Everyone Is Pulling Back Right Now (That’s Your Chance to Double Down)

Mike DeHaan: [0:02] What's going on, guys? Welcome to collecting keys. I'm Mike DeHaan here with Dylan Cook. Dan is out today. Gave me all a two hour notice yesterday. So we tried to find a cool replacement for you, but it ends up just being the Mike and Dylan show. And, Dylan, congratulations. You're now in, the great blue state of Ohio. You guys switched along with, you know, along with Texas and Kansas. Not the ones people expected to switch, but Ohio was the real big stunner.

Dylan Koch: [0:29] Yeah. I I mean, the problem was Vivek kind of shot himself in the foot with kind of those ads that he ran. Yeah. And that... I mean

Mike DeHaan: [0:37] I saw a lot of people talking about that. Yeah. Yeah. So it was... If unless you live up in... Under a rock, you heard about the blue tsunami and the the midterms here. You guys listen to this now. It'd be... Have been a week ago. We're recording, which is two days ago. But, yeah. I mean, some really big surprises in there. I mean, Texas... Like, some people have been talking about Texas flirting with going blue for, like, a while, but for it to get blue senators and blue governor and blue reps, like, I I don't think anyone was expecting that big of a swing. And then some of the other states too, like Kansas, they got their first democrat senator since, like, the thirties, which if you go back to nineteen thirties, the Democrats back then are basically Republicans now. Yeah. Like, he said. Yeah. So that's actually a pretty big pretty big change. And then some of the other states I saw in there too, like South Carolina, traditionally super red state.

Dylan Koch: [1:23] What do you think of like the people saying it's just the people who are leaving California and going to these states and then voting the way they voted when they're in California?

Mike DeHaan: [1:30] I call that copium, baby. Come on. That's that's just them trying to trying to understand that nobody in their state actually agrees with them. Like, I mean, of them too were were really, really close. Like Florida, one of those seats, it was off by like a couple thousand votes. Like, if that. It was it was really, really tight, and people were were surprised there. And I don't know. Like, if you look at the big picture, a lot of people kinda knew that was coming. But I also feel like every midterm, you always kinda see a big swing the other way. I haven't actually seen, like, what the statistics and stuff normally look like.

Dylan Koch: [2:03] I just looked this up. Since 2000, Ohio's voted Republican 71.4% of the time. Really? Interesting. 70% since the year 2000 we've been read and then... Yeah.

Mike DeHaan: [2:15] Yeah. I mean, the thing that's always interesting to me about these sort of things is stuff will swing, but, like, the voter turnout is continually just, like, so low. Yeah. Like, around the country, a lot of this, it was, like, between 35 to 40% of the registered voters actually voted.

Dylan Koch: [2:29] In between those 30%, it's mostly boomers. Like, it's old people.

Mike DeHaan: [2:33] So that was the other thing is it was like 85% of the voters were 40.

Dylan Koch: [2:37] Yeah. Right.

Mike DeHaan: [2:37] Right? And then if you... The voters that were 25, it was like 2%. Like, it was like nobody.

Dylan Koch: [2:43] I vote every time. It doesn't take... It's not take long for me to go and vote at our voting place, but like, I think that's a general trend on the importance that the younger people thinks that politics has in their lives.

Mike DeHaan: [2:53] Well... And also the reason it's important to vote is... So, like, the candidates, the electoral... What what would you call them? Like, the electorates? Electorates? Yeah. Is out there. The electorates. What they do... And everyone should understand this. This is this is actually why it's important to vote. What they do is they go and they look at the demographic of everyone that actually voted. Not the people that exist, but who actually votes. Because they don't give a shit about you if you don't vote. You don't mean anything to them. Right? Who actually votes. And they will basically put a lot of their policies and a lot of their messaging and a lot of their, you know, everything they're putting together, their their campaigns around who actually voted. And so if you're somebody that has these opinions and you don't vote, just know that they're not gonna change anything in your favor because they don't know you exist and nothing that you do actually affects them. So you should vote just for that reason alone, whereas now you are, like, on their radar.

Dylan Koch: [3:41] I did get a lot of texts that said, like, data shows that you voted the past couple elections. And then, like, I was, Mhmm. Still unsolicited. Still try to report them. It's okay.

Mike DeHaan: [3:49] Yeah. Because if you don't vote, you're not their audience. They don't care. Even if you voted for the other person, the fact that you voted, you're still sort of like in the sphere. Like, they want to do things to appease you. You know? And if you don't participate in the process, it doesn't matter.

Dylan Koch: [4:02] Well, Mike, now that we're at Blue State, I think I'm I think I'm shutting everything down. I'm gonna sell all the rentals. Gonna shut down the the entire business, you know, because that is the fate of my business.

Mike DeHaan: [4:11] You probably should. Yeah. I mean, as as someone who's operated exclusively in a blue state the entire time, I can tell you it's hell. That's why that's why I'm poor. That's why I'm in this shitty apartment. Everything about my life has been challenging exclusively because of that. Yep. What I see... I'm seeing a lot of right now is like the sort of age old posts of, oh, the politicians aren't gonna save you anyway, blah blah blah blah blah. And there's a lot of truth to that. Right? I don't particularly like that messaging because I do think that for a lot of people, and also if you look at like the span of how short, you know, the the different people's sort of time in office really is a lot of the time, in the short term, does matter to people, especially if you're like on the lower end of the totem pole, you know, or you have, I know, general needs or or you have bills and things that do actually apply to you. But big picture that there is a lot of truth to that, that regardless of whoever's in office, you can still do very well for yourself or very poorly for yourself depending on the decisions that you're making and what you're doing with your investing, your free time, your business, and everything else. So I don't know. Just depending on where you're at in life, it'll definitely affect you more.

