Escaping the Entrepreneur Rat Race, Renovating Flips vs Rentals, Are we the Most Flood Prone Investors Ever?

Mike DeHaan: [0:00] People hear that and they think like, okay. Cool. So I'm gonna go and I'm just gonna hit another thirty hours of cold calling myself instead of outsourcing it because they have such a broke mindset around it. That is the greatest way to have an absolutely miserable life as an entrepreneur. What's going on, guys? Welcome to this episode of the Collecting Keys Mike and Dan Show, where I, Mike DeHaan, and my host here, Dan Austin, talk about real estate investing, business, and whatever the hell else we feel like that week. So Fair enough. Yeah. Here we are wrapping up q one already, which is hard to believe. Is Friday the last day of q '1? It is. Yeah, man. Freaking flew by. It's funny. At the beginning of the year, I started doing this Instagram thing from it's an idea from our buddy Drew Wiard, whose whose episode actually should be coming out, I think, this next week Nice. On the collecting keys podcast. So the week after you listen to this one, Drew's will be coming out. But he did this thing last year where every week he would post like a weekly update, and it would just sort of like review all the stuff that he personally and that his business accomplished in the previous week. And I thought it was super cool. And I've been doing that almost as just like a reflection exercise.

Mike DeHaan: [1:18] And I will say it it, like, helps keep me accountable to, like, not only reflecting on progress, but also getting stuff done. Because if it gets to, like, Thursday, I'll be like, fuck. I don't have anything good to put on my Yeah. My update for the week. Like, well,

Dan Austin: [1:31] we can't put did lunch every day.

Mike DeHaan: [1:33] Yeah. I have five workouts. Like, we already do that.

Dan Austin: [1:37] Yeah. Exactly.

Mike DeHaan: [1:37] But it's been really good. And then the thing that's really cool that I like about it too, as I've been doing that, it's actually been a really great way to get engagement from other listeners. And I've had a lot of people reach out and say that it's like inspired them to start to take more action Yep. And those sort of things. So if you're somebody that, I don't know, likes to show your progress or you want to engage with other people sort of in your sphere, it's really simple. I literally just went on Canva, and I made like a, you know, little thing, like a little template that took me five seconds. I just swap out the background picture, and I just list my my weekly updates every week. And I could hardly believe this past week when it was already week 12.

Dan Austin: [2:12] I know. That is wild.

Mike DeHaan: [2:13] Because it's just freaking flying by, man.

Dan Austin: [2:15] You know what else is hard to do is reflect back on success. Yeah. That's always, like, really challenging for me anyways, personally. You know, some people are, like, really good at Like, I love celebrating my wins. I'm like, man, I guess I don't have enough wins to celebrate. I don't I don't know.

Mike DeHaan: [2:28] Yeah. I mean, I think the challenge comes with that because your framework of what's a win changes. I mean, like, I I always remember our our first deal that we assigned, man. We were standing outside the freaking Coza house. Yeah. And I remember I talked to the guys that were gonna buy it. They just beat me down on, $5 for the freaking deal, but I was like, doesn't matter, dude. We're we're wholesalers now.

Dan Austin: [2:50] We officially We're making money.

Mike DeHaan: [2:52] We're making money.

Dan Austin: [2:52] Yeah. How long have we been in business before that? Because if you step back, so we started out together in business. We both had owned real estate before, done real estate stuff before. We started out in business. We started marketing. And before we got our first deal, we bought a duplex from another wholesaler, and we're renovating And then we bought a house off the MLS.

Mike DeHaan: [3:12] Mhmm.

Dan Austin: [3:13] Which is exactly why we

Mike DeHaan: [3:14] got into business because we

Dan Austin: [3:15] couldn't do that. But we still bought one off the MLS, which was great.

Mike DeHaan: [3:19] Well, so we bought that one off the MLS though because we had a deal going with the state. No. There's a reason why. Where they were looking for they were looking for a rancher style house that was that size. Yep. That they wanted to put some people in. And so we literally went and, like, walked to the house with them and said, does this fit your criteria? And they're like, yes. And then we proceeded to close on it, and they were like, actually, we

Dan Austin: [3:39] were like, nope. Well, that that house is one of our top performers actually now, but, like

Mike DeHaan: [3:44] It is. That was kind

Dan Austin: [3:45] of a sticky situation, but we were in in that house, that three bed, one bath house, because there was a little bit of maintenance we ended up having to do. I can't remember where we bought it. But It's a

Mike DeHaan: [3:54] bunch of random stuff. Random stuff, but

Dan Austin: [3:55] we were standing in the front of the house, and that deal came in.

Mike DeHaan: [3:58] When we assigned it well, so we we got that one signed around about the I don't know, two or three days before it, and we had decided to go to these guys when we got a deal because we had connected with them previously. At least I had at a at a meetup, and they had You had met them there. That's surprising in a meetup. Yeah. So I had met a person that knew one of the guys that we connected with. And I said like, oh, yeah, we're starting up this wholesale business. This was pre COVID. Then COVID happened. Everything got weird. All of the buyers shut down pretty much everyone that was buying properties. And this guy who I connected with kind of on the phone reached out coincidentally, like two weeks before and he was like, hey, I don't know if you're still in business with the pandemic, but I'm still interested in buying properties. And then sure enough, we got the deal signed around. He was the first person that I went to, and he was in like hell yeah.

Dan Austin: [4:46] We're full swing, man. Crushing it out here.

