Don't Fall for the OPM Lie: The Hard Truth About Using Private Money in Your Real Estate Business

Dan Austin: [0:00] Like a seller carry, you know, potential kind of thing. And I've gotten quite a few comments and DMs and stuff like that about it. The amount of agents and people working with agents that are trying to be investors that don't understand even what seller carry means or understand the basics of seller financing. It's just, it's almost startling because this is also at the same time where I get a lot of questions from other people and agents especially about sub two. Yeah. How do we get these sub two deals closed? It's like, oh boy, you know what I mean? And and really you're kind of, it's like exposing like the lack of knowledge from an investment standpoint. Not all agents are like that, but a good chunk of them that are trying to cater to investors, because let's be honest, investors are the one doing the most volume, you know, buying and selling. And so it's a good partnership for a lot of agents. But you gotta know your stuff.

Mike DeHaan: [0:55] 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 how to make massive income, not just passive income with your real estate investing business. This is your first time here. I am Mike DeHaan here with your cohost, Dan Austin. Hey. And we talk about real estate investing whenever we feel like on these Wednesday episodes that we dubbed the Mike and Dan show. And we are sort of I guess, I am just getting back after a little week off with my parents in Colorado. And it's funny, I always like taking a little bit of time away because I tend to be kinda overbearing on the business sometimes or have my fingers involved in a lot of different things. And stepping back a little bit always, I'm gonna say it like shows like the leaks, but it like it shows like the little gaps that we do have and it makes it easier to fix them because I think a big thing that affects all business owners is that when you are working in your business as well as on the business, you don't realize how many things you're kinda directly influencing all the accidentally.

Dan Austin: [1:58] Yeah. And the other challenge with that is is just from a leadership standpoint too is when people are looking to you for an answer even though they're ready to make the move but they want your confirmation. When you're not there, they have to make those moves and so then it kinda reignites that motivation and self direction.

Mike DeHaan: [2:13] I mean, at least that you would hope so. I mean, there's always Things the

Dan Austin: [2:16] team members that their default is still break but

Mike DeHaan: [2:19] There's team members who their default is always to do nothing which is a whole other problem. But

Dan Austin: [2:23] Right, for sure. And I think that's like a leak or hole, you're like, okay, well that's a problem. Because generally speaking when you ask people what to do when they want something, when they're asking you what they should do and if you turn that around that you have the right answer. I would say eight out of 10 times, if not nine out of 10 times, when I've done that with people, they have the right answer.

Mike DeHaan: [2:41] Yeah, they just don't have the confidence or the confirmation to move forward with it. Exactly. Even this morning we were having a whole debate with one of our sales guys about a deal that the person like wanted money up front. They said I wanted money up front to be able to go buy the next house. And they're trying to figure out how to approach the situation. And we're basically like, well, what do you think we should do? He's like, well, I think what we need do is we need to close and we need to do a holdback of the funds and then they can have like x amount of money released and go buy them now. And I was like, perfect. There you go. You already knew the answer. Why are we waiting five days to do this? Yes. You know, it doesn't make any sense.

Dan Austin: [3:15] Yes. The alternative that the seller pitched wasn't it like, give me all the cash up front for closing and then I'll move.

Mike DeHaan: [3:21] Yeah. That's exactly So you know that's

Dan Austin: [3:22] not gonna work and in your head you know it's not gonna work. So like just yeah, step back, step by step think through this, you know the answer.

Mike DeHaan: [3:28] Sure. I think something that's easy to sort of forget when you're in this business and you're doing a real estate business, any sort of volume, you're doing a lot of transactions on a regular basis, is you tend to commoditize properties. Right? Like you don't really realize that the seller has probably bought and sold a couple properties in their life maybe. Right? So they don't even understand the possibilities of things like a hold back or like flexible closing or you know creative financing or all the different things that us as investors need to bring forward and have them in our tool belt. And you tend to sort of take it for granted and when they make these sort of outlandish asks. I don't know. Because sometimes throw people for a loop if you're not fully prepared for them. When there usually is a Yeah. Easy solution to whatever problem they're facing that is beneficial for us. Absolutely. Without needing to do something silly like give them all the money for their house before you close.

Dan Austin: [4:28] I know. Yeah, before they close them they can stay there as long as they need to till they find a place. Yeah. Sounds like a great deal for us,

Mike DeHaan: [4:34] right? Right.