Mike DeHaan: [5:18] But were there any like big bills in Ohio that were kind of controversial?

Dylan Koch: [5:23] Not really. And no, I mean, even Ohio wise, no. We had a couple of that, you know, from our local jurisdiction that were controversial of like, you know, a couple thousand people, but nothing nothing big in the state.

Mike DeHaan: [5:35] Yeah. So we had two really big ones in particular in Washington. And they were both very fascinating to me because I got to see... You know, there's a whole concept of like the slippery slope, right, where it's like you don't want to support one thing that's kind of like higher level, like vague, because it will lead to additional things become the slippery slope that What do

Dylan Koch: [5:58] precedents are you setting for pre... Yeah.

Mike DeHaan: [5:59] Exactly. And so there's two big ones, Washington. One of them was the millionaire tax. Mhmm. Right? Which basically now in Washington state in this past, no real surprise. If you have an income of over a million dollars a year, you now have to pay a 10% state income tax on every dollar over that million dollars that you make. Right? So, you know, it affects a very small percentage of population.

Dylan Koch: [6:22] So if you make a million, 1,100,000, you have a $100, you're paying another $10,000 in taxes?

Mike DeHaan: [6:28] In state income tax. It's the first, it's the first state income tax. You don't have state income tax here besides that.

Dylan Koch: [6:34] Oh, okay. Yeah.

Mike DeHaan: [6:35] Okay. The opponents of that are like, well, now it's a million, then they're gonna lower it to 72,000, then to 500,000, then to 52,000, next year, we're gonna have a sale, a state income tax.

Dylan Koch: [6:43] Which is how that kind of started, if you're being fair. Like Of course. State income tax started a long time ago that was supposed to be temporary. Mhmm. Obviously, it's not temporary.

Mike DeHaan: [6:50] Yeah. And so there's a valid argument there. The one that was really funny to me is there was... Like, the people that are the biggest proponents, they... The biggest supporters of that were also the biggest opponents of the other bill that we had, which was around transgender students and people playing sports. Right? And the language in the bill was really strange because there was basically, like, a clause in there that said they would have to go through a verification of their sexual organs to be able to participate in sports. And so a lot of them are like, that's just for perverts. They can look at my child's genitals, which isn't nearly... That's just not the intention.

Dylan Koch: [7:28] Because there was a doctor that did the Yeah. Cast the ballot or cast the... Whatever. You know what I'm trying to say.

Mike DeHaan: [7:32] Yeah. Exactly. And I'm staunchly against, you know, trans in sports like that. There's physiological differences that exist when you're born a male, a female, and you you grow up, you're hippie, those kind of things. Right? But what was so... Has been so interesting to me has been seeing the people that were very pro that. And they're like, this is such a slippery slope because now it's gonna start with trans can't play sports. There's gonna be they can't do this. This could be they... And it's gonna... It's all based on bigotry. It's it's all this slippery slope.

Dylan Koch: [7:59] They couldn't apply that same logic to the other bill.

Mike DeHaan: [8:01] They couldn't apply it to the other one. Right? They only apply it to that one because that's what matters to them. Yeah. Right? And as I've been sort of seeing the reactions and things, I've really realized, like, that's all just... There's no winning in any of these sort of things. And, you know, also too, at the end of the day, like, you lost in a fair election. Right? Yeah. The people spoke against you. You kinda just gotta deal with that. There's not much you can do about it. And if you don't like it, you can move to one of the great states that really strongly supports things like transports, whatever state that is. Oregon? Like, I don't know.

Dylan Koch: [8:34] Yeah. Probably. Yeah.

Mike DeHaan: [8:36] Dude, don't Vermont?

Dylan Koch: [8:37] I try to control the controllables at the same time, at least staying abreast to, like, things like that. Because, like, where you live, it is like... The biggest thing of... It's focus on your local places first. Right? And then you can kind of branch out. Some of the federal level, you're not gonna change that. It is something that your your local municipality, a king school levy, whatever it may be, that stuff that you can maybe at least deserve to have an opinion on and that you can change. So that's my general framework when it comes to this election stuff.

Mike DeHaan: [9:04] Well, and it's always interesting, right, because there's the social and then there's the the fiscal issues, you know, and those are very, very different. And if you look at like the big picture, especially now with Texas turning blue, almost all the very prosperous states are blue.

Dylan Koch: [9:19] Yeah.

Mike DeHaan: [9:19] Right?

Dylan Koch: [9:20] Yep.

Mike DeHaan: [9:20] And what... Like, what does that say? And then the states that tend to struggle a little bit more, they're all red. You know, that can be around education, whatever that is. But the funny thing is is you have these people that would wanna move to the red states because it's better fiscally for them, I guess. But, like, is it? Like, I I don't know. I guess the general environment, the economy, and stuff isn't as strong because the state isn't producing as much money. I guess you can be the the big fish in the smaller pond. The whole logic doesn't really make a lot of sense.