Mike DeHaan: [4:49] I mean, we were hustling, dude. Like, we were trying to figure it out for those first months, but that that so that first deal was about five months before we got it signed around. So we did our first mailing in at the beginning of February. It was, like, February 1, I believe, sent their first batch mail, and we got that deal signed around. I actually looked not too long ago. It was right before Memorial Day. So it was the end of May. So it's not not quite five months. Right? It was a four months in a bit. But I mean, what we were we spent $2,025,000 dollars on marketing, plus all the systems, plus all the time that we'd gone into it at that point. So we were pretty committed. And we signed it around for a whopping $7,500 fee, which the guys then proceeded to vacuum the carpet and throw on the MLS, and they made, like, $80.

Dan Austin: [5:30] After beating us up over the phone. But it was just not a good deal.

Mike DeHaan: [5:33] After beating us up. Yeah. Being us up over $5,000 about how tight it was. Fuckers.

Dan Austin: [5:37] The best thing is is that we knew that we're like, that only happens once. Only one time. It's never happened to us again with I was just with them.

Mike DeHaan: [5:44] Yeah. Not with them. I mean, you know, and we sold dozens and dozens of deals to them over the years. Yeah.

Dan Austin: [5:50] It paid off for sure. You know, sometimes you gotta do that first little take that first little like, we'd be humbled a little bit so that the relationship can expand and grow in the future. Sometimes it's not about that maximizing every penny of every single deal because a lot of times the relationship is so much more valuable. Even on the buyer side of that, if you're like and if you just wanna be a buyer, and you want good deals to come to you, which is honestly why a lot of people come to us to get coaching, or to understand, use our systems, is because they just want access to more deals, because they just don't feel like they can organically get those. Yeah. But if you want more deals organically without having to do all this other stuff, just be a good buyer, and don't beat up beat up the other wholesaler, or don't beat up the seller on things. Just be like, you know what? I this is a good enough deal for me. I'm not gonna squeeze you for any more if it works for your numbers, because that right there on that first initial deal, you become a closer. And people are like, I know that guy's a closer. He's not gonna make it a problem for me. They're not gonna create drama. They showed up with their money. We closed on time. I got my fee, or I got whatever profits I was getting from that sale, and the buyer got what they wanted.

Dan Austin: [6:52] Like, that's kind of the goal.

Mike DeHaan: [6:54] It is. Well, and I'll say too that also exists on the other side. If you're the wholesaler, don't go and be beating up your buyers trying to squeeze out everything that you can out of them because, you know, I'll tell you what. So like, there's some people, their whole business model is they try and they find like the new buyer that's ignorant, and, you know, they try to get them to overpay. Like, lot these people with these big buyers list I mean, one of our main competitors here in town, that's like literally what they do is they go and they try to piece a shitty deal with a buyer that doesn't know what the hell they're doing. They go and they take out all the new people. They try to show them this is how you invest in real estate. They sell them a deal. They don't care if they make money. And more often than not, they lose their ass.

Dan Austin: [7:28] Do I know how I know that they have shitty deals? Is their employees have to go elsewhere to look for deals.

Mike DeHaan: [7:32] Yeah. You're honestly right. Yeah. Yeah. Like yeah. My god. But point being, every time you do that, you're making your buyers list smaller. You've now taken a person that could have been a lifelong buyer. You've made them quit real estate because they just lost their ass and they have all their money tied up. And you get a bad reputation doing that. I mean, one of the businesses that used to be here that's no longer around, they got a really bad reputation for that. And people stopped buying deals from them, period. Because everything they would send out would be so bad. And all it takes is two or three deals like that, and then you start to get a word for yourself amongst the local community. No one will do business with you at all anymore at

Dan Austin: [8:07] that point. Yeah. Experts or the consistent buyers are gonna see what you're doing, and they're automatically gonna be like, yeah, I'm not playing that game. And they'll just, just based on principle, they'll just choose not to do business with you because they typically have options. And then, yeah, you screw over or you don't do good business with a few of the new buyers. Eventually, those new buyers are going to meetups, and then they explain their story, and then those other new buyers get scared, and then they you just don't have the new buyers or the expert buyers.

Mike DeHaan: [8:30] Yeah. Exactly. And and, you know, if you're in, like, a huge market like Phoenix or Houston or something like this, there's, like, literally thousands and thousands of buyers, it might take a little bit longer for that to happen, but it will still happen. You know? Eventually, stuff will come around, and you're gonna end up in a bad So point is, on either side, don't be greedy, and just make sure that you do everything you can to make stuff a win win situation all around. And it it's all about longevity. If you wanna make, like, actual money in this business, you don't wanna have, like, a quick payday Yeah. Which you then eventually lose because life happens. Right? But you wanna have it where you're making actual life changing money, and you're actually having actual wealth generating opportunities. You have to be in those for the long game.

Dan Austin: [9:10] Yeah. We had a we had a couple of great conversations in our in semester coaching call today, and one of them was from Dylan, one of the guys who just crushes it in our program. And he was just talking about how sometime he's having a tough month or he's like, April's gonna be awesome for closings, but but March, no closings, and how that doesn't feel good when you see other people, including us, on social media talking about doing deals or making progress. But that doesn't mean just because you see this new person in the game doing all these things, doesn't mean they're actually making money. They're Go they're talking about how great things are. But really, behind the scenes, it might not be that great, and five months later, they're filing bankruptcy.

