Everyone Wants Overnight Success... Nobody Wants the First 5 Years

Mike DeHaan: [0:01] What's going on, guys? Welcome to collecting keys. I am Mike Ahon here with Dylan Cook today. No damn. He, he just no showed on us. And after twenty minutes of waiting, we had to get going. So I don't know. Hope you safe out there, buddy.

Dylan Koch: [0:15] Mean, 500 episodes, and he was out. He's like, I'm out of here.

Mike DeHaan: [0:18] Yeah. Right. Surprise. After episode 500, Dan is no longer a part of the show. We will keep him on the, the cover. And, Dylan, I saw your note. I actually did add you to the cover.

Dylan Koch: [0:30] I listened to our five hundredth. Oh, did you? If I didn't say anything, who knows how that low... How long that would have went on?

Mike DeHaan: [0:37] Oh, no. I wouldn't noticed it. Because I I I checked the stats every week, and so when I logged on, I would have been like, oh, shit. I did it.

Dylan Koch: [0:44] I don't really listen to all of our episodes, so I did really listen to 500, and I thought it was good.

Mike DeHaan: [0:47] Yeah. I thought it was a decent one. I've actually gotten some great feedback. I appreciate everyone that that reaches out to me after after some of those and just to answer a couple questions. One, no. I'm not gonna release the episode of the stolen valor guy. I know people were very interested in that, and it's just not gonna happen. And two, I'm not gonna share any more details about the sort of failed partnership that Dan really opened up about in the last episode because there is a lot of, like, crossover social connections in there. A lot of people wanted, like, more details on that, I think, because people know the other person involved. And, nice to meet directly, and maybe I'll tell you something I'm not gonna talk about on the show.

Dylan Koch: [1:26] People just

Mike DeHaan: [1:26] want dirt. People did enjoy it. No. Like like, I'm all about spitting some dirt. It's it's tricky when it's like, you know, our, like, families know each other and it's a small town. Sure. Sure. You know, it it makes it a little bit different. I mean, I'm I'm more than happy to talk about it, just not in a public forum where people are unable to defend themselves. But, either way... I mean, even them. When I talk about, like, public people, I talk shit on them. They are more than capable of defending themselves because they are putting themselves out there on a regular basis. So that... When you become a public figure, you are voluntarily opening yourself up to criticism whether you like it or not. And so I have no problem speaking out against kind of those people because they already know what they're what they're doing.

Dylan Koch: [2:07] I'll just echo that whole message.

Mike DeHaan: [2:09] Yeah. So either way, appreciate everyone tuning into that one. It was fun. It was fun to talk about some of the stories. And it's funny whenever we do those kind of things, it is funny to look back at, like, how much can happen in a really short period of time. I guess when I was talking to to Dylan actually right before the show, and I was like, oh, yeah. That... Talking about my my old days when I left my job and I was working at the gym kind of before real estate stuff really started to take off. And I realized that I really only left my job, like, six years ago. It wasn't that long ago in the big picture thing. It was a little bit longer than that because it was right at the very beginning of 2020. And what really kind of, like, pushed me out of that entirely into real estate was when COVID happened. So that was March 2020. And it's funny. It's one of those things that six years definitely doesn't feel like a long time. And if you look at how many things have transpired in six years, it's kinda crazy. Especially, you always hear about, like, some of these bigger business owners that are doing things over, like, ten year time horizon and that sort of stuff. And realistically, I mean, I haven't even been in business for that long. I mean, how long have you been a business owner at this point, Dylan? Like, 04/22?

Dylan Koch: [3:15] Technically technically, it's end... It was October 2021.

Mike DeHaan: [3:18] '21. Okay. Yeah. Yeah. Me So coming up on five years this year, you know, and you've done very well for yourself. One of my favorite sort of sayings and concepts is this whole view of, like, people overestimate what they can do in one year. They underestimate what they can do in five. You can say that same thing with, like, any sort of bearing of time. It always seems to be true. But, like, that is such a a true statement overall of, like, you do stuff for long enough and you're intentional about it and you're not wasting your time doing dumb things, you can really grow relatively quickly.

Dylan Koch: [3:51] Well, everyone... Like, the headlines are always like overnight successes. Right? But in reality, no one sees the fifteen years that it took to be the overnight success.

Mike DeHaan: [3:59] Well, totally. Well, even shorter. Like like, people talk about how our LensLot business has grown. People also say like, I feel like you've really grown that so fast. So LensLot LLC was founded as a company at the beginning of twenty twenty two.

Dylan Koch: [4:13] Yeah. So four years. Yeah. Over four years.