Dylan Koch: [9:47] I haven't even looked at that enough to have an opinion, if I'm being honest.

Mike DeHaan: [9:50] But even just looking at, like, the state's actual GDP, right, and, the amount of money that they produce themselves versus what they need to get from the federal government, almost all the states, like, the top producing states are all blue at this point. It's the exception being pretty much Florida.

Dylan Koch: [10:02] Yeah. Well, and that's where the largest cities are. It's almost like a chicken or the egg thing. Right? Like, are the people following the cities or it's the people that's... You know?

Mike DeHaan: [10:09] Yeah. So either way, you know, it's...

Speaker 3: [10:11] It'll be interesting to see

Mike DeHaan: [10:12] what happens. What's gonna be more interesting now is is going to be, you know, what the Democrats had to do with the presidential election because they obviously have a very, very strong foothold in that. Cause now that they have control of the House and the Senate, when they get to the presidential election, the electoral college who actually decides the presidential election, you guys don't know that, they really have no reason to lose the next No. Election at all. No. Yeah. Yeah. So like unless they nominate someone that's

Dylan Koch: [10:37] Unless they throw up Kamala Harris again. We'll see what happens. Fuck. Get

Mike DeHaan: [10:40] me started, which I wouldn't be surprised if they did. But, yeah. So, you know, we'll see what happens there. And then, you know, over the the next little bit, you know, Trump's just gonna veto everything. But I did see this meme the other day, which I think makes a lot of sense where they should just basically name all the bills like the Donald Trump is not gay bill. So that way if he vetoes it, then he's saying that he

Dylan Koch: [11:00] is gay. That's... That's clever. That's... There's there's one... This is gonna be a quick tangent, where it was like a local town meeting, and they were voting against data centers. And in the the meeting, they played like this humming noise that would mimic how what a data center would sound like. But they played it in the town hall meeting, and they've been... So the the citizens were like, see? See how annoying that is? Like, this is why I we don't want this thought that was funny.

Mike DeHaan: [11:26] That's smart, honestly. Yeah. Like, it it sets a presence. It creates context. Like, and that's the biggest thing for, you know, most of those kind of decisions, right, is people don't have context for what's actually... They're actually voting on.

Dylan Koch: [11:38] Yeah. And then when bills... Can you explain to me when they're like... When they... Even the the big beautiful bill or like the JOBS Act, like, when they pass these thousands of page documents, why can't bills and or laws be like, one law is one issue, not one law is 15 issues? Like where they can all be conflated?

Mike DeHaan: [11:56] I'm not smart enough for that.

Dylan Koch: [11:58] Yeah. Dude, this doesn't make sense to me.

Mike DeHaan: [12:00] Like- I've always just been under the assumption the reason they make it like that is because what they're actually doing is I'm like, A couple pages in there, they're squeaking through like the one

Dylan Koch: [12:08] thing that

Mike DeHaan: [12:08] they actually care about.

Dylan Koch: [12:09] Yeah. Yeah.

Mike DeHaan: [12:09] I- You know? They just basically pack it around all the stuff that people are talking about. But right there, it says like, oh, well, we all get to pay ourselves an extra 1% of something.

Dylan Koch: [12:19] The reason I voted no on one of the tax levies for old people yesterday or whatever day, Monday. You know, you say that right there. You're like, what? You voted to take away senior citizen care It's no because this was a renewable levy, and it's public information. And like 80% of the previous levies went to like administrative bloat in salaries. Like, so sorry. I'm not I'm not doing that. Like, find the... Use the money better.

Mike DeHaan: [12:40] Well, you know, they gotta pull themselves by their bootstraps like

Dylan Koch: [12:42] the rest of us.

Mike DeHaan: [12:43] Yeah. Yeah. Yeah. Anyways, so good transition there. Going into the current economy, everything else, we were just kinda having this this conversation in the, the pre show. But as we go into the fall, winter, get into the springtime, the economy is still slow, and nothing that is currently affecting the economy is going to change overnight. You know, there seems to be a lot of people that think the economy is gonna get fixed. It's not. It's not gonna fix our imports. It's not gonna fix this Iran conflict that's going on. It's not gonna fix the general pricing of things. The inflation has already happened. And so I imagine

Dylan Koch: [13:18] And there's a lag to inflation. Right? So like the things that six to twelve months ago is what Correct. Will do. Not what decisions you make today, but gone.

Mike DeHaan: [13:25] Yeah. And so we're gonna be in a a tough spot here for a while. And we're talking about the the... In the preshow, it's a pretty natural reaction to think you need to, like, cut costs and sort of, like, bide your time. But the problem is if you look back historically, people have been saying it's like a tough market, and you seem to bide your time for as long as I've been doing real estate, which is since 2015. Like, I remember back when I first started buying something, was like, oh, man. You just gotta wait. The market's too high, whatever. If I had done that, I would not be where I am today Totally. At all. Yep. You know? And there's the old saying that you need to be greedy when others are fearful and fearful when others are greedy. Right? And right now, a lot of people are being fearful. And so if anything, this is probably the time to start, like, doubling down on stuff. You know? And that can feel very scary. It can feel like you're throwing money away, and you will probably have a little bit more waste in, like, the marketing and things like that that you are doubling down on. But the return that you can get can be significantly higher just because there's gonna be less people that are playing the game.

