Achieving Long-Term Success In Your Real Estate Business

Dan Austin: [0:00] Just on this note too, just because of now we're talking about it, now I'm all fired up. I was watching a video for Baseball RV a while ago. Yeah. And he was talking about, he's like, look at this, a due on sale clause happened, and we're just doing a deed reversal. So essentially, I'm gonna deed it back to the seller, and the seller's gonna deed it back to me at a later date. It's like, that sounds like a pain in the ass.

Mike DeHaan: [0:18] That also sounds like fraud. You already got called on something and they're like, you can't do that, and you're like, okay. What's going on, guys? Welcome to today's episode of the Collecting Keys Real Estate Investing Podcast. This is the show where we teach you to make massive income, not just passive income with your real estate business. This is your first time here. I am Mike DeHaan. I'm here with my co host, Dan Austin. And this is Wednesday. This is the Mike and Dan show where we talk about real estate investing, business and whatever else we have going on this week. So we are middle of January, off to a pretty decent start. We got what five contracts on the month. We got a bunch of closings between now and February 2. I think what eight closings we have in our pipeline right now. Got a bunch of new sales staff that have come on, or just like staff in general that have came in. And I don't know, it feels like in the last like two weeks, you've kind of accomplished more than we did in like all of Q4. Yeah. I don't know. If that's just like us coming rejuvenated from the holiday or the team has been getting after us.

Dan Austin: [1:27] I think it's just more wisdom and where we need to go. You know, like if you think about this, like the concept of like goal setting or whatever you wanna something like that, you need to spend more time in building the strategy and understanding where you wanna go and figuring out what you want, and then once you know that, like you just have to take the steps. And I think as business owners, we've kind of finally figured out how to really truly set strategy. Yeah. And understand where we wanna go and why we wanna go there. And so now it's just easier to execute on opportunity when we see it. Because it's not like we didn't lack opportunity. And it's not like a lot of people don't lack opportunity, it's they just lack focus and understanding which opportunity is the right one for them.

Mike DeHaan: [2:04] Yeah. I mean, I don't know, like, you say it's important to plan. I would say most people, they never get any work because they spend too much time planning. Right? They don't actually, they never take action.

Dan Austin: [2:12] Yeah. And I I shouldn't say it's simple, I'm not saying it's important to plan, I'm saying it's important to get out of the planning phase because if you don't have a strategy, you're doing is planning and thinking.

Mike DeHaan: [2:21] Mhmm. Yeah.

Dan Austin: [2:21] You know what mean? Like, well, I think this is what I want, or I think this is where I wanna go, I'm gonna set this goal, but you're just like, you're not actually getting to where you need to be. Mhmm. That's true. Which is taking action. Yeah. Because you're so, and you see this a lot, especially towards the end of the year when you're talking to people trying to set their goals is they never get out of that, the difference between people that are like a rocket ship when they do is because they have, like they know where they're going, they have some experience and they're ready to rock and roll, and it's just like step one, step two, step three where if you're stuck in this like I don't know phase where like you're just like shiny objects, like which path do I take? It feels like slow and muddy and you're just not going anywhere.

Mike DeHaan: [3:00] Totally. And I think that becomes a skill once you sort of learn to take action a little bit quicker and and put things together. You realize how most things that you think are probably over complicated, like really aren't. You know, like we talked about adding in cold calling to our lead generation. A lot of people spend months trying to find like a VA or a cold caller that can work for them. We got a whole team up and running in like six Didn't even know how to use the software or anything like that. We just leverage the education that's already out there that other people have put together to teach your team and you just say like, here's the expectations, here's what you need to do, you go and you find the people and you do it. Know, and then Sam, we talked about bringing in a disposition manager to help move some of our deals, or to help move some deals for people in our scale community because we set up a pretty sweet relationship with Investor Lift so that people that are here at Scope Community get these heavily discounted seats. Not everyone wants that, so we brought in somebody that could help people get the advantage of Investor Lift without needing to necessarily have their own accounts or buy into the group system that we have. So we brought some of for that, and that was like, you posted the job listing, found someone two weeks later.

Dan Austin: [4:08] How fast did we have them start like three weeks,

Mike DeHaan: [4:10] So four weeks now dude, listed that job listing after the new year, so it's currently January 16.

Dan Austin: [4:16] I guess I was thinking a concept to close, it was like three or four weeks, because like we had kinda talked about the dispo stuff, but we were like, okay, this is what we're going to do, this is how we're going to do it.

Mike DeHaan: [4:27] Mhmm, about four weeks there. And so you just started with us now, that'll be another vertical for the business that we'll have bringing in, it'll also really increase our ability to make money on deals that come through when our when our partners aren't interested in stuff, that'll be massive.

Dan Austin: [4:42] Collecting keys dispo shop coming to a market near you. If you have deals that you wanna see if we can dispo, like we'll do it for a flat fee, just just hit us up and we'll see if our guy can do it for you.

Mike DeHaan: [4:52] Well that's the whole thing, right? It's like, this is the opportunity that we recognize is we have so many people in scale, and so we've known around the country in general that will have these different people that bring them buyers, daisy chain their deals for like 50%, doesn't make any sense. And we're like, what if we just did that for like a flat fee? Because it's really not, it's not worth the 50% that people pay for. That's a ridiculous thing for somebody to go and make this connection. No.