Mike DeHaan: [9:50] Yeah. Especially with real estate. I feel like that's so such a big problem because there's big checks that go around in real estate, but they never show the whole story. You know? And and we've all been on Instagram, social media, whatever, and we've seen these posts of, the HUD statement. And it's like, oh, yeah. Due to seller, a $107,000. And they're like, learn how I accomplished this. I'm so awesome. What they don't show you is the $75,000 down payment they had on the deal and the $40,000 renovation. So they actually lost $5. Right? And you have no idea that they're just, you know, throwing this bullshit out there. And I actually I did an Instagram post on that not too long ago where I took the the HUD a snippet of the HUD from the flip that we just lost $50 on, like, couple months ago now. And because we have, like, a $120,000 that came back.

Dan Austin: [10:40] Yeah. I can't remember what it was. But, it was 6 figures.

Mike DeHaan: [10:42] Yeah. It was like a fat check. Right? But it's so easy to post that and not know the whole story, and people get so tied up with it. So, like, what we said to Dylan today, he's even he literally even says, when I see guys, like, guys crushing it and other people crushing it. And I'm like, you know, understand, like, our business is doing well. You and me are not cashing fat It's checks every all going back to be reinvested into the business, working on bigger things.

Dan Austin: [11:05] We've always done that too.

Mike DeHaan: [11:07] Exactly. You know? And and we even have had this with, like, staff and things like that, where they, like, see, like, the wholesale fees they get closed and all sorts of stuff, and they're kinda like, well, I'm only making this point on commission. I'm like, bro, you're making more than me on a regular month. Like, where we will make our money as a business owner, and this is how any business owner is, is it gets built up over, you know, a quarter, six months, a year, and then you take a large distribution from it because you've maintained strong performance. You know, and sure, you can increase your salary, things like that. But typically, it's not beneficial to do that unless you wanna have a job. Yeah. Which most of us do this to not have a job, but to have

Dan Austin: [11:42] a business. Yeah. Absolutely. And we have, obviously, several different businesses together in our business model. The Collecting Keys brand is slightly different than your typical wholesale business. We still have our wholesale business. That's just a framework of a wholesale business, but then we have the Collecting Keys business. Although it's different, you can still kinda compare running a business to running a rental property. When you buy a rental property, like, when I coach people, I'm like, you don't just get to take all the money out of it right away. You're not doing a cash out refinance right away. You're not doing, like, all the cash flow that comes to you. No. You gotta build up reserves. You gotta build up equity. Same thing with a business. You build up reserves that you can continue to pay your staff and continue to invest in your systems and your marketing, and then you build up the equity because the more the more revenue that a business can have, the more equity you have in that business, the more valuable the business is. So as a business owner, your goal is to increase both of those, your reserves and your equity, to a position where you finally can start paying yourself. And this kinda goes a little bit against the profit first bottle. When you're starting a business, generally speaking, profits kinda get reinvested in a business. Yeah?

Dan Austin: [12:44] So, to that point, yes, we might be doing a lot of transactions all the time, or doing a lot of bringing a lot of revenue, but depending on what you're doing in your business, some people are a different season where they are taking the revenue from their business because they're at that point where they're on the set it and forget it, and they don't want more growth. But if you want growth, you have to invest.

Mike DeHaan: [13:02] Yeah. And I think that's the biggest thing where a lot of people, they end up in this situation where they feel like they are married to their business, and they have to be working all the time. And that's one of the things that I don't like about this whole mentality of entrepreneurs are the only people that'll work eighty hours and don't have to work forty.

Dan Austin: [13:19] Right.

Mike DeHaan: [13:20] Yeah. And I think that that's true to an extent, but I think what gets lost in that statement is that it is implying that that person is doing actual tangible work in the business, which is not true. If you are running your business correctly, you are reinvesting that money, that your profit you're making into systems, into staff to actually operate the business. And then that eighty hours of work comes in the form of educating and learning and networking and, like, sort of, like, analyzing and strategizing, which is not tangible work. Right? Like, people hear that, and they think, okay. Cool. So I'm gonna go, I'm just gonna hit another thirty hours of cold calling myself instead of outsourcing it because they have such a broke mindset around it. That is the greatest way to have an absolutely miserable life as an entrepreneur.

Dan Austin: [14:08] Yes. And and people are I mean, a lot of entrepreneurs do do that. And they basically create a job for themselves where they are doing what you're saying, the tangible or the task based work, and you can't get

Mike DeHaan: [14:17] at dude, you and I have

Dan Austin: [14:18] been there. It's like hard to get off that hamster wheel when you're so used to doing it. It is. And for you to create additional revenue, it needs to get done now. So when do you have time to train that person to come and do it behind you? And then when they fail, be accepting of that failure that you maybe didn't get as much revenue as you had if you would've done it yourself.

Mike DeHaan: [14:34] Yeah. And I mean and I think that it's you do have to do that in periods of time. Like, I mean, especially over the past month, there were weeks sort of through March where I I was working twelve to fourteen hour days every single week, you know, Monday through Saturday, pretty much, or Sunday through Friday, whatever it was. But the whole period with that was it was preparing to not have to do that here in the future. Right? And it was a planned period of time where, like, I'm gonna have to work like this for the next two to three weeks, month, whatever, as we bring on more people, we onboard more people, we train more people, and then I will be able to focus on the bigger part. But, you know, when you're a new entrepreneur, it's the same thing. You don't necessarily have money yet to be able to bring in the systems or the staff and that sort of stuff. So you have to work like that. But I think that the the objective and the way that you can guarantee growth is that there always has to be the intention of, I'm not doing this forever. The money that I am generating through these twelve hour days right now, I am going to be strategically putting towards

Dan Austin: [15:37] the growth

Mike DeHaan: [15:37] of the business. And that's what leads to longevity. And so, know, and, like, making sure you don't burn out and you actually have growth