Mike DeHaan: [14:25] Yep. And so I guess from your perspective, Dylan, you know, you're kind of alluding before the show that you've been really leaning into that, or was that just more like a thought? I shouldn't actually confirm with that.

Dylan Koch: [14:32] Yeah, no. I mean, it was more of a thought because we have, let me think, four projects that are either listed and or being rehabbed. Two of them have been listed with significant price drops to the point where one, we'll be lucky to break even. Two, we'll probably still make a little bit of money like we bought really right on that one. And some of it is not just making profit, but you're getting some of the money that you have into it back. But you're... If you're doing some of the financial forecasting, you're like, wow, I'm having not as good as a year as I anticipated or, you know, some of things. And then you add vacancies and unit turns and more money that's just, you know, going out of your pocket on top of that. And then my natural default is cut expenses, get as lean as possible, and then like, work, still work hard, but that's not gonna save you when the numbers are this big in this business. Yeah. You can only cut maybe a couple thousand dollars a month. And, you know, you're... There's much bigger numbers on the rehab side of things.

Mike DeHaan: [15:26] So... I think particularly in your size of business too, because you're like, what, a team of two? And your main overhead is marketing. Yeah. Right? Which is a very easy to adjust cost. And your profit margins, and that can be exponential.

Dylan Koch: [15:38] Correct.

Mike DeHaan: [15:38] You know, like, we would always talk about three to five act return on marketing. Mhmm. When you have a larger company with additional overhead, I mean, lot of companies, they operate on like 20, 30% margin, you know, which is significantly less than Yeah. You're able to get on your company. So your logic is right for sure.

Dylan Koch: [15:53] But the point being is like, I think a lot of people either in my position or even me personally be like, okay, cut the marketing spend because that's like an easy lever to pull. But it's almost should be the opposite. It's like lean into the uncomfortance of like almost either do the same size or maybe even a little bit more. Yeah. Because that's what's gonna generate the returns two, three, four months from now.

Mike DeHaan: [16:13] And that's producing revenue. I was going say, what do think about like the buy and hold side?

Dylan Koch: [16:17] That I have to be quicker to honestly, like either lower the rents or give concessions just to fill the seats because vacancy is your biggest profit killer in rentals.

Mike DeHaan: [16:26] Yeah.

Dylan Koch: [16:26] And then from an acquisition side, you wanna be greedy, but at the same time, you can't change the interest rate. Mhmm. So, like, I may... I am making an offer on an auction property, and then the other one I'm making an offer that is seller finance on an eight unit. And so, is just trying to find ways to make it work. Like, the default question should be, how do I make this work? Not, you know, I can't make this work. And so, there might be more seller finance options that come up now because if you can go to a seller and say, hey, I can't give you your price because rates are seven and a half percent, but I can give you your price if you'd like, you know, we'll carry the no x percent or whatever it may be. You could still probably make deals happen.

Mike DeHaan: [17:03] You sound like a sub two guy right now.

Dylan Koch: [17:05] Yeah. Yeah. I'm not saying I'm not saying sub two because I... I'm actually saying full seller finance. I'm taking title. I'm not gonna leave you out the dry kind of a thing.

Mike DeHaan: [17:13] Yeah. Yeah. Had a friend who called me last week that he had a substitute get called, and he was trying to figure out what to do.

Dylan Koch: [17:18] I saw that in one of the GoBundance chats, actually.

Mike DeHaan: [17:21] Yeah. So that was actually a different one.

Dylan Koch: [17:22] Oh, really?

Mike DeHaan: [17:23] Yeah. So there's been a couple of these in the last little bit.

Dylan Koch: [17:26] I like how you're the guy to call off now. Yeah.

Mike DeHaan: [17:28] Yeah. Well, because I I think one of the few people that in that street people know that's actually dealt with that already, you know? Yeah. And there's gonna be more and more.

Dylan Koch: [17:34] If you're a lender, why would you not go through all your books and be like, hey, we have this loan at 3%. It changed title a year ago. Now we can reissue this loan at seven and a half to 8%. Like, why would... The lender has every incentive to go through and find each and every one of

Mike DeHaan: [17:47] those. Mhmm. Absolutely. Yeah. And so the the interesting thing with this one, why it got caught was so they had a third party, no servicing company that was basically collecting the payments and then paying the mortgage, which is how your sort of stock set up do it correctly. Right? They did not adjust the escrows correctly, the third party on the company, for the tax increase that had occurred. And so they basically paid short, which caused the lender to go and review the loan file and, like, look at the property and see that the LC had changed. Right? They reached out to the borrower and said, hey. Like, what's the deal with this whole sort of thing? And they ultimately came clean, and then it got called. The... If you were in, the sub two cream, they're like, oh, you lie. You beat it back.