Dan Austin: [5:18] So, back in the day, even when we started, like your email list your contact list for wholesaling was huge, Like no, like if you shared your buyers list, people would be like, oh my god, you screwed up, right? It was a big deal because that's who you sold your deals to. And if other people had those buyers and they they were worried that you weren't gonna sell them deals. Well now, I mean, with software and some some tech, all that information is public anyways, and so now they just basically, Investor Lift has created that, put it behind a massive paywall that most people can't afford, and we were able to, fortunately, just because of where we're set up in our business, be able to buy the the full version with whatever they call God mode and Artemis mode, you don't have

Mike DeHaan: [5:56] to do the legwork of building

Dan Austin: [5:57] your list, it's already there. And so now, it just makes it a little bit easier for people. Still, if you don't have the contact list, you still can't dispo to those people, so you so now you can pay to get there.

Mike DeHaan: [6:08] Yeah. So either way, we got that up and running which has been, you know, really quick transition and same thing, we're just utilizing investor list pre built training, putting him through that and you know, establishing with our already, sorry, checking with our already established connections, which makes it easy. And I think that like, one of my favorite quotes, think think it's her Mosie quote is, big decisions don't have to take a long time, people just choose to make them take a long time. Right? And that's so true, like with a lot of these things is, in the reality what most of us are trying to do is not inherently complicated. People just choose to make them complicated because they don't fully understand them. Even right before this recording I was on a online marketing call for GoBundance, they have like a new micro tribe for people that have online community. And I was on there, It was great information.

Dan Austin: [6:57] I heard about that, yeah.

Mike DeHaan: [6:58] But the guy was going to like social media ads and like different things like that. And I'm sitting there, on this call, there's like 30 people in there. And I'm looking at all these guys, I know a lot of these names that are on there because it's a relatively small community. And I'm like, why the fuck are these guys that are all worth millions of dollars, like you have to be to qualify for GoBundance, why are they in like a technical seminar learning to run online ads? It doesn't make sense. Because like what are they gonna take a break from their business that makes some money to now go and run ads? Why don't they have a marketing manager this year? Right? Or why is there like not some way that they can use it to teach this to somebody in their company, when instead like they're here and they're gonna like remember this information and go back and be like to their assistant like, Oh hey, I learned about this thing called a pixel, and I need you to go research that now, because I just wasted an hour on an educational call teaching me the technical skills that are not applicable to the entrepreneur. Like if you're like a solopreneur that's one thing, but all these people on there, they have legitimate businesses.

Mike DeHaan: [7:58] I don't know if it's like the school system, or the way that we're brought

Dan Austin: [8:00] or whatever, but like there's kind

Mike DeHaan: [8:02] of this view that you have to like really be proficient on things before you can hire someone to do it, and that just doesn't make sense, like at all.

Dan Austin: [8:10] Yeah. I'm a good example of that. I try not to be a provision of things on purpose.

Mike DeHaan: [8:14] You know, try, you succeed.

Dan Austin: [8:15] Because I know my personality. Yeah. You suck at everything. Well, like, I learned early on, I used to be that way, especially as an engineer, like, oh, I need to design it, I have to build it and design it. It's like, well, in reality, engineering's not Yeah. Engineering is copying and pasting other people's stuff, and so, sometimes I get too deep into that sort of stuff, and I don't even like engineering, right? But it's like, for me, I wanted to create and understand how to do it, and then as I stepped into like more leadership roles and managerial roles throughout my career, I realized I didn't need to, and I didn't wanna be the expert at a lot of stuff, because there's other people that really truly care to be the expert at social media, or at whatever it is. And I can think more clearly on strategic things and I am more, I enjoy the strategic problem solving over the tactical problem solving.

Mike DeHaan: [9:01] For sure, and some people don't like that. Some people like the tactical and being in the weeds and all that sort of stuff and fine. But I think one of the problems is you have a lot of people who like to be at the higher level, who still kind of have ingrained in them that they need to be in the weeds, like learning all the hard skills, which isn't true. Know and sometimes people figure that out and a lot of people that have W2s you hear this, where they go like, my freaking boss doesn't know anything about this. Like, why is he telling me how to do this? He's like, you're right, he doesn't. You literally are there because he doesn't know how to do it.

Dan Austin: [9:31] That's why you have a job.

Mike DeHaan: [9:32] Yeah. If he's asking you questions, it's usually because he doesn't understand or you're not relaying it correctly or you're not meeting his expectations. Sometimes that's because a lack of communication, sometimes it's a lack of him setting those expectations for you. But I think one of the things that the entrepreneur, the high level one that always will have going for them is that most people, they like to be in the weeds, and so the person that's in the weeds is always gonna be more replaceable than like the thought leader, right, or the person that's actually at the ship.

Dan Austin: [10:01] Sure.

Mike DeHaan: [10:02] It's a different skill set, know, and it's it's a hard thing to kind of comprehend I would say until you've sort of been in that role anywhere.

