight unseen and we walk a lot of properties or seen a lot of properties to the point to where you can give me some two or three exterior photos, handful of interior, and I know exactly what we're gonna find. Because, like, what's what's the worst you're gonna find if you pull open a wall? Because we know what we're looking at. Obviously, when we look at something, it's like, no. That house is a piece of crap.

Mike DeHaan: [29:43] When you open

Dan Austin: [29:43] up the wall, I know what you're gonna find or what you know what I mean? And so we just don't do those properties, but the ones we we kinda have our systems dialed in on that of knowing what our risk is on the on the budgetary side of things. Yeah. To me, it's more of the risk of carrying multiple properties into a downturn market. That would be the risk. Right?

Mike DeHaan: [30:01] Yeah. Well, and I'll yeah. I think we have reduced risk now because we've done enough that we you guys said, you know, we know what to expect. And especially, like, if you're in your own market, you you'll probably find in any market that you're in that there's a lot of houses that are built super similar, you know, especially by the decades that they're built in. I mean, we've had I've been on meetings with our sales guy. He's trying to describe a house, and I'll be like, okay. So there's, like, a little en suite kind of in, like, the back corner and there's a bathroom halfway down the hall, and then you go down the stairs and like this. And and he'll be like, yeah. You've walked this house before. Was like, yep. Like, three or four times. I know exactly the house that you're talking about.

Dan Austin: [30:39] Yeah. Like or the, like, the nineteen seventies split level.

Mike DeHaan: [30:42] Yeah. They're all the same.

Dan Austin: [30:43] Is it a four bed,

Mike DeHaan: [30:44] two bath?

Dan Austin: [30:44] Yeah. Oh, yeah. Exactly.

Mike DeHaan: [30:46] You know exactly what it looks like. Right? And then you can predict, like, okay. It's a 100 years old. It's probably gonna be knob and tube. Like, the the pipes are probably gonna be galvanized.

Dan Austin: [30:56] Galvanized. Yeah. That's why when you, like, when you get and that's where you when you gain experience on the construction side of things. When you walk into a certain house, like, the one we're flipping now, we walk in. It's like, you know, whatever age. I can't remember the exact year, but it's like, oh, that should have galvanized in it compared to some of the other properties, but it has copper. Okay. I mean, somebody when they built this, it was like at the turn of a materials type thing and or they were just a higher end builder and they used better products. Right? Yeah. And so you're like, okay. I know this is gonna be a better deal. It's gonna be easier. It's copper, right, versus galvanized.

Mike DeHaan: [31:33] This is in the condo? Yeah. Yeah. That's funny to think that place being a higher end place when they built it.

Dan Austin: [31:40] I know. I know.

Mike DeHaan: [31:41] It's like a weird, ugly property. Like, I mean, it's fine, but, like, it's not

Dan Austin: [31:45] No. But whoever built it, obviously, built a whole cul de sac. Right? Yeah. And when you when you go in there, you're like, you could just look at some of the construction methodologies. I'm not by saying by any means that it was like a high end property. Yeah. But you just see those little nuances that tell you, oh, okay. This is gonna have better generation or or easier time when you're tearing into things. When you're trying to deal with copper plumbing versus galvanized, it's not that it's a major cost difference, but it is a major time difference

Mike DeHaan: [32:14] Yeah. Right.

Dan Austin: [32:15] For your for your contractor when they're having to do stuff.

Mike DeHaan: [32:18] Yeah. Yeah. That's true. What do you think are, like, the immediate sort of red flags that, like, you always get nervous about? And you can't say age. Like, you don't see it. You can't say age. Yeah.

Dan Austin: [32:32] Yeah. I I think when I when I look at a house and I'll tell you is like, what does it look? Is it squared up? Is it leaning one way or the other? And that might sound, oh, yeah. Foundational issues, but it's more than that. It's neglect typically is what so if I'm walking up to a house, I'm like, oh, I can already see that roof. It doesn't have to be the whole house, I can like, oh, I can already see the roof is sagging in a spot. Well, that tells me that there's some neglecting when I walk in, it's gonna be very neglected. Mhmm. On the you know, anything like that you walk into that just flooring, paint, drywall, even kitchen cabinets, bathrooms, there's nothing in there that's like, oh, no. It's this. Right?

Mike DeHaan: [33:10] That's all that's all easy. So, like, like, a a person that's going to walk their first or second flip, what is, like, the biggest red flag they should be careful of, do you think? They're like, they might not think of. They can't visually look at it and be like, that is bad.