Speaker 3: [18:30] You do

Mike DeHaan: [18:30] all kinds of... No. Once you're caught, you're fucked. Like, there's nothing you can do about it. You you need to deal with it at that point. But, like, they've owned it for several years. It's been going for a while, there was just that little blip that happened because it's third party, which is kind of inevitable. And that's what ultimately brought attention to it, and it got called right away. So you're starting to see stuff like that. But, anyway, so back to the the leaning in or, you know, sort of like pulling back on stuff. I think when it comes to, like, producing revenue, think you're completely right, Jonas. You have to be leaning into it at a maximum capacity right now. I think where it gets more interesting is if you're looking from, like, an investment standpoint, like, long term, like buying assets. So for us on the the revenue side, it was interesting. We were actually talking to one of our investors, about a week ago, and they were saying that what they're seeing is this massive race to the bottom with a lot of the other lenders that bring them loans, where they're, like, getting tighter and tighter on their premiums and their pricing, everything else. And then they said, except for you guys. Interesting. Yeah. Because because honestly for us, we've actually been able to hold pretty steady.

Dylan Koch: [19:27] You're saying on your on your margins. Right? But you're getting it and what you're selling it to them Correct.

Mike DeHaan: [19:32] Yeah. Our margins. So everyone else is getting tighter and tighter. And we stay pretty much the same. And they were really fascinated by that. They wanted to what we were doing. And the funny thing is is it isn't that we've necessarily changed anything because of the current market conditions. I would say it's more so that we've just been kept doing the same thing. Whereas other people, because they built these big teams, they have all this overhead. They're trying to basically not have to cut back or reduce head count or do all those sort of things. And so they're just trying to get as much business done as possible. Whereas we've always sort of operated from the lean ship, and we have our standard set of loans that we do. And even if we lose business because of that, because Dan and I, we come from the marketing and sales background. And honestly, this is a reason why I think wholesaling is such an amazing business to get started as like a first business. Because you can make a lot of money because the ticket sizes are really big on what you can do with the wholesale contracts, and it forces you to get good at marketing and sales. And if you can't do those things, you just don't win. You just suck. Right? But... So now us in a completely different business, right, we're able to take those marketing and sales methodologies that we've already gotten good at, and we started those from day one.

Mike DeHaan: [20:38] And now it's carrying through. And believe it or not, a lot of finance people and lenders, they're not really good at marketing and sales. Like, their idea of doing marketing is either to just like find a bunch of brokers, bring them deals, or to just like run a Facebook ad that says, rates at 6.25. And really, they're at 6.75, but they're lying to you?

Dylan Koch: [20:55] Yep. Yep. Or as low as 6%, you just have to pay us five points.

Mike DeHaan: [20:59] Exactly. So they're doing stuff like that. They don't have a sales team. They're not doing outreach. They're not prospecting. They don't serve, which is what all of our guys do. And so we focus there first, and we've actually been hiring very aggressively over the past couple months. And so we have a really strong core team right now, and we're able to find business that way. Yeah. And if we lose loans, we just go, cool. It doesn't really matter because our team is doing several 100 phone calls a day. And so we know there will be more loans that always come in to the business. And because we have a lean shop, if revenue fluctuates, it really doesn't matter.

Dylan Koch: [21:28] I saw a stat the other day that, not from a dollar value because values today are much higher than they were in 2008, 2009, but volume wise, there's less mortgage applications now than there was in 2008. So if you can grow in a season of now, like, even where it's really tough, like, then that's as good bodes well for when things get even better.

Mike DeHaan: [21:47] Yeah.

Dylan Koch: [21:47] Right? And stuff. I think part of it is, I think it's good to have goals because, like, we had a revenue goal this year that we probably won't hit. Mhmm. And don't let that be, like, double down on the wrong things by still do you get what I'm trying to say?

Mike DeHaan: [22:01] Like Yeah.

Dylan Koch: [22:02] Don't let that be the cause to make a poor decision.

Mike DeHaan: [22:05] Well, you're focusing too much on the end result and not the goals to actually get there. Yeah. Right? Because, like, if you set a revenue goal and you're doing historically all the correct steps to get there and you don't get it, you just don't get it. Like the whole point of having goals is not to achieve them. Yeah. Right? And I think people tend to forget that. They tend to... When people, they go and they set their annual goals or whatever people that are into that do at the beginning of the year, people always set stuff that's, like, very doable for them, which I think is kinda like missing the point. Sure. You know? Or even if they're like, I'm gonna have my misogie, my big hairy audacious goal. I'm gonna go and do this, climb this mountain or do whatever. It's like, you're you're probably gonna do that. That's a good, like, bucket list item. That's not like a real goal because you don't actually have to change anything for that to happen. Yeah. If something becomes a goal, you're gonna have to make aggressive changes to how you or your business or your employees perform and act to reach

Dylan Koch: [22:54] them. It's like someone who's overweight, wants to run a marathon. Okay. That would be a goal because like Yeah. That that would be tough. Like, you're gonna have to change your habits and your training and all that kind of stuff. Totally. But, I mean, if you set a revenue goal of, let's call it a million dollars in the wholesale business, then you don't get there, but your margin... Let's say you get to 900,000, but your margins are still 50%. Okay. You made $4.50 ks. Mhmm. But then that last 100,000, you spent 200,000 to make it. Like, that doesn't, you know, you're you're shooting yourself in the foot.

Mike DeHaan: [23:21] Totally. If it's... If you're so focused on that that you're sabotaging yourself, that

Dylan Koch: [23:24] kind of Yeah.