Dan Austin: [15:44] in success. Our on our, like, management meetings, I'll call them, like, the step function kind of concept. You're gonna do things like think of a stairs. Right? So you're gonna do things in a certain season of your business or a certain a part of your business where you're just kinda doing the exact same thing. Like you said, hey. Three weeks, I gotta grind for twelve for twelve hours a day, six days a week. But that's gonna take this step function, I'm gonna jump up to the next step, to the next level. I'm gonna be able to hire this staff member now, all that stuff behind me, that stair below, it's behind me. I don't have to worry about that. That's not my thing anymore. And then you just kinda do these step functions up through your business. It doesn't have to be this straight line increase of growth. Sometimes you're in these moments where it does suck, and you're working your tail off, or you feel like you're going backwards, but then you get to the next step.

Mike DeHaan: [16:27] Yeah. Absolutely. That's a good transition too. We had a request for a, I guess, topic to talk about sort of on the same lines from somebody in our instant investor call, Otto, today. He asked about basically the the mindset, both the mindset and, like, the actual I guess, like, physical data or, the, literal data about going from a survival to a sort of abundance mentality. Going from maybe hey, I'm starting out and I just proved that I can make money,

Dan Austin: [16:57] and now I am making money. What do I do next kind of thing?

Mike DeHaan: [17:00] Yeah. Yeah. Which I think is a great escalation of what we were just talking about of getting off the entrepreneur hamster wheel about how do you actually know when you've made that. So we're talking about how we are voluntarily working like that because it's strategic. How do you go from being the person that does that because they have to versus the person that's doing it in the strategic? And what does that look like mindset wise, and also, literally with your numbers? Like, what does that look like, and how do you know that you're in a position that you can do that? What are your thoughts on it?

Dan Austin: [17:27] So, my thoughts on the numbers or what it looks like, I think are all arbitrary. I think a lot of it's a sense of what you've done, where you've come and what you've accomplished. For us, that moment, I would say that initial moment was the story we talked about earlier where we made $7,500 So we went through like straight, that was like, would call that, not like starvation or anything like that, because we were buying properties somehow, like with the limited funds we had, but like we were we were still making progress at real estate, so it wasn't like we were just like, oh my god, this is all we got. But we got that first deal for $7,500, and that was proof of concept that allowed us to continue going forward. So sometimes you just need that proof of concept to keep going forward. So if you're out there struggling to get your first deal, trust me, it will come if you show your consistent actions. Once you get that first deal, you have proof proof of concept, now let's put your foot your foot on the pedal. I would say, like, when we really started to actually get to the point to where we could, like, make progress to in growing a business, was after we hired our first acquisition manager. It wasn't when we hired our first acquisition manager, I think that was a major step and a milestone for us, but at that point, our business had not actually flourished and gone to the point to where you and I were paying ourselves or doing anything financially to invest in the business, because everything was just an expense at that point. We got the acquisitions manager.

Dan Austin: [18:43] Yeah. She started closing deals for us. It allowed us to focus on other things that weren't surviving, because sales wasn't our thing.

Mike DeHaan: [18:50] Yeah. Mhmm. Yeah. I think that you're completely right on, like, the mindset position for me where I feel like we I made that transition from sort of survival to abundance was as soon as we started bringing on staff, and we had deals that were closing, and we had stuff that we were moving forward without our immediate

Dan Austin: [19:08] that would call be like what's going six to eight months after that first acquisition manager. Is that what you're saying?

Mike DeHaan: [19:13] That's where I would see it. So because when we had our first one Yep.

Dan Austin: [19:16] That's kinda about when I would say that.

Mike DeHaan: [19:17] Yeah. We still had to be super involved. I would say where I felt like we suddenly had a period of where I was like, dang, we're like, we're doing something right now, was when we had our acquisition manager and we had our first lead manager, and they were working on stuff together and deals were getting moved. And, like, all we were doing was having to disposition. I say all we were doing, which was still a lot of work, but it all of a sudden, it seemed like there was a a machine that was sort of operating on its own, and you were able to steal like, take opportunity from it instead of, like, you're trying to make your cake and eat it too or whatever. I don't know. Yeah.

Dan Austin: [19:52] And that's a good that's a great point with the way our business was set up too, because at that point, like, things were coming over the fence from our lead manager and our acquisition manager, and then it was up to you and me to say, do we buy this? Do we wholesale this? Do we flip this? What do we do? And then those decisions were made, and then we had outputs for each of those to make money. Mhmm.

Mike DeHaan: [20:11] Yeah. Yeah. That's huge. And then so that's the mindset side. And then for the actual tangible numbers about what that looked like. And this is I think that this pattern exists in pretty much any any business, especially ones that have large transactional potential like this. When you have your first big month, like and big is relative to you for us, I would say it was like our first, like 6 figure month, I think was actually like our second one, where this really started to make sense. But actually, I'll say it's our first one. It was that October 1 when we had our first action manager come on and remember, because it was like right before my thirtieth birthday, and I went up, and it was, you know, end of my birthday is October 31, it's the end of the month. I remember going up to hang out with my parents, and in Sandpoint with my wife. And I was like, my entire life is now different because of Yep. What I just proved that we could do in a month with a super basic system and us and one other person. Right? And that immediately changed it. And I think that the reason that it made on paper, showed that to me because we were not in a position where either of us needed that money to survive.

Mike DeHaan: [21:22] And I knew that we're gonna be able to take all of that and just immediately apply it to the business, which is what we did. And I had at that point figured out enough of the process that I knew if we did that, what the future potential would be from doing that.