Dan Austin: [4:35] Yeah, I think it's a big part of it is they see a problem. Right, they have a problem, they wanna solve it. To your point, they don't have necessarily the knowledge and experience we do. So you need to see the problem through their eyes, through their and understand that, but then explain it to them with your expertise and show them. Because I mean, you and I have always realized, I think we realized this early on, it's like in this business, to be successful you're solving problems and you're helping people who don't usually know or understand the situation they're in and often times they're in that situation because they're un, they have been unable to make a decision and that inaction has put them into some level of distress. Not always but a lot of times.

Mike DeHaan: [5:13] Most of the time. Yeah. Or or like they're not an actual enough person that they realize that there are challenges that they're gonna have to deal with and they just don't wanna deal with.

Dan Austin: [5:21] Mhmm.

Mike DeHaan: [5:21] Right? Even if they're not actually in distress, they like look at it like that sounds like a pain in the ass. I'd rather just pay you to take care of it by giving you the house at a discount, which does happen very, very often. Like I was talking to one of our partners today, he's up in Maine, and he was we're kinda going back and forth about this because he's worried about some of the ethical issues of being a realtor and, you know, wholesaling and buying properties. And he's like, well, what happens when, you know, we buy it for 150 and then the next week I have that thing listed for like the low 2 hundreds? Like, aren't they gonna be like, why didn't they pay me that? I'm like, you think that they don't know what their property's worth, dude?

Dan Austin: [5:59] Yeah. They're that dumb.

Mike DeHaan: [6:01] They're not stupid. Yeah. The internet, they fully recognize that. It's like by buying at that one fifty point, you know, particular one, it's a rental property, it's a multi unit. We're buying it with the tenants in there. Like he recognizes that we're gonna have to deal with that. He doesn't wanna have to do it. I understand he has a personal relationship with his tenants. That's even worse. See you have to go to this person that he has a relationship with and say, hey, I'm gonna ask you to leave. He doesn't wanna have that conversation. He's willing to pay us $60,000 to have that for him.

Dan Austin: [6:32] Cannot have that. You bring up a good point with the internet. Like I love having Zillow because a, I can go and look at stuff really quickly, but also b, the sellers can look at it too. So they can be just as informed, you have a conversation with them, you can really look at the root of their problems, and you guys can be on a level playing field, it's not like you're playing a game of cat and mouse. Oh, I wonder if they, those their property could be worth more. It's like, no, their problem is worth more than what they are willing to do to solve it.

Mike DeHaan: [6:57] Exactly. It's a weird thing. I don't know if it's like realtors worry about that because they're like, I don't know, firmly know the real value or if it's because of the typical rules and regulations around it or

Dan Austin: [7:11] Here's what I think it is, I think in the realtor space, especially now that like off market direct to seller has become kind of a, just not, I wanna say popular, but it's just more mainstream. There's more of us, there's more people like us doing this type of business on a sophisticated scale level that you can't ignore it anymore. And I think in that space there's a lot of poo pooing on wholesalers, right? We in the military we used call like the badge protectors, when you're going through to get like a certification or a badge, there's these guys that they wanna make sure that only the best of the best in their eyes get the badge, so because they're wearing it, they want other people that look like them to wear it. And so in this, with the realtors it's the same thing, they're protecting their interest by making sure everybody thinks wholesalers are are poo poo and that don't do business with them. They're, you know, they're doing things that are unethical and all these sorts of things. It's like agents, trust me, are doing plenty of unethical things.

Mike DeHaan: [8:03] I can tell that you have a tear all the homes. You just say poo poo twice in the same sentence. The same.

Dan Austin: [8:08] Sorry. Little doo doo. Little poo poo.

Mike DeHaan: [8:11] You've been to war now. This is how you talk.

Dan Austin: [8:15] No. Talk like this. Yeah. Exactly.

Mike DeHaan: [8:17] It makes sense. So that's gonna explain to him too is like realize that most realtors that are vastly against it, like they are threatened by the business model. And you know, they're jealous of the money that you can make from these deals that they don't know how to monetize a certain way. And also too, realtors have their place. Like there's tons of people that don't want that discount. You know, they don't have anything that they wanna trade for that equity or any sort of situation that makes sense. Perfect. They can go and sell the traditional way, that totally works out. But also most sellers that work with us, they are not a good fit for the on market model.

Dan Austin: [8:53] Yep. That's why they're working with us.

Mike DeHaan: [8:54] That's why they're working We with

Dan Austin: [8:56] have realtors that refer us to people like that because they're like, yeah, that's not gonna work on market.