Dan Austin: [10:09] Yeah, agreed. Yeah, it's one of those things where the way I guess I summarize it to is the CEO of the business doesn't know what most of their employees do, but somehow they're still setting the vision for the company. Yeah. And it's fascinating too because you'll always hear like, oh, that guy doesn't know at all what he's talking about, there's no way this is possible, but then you know, six months into a project Mhmm. Something becomes possible because this vision was set and it was pushed, it's like this is where we're going to get people to buy in and believe into that. That's kind of the hard thing with like small business is making sure you're doing that. A lot of folks that listen to this might be solopreneurs, might be the only person in their business like, well how do I get to that point? Like, I'm still just grinding, and it's like, sometimes you do have to be a technician, because you started out as the sole person in your business, but it's really still setting the vision for yourself, and then understanding what steps you need to take to like hire that first employee, that first staff member.

Mike DeHaan: [10:56] Yeah, well, think one of the challenges is, you know, when you're going from that solopreneur to entrepreneur shift, and this is especially true in the real estate industry because we already deal with a cash crunch all the time, you're starting out anyway. There's always like a huge shift between your money going out when it comes back, And that challenge compounds the efforts and the difficulties of trying to like get out of the business and sort of bring in people. Because you constantly, not only you don't have the time, also feel like you don't have the money or you need to have the money available for opportunities that come through. And so realistically what you need to do is like get super lucky and have like a big win that you can just like bank a ton of cash, right? Or you need to like accumulate your little reserve for a while to bring somebody on, that's hard to do.

Dan Austin: [11:44] But

Mike DeHaan: [11:44] you need to spend the money kind of before you have it, which is what we did. We brought on our first sales manager, we literally didn't have enough to pay them for their first month and we said, well they better make some money or it's gonna be really awkward, right? Or you need to be willing to pay yourself significantly less, which is the one that most people are really have a hard time giving up. And that's just part of like being a business owner, right, is you're gonna have variable pay. That again goes back to kinda like the traditional expectations.

Dan Austin: [12:10] What about profit first, man? Everybody's talking about profit first, pay yourself first dude.

Mike DeHaan: [12:14] Yeah, of course. Respect your time, you're a brand new business owner, your time's valuable. It's fucking trash dude.

Dan Austin: [12:21] There's a lot of that stuff out there that you're like, yeah, even like there's a lot of, and you and I like subscribe to a lot of it, but you kinda have to earn it like, like we tried profit first when we first started, we're

Mike DeHaan: [12:30] like, the

Dan Austin: [12:31] fuck is the profit? We don't because have profit, you're reinvesting it, right? But so many people they do, they wanna be like, well I'm supposed to pay myself first and there's a lot to be said about that, right? However, when you're trying to build something, and to your point, you're trying to build up some reserves so you can take advantage of opportunities, you might not get the profit first, you might reinvest first and there may not be a lot. And I know that there's some people out there like the purists are like, oh you can still take a percentage and it's like, probably, but who cares about $20? You know what I mean? You know, but then like the who, not how, it's like, well, sometimes you do have to be the who, and you have to be the how, right, all at the same time. But the goal should be is understanding what you're going through, setting the vision so when you can grow out of that, and then you can start applying each of these different elements that we learn, you know, on the podcast, you know, the MBA podcast where they teach you all these sorts of things of how to be a business owner.

Mike DeHaan: [13:20] Well, thing is with a lot of those books, or methodologies, whatever, they exist because the people behind them are trying to sell you something. They have some sort of coaching thing, certification, more books, whatever it is that they're trying to sell you. And the main people that are going to aggressively consume that, whatever they're trying to sell, are the people that are new and are trying to figure out business. Or they are people that are very small and they're trying to figure out how to grow, right? So even if they've been doing it for a while they're like a really small business and they're working a ton. And those sort of things, you need to always pay yourself first. You need to make sure that you're respecting your own time, like all the different things people do. That's the most sexy to people that don't fully understand the game yet. Yeah. Right? And like when have people that are kinda like, I don't know, entrepreneurs that have been in for a while, how often do you hear dudes like Aaron Imuchistecki, who's been an entrepreneur for like his whole life, talking about freaking profit first. He doesn't. Yeah. It's a ridiculous thing. And he's like, some years I make $3,000,000, other years I make $200,000, other years I lose my ass.

Mike DeHaan: [14:29] And that's kind of the way the business goes. Right? That's honestly a lot of entrepreneurs that have been around for while, or like even larger ones, smaller ones, whatever. Those things that people get really excited about, and there's nothing wrong with understanding them and actually seeing them as you're trying to portray. It's more when people take them as gospel, would say they inhibit your growth because you're too focused on trying to follow a regiment that isn't necessarily going to encourage you to take the rest that you need to probably take to get out of your own way.