Dan Austin: [21:36] Yeah. I think the like, to clarify that, like, what does that look like? Like, or feel like dollars and cents wise, if I could put that in? Because it's gonna be different. Like you said, you and I didn't need that money to live off of. Right? So that number can be various, and it could have different meaning to people. But when you get to that point in your business where you just realize that you could prefund the next two or three months of your operation and not have to worry about money, that's when I think you make that Yep. That monetary position and that also that emotional, like, oh my gosh. You just opened you just expanded your emotional, like, the amount of emotional space you have to think about other things, as opposed to how am I gonna pay for my next month's marketing. Yeah. Right? Or next month isn't an expense. Right? Where, like, for you, you said for five months, that was five months of you and I writing checks to the business. Now, their business is writing its own checks, and you can do that for two to three months, or however long you feel comfortable with that you wanna have that business paid for up upfront without if you had no revenue. There you go.

Mike DeHaan: [22:32] You just said it way more simply than me. But, you're completely right. And I think, too, it's on the back end of it, it is having the system and the KPIs kind of measured that you could you know what that looks like, and you don't feel like you're just taking the business money and putting it on a roulette wheel every single time.

Dan Austin: [22:46] That's a great point. So it's like if you wanna do one deal a month for three months, you better have and your deal per month Cost per deal is $3,000, and you just could crash the $9,000 check and put it in the bank, and that's gonna cover your cost of marketing for three that's there you go. And say the average cost per deal is 9,000 or the average profit per deal is $9, now you've got three more months every time you get $9. That's kind of the, I guess, the metric you're talking about a little bit. Mean, I'm breaking down. It's too simple, but that's how you think about it. Right? You need to know how much it costs you to operate your business.

Mike DeHaan: [23:16] Yeah. Yeah. And it takes a while to get there. And I think one of the challenges that you kind of need to go through the uncertainty and the suck factor for a period of time before you get the right to be there.

Dan Austin: [23:30] Mhmm.

Mike DeHaan: [23:30] Because I will say there are people that you hear about that jump into this business, and their first month, they just hit it out of the park. I would say if anything, those people are less likely to do well over the long run because they have been spoiled out of the gates. Right? So then eventually, when they do get into a dry spell, which will happen, it happens to everybody, they're not gonna be able to endure it because their sort of expectation was set by that unrealistic first month. I think the best people in fact, I know the best people in this business, they're the ones who get in and they kinda struggle for a couple of months to figure it out. And all they know is that no matter what happens in the future, they've already been at zero at one point, and they can deal with that.

Dan Austin: [24:12] That's great. Because you have the wherewithal, and you understand that. And you're like, this ain't that bad. I only closed one deal this month. I went five months without closing a deal. You know?

Mike DeHaan: [24:21] Yeah. Exactly. Right? You know? And then and then bigger picture too, after you do that for a while, you start to, like, understand business, those sort of things. This is where I would say the true bigger picture mindset change between survival and abundance happens is when you know that the basic patterns that you've learned in, like, your wholesale business or whatever business you're in, that you can do that somewhere else. And we have uncovered that with various things. So like, you learn how to make money. You know, you learn like, making money is actually not that hard if you have a basic offer that creates value for people, and you have a general level of execution, and you know how to sell it. That's really all you need. And you can make very significant money if you just piece those things together, but you need to know what that looks like, which is something that you have to learn through trial and error.

Dan Austin: [25:09] Yeah. It's not hard to make what I always told you is, like, it's not hard to make money on your own and, like, figuring out. It's hard to make a lot of money consistently, though. Like the difference between a millionaire and a Like, really highly successful. Like, you can go out there and here here's a good example. This is a topic that's on my mind because I had to talk to a carpet cleaner. You can go and buy a van k. With a carpet cleaning machine in it, and go and be a carpet cleaner and make money. Like, that is not hard. You could go start a Facebook page, do all these things, and you'll make probably a good living for your family. You're not gonna be, like, well off, you know, whatever, like, to where you can't you can retire at age 30, whatever. That's probably gonna happen. Maybe there's some awesome carpet cleaners out there that can do that. I don't know. I'm just making the assumption based on what I pay that you can't do that. Yeah. What's really hard to do is own a 100 carpet cleaning vans and go clean a 100 houses every two hours in your carpet cleaning business while you sit back and just run the system. Like, that's really hard to do compared to owning one carpet cleaner.

Mike DeHaan: [26:03] Yeah. Yeah. I I think, well, that's the definition of that person getting out of the handkerchief. Right? Is the person that can take the money from their singular van, use it to get another van. They hire staff to run the first van and the second van, and then they focus their time on how to get more vans. But most people never get that way because they're too worried about the loss they're gonna be having or the expense from no longer being the guy out driving the van themselves. The loss

Dan Austin: [26:29] of the revenue in the van. Exactly. The cost of paying that person. And the challenge, one of the reasons why it's so hard to make that step is or to go from one van to the 100 vans is because now you've become a problem solver as the owner of the business. That's Solving problems is hard. Okay. So say you wanna go buy five vans, or you don't have money. Now you're gonna solve the problem of no money. You need to go raise capital and figure that out, get investors to come and help you do that. Like, that would be a solution. Now you have to figure out how to schedule Five Guys at the same time. How can you schedule Five Guys? We need scheduling tool? You gotta create that. You gotta buy that. You gotta integrate that into your systems, and then you you just start seeing all these problems you have to solve, and people are like, I don't wanna do that. I'd now I'll go back to the one van, go clean carpets, or go back to my w two job where I do the same thing over and over every day because problem solving is hard, and not everybody's cut out to do it.