Mike DeHaan: [23:24] That's missing the point entirely. Yeah. It's like a lot of people that were so married to, like, door count or assets under management or all these things for so long. And they're like, I really wanna have a 100,000,000 assets under management. But they had no equity and nothing cash flow. Because it's all it's all privately raised money. You know, it's all three year adjustable debt. Those are all people that got cooked over the past few years.

Dylan Koch: [23:44] The one thing that I was underwriting this seller finance so that I just referenced this eight unit. And one thing I had to keep in mind is like, okay, let's say we get seller finance, we'll put it on a thirty year term and anywhere from like a five to ten year blow. And then it was like, okay, cash on cash will be like 20% if we do it this structure. One thing I had to like... That kind of surprised me. It was like, okay, we're at the end of year five. And we had... We're gonna get a 70% loan on this. But I have to say, what do I underwrite this loan at? So I chose seven and a half percent. Is that right? I don't know. Could be. That's about what they are today. And even at seven and a half percent, like, the numbers get a lot worse, even with the five years of principal pay down from that. So it's almost like you had to do a minimum of a seven year pay down on seller finance structure just to make sure that your back end numbers still made sense.

Mike DeHaan: [24:30] Yeah. Yeah. That's at least conservative. Right? So, you know, like, if it does improve, which hopefully it does, that's great. But I mean, historically, that is probably relatively accurate, you know, especially if you take into account property values.

Dylan Koch: [24:43] Yeah. Like, and I asked Claude, I was like, you know, given the interest rates for the past couple of years and history, all this kind of stuff. And it does say like, even within five years, like it doesn't see a steep incline because they've raised from so low to where they are now. But pretty much it just be like a sideways for... That's what it anticipates anyway.

Mike DeHaan: [25:01] So as someone that's still buying assets, I guess, like, what is your time horizon on a lot of that sort of stuff? So, like, I guess from from my perspective, I stopped buying real estate a number of years ago for the most part. But, like, one of the... Someone that I know that's been in the space for a very long time is a good friend of mine. He's in Austin. He's had a successful house. Think he in Austin for, like, twenty years. Right? So he's seen all the market changes he started pre 2008. Like, he's been doing it forever. He is... Like, his portfolio and his net worth has dropped a lot. I imagine $78,000,000 over the past little bit.

Dylan Koch: [25:33] Is this the same guy who couldn't afford $40 in payroll, a couple weeks ago?

Mike DeHaan: [25:37] No. A different guy. Different guy. This guy's actually legit. We're actually... We're actually doing some loans for this guy right now. His financials are really solid.

Dylan Koch: [25:43] Okay.

Mike DeHaan: [25:43] He's like a pro. Makes a lot of money. He does really good from selling his business. But he is still so aggressively buying properties in Austin, even though they're, like, negative cash flow. Right? And they're, like, kinda assets that no one would touch. And he's... And his whole thesis is he's very, like, just bullish on the long term of Austin. That's where his whole portfolio is. He buys a very specific type of asset. And some of the numbers that he is getting on these properties are crazy. So, like, I was just in Vegas with him last week. We went to go see Metallica at The Sphere, which was super epic, by the way. You guys should definitely go to a show there. But while we were down there, he got this duplex under contract for $200,000 that the person had bought in 2021 for $460,000. Woah. So they're taking a $260,000 haircut. And he's like, yeah. It'll probably appraise now for, like, $2.80. And so maybe it's tight, but he's gonna hold on to it. It'll... It won't cash flow very well because the taxes are still riding that $4.60

Dylan Koch: [26:36] Yep.

Mike DeHaan: [26:36] Valuation. Right? But he's like, I know that at some point someone was willing to pay $4.60 for that. So somebody probably will be in future again.

Dylan Koch: [26:43] I mean, the whole point in real estate to me is someone else is paying down your debt. Yeah. So if you can get in for a little... As little as possible and the CapEx stuff doesn't kill you, over the long term, they're probably going to work out. Mhmm. Like, that's a very base assumption, but that's kind of this... The whole playbook. Yeah. And you have to choose someone that's growing. I mean, like, Cincinnati is growing. You can't just go put this in the middle of nowhere.

Mike DeHaan: [27:04] And even though Austin has declined, I think there's two pieces of spaces that are growing. I've also really sort of believed in this whole thought of, like, if you're doing it something in places that are like actually pretty cool, like people wanna live there, you know, and people are never gonna like not wanna live there. This is why despite all the politics and everything else, people always worked out. Pacific Northwest has always been a great place to buy real estate because no one's ever gonna be like, you know, the Pacific Northwest kinda sucks. Yeah. People are always gonna come here. Yeah. You know? Even if it's to buy second homes and things like that. Right? There's still gonna be that desire for people to come here because we have outdoors. You know, we got skiing, all that kind of stuff. Cincinnati's... You know, the places are growing very aggressive. I actually heard Cincinnati is a pretty cool town. You have a lot of people that are like, I'm gonna go to a bum fuck town because rents are high and property values are low, and I'm gonna cash flow.

Dylan Koch: [27:48] Yeah. All this is price to rent ratio.

Mike DeHaan: [27:50] All this is price to rent ratio, but, like like, no one wants to go there. Like, that's not like a good place. The reason that it's like that is because no one has moved there in a very long time. And your renters are all people that are trapped because of personal reasons or economic reasons or whatever else. And that isn't really the kind of people you wanna serve if you have a realistic long term view.