Mike DeHaan: [9:00] Exactly. Yeah. So It's just so

Dan Austin: [9:02] You know the other incredible thing and I'm not trying to poo poo on anybody or real estate agents, but I posted one of our Airbnb's for sale and I just put, hey, willing to do like a seller carry Mhmm. You know, potential kind of thing. And I've gotten quite a few comments and DMs and stuff like that about it. The amount of agents and people working with agents that are trying to be investors that don't understand even what seller carry means or like understand the basics of seller financing, it's just it's almost startling because this is also at the same time where I get a lot of questions from other people and agents, especially about sub two. How do we get these sub two deals closed? It's like, yeah, oh boy. You know what I mean? And and really you're kind of, it's like exposing like the lack of knowledge from an investment standpoint. Not all agents are like that, but a good chunk of them that are trying to cater to investors, because let's be honest, investors are the one doing the most volume, you know, buying and selling and so it's a good partnership for a lot of agents. But you gotta know your stuff. I mean like, I

Mike DeHaan: [10:04] guess what don't they understand about it? And I guess to explain this deal for people, so we have this property that we had been renting to an Airbnb arbitrageur for a while. For us for like long term, it's not really like the best deal. We don't wanna have it as an Airbnb on ourself again because we had that previously and it was a lot of work. We got other shit to do, it's just not worth our time. And we're looking to sell it on a seller finance because we technically have a long term debt. We have a prepayment penalty on that. And so, like, if we go and we sell it with the prepayment penalty from the CCR lender, we'll basically walk away with, like, almost no profit. And so it makes sense for us to sell it on terms to somebody with us carrying a note so that we can recover our full equity in a few years.

Dan Austin: [10:49] Essentially, we just wrap the we'll do what's called like a a seller wrap or wraparound mortgage on it. So we'll keep the mortgage in place. It's kind of like a sub two, not a sub two, but you're basically they're taking that property sub two, that mortgage, plus we're wrapping around our equity in that and then selling it for a interest and amortization just like we would in and then both mortgages we get paid and then the original lender gets paid as well. Exactly. So what they don't understand about it is that that's possible. It's one of them. That you could do that, that you could sell it and it's like what is the difference between Sub two and Wrap? It's like having to explain that sort of stuff with people and the details, so it's like really, it's just mind blowing to me that people have clients that they want to represent. They of course, like I said, they know what sub two is, they've heard that term, of course, because Facebook always done a great job of telling everybody how great of a transaction style that is, and that's what every investor needs to do, but they don't know anything deeper than that.

Mike DeHaan: [11:41] Yeah. You know the thing that drives me crazy right now about all those people, like not that they're the same investors, same topic a little bit, I've seen notice notices that are reoccurring trend on all the sub two posts and videos and things like that, is they like to make these really bold statements like I bought this property and I'm making this amount of money, bought it at sub two, and I didn't have to put any of my own money into it. And they don't give any sort of like disclosure around how much they actually had to bring to the table, even if it's from an investor, or a friend or their dad or their freaking, I don't know, IRA. But is that not your own money if it's a business that has a trustee? Do they consider that? Like not their own money probably. But like they completely leave out the most important part of the fact that to buy that house, they were still buying it above retail price and getting 50 to $100,000 from somebody else to buy it but they're super proud of their 4% interest rate that they got. It just doesn't make any sense. Like why do they keep doing it? And the thing that's so brilliant is with their whole like gator lending thing too, what these dumbasses do is they just borrow money from each other

Dan Austin: [12:48] Yeah I know.

Mike DeHaan: [12:48] On these terms that aren't favorable to anybody and now everybody's losing money.

Dan Austin: [12:52] I know, it's a terrible situation.

Mike DeHaan: [12:54] Right, you have the person that bought the property that's not cash flowing, you have the investor that's now parked their cash and doesn't know when the fuck they're gonna get back. Doesn't make any sense.

Dan Austin: [13:02] There's no money down real estate dog.

Mike DeHaan: [13:04] It's somebody's money, but they should pretend like it's no money down, it doesn't make any sense. Even Pace did this post about how he bought this property with no money down, but then he threw in that he like paid the guy that brought it to him a $20,000 assignment fee.

Dan Austin: [13:17] Was like,

Mike DeHaan: [13:17] who the fuck paid that? Yeah. That came from somebody.

Dan Austin: [13:20] Yeah. And this is one good point to make too about creative financing like, the money has to come from somewhere. Yeah. Right? Like there's no other lender bringing the full sum of money for the purchase price. There's No. Loan and then there's a difference between the loan and the purchase price. Somebody is paying that. Yeah. It's usually you.

Mike DeHaan: [13:39] Yeah, I mean, and you know, and if you have people that are willing to lend you money on favorable terms, that's great. But I mean, is something that I'm still trying to comprehend and and somebody in our scale community asked about bringing on a speaker to come and talk to them about talk about building your private money pipeline. And I'll be honest, I have yet to find someone that actually has a good answer for how to do this organically. Like a lot of people will talk about how I like, oh I just post on Facebook and people offer to give me money. And unless you're like a really big name, I cannot see that happening.