Mike DeHaan: [4:16] Yeah. And we did our first loan under... It was under I and W Properties, because that was our wholesale company at that time, in November '21. So we've we've been running... We've been lending for almost five years, and we've really just started promoting it over the past couple of years because that's really when... I mean, honestly, even just like this year, that's really when it started to, like, gain traction and actually have legs underneath it. But we spent from the beginning of '21, all of '22, all of '23, pretty much all of '24, doing these loans on the side that were like stupid loans to do to people, to our friends that were like max leverage, who weren't collecting interest. We're doing all like the dumb shit that you do when you don't know what you're doing. And we only had one oopsie, which is why we now own a freaking duplex in Baton Rouge. I guess aside from that, we just got lucky. You know? And we've had some of these deals with friends that that did go sideways. They told us after the fact, that they paid us back because their reputation with us was worth more than the money that they lost on the deal. Right? But that's not gonna be the same for everybody.

Dylan Koch: [5:22] If you're lending in 2122, I mean, there is still some runway with the market could have bailed out some of those deals anyway. Yo.

Mike DeHaan: [5:29] Totally, dude. 100%. Especially on some of the bigger ones. Oh, nice. Dan said, no. I'm out with me. He's playing golf. It's fucked up.

Dylan Koch: [5:41] Wow. What a jerk off. I

Mike DeHaan: [5:45] wish I was golfing. He said he forgot. Okay. You guys could message Dan and let him know. Like, that's fucked up. Same time every week. Just because... And if my audio sounds weird, I'm in California. Just because we, I left town like I regularly do, doesn't mean we're in the challenger can do instead of Cali.

Dylan Koch: [6:02] A different time zone. No. I mean, hope I he shoots over a 100. I don't know if Dan's a good golfer

Mike DeHaan: [6:06] or not. He's not a good golfer. He will definitely shoot over a 100. But he, you know, he... He's athletic enough to figure it out.

Dylan Koch: [6:13] Yeah. To your point about the lending, most of your time and focus was on the other part. Like, lending was not, what, 20% less or, like, not even 20% of the businesses that you were doing No. At the time.

Mike DeHaan: [6:26] It was a it was a true side gig. Right? Like, when we started doing that at the end of twenty one, we had noticed a decrease in properties that we are interested in holding, mostly because we were starting to see the values top out. And then in March '22 was when we decided that we're gonna start going virtual because we recognize how top heavy the market was in Spokane. And so at that point, we had accumulated a shit ton of cash and we just wanted yield on it. And so how it originally started is we were just doing loans for the deals that we were wholesaling. And the thing that was awesome about this, by the way, if you ever do a loan for a deal that you're wholesaling, is you collect an assignment fee from your own money. Right? So let's say that you're generating a loan. It's for easy math. It's a $100,000. It's a $100,000 purchase or whatever. The loan's $100,100 grand. You're collecting a $30,000 assignment fee, and it's charging 12% interest. You're going to go and get your thousand dollars a month, right, on your $100,000 that you're sending out. But let's say you have a $30,000 assignment fee in there. That $30 is gonna come back to your pocket. So you're basically collecting a thousand dollars a month on $70,000 that's out instead of on a $100,000 that's out. So you can really juice your spread. And when we started doing that, we're like, we're the smartest fucking people in this industry.

Mike DeHaan: [7:44] Like, why is it? And it turns out because most wholesalers are broke or they're flipping houses or doing other things. So we did that for like a while, and it worked out pretty well. And then we started to do loans for other operators that we've met kind of around the country just because we had a lot of cash.

Dylan Koch: [8:00] You ever see wholesalers who are going to, like, flip it or, like, will wholesale it to themselves, but just via a different entity. So that way they can play with the purchase and rehab numbers to try to get the financing that they need.

Mike DeHaan: [8:12] See, people try to do it all the time. It always gets affected because it's... You're just basically trying to make it so you have no skin in the game.

Dylan Koch: [8:19] Yes.

Mike DeHaan: [8:19] And and years ago, like, we were trying to do that. There was always like a thing. It's like, oh, we need operating capital. You can, like, kinda make your pitch. At this point, lenders are onto that. They don't wanna get one.

Dylan Koch: [8:29] Yeah. No. That makes sense. I've seen people do it before, but it also will get flagged quite a bit.

Mike DeHaan: [8:34] So so... Dude, the stuff... All this creative shit that people try to do to, like, have no money in the deal, if you're working with, a real lender and not just, Rich Guy Joe, it's not gonna fly anymore.

Dylan Koch: [8:44] Yeah.

Mike DeHaan: [8:44] Like, the other thing that we see, like, the Morby method bullshit where, like, you have the seller carry a second position after closing, you know, but because we're following the course that we took out as 0% interest credit card to buy because you're fucking idiots, we're going to, you know, have that on the dock so that, like, the person's secure. It's just like that's never gonna get approved by a lender because you're delevering yourself. The entire... And the the whole point of these loans is they want you to have skin in the game so you don't just, like, walk away. And then well, if you decide to do that, you're gonna leave us with this poor seller that you put in second that has no idea what's going on. They thought they were done with that property.