Dylan Koch: [28:08] No. I mean, I talked to a go bro that's here locally. He's like, oh, I bought a a duplex in Springfield, Ohio in, like, 2002, which is keep in mind, only, two hours

Mike DeHaan: [28:16] a day. Worth the same amount.

Dylan Koch: [28:18] He sold it for the same exact value twenty Oh years my god.

Mike DeHaan: [28:21] So- Twenty years. That's crazy. I mean, it was probably like under $30,000 We wholesaled it It out crazy.

Dylan Koch: [28:28] Is I guess to your point, pick a market that you know, pick something that is probably at least gonna grow a little bit. Even if it stays stagnant, like your prices aren't gonna go down, like if population stays the same. And just don't don't be unbiased with the numbers. Like, I should look at your cash on cash and what it is. If you can recycle the same dollars over and over and over again, that's where people make outsized returns. Mhmm. Like... And if you compare this to other assets, don't be a 100% real estate. I'm not a 100% real estate, and that's basically all I do. I'm like probably 50%

Mike DeHaan: [28:57] real Well, think one of the worst things people can do though is constantly be playing the comparison game with how the other assets have performed. Right?

Dylan Koch: [29:04] Sure.

Mike DeHaan: [29:04] Because then what you do is you never give yourself enough enough time in that particular market to actually get any returns. Yeah. Like, if you're constantly selling all your stocks to go buy real estate, and then you're having to liquidate all your real estate to get back into crypto, and then you're like, oh, no. I gotta get out of crypto because I'm gonna do this equity deal on a friend's self storage unit. Right? Like, you're just doing that all the time. You'll never actually get any realistic long term returns because you're base... You're trying to catch like those tiny little glimpses of time that got your attention, which are probably in the past, which is why they got your attention.

Dylan Koch: [29:35] Almost every new investment should be funded by revenue from some other source, not provided previous investment as a general rule of thumb.

Mike DeHaan: [29:44] Yeah. And that's why you need focus on revenue. That's why I like we've always sort of beat the chest on this show of like focusing on massive income before passive income. Because also too, I think one of the biggest things that holds people back is they have a $100,000 total to invest, and that's what they've saved up over ten years. And they're constantly trying to turn that into a million dollars somehow, and they're studying all these things. They're jumping around doing all sort of shit. When realistically, if they just went and focused on making a million dollars, that would be more likely to happen.

Dylan Koch: [30:10] Totally. Yep. And if you choose real estate as... Go what?

Mike DeHaan: [30:13] You got some construction going on

Speaker 3: [30:14] over there?

Dylan Koch: [30:14] Dude, this is... We're in the office right now, and the the place next door was a dental office, and they moved. And now they're redoing it as you can hear. I can't control it, but it is super annoying because I was on the phone earlier. Some big saw came on.

Mike DeHaan: [30:28] But nice. Yeah.

Dylan Koch: [30:29] But... Someone asked me earlier, like, how do I scale so quickly? And I'm like, I I don't think it's really that quickly at all. Like 2022, I have 50 units. Call that five years. It's 10 units a year. But I am... My answer was one, I burned out almost all of the properties. I had seller finance deals, which was 12 of them. And then I wasn't afraid to sell the shitters and turn that equity into down payments in other places.

Mike DeHaan: [30:51] Yeah. And and that's what it is. Right? It's strategic things over a long period of time. I mean, I got asked that too even over the years. But like, when I first started getting asked that when I was running this show in 2021, 2022, at that point, I had owned real estate for seven years. Yeah. Right? Yeah. Even though... Like, so my first property I bought was in 2015. It was my primary home. When we moved to Spokane, we kept it as a rental. Right? So then we moved to Spokane. We had our house there that we we bought. Yes. I was in a position where I could buy two homes. Stuff was cheap back then. You know? The first two houses we bought were each under $200,000. Then I bought my first, like, true investment property in 2018, just three years later. Then I started flipping houses in 2018, flipped, like, one. Then I flipped three in 2019. Then I started working with Dan. And then we started, like, scaling up from there. And at that point, my flip revenue, I rolled into a couple more rentals because my whole goal was getting passive cash flow. Right? So if you look at that whole period of time, like the first six deals, seven deals I did was five years. You know? So then we went into 2020, and me and Dan decided to take it seriously. The thought of doing multiple deals a year wasn't daunting. Yeah. You know? We'd already done it.

Mike DeHaan: [32:00] Dan had done some deals as well on his own. And so like our goal at that point was really just to do a deal a month that felt like a big hairy audacious goal. And then in October that year, we did like seven in the month. And we're like, hell yeah.

Dylan Koch: [32:13] Yeah. It's funny because the goalposts always change or whatever. It's like, Yes, but you also just realize what you previous thought was impossible as possible. And so of course, you kind of naturally gravitate towards that.

Mike DeHaan: [32:26] Yeah. It's all learning. But if we had gotten halfway through 2020 or, like, even before that, we were like, oh, no. Crypto is going crazy, which actually no guys that did this. They left real estate in 2020 because the crypto market started going nuts. I'm like, I'm gonna sell my houses and go all in on crypto. They might have done okay, or they might have lost their ass. Because if you don't know what you're doing, that becomes a slippery slope where you're

Dylan Koch: [32:46] You had to time that very right.