Dan Austin: [33:28] I I would say the other thing that I get nervous about is anything that looks like water damage. Mhmm. And not like, there's a stain on the drywall. Because if there's a stain on the drywall, yeah, that's kind of bad, but that's actually not bad. Because we walk properties where the drywall is just gone. Right? Yeah. That's pretty obvious. And that that's fine. When I say water damage is or something that when you're walking around you feel something weird on the floor like on this property we're we're doing right now. It wasn't really quite apparent but the wind one of the doors wasn't correctly sealed and it was leaking through the roof, through the door, down into the floor, and it rotted the floor out. Mhmm. Which wasn't a big deal, but what that does is now we gotta put new subfloor on top of this. We had to rip out the old subfloor, new subfloor, and then try to get that to match with the existing subfloor and all that. So again, it's not materials cost, it's time of your contractor, time of your project and delaying you putting down your LVP or your whatever flooring you're put down. I would say that yeah. Two things, anything that's like sagging, you know, falling down or anything that's like significant water damage. Yeah. Bathrooms, you're see water damage sometimes, that's not as big deal. Like this one, it was urine damage because they didn't seal their toilet properly.

Dan Austin: [34:45] It smelled like piss, but, I would say those are kind of the two biggest things. The other major things I look at would be mechanical stuff. And so if you walk into a house and you see knob and tube, it's not a bad thing, like knob and tube inherently isn't bad, but if you want to knock out a wall or you want to do something, that's just a pain in the ass for an electrician or whoever and it's gonna take them way longer because with knob and tube, it's not like circuit to circuit direct wiring. Right? Like you see in a modern home, they're gonna have your bedroom, it's gonna loop to all the outlets and then it's gonna go back up to the circuit panel, maybe it grabs two bedrooms or whatever. Knob and tube, they just like ran wires throughout it and they just like tapped off of it. So there if you cut a wire, you have no idea what else you're killing. And then if it's knob and tube, you know it's probably lath and plaster. And then if you want it so if your guy has to cut into the wall and they're cutting in lath and plaster. And then if there's other damage in it, it's lath and plaster. So there's mitigations too, but it's just that takes time. Yeah. That makes sense.

Mike DeHaan: [35:43] You wanna know what I think is the biggest red flag from my experience? DIY work on CapEx items. Like anything that you, like, sense that is a DIY electrical deal, DIY plumbing, DIY, like, window installation. Anything that you can go like, if a seller ever says to you is like, I've been fixing this up myself.

Dan Austin: [36:07] Right.

Mike DeHaan: [36:07] You should immediately be like, shit.

Dan Austin: [36:10] Yeah. That's actually a great point. Like, I I would say it's not like my biggest like red that's a big red flag. I like that you said that because I should have said that in my probably top two or three. When I walk when I walk into a house and a seller has done DIY stuff, and I don't care if it's like mechanical or whatever they've done, you know, but if they've got their 14 different types of flooring in there, their Home Depot vanity that's like hickory and this random ass faucet that was like $400, but they thought it was cool and it raised the value. Because two things. One, they think that it's worth way more than it is Yeah. Because they spent that time and money on it.

Mike DeHaan: [36:47] Yep. Two Cost bias. Yep.

Dan Austin: [36:48] Two, you're gonna have to rip out half the shit they did.

Mike DeHaan: [36:51] Yeah. Exactly. And you can say there's gonna be so much and then not like, it's gonna be so much more than it initially looked. And then also two, you can almost guarantee that they had to do some really janky stuff that was good enough, quote, unquote

Dan Austin: [37:08] Mhmm.

Mike DeHaan: [37:08] Just to make it be fine with them having to live there. So but cool. Good thing we'd spot a duplex with the shit on the DIY stuff.

Dan Austin: [37:15] I know. Right? Yep. Exactly.

Mike DeHaan: [37:18] So cool. I think that's a good place to finish. If you wanna follow us, I'm at Instagram, Mike underscore invest. Dan is at investor man. Dan on Instagram. Give us a follow and shoot us a DM sometime. You can also follow the podcast at at collecting keys podcast. If you go to our website collectingkeyspodcast.com, you can download our free guide, which is five steps to start generating off market leads. If you follow that process, you'll start getting leads within ten days. Pretty much guaranteed, honestly. If you if you, like, do all the stuff in that in day one, you should be able to get leads within ten business days.

Dan Austin: [37:58] Yeah. What like, what? I'll give you a thousand bucks if you can't get leads in ten days if you do exactly what we say.

Mike DeHaan: [38:04] Oh, there you go. You heard it there first. You heard it there first. But, yeah. I'm backing

Dan Austin: [38:10] it up. I I believe in it that much.

Mike DeHaan: [38:12] Yeah. Yeah. I mean, it's it's literally the process that we do every month, every week. Yeah. It's it's you know, and it works for us consistently. So cool. And anything else, Dan?

Dan Austin: [38:23] No. That's it, man. See you all

Mike DeHaan: [38:24] next Yeah. Just message. Give us a five star review. Subscribe and refer our podcast people. That would be great. We're trying to grow this thing. So right on. Thanks, everybody. See you next week.

Dan Austin: [38:34] See

Speaker 2: [38:42] podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.