Dan Austin: [14:58] Totally. Absolutely. And because there's so many people out there, like, with these books, and you know, these new concepts, and when you're, you know, like, I feel like you and I are pretty forward in in being open and trying to help, you know, learn things ourselves, and like, we join different groups and masterminds and stuff like that. So naturally, there's all that kind of like stuff in there, where people wanna talk about that, because it's like improving, oh, this is how I figured out how to work out of my business, this book who not how, so then the next thing you know, some dudes read every single dancehall of the book that ever existed. And they're great, not to talk shit about them, but like for me personally, I'm kind of a slow learner, if I can learn like one new concept a year, like

Mike DeHaan: [15:33] if at the end of the

Dan Austin: [15:33] year I had this like total epiphany where I'm like, that's kinda what I picked up for the last twelve months, I'm pretty pumped, right? Like, the learning the who not how might not be for the early stage company, and we might say we sell out collecting keys, and that applies to us at this point, but it might not apply to us on the next business we start. And now looking back, after you you and I have ran, you know, a couple different businesses now, I would look at it as starting a business, I'd be like, yeah, okay, so like maybe twenty four, thirty six months if we're luck we'll be taking a good salary. You know, wouldn't it be like, as soon as I can, yes, I'm taking a salary twelve months, that'll be, no, realistically, I'm going to bank on twenty four to thirty six months that I won't get a paycheck.

Mike DeHaan: [16:14] The problem is, is most people have the expectation that they need to be replacing their exact income that they were making at typically their high paying w two if they're in a position that they're even thinking about getting into entrepreneurship.

Dan Austin: [16:25] They're able to do that. Yep.

Mike DeHaan: [16:26] Right? And so they're like, man, I make $1.65 a year at this job, like I need to be able to replace that before I can leave. Why?

Dan Austin: [16:32] Totally. Yeah, and you don't have to, and the other thing about that is too, is like this Well, the idea of not having income, I'm not saying that to be like, you're not gonna make any income in your business for three years, but you shouldn't have the expectation that you're going to, to your point, replace whatever income you had before in the first six months or twelve months or that is the mark of success right there. Because there's some businesses that they take a while to develop, and real estate, because what we're doing in the out market real estate business is, first thing, is real estate's expensive to buy, right? It's just, you run out of money eventually. And finding deals, we're we're running marketing businesses, and our marketing unfortunately costs money. Whether you're doing, I don't know any marketing out there that's that's free other than I guess you going out and beating the pavement, but that that does have a cost, but you know, SEO is gonna cost you money, the more you spend on that, the more deals you're gonna get. Direct mail's gonna cost you money, cold calling's gonna cost, everything's going, all this outbound and inbound marketing costs money, so it's a heavy expense and so, when we talk about reinvesting in the business, that might simply mean instead of paying yourself an additional $5, you're pumping additional $5 into marketing, investing in that to grow more your lead flow. That's kind of what we're talking about here. That's why it's like always a cash crunch and you may not get to replace your $165,000 a year salary in twelve months because you're growing your pipeline.

Mike DeHaan: [17:53] Yeah. And I think the challenge is is that a lot of people, they don't like investing that money or putting in the time if they don't know that they have a guaranteed outcome. Right? And the problem is I would say if that's realistically you, you're probably not meant to be an entrepreneur. Right? Like honestly, unless it's something where you're billing hourly or you're like, I don't know, more of like a hustlepreneur type, then you could probably get by. But if you wanna grow a business and you wanna make business investments, you wanna spend money on marketing, you wanna try and grow a team, you will spend money back on expected returns, but not like guaranteed returns. That's why when you look at publicly traded companies they'll have things like, oh this company's earnings exceeded expectations. Because yeah, because they didn't fucking know either. Yep. Right? And like like, because it, that's why it's called an expectation, like they were, you know, expecting the money to come back. And sometimes they're like, damn, we did good, and other times we're like, uh-oh, that was really bad.

Dan Austin: [18:53] Yeah. You know? Whoops, that CEO is getting fired.

Mike DeHaan: [18:56] Yeah, and that's how business works, right?

Dan Austin: [18:58] So, right. Yeah, would say to me for me though, like if I was to share like a learning opportunity, going back to this kind of conversation of like, oh, I might not take a salary for twelve months or whatever, is that my timeline is much longer when I'm making that investment.

Mike DeHaan: [19:11] Mhmm.

Dan Austin: [19:11] So if I choose to say pay $10 in marketing or $10 to join a mastermind, I'm gonna have a different timeline for each of those and I'm okay with the timeline being longer than instant or next month. So if I join a mastermind for $10,000 to learn how to buy off market real estate or buy, I don't know, buy a business, whatever, that's a big hot topic. I'm not expecting to do that in a month or even a year. It might be two years before that comes to fruition and I'm okay with that just because I've learned that sometimes where I thought I spent money that that just didn't hold value, looking back on it, it did hold value, it was just a longer timeline.

Mike DeHaan: [19:46] Yeah, and that's, you know, when it comes to buying a business, making real estate investments as well, that's such a valid point because so many people, they analyze opportunities off of what it's doing right now, not off what it's potential is. You know, see this all the time with people that are like, well I can't buy this property, it's currently negative cash flow. It's like, know, and there's tenants that are in there until June. It's like, well buy it as a negative cash flow property, make sure you have some good equity so it's worth your downside. Get the tenants out in June, fix it up, increase the rent rate, there you go. Now you're making money, right? It's a longer term time horizon and your gain over that period of time will vastly exceed the bleeding that you do for six months. And then same with like a business. I see this a lot in like different Facebook groups and stuff I'm in now where they're like, oh, I'm looking at this business. The problem is is that last year because of different things it only made this much money. So I don't think it's a very good investment at all. And I'm like, Well that's probably because the systems were crap. They probably didn't have a good internal manager. They don't have any sort of growth plan. Job is not to just like buy this thing and have it print off money.