Mike DeHaan: [32:48] Yeah. And you're buying like all these shit coins and other things, you know, going all in on Doge. There's people that actually did that, like unironically.

Dylan Koch: [32:56] Yeah. That's the reason the people that you always see change every couple of years, like, they're never gonna have any real wealth. Like, sorry. There's not.

Mike DeHaan: [33:03] Yeah. I have one more one more thing on that note, and then we'll we'll call up. Okay. I have this new red flag for people that I never wanna be associated with and I will never take seriously and... Or, like, a new arch type of person. And I say this because we recently had one of these people come through our company, and they're a fucking joke. It's like a... Usually a guy that's, like, in their fifties that tells you that they've been a career salesman, and they think they're the shit, but then they don't really have a lot of stuff in their life. I'm like, if you were good at sales, bro, and you've been doing this your whole year, like, your whole life, you would not be in situations you're in right now. You would have a dope house, you know? No, man. Awesome car.

Dylan Koch: [33:41] Sales is like the most- You'd be

Mike DeHaan: [33:43] very successful. If someone is like a career salesman and they haven't, they have nothing to show for it, that means they're a really bad salesman. And you should absolutely never hire that person in your company ever.

Dylan Koch: [33:51] I totally agree. I'm sorry. I'm gonna back it up just a second. Mean, it's funny that you're in the lending space. When I graduated, paid off my debt, I was probably 25, 26, had a great credit score. I look back now and I'm like, wow, lenders were probably salivating at me and I didn't even know it at the time. Great credit, good w two, young, like no liabilities. And I think I underplayed what leverage I probably had at some of my initial loans. Just took whoever said like, go to this guy. I was like, sure.

Mike DeHaan: [34:17] Yeah. Totally. That's what we all did. That's how I got ripped off on one of my early flips I did was because the lender that I was using backed out because the deal was sketchy. And the wholesaler who I was buying the deal from was like, oh, just use this lender. They're way better. And it's funny. It's one of those things I look back, and I paid, like, $30,000 in fees that I didn't fully understand.

Dylan Koch: [34:36] Jesus Christ. You wanna know

Mike DeHaan: [34:38] what's crazy about that deal too? I lost money on it. Wanna wanna know how much I lost?

Dylan Koch: [34:41] $30.

Mike DeHaan: [34:42] Like, $29,000. Yeah. Like, exactly all the bullshit fees that I shouldn't have paid, but I had no idea what was going on. And I was like, it was like my fourth deal. I'm like, know what

Speaker 3: [34:51] I'm doing.

Dylan Koch: [34:51] And you basically go, Is this normal? They're like, Yeah. Like, Okay. And then stupid.

Mike DeHaan: [34:55] I'm like, That lender that's done hundreds of loans, they don't know what the fuck's going on. This guy, he definitely does. He's going to close it for me in two days with no questions?

Dylan Koch: [35:03] Yeah, absolutely. Of course. Alright, man.

Mike DeHaan: [35:05] Cool. Alright, guys. Well, thanks for listening. Any last words, Dylan? Send it off?

Dylan Koch: [35:09] No. I think I'm good.

Mike DeHaan: [35:10] You think you're good? Come on. You got something for him. No. What were you for Halloween?

Dylan Koch: [35:15] I was a farmer, and my wife was a pig, and my daughter was a chicken.

Mike DeHaan: [35:19] But the wife being the pig is an interesting choice.

Dylan Koch: [35:21] Her choice. Yeah.

Mike DeHaan: [35:24] Yeah. Feels very... It feels like a very Ohio

Dylan Koch: [35:26] Oh, very, man. Very Ohio.

Mike DeHaan: [35:28] Yeah. We we were the Incredibles. Worked out pretty good.

Dylan Koch: [35:31] Oh, that's... Yeah. You were the female?

Mike DeHaan: [35:33] Yeah. I was. Yeah. No. I I was the baby, and

Dylan Koch: [35:35] my Flexer girl?

Mike DeHaan: [35:36] My son was mister Incredible.

Dylan Koch: [35:38] There you go.

Mike DeHaan: [35:40] Alright. Alright, everybody. Thanks for listening. We'll talk to guys next week. See you.

Speaker 3: [35:43] This episode is sponsored by Sir Lenzelot LLC, also known as SLA Capital, which, if you didn't know, is Dan and I's private lending company. So, yes, we are sponsoring our own show, but what you're do about it? It is our private lending company that offers hard money and DSCR loans to real estate investors of all types. So you can be a new investor, an experienced investor. You can be buying flips. You can be buying rentals, whatever. We can do everything. And not only that, but the rates that we offer are just as competitive, if not cheaper, than pretty much every other company out there. So whatever big company you've been working with, bring us their term sheets, and I guarantee that we can probably beat it. We have the same connections they do. We just don't have all the overhead and middlemen. So if you wanna come and check us out, go to slacapital.com/keys, and I will know that you came from the show. And by seeing that you came from here, when you get the closing, you will save $500 on your first loan with us. So slacapital.com/keys, we would love to fund your next deal. Thanks for listening, everyone. If you want more from us, you can shoot us a follow on Instagram. I am at Mike underscore Invest. Dan is at investor man. Dan and Dylan is at Dylan underscore does underscore deals. Choose to follow and send us a DM to let us know what think of the show.