Dan Austin: [14:08] That doesn't happen.

Mike DeHaan: [14:09] Right, it doesn't make sense. And so like my kind of joke response to him when he asked about that, was like, okay step one, come from a rich family or work in an industry where there's a lot of rich people. Yeah. And then step two, find the people from step one who don't have a good understanding of investments and real estate and convince them that an 8% return is actually a good deal for them. Right? Like honestly, it doesn't make any sense at all.

Dan Austin: [14:33] Yeah though the best way that I found looking back like with people wanting to invest is doing something for a while and telling people about it and then eventually people see that you're successful over a long period of time. Mhmm. And they're like okay, I kinda wanna get in that game. Like I've had a few people recently in the last few months just call and say hey, I would love to give you some money. The problem is with a lot of people when that happens is they are like, well, let's just go fifty fifty, I'll bring part of the down payment, I'll be the money guy. It's like, part of

Mike DeHaan: [15:00] the down payment is the money guy. Mhmm.

Dan Austin: [15:02] Totally. I'm the money guy, you know what I mean, if that's the case. So like their their terms, a lot of people, it's just like any other lead source, right, you have to work with and filter through and find the the right people to work with when it's in the private lending space because really ideally what you want, Mike, you mentioned is like, what the rich people that don't know or don't want to invest in real estate themselves, but they'd wanna be in the game. Totally. Like that's the goal. Mhmm.

Mike DeHaan: [15:25] Yeah. I mean, and and if they're you're doing like short term stuff, you're doing flips, and like people are gonna like lend you at 8% for like a few months or whatever, like that's different. Right? It's probably some some extra cash. But you hear about some of these people that are buying these like long term rentals with these people that are paying like a six or 7% pref. I would say like that's honestly a little bit shadier than being like the wholesaler who's lying to a seller about to buy other property to get a deal. Like what you're doing is you're lying to that person about their opportunity with that money and instead parking it into your deal at 6%.

Dan Austin: [15:57] What do they mean by that? What do you mean they're they're being shady by getting the lender to give them a long term loan? I don't understand.

Mike DeHaan: [16:03] By getting this random grandma to go and get a HELOC on her house, right? Or to like take out her retirement and give it to I them at 6% see. So they can have this long term rental property they pay interest only on.

Dan Austin: [16:14] So they're basically trying to pitch the benefits of real estate, but really they're getting benefits of like a CD.

Mike DeHaan: [16:20] Exactly. Right. And they'll and they use all this see similar sort of like bullshit sales tax of like, oh, well, you're gonna get a check every month. You don't get that with the stock market. It's like, oh, it's secured by real estate. It's gonna be secured all the time. The stock market can go down, all these different things. Yeah. Valid statements. But also if you look at the true opportunity cost for that person and you are honestly trying to convince them that giving you long term money at below inflation Yeah. Is a good deal. It's like you're more, you're just as much of a crook as the wholesaler that's lying to a seller about the buy of their house.

Dan Austin: [16:53] Especially because like in my opinion, you want you want your investors to a, be able to sustain a loss because that's always a risk, but also be informed enough to be able to make a good decision because it's really easy to go and get your grandma to loan you money on a shitty deal because she's gonna trust you. A lot of times private lenders are lending in you, they're lending to you, not to the asset, right? They see you, they trust you and that's why when I say people, you do something well enough, long enough, people will start saying, I wanna participate, can I loan you money? And that's how a lot of private lenders come in. But like, if you take your grandmother's HELOC money for her whatever mobile home that she lives in and now she's gonna be out, I'm not trying to paint a really bad morbid picture here, but like, you know what I mean? And and you lose it on a flip, that's a problem. You know, I have a friend that that happened to, right, loaned money on a mobile home and never got their money back. And so if

Mike DeHaan: [17:48] Did he actually knock that money back? I know you're talking about, we talked about this briefly in the car when we were somewhere.

Dan Austin: [17:53] Different guy. Different guy. I don't know, actually I should ask Troy that, if he's doing well. But yeah, he's he's had his money out for a while with that guy too. And so there's certain things where, like, the deals aren't there's risk associated with it, I guess, what I'm saying. And if they're not able to understand that, then you're you're being a little unfair by not sharing these risks and helping them understand and analyze the deal.