Mike DeHaan: [20:52] Your job is to come in, instill stability, and grow it with the potential that's there and whatever the industry is, the established brand, whatever that company has. And that's where you make your return. It's not like you just like buy it and you're immediately getting a you know, 50% cash on cash return. That's not how anything works.

Dan Austin: [21:09] That's not usually how it works. And that's why you're buying it.

Mike DeHaan: [21:12] It is, you know, when you hear people like talk about that on podcasts, it's because A, they found a unicorn or B, they're a liar. Like honestly. Right. Yeah, so yeah, it's just interesting. But anyways, yeah, that's been something that we've been I guess dealing a lot with with people in our scale community as they're sort of going through those growing pains. It's part of every small business, you know, you kind of either got to get used to it or do something else, just to be honest. So anyways, well, I want to talk about the sub two deal that we've heard us talk about over the past few weeks where we had these loans get called and on these on these duplexes. So in case you missed those,

Dan Austin: [21:48] this is called subject to t o o.

Mike DeHaan: [21:51] T o o, and that's not like two. It's definitely not what it is.

Dan Austin: [21:55] Like we're doing it too.

Mike DeHaan: [21:56] Yeah. We're doing it too. Yeah. Right. But if you guys missed that, bought these properties, these three duplexes and we bought them subject to basically, subject to the existing mortgages, we did not assume the loan. Subject to does not mean you assume the loan because that means the loan is transferred to you.

Dan Austin: [22:12] You don't even assume the liability of the loan, which is pretty cool, right?

Mike DeHaan: [22:15] I know, yeah, exactly. So if you're, you've seen Pace Morby, whatever, you've seen all this bullshit everywhere. Anyway, the number one thing that all these, I don't know, fanboys for this process out there say is that, you never have to worry about the due on sale clause because lenders never call that. And the due on sale clause is basically the clause that's in every loan document that's ever existed that says, the property sells, you have the right to call the loan. The subject to people say, you don't have to worry about that because it never happens. We buy these three properties literally like four days later, we get a call from the lender and they call the loan due. So it's like $5.80 ks that they're demanding due right away. Okay? And we go back to them and we say, listen, we're experienced investors, our plan is to sell these properties. Can we keep your loans due? Can we take over the payments? Like what would you like us to do to make sure that this is an easy transition? And they basically gave us like two middle fingers and we're like, you better figure it out fuckers. Right?

Dan Austin: [23:11] And didn't even wanna communicate, then also wanted to spend a bunch of money on their end on foreclosure costs and all that bullshit.

Mike DeHaan: [23:17] I know all this bullshit, yeah. And so after six weeks of this, and then finally you kinda like strong armed them last week when they were really being difficult, and you were like like, listen, if you're gonna be this like, we'll just deed them back to the seller and then you can foreclose on them.

Dan Austin: [23:31] The dude that was failing to pay these loans, by the way.

Mike DeHaan: [23:34] Yeah, all these loans are underwater when we bought them. That was the whole point, our plan was to get these properties, get them caught up and then flip the houses. And we just said, we'll just sell, give it back to the previous owner, the guarantor, and you're alone, you can deal with that. And then all of a sudden they were like woah woah woah woah woah woah, let's not do that.

Dan Austin: [23:53] Like let's not go that Yeah,

Mike DeHaan: [23:54] and they'd sent us these payoff statements that had all these like legal fees and all these penalties and stuff, they were trying to pass off to us and we're like no, Like if you had talked to us six weeks ago, we wouldn't have any of these but you were unreasonable. Uh-huh. And so anyway, they were like, what is your number?

Dan Austin: [24:10] Basically, is your offer?

Mike DeHaan: [24:11] What is your offer?

Dan Austin: [24:13] We should've gone lower, damn it.

Mike DeHaan: [24:14] Wish we could've. So I I was trying to not be a dick about it, right? Because I wanted them to accept it.

Dan Austin: [24:17] Totally, we were above board this whole time, we were like trying to be like, hey, we're here to help, like the guy who we took these over from, and we get, we're lenders as well, like we get it, you don't wanna lose your money, so we're gonna work with you, just work with

Mike DeHaan: [24:28] Exactly, yeah. So so I went through and I backdated everything to be the interest up to the day that we bought the property. Right? I was like, we're gonna pay you this much, you know, it'll get you paid off square, and then you can, you know, do whatever you wanna do. And after, I don't know, five days of that, they finally came back and were like fine, we'll do it. And so we were able to finally get them paid off. A bunch of headache for nothing and then looking at the different numbers that they have, they spent a bunch of money on like lawyers, like these different things. Now they are losing money because they decided to be dissed Like for $6.40

Dan Austin: [25:03] g's, they're gonna lose in commerce, which is like 10% of the loan value damn near. Like honestly If

Mike DeHaan: [25:08] they had just not been ridiculous from the get go, everyone would be better off.

Dan Austin: [25:14] Once they release their liens on these properties, think 100% we should do an email to our favorite guy over there at this specific lender and be like, man, I bet you wish you weren't being a jackass now, and then just leave it at that.

Mike DeHaan: [25:27] No shit.

Dan Austin: [25:29] Be like, you just lost your investors $40, how does that feel?