Dylan Koch: [9:23] Yep. Dude, there's how many loans lately or how many deals lately have come back with these COVID and HUD loans that the sellers, like, have no idea. One seller took out five different ones for a total of $46,000 over four years.

Mike DeHaan: [9:37] So I don't even know what this is. You put this in our notes, and I've I've never seen this.

Dylan Koch: [9:41] I think it is, but it's probably the same terminology. But the way I understand it is, like, you... If you have a loan with, like, US Bank. During COVID, you went and got, like, these COVID relief loans for, like, six or seven, eight

Mike DeHaan: [9:53] Is it like the forbearance?

Dylan Koch: [9:54] Yeah. I think it's the same thing. But let's say your loan, for example, versus was a $150. You go to the this COVID relief program, or these HUD loans and say, Hey, I can't pay my bills because of COVID. I need some money. And they're like, Oh, well, we'll give you $10,000 cash upfront, but then we're just gonna take that $10,000 and put it on the back of your loan. So now their loan's $160,000

Mike DeHaan: [10:16] Yeah. So that was the forbearance that they were doing.

Dylan Koch: [10:18] Right. How many of these I've seen lately are so crazy? And then the seller's like, Oh, I didn't know I had that. I'm like, Are you lying to me? Or are you really that oblivious?

Mike DeHaan: [10:26] So that's interesting that you're seeing a lot of those. We've seen a couple. I'm almost wondering if it was, like, market specific. You know, what's the average income in Cincinnati?

Dylan Koch: [10:35] Oh, Cincinnati specifically? Probably for a single person, probably $60.70 grand.

Mike DeHaan: [10:39] That's higher than I thought.

Dylan Koch: [10:40] Yeah. I mean, I could try to look up. Our median home price is, like, about 300 on the

Mike DeHaan: [10:44] because out out here, you just didn't see a ton of forbearance stuff. You still don't. But, I mean, that is gonna start coming back to bite people. Like, a lot of people didn't realize when they were getting their loans. Like, I don't know why people don't understand this from the government. There's really no free lunch. You know? Even like the free, like, stimulus checks that we all got, the payment for that is rapid fucking inflation that's now made everything more expensive forever now. So I hope you enjoyed your $2,000. Now you're just gonna pay pay more money for it.

Dylan Koch: [11:11] Google AI says the median household income is 81,000, and median salary for individuals is $52.03. So 53,000.

Mike DeHaan: [11:20] Isn't that crazy? Can you imagine living on $50,000?

Dylan Koch: [11:23] No. Actually, I can't.

Mike DeHaan: [11:24] After taxes, that's, 36 or something. Like, 42, maybe. I don't know.

Dylan Koch: [11:28] There's no way that people could... Like, I mean, shit. When I graduated college, I split rent, like, with five other guys. But still, like, I bet I could have gone a two bedroom, like, 800 a month. Now it's $12.13, 1,400 no matter what.

Mike DeHaan: [11:40] So crazy these days. Well, it's crazy how fast that changed too because, like, my first job that I got out of school, I was an engineer, and I I got a $60,000 a year job. And I was, like, so rich at that point in time. This was 2013. You know, I could do anything. But now that's, like, barely even a... Like, enough to get by, it feels like. My my first apartment as well was, I think, $650. That was, like, nice.

Dylan Koch: [12:06] Right. It was funny because, like, when the new guys are buying shit and they're underwriting rents at being, like, let's say it's $950,000, and the old guys are sitting there like, you're not gonna ever get those rents. And then we're way, like, blue past all of them.

Mike DeHaan: [12:17] I know so much. Yeah.

Dylan Koch: [12:20] But, hey. I mean, that... Sometimes experience can bite you in the ass and... If you have your bike like that.

Mike DeHaan: [12:25] Yeah. And... Well, that... That's that's the thing is people use experience to predict the future, and people tend to not understand that past success is not equal future future success every single time. Yeah. I don't know what that is about human psychology, how you always seem to ignore that. You know? Like, there's so many things that are, like, around investing, stuff like that. Like, everything always goes up into the right, which, like, I guess it has been that way for, like, a while. But if you look over the history of all time, there's a lot of shit that kinda just went down and disappeared forever.

Dylan Koch: [13:02] Oh, yeah. Like most businesses.

Mike DeHaan: [13:04] Yeah. There was that. Well, most businesses, right, or, like, fucking countries, nations. Like Yeah. That there was there was that thing for, like, a long time. I was like, how often do think about the Roman Empire, which was, like, the weirdest trend ever? Yeah. To the point, that was, the biggest thing ever, and now it's gone entirely.