Mike DeHaan: [18:13] Totally. And and like honestly, if you're being truthful to your private investors, what you can offer them should match up with what their goals actually are. Right? And you should actually get them an amount of money that makes sense, you know, and looking at their time horizon, what their needs are. It's just like working with a seller. They have their goals and you need to match up what you can offer them as a borrower with their debt. Right. You know, and I think it kinda gets out of hand. And this is something else that's been really interesting recently, I've been getting hit up on Instagram regularly about this, is people asking us where we get our private money lenders from. Like there's like some like weird source like how we were able to get so much private money that we you know bought so many rentals over a short period of time. And I tell people, I was like, oh, we use hard money loans and mostly it was our own cash.

Dan Austin: [18:59] They don't believe you?

Mike DeHaan: [18:59] People like lose their fucking minds. Yeah. That that's how it went. They don't believe me. Like honestly, that's literally what we did is we had an active enough wholesale and flipping business that we used our own funds and we used hard money lenders a lot. But the whole OPM, other people's money thing has gotten so out of hand. There's a ton of people that don't even consider hard money an option.

Dan Austin: [19:18] Yeah. It's a great option. It's helped us build a great portfolio, do lots of flips, do lots of projects, double close on things.

Mike DeHaan: [19:25] Yeah. And it's it I don't know why it's kind of turned that way. People have this weird aversion called institutional money to the point that like, I was gonna talk to somebody else earlier today and they were saying that they have a line of credit and they're using that to close on properties, and then they're gonna hold onto it in that line of credit while they go and refinance into long term debt. Okay? But their concern was like, well it's gonna eat up my whole line of credit. And I was like, well dude what you do is you go and you get a hard money loan, you use that line of credit to cover your down payment and then your monthly holding, and then you have like 90% of your line of credit left, like what are you talking about? Yes. Didn't even wanna consider that. He was like, nope, not gonna do it. I'm like, like what are you concerned about? The line of credit holder's still gonna steal your primary residence just like the hard money lender, it's

Dan Austin: [20:10] Right. Exactly. That's an interesting perspective because yeah, I guess there are quite a few people that are talking in, there's always like this, it doesn't even get me going like this dick measuring contest about like, oh, I can get it for eight and one or my Leonard is seven and two, it's like, who cares?

Mike DeHaan: [20:27] I know. If I'm paying

Dan Austin: [20:28] 12% interest or 8% interest, like I'm going in there with a purpose, I'm underwriting you with that, and yeah, so maybe at the end of the deal it's, you know, with the average household price, it's a few thousand dollar difference, but people get so wrapped around the axle on like how much their monthly interest is, and I get it, you want it to be as cheap as possible so you can get it, but also, I don't wanna go have a colonoscopy to get an 8% interest rate when I can just go to buy a local hard money lender who I know very well, that's going to give me the loan, no questions asked within forty eight hours. Mhmm. And I can keep going and buy three more of that.

Mike DeHaan: [20:58] Yeah, totally. You know, it's just, I don't know, I feel like in the past little bit it's gotten extra out of hand with people that are pursuing the OPM, other people's money model. Yeah. It's because you keep seeing all these like dorks on social media, these like 24 year old kids know, like I bought 10,000,000 in apartments with none of my own money. It's like, no but your dad was a developer.

Dan Austin: [21:19] No, your dad bought it.

Mike DeHaan: [21:20] Yeah. Have you seen that, there's this, it's like an honest TikTok or reel, whatever that's been going around, it's a stand up comedian.

Dan Austin: [21:26] Oh I have, who would, yes, know what you're about to say.

Mike DeHaan: [21:28] But he's on stage and he's like this young kid and he's like, oh, he's like, you're you know, you're pretty young, like what do you do? And he goes, I own a real estate development business. And he goes, you own a real estate development business? Like you're super young. And he goes, oh well, I work for my dad's real estate development business. And he was like, this motherfucker Yeah, looks me dead in the face and said, I own a real estate development business. No. Your dad does and you work for him. Like that is very very different. I've seen that. Different.

Dan Austin: [21:57] Oh, that's hilarious. Yeah. That's about it. That sums it up. That sums it up. Yeah. And it's like not And yeah, just using other people's money is also not that easy. Like just give it a break.

Mike DeHaan: [22:06] No, it's not. And people you know trivialize it and then they see like you know, Pace talk about how all those people are like these other people, it's like yeah, because they built a community and a brand where they have now gone and convinced a bunch of other people to come in there and invest with them because they realize that it's more difficult. And again, if it aligns with the investors goals, that's fine. Like we have a debt fund. We pay people out and Mhmm. 9% pref on that. Yep. But it's usually short term, right? They're looking to park money for a year. That makes sense. They're not looking to park money into your rental property for the next five to ten years

Dan Austin: [22:38] Mhmm.