Mike DeHaan: [25:31] Outrageous. You know, it just Right. And like like, literally, from day one, we were so just like transparent about the entire situation. We put all our cards out there, and they were just like, they would never talk to us on the phone. They would like respond to our email like only once a day, like every few days at weird hours with one line sentences. I'm sure they had something where it was like, our attorney says we're not supposed to accidentally share too much information. Something stupid. I'm like, let's figure it out.

Dan Austin: [25:59] Well, it's not like they're a big lender, it's not like they're a Bank of America, like this wasn't a, I mean, they're a decent size, they're not like a massive lender, and so, I would be, you know, fortunately we were able to, you know, we were liquid enough and able to get the funds to pay these guys off immediately, they just didn't want us to, right, for whatever reason. I think they just wanted to stick it to us. I think there was a partner there that was just being the jackass. Oh, absolutely. Which is fine. But, if you're going subject to, and a big time lender, which is a lot of these people get, you know, these loans originate because you're not, this was like an investor that we took these from, so it was a different product in general. But, like, could you imagine trying to communicate with somebody at Bank of America, Wells Fargo, one of the biggest mortgage, you know, originators in the country, and like trying to explain to him what happened, like, I don't care. And in general, I will say, the reason why Pace Morby law is subject to, and he's quoted saying this all over the internet, is like, I would never put my name on the, as a guarantor for debt, why would I do that? And so, the due on sale clause, in his opinion, doesn't matter, because truly, doesn't matter, right? You could just walk away and say, I don't know, like, yeah, whatever, that's, this guy's low, not my loan, And and the guy you bought it from subject to, or the person you bought it from subject to, is the one in trouble, because four years later they get it called and they're like, wait, Holy crap.

Dan Austin: [27:17] And there's a good chance you weren't paying

Mike DeHaan: [27:18] that. Well see, that's why it's shady in general too, right? Is you fully have the ability to completely screw over the seller, and they'll be none the wiser until all of a sudden they're getting sued. Right? Exactly. But you have all these like dipshits that are out there peddling these things because they don't fully understand or care about that. Yeah. And like we could have very easily done that in this situation if we're like, don't wanna deal with this. We could have just deeded it back to the seller. Or just like let it go, and whether they're gonna come take the properties, not be made whole anyway, and then go and sue him, but he doesn't have anything, he was already found.

Dan Austin: [27:47] Yeah. Just on this note too, just because of now we're talking about it, and now I'm all fired up. I was watching a video for Pace Morby a while and he was talking about, he's like, look at this, a due on sale clause happened, and we're just doing a deed reversal. So essentially, I'm gonna deed it back to the seller, and then the seller's gonna deed it back to me at a later date. It's like, that sounds like a pain in the ass.

Mike DeHaan: [28:07] That also sounds like fraud. You already got called on something and they're like, you can't do that, and you're like, okay, I'm just gonna do it, I'm gonna wait till you're not looking, then I'm gonna do it again, I'm gonna do it again.

Dan Austin: [28:16] And the seller's like, wait, what do you do? Like Yeah. Most people don't understand subject to, most people don't understand any of this, and so you explain a process to them, and however you explain it to them, say you explained it above board, and everything was exactly, they knew exactly what they were getting into, and then two years later, you're having to, hey man, by the way, I'm gonna have to give you this property back, and I'm gonna sign it back over to me like two weeks later, like that, that doesn't leave a feel good to me

Mike DeHaan: [28:40] No. That seller. No, know, and then like that whole process, think about it, it's exactly the same as like a kid, like they know they're not supposed to be, you know, stealing a cookie out of the cookie jar. Mhmm. If they wait, so their mom catches them, they go, oh, not gonna do that, and the second that their mom's not there, they go to like do it again and hope that mom doesn't see. It's like

Dan Austin: [28:56] Right.

Mike DeHaan: [28:56] You're already on the radar. She's already counting how many cookies there are. You do it again, she's gonna catch you, dumbass.

Dan Austin: [29:01] Seriously. And it reminds me of like, you see some of these like rental fraud, or like even OA where it wasn't fraud necessarily, but the like landlords were getting foreclosed on, and tenants were like, I've been paying my landlord They're like, you certainly have, but guess what? Get because

Mike DeHaan: [29:16] you don't own this house, and neither do they. Yeah. We are seeing that a lot with like lease to owns, they were collecting these large down payments, those are recorded on title, and then the landlord would just like take the money and run, they'd be like, I was paying, I don't know why I'm losing the property. I'm like, yeah, you're right, well the bank's not taking it back from the landlord, and your lease to own is like the secondary loan to the to the title, like the fucking whatever Yeah.

Dan Austin: [29:42] They're in second position. They're in a lower position. You know what else you could be in a lower position than? Federal taxes.

Mike DeHaan: [29:48] Gas. Yeah. Right. It's a lot of So

Dan Austin: [29:52] a guy doesn't pay, guy pays his mortgage, but he doesn't pay his taxes. I mean, they're gonna get a lien on it, you're gonna be behind that.

Mike DeHaan: [29:56] You know what blows my mind though, and everyone's probably heard this, but it's crazy, is like the fact that the pinnacle of like the liens that you can have that's above everything else is fricking HOA liens.