Mike DeHaan: [27:15] It is. You know? And the challenge is is that there's no playbook for Like, you can join a group coaching program. Joined, our instant investor program. We'll give you, like, the general foundation, but you still need to figure out what's gonna work for you, and your market, and your lifestyle, and your skill set. You know? And you can find that for everything. There are literally if you talk about the carpet cleaning, there are literally groups you can join about how to scale a cleaning business. I have seen these advertised on and they're like, here is how you can go, and you can scale a cleaning business by getting corporate clients and having cleaners and all sorts of stuff. They'll give you like their CRM they use, give you all those sort things. That is awesome. But it's not gonna get you your clients. Yeah. It's not gonna help with the client communication. Employees. It's not gonna help. It is. It's you know, right. It's not it's not gonna help when your cleaner doesn't show up to clean a place that they're supposed to do. Those are the problems that you have to solve an entrepreneur, and that's why you get to make real money, right, on top of everything else. But that's also the risk because going through that, you're going to lose money along the way. You're gonna have to spend money that you were hoping you were gonna have to spend. You're gonna have to have months where you don't make anything, but everyone else that works for you makes money. Right? How many times have we been there?

Mike DeHaan: [28:30] So many times. And that's one of the biggest things too is through the traditional education process, the traditional sort of work life that we have here in The United States and most places, they get so used to living off of like a monthly income, monthly stability. And if you're gonna go be an entrepreneur, you basically say, I'm willing to risk having none of that to be able to have, you know, potentially more freedom, more control of my time, and hopefully, if you're lucky, make more money than if you would just work that w two job.

Dan Austin: [28:58] Bingo. Well said. So Anyway,

Mike DeHaan: [29:01] there we go. Thirty minutes of business talk. If you're here for real estate strategy Sorry. Day was not the day. You know what? Here, I'll

Dan Austin: [29:06] give you some I'll dump on you for a minute. Like Yeah. So we are, I think, officially, the number one basement flooded property holding company in our market. We had two this week.

Mike DeHaan: [29:18] I didn't even know that we have

Dan Austin: [29:19] two basements anymore. We had one. I think I talked to you well, I didn't tell you exactly what happened. The hot water tank flooded the basement of Glencore, one of our favorite rental properties.

Mike DeHaan: [29:28] Did it really?

Dan Austin: [29:29] Yeah.

Mike DeHaan: [29:29] I thought that was such it was new.

Dan Austin: [29:30] No. No. It it wasn't. So that leaked, flooded all whole nine yards, and then the same day because I haven't had to deal with we've offloaded a bunch of our properties property manager. We have a we have a handful hanging over that I'm still dealing with. I haven't thought about property manager in a long time. And then a floor drain in our another property in the basement started leaking water up through the sewer and through the back deck. Back deck. Basement flooded that. That one wasn't that bad, but it's like Which

Mike DeHaan: [29:57] one's that one?

Dan Austin: [29:58] So yeah. I got an email like, hey. By the way, the sewer the floor train's backing up. I'm like, what? So anyhow, this reminds me of some principles that I've tried to live by and don't always do this perfectly. But when you buy a property and you're renovating it, replace shit that you should replace, like a hot water tank. So, Glenn, that hot water tank was 30 years old. We knew it needed to be replaced, but we were being scummy flippers, and we didn't replace it because it was working fine. Right?

Mike DeHaan: [30:29] And we were planning to sell it, and we did sell it. Go listen to the episodes from, like, March of last year. You can either have

Dan Austin: [30:35] a fiasco whole fiasco anything. And so that became a hot water tank that we now own because we had to convert it to a rental property. Lo and behold, it flooded. Several months ago, last year, probably, we were talking about this, we had an Airbnb house that we remodeled top to bottom and chose to not replace the furnace. It was an oil furnace that leaked and mutilated our brand new basement that killed us for six to eight months or whatever. But we went on a tear there for a twelve month period where we were buying properties so fast and doing such large renovations that, a, the capital expenditure of doing some of this wasn't quite the easiest decision to make, and b, there's just so much going on, it's like, where do you draw the line as far as replacing, and not replacing, and scheduling contractors? Because you're like, we have we have to get our contractor from this house to that house. If I wait for a furnace company that's gonna delay the project two weeks, right, you you start having to make these decisions on the fly. So you gotta be careful there and a little bit more organized in those because these most of the things, even the Frederick house, like, a simple fix to that would have been scoping the sewer and just getting it cleaned out right before we turned it over to tenants because we remodeled this was a Frederick was a great one because we remodeled this house in the beginning of, like, I don't know, '21 or mid through eight through twenty one, and then rented it down. It sat vacant until, like, three months ago, and they the state was paying us to own it, so we didn't know that there would be a problem.

Dan Austin: [32:00] And then they moved in, and lo and behold, guess what happened? They started using the washing machine, all this sort of stuff. But like a simple upfront fix would have been, hey, scope your sewer, clean it out, because it's an older house, fifties. You should take it and make a judgment call on that. And my point bringing this up is, like, as you own properties and you're burying them, which everybody loves to talk about burying properties, like, do some upfront things to save yourself from having to spend your OpEx and CapEx set asides all at once on something silly like a hot water tank.

Mike DeHaan: [32:30] Yeah. And it well, I will say it is a fine balance. Right? Because if you look at the rate that we were buying everything, if we had spent the extra money to fix all of those things when we needed to, we would not have been able to buy as many assets.