Mike DeHaan: [22:39] While you sit there and like try to figure out what to do with it because you've never bought a property before. Like that makes any sense.

Dan Austin: [22:45] Right. That's not a good idea. Yeah. And I think for us with using private lending and other people's money is like, we've always had a way to pay them off. Like, right? Like, we've never taken more money than we really could afford to take. Yeah. Where I think some people get in trouble is they do a private money loan for one property and then the next one and then they've got three, they have no way to even cover those properties if something goes wrong, let alone if one thing goes wrong. So for us, I I feel like we dipped our toes in and we had a private lender starting out, great friend of ours, he's awesome dude, awesome lender, and anytime we needed money, he was able to fund deals, but we always had in the back pocket like, if something goes sideways here, we'll make sure that he's made whole and we have the ability to exit. It's one thing to say, like, I take care of other people's money better than my own, it's another thing to actually do and pay people when you and we've done that.

Mike DeHaan: [23:29] We've done that. Yeah. Mean, even this past Christmas.

Dan Austin: [23:32] Yeah. He and that private lender that I just talked about, like, he was like, hey, I need my money back. Our year's up, and I I'd really like to not extend. And we're like, perfect. And we wrote

Mike DeHaan: [23:40] And him the it wasn't fun, we had to go on like open these lines of credits and figure it out, but that's the promise that we made there. No. It's a weird part of the space right now that I think is, I wanna say like slightly alarming because I feel like it's similar to a lot of the creative financing things or stuff like you think people are doing where there you have people that are not fully responsible or don't fully understand the seriousness of what they're doing that are going out there and trying to figure out how to hack the system. Mhmm. Right?

Dan Austin: [24:10] And it's I don't know. There's no fast way, man. I don't know. I'll just tell you, the longer I'm in the game, the more I realize that it just takes time.

Mike DeHaan: [24:20] It does, know, and don't be afraid to use institutional money. Like these businesses that are out there that wanna give you money and say that's gonna cost you a little bit. But honestly if twelve and one versus eight and one are the difference between your deal being profitable and not, then you should probably not buy that deal. Just really freaking tight.

Dan Austin: [24:38] It's probably not a deal.

Mike DeHaan: [24:39] Cool. Speaking of all that, do we have, where do we have with our commercial deal? Do we have our loan figured out? This is speaking of debt, let's make this the theme of this one. But we're buying a commercial property right now. If you listen to my Friday Focus last week, talked about some lessons learned with this. But the whole debt process with it has been different. Because we've had apparently you can when you do commercial stuff, there's so many different options you can get from traditional lenders. Mhmm. We found one that says they're gonna work with us, they're gonna give us construction funds and like different things, but they're asking for tons of different material with it. So where where are we at with all that stuff?

Dan Austin: [25:13] Yeah. We're just still waiting to hear back the banks are closed on Mondays because it's president's day, holiday.

Mike DeHaan: [25:19] It's been like a month.

Dan Austin: [25:20] I know. I so the last I pinged her at the end of last week was that your and my financials were complicated and so they had to go through it because we have several k ones from different businesses and you know, to a smaller community bank, we're probably like the freaking Wild West Cowboys when they see our shit. Yeah. Like they love our idea, they know we have money, right? They're like, I told her, was like, we could honestly, if we have to, we could just pay cash for this like, but we're trying to avoid doing that like because we don't want to hurt liquidity because we don't, you know, we're stabilizing a property right now, we've got other things in the pipeline. And so, it's just a matter of getting them to sign off at the board. So I'm hoping first thing tomorrow, we're now gonna get an update because we kinda need that because our due diligence period ends tomorrow at 5PM.

Mike DeHaan: [26:07] I know. Yeah. Because if we don't have like kinda clear to go, like, don't know if we have enough time yet to get the funding lined up.

Dan Austin: [26:13] I know. Exactly. So I think we'll have to either get an extension on the due diligence or figure just figure something out, you know, here in the next literally twenty four hours. So, you know, nothing like this living on the edges, see through your pants right there.

Mike DeHaan: [26:27] I mean, we've always done that though. That's kind of part of being a in the off market world is you deal with weird things as they come through. I think that's the reason we've been able to be successful. Mhmm.

Dan Austin: [26:37] Totally. Yeah. And this is no different. Right? So different. This is a good example like to talk about. So this is a commercial property, deal was brought to us and it's owned by the terrible landlord that Mike and I have done business ish with over the years.