Dan Austin: [30:07] Yeah, are they really?

Mike DeHaan: [30:08] Oh yeah dude, like that'll even come over like first position liens from banks in like certain situations. That was a whole thing, Matt did some legislation, remember hearing this a while back, where there was like in some of these states where they have you know racism, which is a very Republican United States, you know, we're pretty good with that in the Northwest. A lot of places don't have that. You're having these like white HOAs that would have someone of ethnicity move into the neighborhood, and they would start like being like, oh you have a lean, your grass is like an inch too short, too long. They were like doing all Oh these really? Yeah. And then basically what they would do is like, oh yeah, you violated the HOA for too long, we're just gonna take your property back from you. They were doing

Dan Austin: [30:48] that also feel like HOAs like where we live at specifically, don't really do anything. They don't

Mike DeHaan: [30:53] do anything.

Dan Austin: [30:53] I don't understand why we have them. I feel like there's a reason why we have them like from a planning and zoning standpoint, and there's gotta be like a loophole or something that they get by having HOAs, but yeah, they don't do anything. I had a guy talking about he wants to move into my neighborhood and there's an empty lot, and I was like, say, how's the HOA? He's like, I have no idea, never talked to him.

Mike DeHaan: [31:11] Yeah, you see it a little bit more, I think, in certain places, but up where I

Dan Austin: [31:15] Yeah. It's on it.

Mike DeHaan: [31:15] Really, it's just because people don't like people to have pit bulls. That's like the one thing that they're

Dan Austin: [31:19] hard on is They pit bulls. My I think I my say to say that. Or my old one said you can't have a pit bull.

Mike DeHaan: [31:24] Dude, they all say that. That's like the one thing and besides that, they're like, yeah, you can leave trash in your yard, we don't care. If you have a pit

Dan Austin: [31:30] bull Yeah, we don't care. Yeah. Park on your grass, nobody cares. Yeah. My biggest problem, my HOA, where they don't they don't do it much is like, there's a lot of people that park boats and campers in the driveway, because they have lots of excess income apparently to buy the giant boats and campers, they can't fit them in their driveways, so they park out on the streets, you know, while they're, you know, in the summertime or whatever. I'm like, where's the H 2 a now? The blind corner, I can see around the student's 40 Yeah, foot

Mike DeHaan: [31:57] right. That is funny. We get it, Dave, you live in a nice neighborhood, people have boats where you live, must be nice. Shut up.

Dan Austin: [32:04] Not my that's not my point.

Mike DeHaan: [32:06] Anyways, yeah, so I'm I'm just glad to finally have a conclusion to that. Well, I as of time of recording, I wired the money to pay them off like two hours ago. So it should be good. We have plenty of time for it to still turn into a fucking disaster. So if Yeah. I

Dan Austin: [32:23] hope they give us lean release of the documents here in the next few days.

Mike DeHaan: [32:27] So the only reason that I'm feel good about that is because we are going to the note servicing company and they're technically the ones that do all that. Right?

Dan Austin: [32:35] Yeah. They should we should be good.

Mike DeHaan: [32:36] Yeah. So it's not like we're sending them money directly and it's gonna get real dicey. But Yeah, so that's that. But if you're doing sub two deals out there, be cautious. Loans do get called and it's not like they tell you where like, oh the lender doesn't wanna have to deal with it, like they'll just be really easy to work with. No. They'll make it a pain in your ass.

Dan Austin: [32:57] So here's my question then, I mean, we've talked about sub two deals a while, we even have a subject two course, so if you go to collectingkeys.com/subtwo, in any form or fashion you wanna spell to, you'll find it, I believe. Mhmm. So we do talk about it, but we talk more about like, what people, you know, should just be aware of and that aren't, isn't being talked about. So my question is, would you, not this sub two deal, but would you do a different sub two deal?

Mike DeHaan: [33:20] I do more of them for sure. Yeah. I think the reason we got bid on this one, like the circumstances with the seller, was already having problems, definitely was already on their radar. Yeah. Okay, so that's a big thing.

Dan Austin: [33:30] The loans were already due and all that sort of stuff, like there's problems with it.

Mike DeHaan: [33:34] Yeah, He was already behind on him and there was a whole dilemma. So he was they were already kind of monitoring it. Secondly, it was a investor grade lender, so it's a DSCR lender, so they're naturally going to see that anyway compared to like a Fannie Freddie lender, you someone that sells to the federal government, you're less likely to get seen because you're just going to a portfolio they don't really care. But those are the two main things that I would be like very cautious of.

Dan Austin: [33:56] You'd wanna know who the lender is.

Mike DeHaan: [33:58] Yeah, wanna know the lender is, wanna get more details on those sort of situations. And then I think the big thing is if you wanna do subject to correctly, and this is a big thing that we go into in the course at collectecues.com/sub two, is around how to actually structure the note and like all this stuff so that there is protection, you know for the seller and to make it so that it is a little bit more possible to deal with these challenges. Which we did put these in place which is one of the reasons I think it wasn't a complete freakin' disaster. But a lot of people you'll hear in Cogmas like, oh yeah I just went and like quit claim with the property to me. Like that's a great way to end up in a really weird spot. You know? And so, yeah, there's just like little things you do and I mean I would do it again. I mean we were able to figure it out, so it's not that big of a deal. It was just a pain in the ass. Yeah. Which is a lot of work.