Dan Austin: [32:46] Oh, absolutely. It would have been challenging. 100%. And that's why in the beginning of the conversation, it's like we have these principles that we had to move away from that I don't love, and it bites you in the ass. It does. Inevitably, it's a members game.

Mike DeHaan: [33:00] You could get away with it

Dan Austin: [33:00] on one property, but once you get twenty, thirty properties just stacked on top of each other, inevitably, this also speaks to the importance of set asides. Like, I might tell Mike, hey, we're not cash flowing on this property. And a normal person would be like, what? Why do we even own it? It's like, well, we're not cash flowing on it right now, but we do have money going to set asides in case something happens. Yeah. Like, a hot water tank costs you $818,100 dollars. And, I know that's ridiculously expensive, but that's what you have to pay when it breaks in the middle of the day, and you gotta help a tenant out.

Mike DeHaan: [33:27] You gotta do it immediately. Yeah. And and, well, I I guess the the benefit though of the route that we did go, so we pushed off some of these things. We're able to build this portfolio of rentals. At least the thing's paying for itself.

Dan Austin: [33:39] Yes. We're not writing checks to it.

Mike DeHaan: [33:41] Right. Yeah. If we had to spend all the extra money, spend an extra $4,050,000 dollars, that's like a whole that's one less property that we could have potentially bought. Yeah. We're sitting on a nice set

Dan Austin: [33:49] of services too. Like, we don't even I don't even think twice about it. We just call the companies, and we take care of it.

Mike DeHaan: [33:55] Now that that is an interesting conversation too. I wonder I mean, like, if you look at people, right, if if they are putting every dollar they have into making a single property bulletproof, is that actually better than them making one okay and then buying a second property?

Dan Austin: [34:12] Well, they what about this conversation? Could it be buy a turnkey rental versus buying one that needs work? It's it's also a similar conversation. Because one is gonna cost more money, but takes less maintenance and CapEx set asides versus the other. So the same thing would be like, well and there I think there is a final I think what you have to choose, and this is this is all a matter of opinion for a lot of people, but you if you follow any bigger time real estate investor, you'll start seeing common themes, and people always actually kind of like look at me funny when I'm like, no. We actually spend more money on rental properties than we do flips, material wise.

Mike DeHaan: [34:47] Uh-huh.

Dan Austin: [34:47] So instead of buying $3.50 LVP for a flip, we might buy $3 LVP for a flip because it's a flip, it's likely gonna be something we buy more expensive materials for our rental properties because they get their butts kicked by tenants, and they're seeing constant turnover, where a flip, it's likely a family buying it from you, and it's gonna have less less turnover. And let's be honest, I don't own the flip after I sell it. I own the rental property after I sell it. So there's like this, you're walking this fine line of like, where do you put the money? I would say there's certain things you should put your money into and other things not. Like, you'd be surprised. I would choose to put quartz countertops at a rental over laminate because laminate, I've seen it so many times get ripped apart. Yeah. And it makes it look nice, and people are like, I have a proper my duplex unit has quartz countertops. People are like, really? That's nice. It's a little bit more of a cost. No doubt. It's probably twice the cost for us to do that. But, generally, our kitchens are small enough that it's only an 800, $900 additional cost on top of laminate, and it looks better, and it never fails. Like, there's no the edges of the laminate don't get ripped off because it's stone. It doesn't get scratched and cut up because it's stone. And so those are things to think about as you're renovating a property versus flipping a property.

Mike DeHaan: [35:58] Yeah. Yeah. And then, like, over the long term too, you're right. It just makes less turnover. Insure, have to write the extra money right now, but that's where you probably shouldn't cut costs. But the problem

Dan Austin: [36:07] I see people do is they just want it to be cute or they just want it that way, so then they start, to your point earlier, is they start spending money on things that you should not spend money on, that you don't need to, and you have to renovate to the area. If you're in a c minus area, don't renovate your property like as an a class where there's a flip or a buy and hold. Don't do it.

Mike DeHaan: [36:26] Yeah. That's funny what you just said. That's like the most repeated joke I hear amongst, like, rehabbers right now is like because actually 2021, so many new people got into the real estate renovation space. And we see this everywhere right now with people that are going into these properties, especially it's made significantly worse with Airbnb and Instagram. There's a lot of people that like, I'm like buying Airbnb. I'm doing a BRRRR property for this Airbnb. And they all they do is they wanna make it Instagram worthy without any view of, like, the functionality or the numbers or all those sort of things. And it's like, that is the worst way to approach an investment property. Chip and Joanna Gaines, do not listen to them for real estate advice. They all they want you to do is to buy their Magnolia products. Right? And to, you know, give them more viewership. They do not care about helping you make money with real estate. So stop doing what they're doing.

Dan Austin: [37:21] Well, I don't wanna belabor the point, and I'll leave it at this. But I know I've talked to a lot of folks, you and I do it through like Abundance or other real estate groups or anything. And I know when you hear a logical real estate investor, when they have a spouse that just wants to make a cute house, is when they're like, yeah, we just bought this Airbnb and we're, you know, it's we're doing this. Like, oh, I see what's going on there. It's like one of the people in the family or both of them just want a project to make something cute. So there's a lot of well to do guys, like, in GoBundits that have spouses that just wanted a project, and they wanted to do the Chip and Joanna Gaines thing. And financially, it doesn't make any sense.

Mike DeHaan: [37:56] Yeah. Well, here's where it gets weird. Here's my theory on that. That then this we're gonna lose half far out inside of

Dan Austin: [38:02] like I know. This is a new BMW. Sorry. I was gonna say that. It's the new BMWs that have the Airbnb.