Mike DeHaan: [26:52] We walked a property that was his that

Dan Austin: [26:53] was the worst property we've ever seen, worst property. And he basically was like, I'm not selling it for any less than 200 or whatever his price was. It was stupid. It was worth like Yeah. 75. Don't even remember what our offer was.

Mike DeHaan: [27:02] Anyways Probably less than that price, 50?

Dan Austin: [27:04] It was probably 50. Yeah. Like we're stepping over the needles and holes in the roof, everything. So this commercial property was probably performing when he bought it, but it's a year ago is when he bought it, think a year or two years ago and now it is underperforming, it's got three tenants of the 11 available spaces, but we're working through a plan to reposition it as an office space and trying to figure out how to maximize the rents and reduce the expenses of course, because it's commercial, we are going to base this on net operating income and so we want, we wanna be able to raise the value to at least a million bucks, we're paying, right now we're in a contract of $5.85. So I would say a million would be like our break, our break point of like, that's at least where we wanna be in the next twelve months from from a valuation standpoint. But, we don't know anything about this. This is like when we bought our first deal, we started wholesaling, I remember back buying my first rental property, I didn't know like the end result, I had kind of an idea and even then I had more of a framework, with commercial, just a little bit, you know, more unknown. Also at a time where in the news everybody's talking about how office space is dead, it's commercial office space is not a good idea, this and that. Where we're kinda taking a gamble on this, but I think it's a calculated gamble. Point being though, is it's like, I don't know, at some point you just have to do it and learn from it.

Dan Austin: [28:19] Like I don't think we'll lose money per se, but we just might not make as much as we want to make. That's the way I look at it from a risk analysis standpoint.

Mike DeHaan: [28:26] Yeah, I will be not in the short term, Ryan. We kinda talk about this as well as one of the things that's challenging for us with this is on the residential side, as you can see, we've done so many flips or the cycle time is so quick on the rehab being able to rent it out. We're used to being able to make all of our money and get things stabilized within a couple of months. Really? Whereas that commercial stuff just is gonna take longer.

Dan Austin: [28:45] It's a lot longer.

Mike DeHaan: [28:46] And this property, it's in a great location in Spokane. You know, it's where I would call as kinda like the path of progress for commercial assets like this. Because right now it's a little ways from downtown, people are leaving downtown, they wanna be close to their home. You know, there are a lot of smaller businesses up in the area. And I don't think that we would regret owning property in that specific spot.

Dan Austin: [29:08] Right.

Mike DeHaan: [29:09] You know, it doesn't make sense for like the office space. Like I bet you look at the building it's like well, I don't know. It could be like a medical office, it could be a dental office. Like it has all those vibes and set up to do that. Just needs to be outfitted appropriately and marketed to the appropriate person.

Dan Austin: [29:23] Mhmm.

Mike DeHaan: [29:23] You know? And there's so many different things you could do that make it harder to analyze because like with a residential property, you're like, cool. I'm gonna put tenants in here. I'm gonna do it as like a midterm rental. Might be a little bit different versus a short term rental versus a long term rental. You know? We never really straightened all the other weird niche stuff that you can do with residential stuff. But I mean, it just it just feels like there's more gray areas and the difference is from like residential, which will be like 20 or 30% more rent, if you go a different way, this is like two x. Yeah. Right. Know, it's a

Dan Austin: [29:55] huge difference. Absolutely. And and it really just goes back to the point I wanted to make was like, this is what we do in the residential space with our wholesaling off market business. Right? If you're listening to this and that's the game you're in or you wanna be in it, this is what you do. You have to take a leap. You're going to go in and buy an underperforming asset. Your job is to take an underperforming asset, which is how you can get it at a discount Mhmm. And make it performing. That's it. That's what it is. And so for us, this is just another underperforming asset that we have to kinda figure out. Out. And to your point Yeah. Is it's going to be a longer cycle time than we're used to because it is commercial. It's just gonna take a little bit longer, everything's just, you know, leasing it. There's, I don't know, for every 100 people looking to buy a new house, there's probably like one or two looking for an office space, if that.

Mike DeHaan: [30:38] Yeah, for sure right. You know I mean, but the thing is they'll be more sticky hopefully, like we'll wind shipping stuff. But the money piece has just proven challenging.

Dan Austin: [30:45] Yeah it's different. You can't just go get a hard money loan like that. We found that.

Mike DeHaan: [30:49] You can't, yeah. I mean most hard money lenders wouldn't even lend on it, know. So I'm proud to announce if you're looking for investors, if you wanna go take a HELOC on your home and give us $585,000

Dan Austin: [31:00] Other people's money.