Dan Austin: [34:46] I just contend that I wouldn't make this my only business model, somebody that was like an investor our size or smaller, they're like, yeah, you know I only do sub twos, I got ten, twelve sub two properties that I'm you know cash flowing on, I'd be worried only because that's your only type of property, so if something does kinda go awry, like you're screwed. It's kinda like if you're a person that's like, oh I have only short term rentals, a lot of those people are kinda crying right now, they're like, oh, that was not a good move, wish I would have had some long term rentals mixed in and some other stuff, and that's not always, it's not always the case, but some people are the exceptions to the rule I guess. However, just I don't feel comfortable with a transaction that is, has so much gray area to have that be my only tool that I use to buy properties and I think it's more so an issue is because you see a lot of people come in here with the no money strategy, which that's what they believe is a way to do it and you can stumble, you know, what do they say like a blind squirrel gets a nut once in a while if they search long enough, and it's like if you do that, you know, you search long enough you can find one and maybe do no money down and get this thing wrapped up and you could get yourself into trouble because you have, the seller has, you basically just have no ability to do much when you don't have money.

Dan Austin: [35:55] Correct.

Mike DeHaan: [35:56] And you have no no ability to even have a backup plan.

Dan Austin: [35:59] Right?

Mike DeHaan: [35:59] Yeah, exactly. Can't bail yourself out, if you don't have money you also don't have track record. You can't go and like raise money all of a sudden.

Dan Austin: [36:05] You don't have reserves, you don't have till it gets a little sketchy.

Mike DeHaan: [36:09] So, yeah. I mean, it's all about understanding your options and like that's the difference between professionals and amateurs is knowing how to navigate different things, how to have the conversations. A lot of it honestly takes practice and kind of like learning as you go. I mean, like from these sort of things when we first started doing off market stuff, we first started doing some of the creative financing things, we didn't know what was allowed and what wasn't. I remember like the first seller finance and more creative stuff that we did, we would literally just like write it onto the contract and then put it into escrow and they'd be like, what are you trying to do? It's like, yeah, can't do that. And we go, oh, our bad,

Dan Austin: [36:46] I mean we just change it.

Mike DeHaan: [36:48] Yeah. Learned. Yeah. Just learned that one. So, what am I doing?

Dan Austin: [36:52] Do we figure things out the hard way sometimes too, know? Yeah. Who knows? One thing that was, that I've been trying to have fun with that, is that note that we have a lead that came into our CRM, this is kind of a totally totally different topic, but also same because we're talking about mortgages. A seller finance note that from the mom of these kids, and they just wanna sell. They don't wanna sell the property, they wanna sell the note. Mhmm. And so that's been kind of an interesting, like how do we buy this? Because obviously we're gonna buy it at a discount if we bought it. Yeah. We're wholesaled, I've never wholesaled a note before. If you know how to analyze notes or you're a note buyer, give us a call, hit me up at investorman down on Instagram or mikeinvest. Yeah. Because I would love to know. Honestly, but that's been kind of an interesting thing that I never thought I would have come across. But it's like, you know, I've always heard about people are note buyers out there, and it just so happened that we found somebody wanting to sell a note just through our normal marketing campaign. That's been kind of interesting because you, my understanding is you have to buy them at a discount unless you're okay with, this is a 5% note, for example. I wouldn't wanna park money, this is a $70,000 balance. Go ahead. My initial thought is, is like, well, probably, I have no idea how to analyze the return right now, but you probably need to throw $50 at it, or $45.

Dan Austin: [37:59] Yeah. You know, to get a better return than 5%. But that's, I don't know, it's just kind of an interesting thought that it has like, well shoot, I wonder if you could search out seller financing loans, like as a data source. Probably. Might be an opportunity to market to people and say, hey, I'd love to buy your loan.

Mike DeHaan: [38:16] Yeah, probably. Yeah, you'd have a lot of cash to do it I would think, but I mean, there's probably I think

Dan Austin: [38:20] so, yeah. Yeah. You know, there's a lot of little notes like this, so this one's $70.

Mike DeHaan: [38:24] Yeah. You know? Yeah,

Dan Austin: [38:25] interesting. Well,

Mike DeHaan: [38:26] know that was refreshing when it came in, so we can dive into that next week since we're out of time. And we hope we have a actual resolution for you on that.

Dan Austin: [38:35] I don't know if we will.

Mike DeHaan: [38:36] Yeah, we will, and I just like I

Dan Austin: [38:38] don't know how to math it.

Mike DeHaan: [38:39] It might just fall off our radar because it ends up not being that interesting in the next week. But anyway, check-in.

Dan Austin: [38:44] So they also take precedence.

Mike DeHaan: [38:45] Yeah. Yeah. Check-in next week and you can hear if we figure out how to buy this loan and exactly how the best way to do it is. So right on. Well, thanks guys for listening. We appreciate you all. You You should to collectingkeys.com/subtwo, get our free subject to course, and we'll help you deal with the challenges that you can face if you have some unfortunate happen like we did, or you have a long get called. So yeah, awesome. Well, you all listening, and we'll talk to you next week.