Mike DeHaan: [38:07] Yeah. Yeah. So that's that's true. But here's my theory. With those guys that get go into that, they are the same guys that they're like, man, I just wish that my wife, spouse, they could be gay. I don't know. I just want my partner to be in to real estate as much as I am. And the person's like, I don't care. Math is boring. Renovations are boring. But they say, what if it was a beach house? And we could like do this. And then they're like, bingo. Now they're interested. So now it's now it's a

Dan Austin: [38:34] You got me interested. Beach house. Come on up.

Mike DeHaan: [38:37] Yeah. It is a bonding moment for them as a couple, even though it is more than likely a poor financial decision.

Dan Austin: [38:44] It's a poor real estate business decision because financially, it might be whatever they care about. It's That's true. Or a second home that they're gonna use as vacationing, whatever. I think you're on the same page. We're trying to explain exactly articulate the same exact thing, which is it's probably not the best way to build your business after that. Yeah.

Mike DeHaan: [39:01] Yeah. That I mean, the key is to buy stuff. And if you're if you have long longevity in real estate, which you should if you're gonna get into this because it takes a long amount of time to get the true potential with it. Buy stuff, make it bulletproof, plug people in there, and, like, just freaking leave them alone and let them live out their lives and their tenants. Make their lives easy as tenants. Yeah. They'll make your life easy as a landlord, and then go and make more money to buy more stuff. And you do that

Dan Austin: [39:26] 50 easy tenant. Exactly. Yeah, you

Mike DeHaan: [39:29] do that 10 times, you will be wealthy. You do that 50 times, you're gonna be doing really dang well. Right? And it's not impossible. It's not rocket science. You don't need to be going and doing these insane renovations to do that. We've done both. We've done both. And then with a couple of really nice renovations that we've done, worth it? What do you think?

Dan Austin: [39:50] Let's see. Hold on. Yes. I would say the 20th Avenue Airbnb peaks my mind because it was worth it because we had to do it. Because I was just the house isn't falling into a hole, and we got an extra lot out of it that's worth good money. What we should have done is just sat on the house and just split the lot. It would have been a lot less

Mike DeHaan: [40:08] stressful. We should have at this point, honestly. But, anyway, you live and you learn, but that's part of the game. Alright, guys. Well, thanks for listening to this week's Mike and Dan show. You should please share this with anyone that you know that is interested in real estate investing, making money, or just listening to you guys talk rubbish for forty five minutes. But if you share this with everybody, it is the easiest way for the show to grow. And we always appreciate, you know, you guys helping us on our journey to show people what it's really like to run a real estate investing business and getting away from kind of like the fluffy, like, rags, the riches, whatever stuff that you hear everywhere else, which honestly isn't most of us. So let's let's be real. So please share with everybody. Aside from that, you can now get collecting keys merch. If you go to store.collectingkeyspodcast.com, we have like a couple different things you can buy on there right now. We keep stuff high quality, low price for what you're getting. We have no margin on this. All we want like, our vision is that when we have, like, some sort of bullshit conference or whatever, I don't know, KeysCon, whatever you come up with KeysCon.

Mike DeHaan: [41:11] That everyone can have

Dan Austin: [41:13] I love it. That's a great name, man. KeysCon. It's been

Mike DeHaan: [41:16] I think it's pretty good. People can have their merch already. They can come, and they can, like, oh, we can just have, like, a unified collecting keys group. Like, that's gonna be dope. That is my vision that we will eventually have at some point.

Dan Austin: [41:27] So It won't be, like, unified, like, all in uniforms. It'll be, like, random cool t shirts from just random stuff that we say. Man.

Mike DeHaan: [41:35] Yeah. As as we post it together, we're gonna have all sorts of dumb shirts. And here's what we should do. We should

Dan Austin: [41:39] do things like I know what we

Mike DeHaan: [41:40] gotta do. So there's like 20 of each shirt. And you can be like, shit. You got the, you know, BDE shirt?

Dan Austin: [41:45] You know? You would guys, takes a Whatever you got. I've got I've gotten some photos of the BDE coming in. Take some photos of you out in the wild if you're buying a shirt, collecting key shirt, a BDE shirt. We'd like to I'd like to see the the T shirts getting used.

Mike DeHaan: [41:57] Yeah. Absolutely. Yeah. Please, if you do get merch from us or you go buy merch, send us a photo. I would love to have a big, like, Instagram story or something that shows everybody Like, once a collage on his wall. Has our merch on. I do. That'd be sick. That's like it means we make it. I mean, we're not gonna beat the guy that got a

Dan Austin: [42:13] tattoo crazy.

Mike DeHaan: [42:14] Which you heard us talk about that last week about how somebody said he was going to do it. Good for him. He did officially do it. It's on my Instagram. If you wanna see the photos at Mike underscore invest. And, yeah, just like, I've been moved basically made at this point. The next person if somebody gets a the BDE Big Dan energy logo, which is Dan's face. Somebody gets that tattoo on them, then you've really made it.

Dan Austin: [42:35] That's that's when you know, you're you're Joe Rogan model.

Mike DeHaan: [42:38] Yeah. Right. So anyways, store.collectingkeyspodcast.com. Go and check that out. Aside from that, guys, if you want to start buying off market properties, go to collectingkeyspodcast.com/free, you can get our free five step guide to start generating off market leads. And, yeah, that's enough calls to action for you all. So thanks for listening, everybody. We'll talk to you all next week.