Mike DeHaan: [31:01] At a 6% press, we'll pay you back in five years. And you'll make significant

Dan Austin: [31:07] For those of you that don't think we don't script these shows, this proves it right there. That was a whole lead up into this.

Mike DeHaan: [31:14] Yeah. It's secured by a real asset, it's gonna be fixed, you'll get a check every single month. Don't buy property, just be the bank.

Dan Austin: [31:21] Yeah, there's even a guy in the basement illegally renting.

Mike DeHaan: [31:24] That's the other thing too with the other people's money stops drives me crazy, is I'm seeing these like C level investor gurus, and like they repeating these posts over and over again, it's like, don't buy real estate, just be the bank instead. Give me money at eight to 10% and don't have to deal with any other bullshit. I'm like, what are you doing? It's always random people that I'm like, have you actually done deals? I can't tell. I really don't think you have. If you weren't, you know, riding on

Dan Austin: [31:49] It's usually less as we found out.

Mike DeHaan: [31:50] Dude, like always.

Dan Austin: [31:52] When you're talking to the big players and they don't really have stories that match any anything that you've done, you're like, okay, you've done quite a bit less.

Mike DeHaan: [31:59] Totally. It's funny. Cole Red Johnson, who is a very a level operator Yep. Saw a dude that was on our show a little while back. He made this post I thought was really funny. Let me find it really quick. I thought I guess it's just so on brand with how we can really feel. Of course, I'm not freaking sure it's not gonna look. But it was basically like back when I started real estate, there was like a 100 influencers that I wanted to connect with or I wanted their business. He said now that I've actually grown a business, met most of these people, I realized there's actually only like two.

Dan Austin: [32:29] That's so true. Like, so true.

Mike DeHaan: [32:33] Cool. Anything else on business side I mean to go into? I think we got off our high horse about

Dan Austin: [32:38] Yeah. I don't think so.

Mike DeHaan: [32:39] OPM now. But Yeah.

Dan Austin: [32:41] I don't know. What's going on? What's fresh?

Mike DeHaan: [32:42] I think that's all we got. So closing tails. The year's

Dan Austin: [32:45] going well actually. I mean, what are we in February? I mean, feel like this spring might be a fun time.

Mike DeHaan: [32:51] I mean, signed around number 20 over the weekend. Yeah. 20 on the year over the weekend. So I mean, we're what? Seven weeks into the year where you got 20 deals? I won't be upset about that.

Dan Austin: [33:01] No. So you can get them

Mike DeHaan: [33:02] all closed out. Have a couple that are on the rocks, but for the most part they all seem doing pretty good. Yeah. I mean, just always something.

Dan Austin: [33:08] Always something. It seems like you were pushing things left or right on the calendar, but that's okay. That's just to be expected. You get these things signed, you gotta push them out a week, two weeks, sometimes three months, never know.

Mike DeHaan: [33:18] Yeah. I will say the thing that is good about just getting that flip is looking at our metrics and stuff. The marketing has gotten has been a little bit better, but not like way better, but our signing rate is much better, which means the team is performing well. Mhmm. Which is always like the big indicator. Right? Because a lot of them too have been like longer term follow ups and create challenging negotiations. Yeah. So it's good to see the the sales team per annum along, which is always kinda one of the the hardest parts of this whole business to get that optimized.

Dan Austin: [33:45] Yeah, that's super valid especially because like we have a sales team that you know grows and ebbs and flows and I feel like right now we have some great team that's they're all you know, they're all at a really good spot in their development set, right? They've all got the skills and they've all kinda heard the stories of how follow-up matters, they're learning the skills, that's the other part about this stuff is you can be an A plus salesperson but you gotta learn some skills in real estate to be able to think on your feet and solution rank, you know, in the moment. It's helpful. Which is always

Mike DeHaan: [34:17] more challenging than you would think and you've been in this for a while

Dan Austin: [34:20] Mhmm.

Mike DeHaan: [34:20] Or you've been studying real estate like intensely, like realize that most people that apply to work for you as an acquisitions manager, even if they have real estate experience, if you're the business owner, I guarantee you they are not as like in the weeds as you are about it. They probably had some sales role in the past because if they were, they wouldn't be applying to work for you. They would have their own business. Absolutely. Yeah. And so so anyways Yeah. Alright. We'll wrap it up there. So cool. Well, thanks for listening everybody. We appreciate all of your time. Shoot us a follow on Instagram. I'm at mike underscore invest. Dan is at investor man Dan. And if you want our free course, teach you how to do subject tos the correct way and not the, you know, the guy with the peace sign on his head way, go to clickingkeys.com/sub2 and you can grab up there. So thanks for listening everybody, and we'll talk to you next week. See you.