Dylan Koch: [13:20] I forget what I was gonna say to that. I wanted to round out the, like, the focus conversation, like, your lending, how people say you've grown so quickly, but that's because now you're... Like, it's a 100% of your focus now. Right? As a personal anecdote to that, like, I basically was following yours' footsteps. Was like, yeah, lending sounds awesome. I'll lend out some of my own money. Wholesaling sucks. And I started to lend out some money, they've gone well. I'm just like, but I don't don't really enjoy it. It is much more work than I want, especially if you wanna scale it. Like, you can lend out your own money, and that's perfectly fine.

Mike DeHaan: [13:48] It's a lot of

Dylan Koch: [13:48] work. But... And then so I was like, so I took the eye off the ball for the off market business for a while. And then I'm like, like, where's my money at? But anyway, long story short is like, I dove back into the off market business a lot the past couple weeks. And now we have eight deals in escrow, maybe nine after this next one. And it just shows the power of, like, intention, focus, and also shows that I didn't have as solid a business as I thought. Because I was still, like, have my AM guy. I still have my other people on my team. They just weren't doing deals if I wasn't there.

Mike DeHaan: [14:15] Yeah. I mean, that's nice, though, at least that you were established enough that you can just jump right back into it. Because I think where people really get bit is when they are, like, one year in or they're six months in or whatever. And they're like, oh, well, I'm gonna go and try to this other thing now. That's where you get into, like, the perpetual entrepreneur that never actually does anything. Yeah. So are you still lending? Are you still planning to do that? Are you gonna be done with that altogether?

Dylan Koch: [14:38] I think I'm done with... At least park... Putting it on the the back burner for now. Like, I I canceled the software subscription, or I put it on hold. I told the attorneys to hold off. I'm very pocket committed to this too. Like, it is 5 figures of money that I've put into it.

Mike DeHaan: [14:52] That's like Just come join our lone cavalry. Like, like, they... It's low commitment. Just like... Seriously, you can just give them your deals. I'll give you the pricing tool. You just price it what it has to be. You can have someone... Now have your VA freaking do it for you.

Dylan Koch: [15:06] This is live negotiation on the on the pod. Don't don't don't have it

Mike DeHaan: [15:10] in my because because because if you do that, I'll pay you half a point for a loan instead of just a couple $100.

Dylan Koch: [15:14] Just doing the math

Mike DeHaan: [15:14] in my head. You're thinking about it. That's a decent chunk of money that you'll get there pretty quick. Hey. That's... If that's a million dollars a month, it's a decent little little bit that you'll get make every single one.

Dylan Koch: [15:25] We'll talk about it after. A lot of my buyers have their own preferred lenders already, but, you know, that... That's the whole gist of of doing it.

Mike DeHaan: [15:31] Yeah. Because they haven't met Sherlens a lot yet, Dylan. Sure. Yeah. We we we already do, like, half the loans in your freaking city anyway. It might be tough to squeeze out anymore.

Dylan Koch: [15:39] Yeah. You're welcome. I feel like I helped with that a lot Yeah. With the connections.

Mike DeHaan: [15:43] And you took it away. It's alright. Scotty can go back to us if you start doing loans.

Dylan Koch: [15:46] Yeah. Yeah. He's not even here today.

Mike DeHaan: [15:48] Yeah. That's how it goes, though. That's pretty sweet, though. You're able to turn it back on. And so, like... So I guess going forward, is that just your plan? You're gonna try to just optimize your wholesale business a little bit better again so you can be less drained by it? Or

Dylan Koch: [16:01] Yeah. And I honestly, I I... Once some of the money started coming back in, I'm like, oh, this isn't so bad. You know, I just needed some revenue to change the mindset a little bit.

Mike DeHaan: [16:10] But That is the nice thing. And so, like, the the good thing about the lending business is it's a much more consistent revenue. Right? Like, you don't have, like, the wild swings. But the downside of it is, like, there's literally no way that we could just all of a sudden have 200,000 in revenue. Right. Right? That's not feasibly possible at all because we wouldn't even have the capacity to produce the number of loans in, like, such a short period of time. Even if we somehow found, like, a borrower, say, that had... I mean, how much in loans would that be? That'd be, like, 20,000,000 in loans for us to do that. If they want to say, hey. I wanna get $20,000,000 in loans from you. Just the actual processing of that much paper, we don't have the capacity for it. So it's not

Dylan Koch: [17:00] Yeah. Right. And I'm sure there's a delta in what you can make per loan. Obviously, on price, the the what you negotiate with who you sell to, all that kind of stuff. But that range is probably, I would say, thousands of dollars, not tens of thousands of dollars, which can obviously happen in the wholesale business.

Mike DeHaan: [17:15] So Yeah. You know, and on average, what we actually make as a company is between two and a half to 4% per one.

Dylan Koch: [17:21] Okay.

Mike DeHaan: [17:22] Right? If you include the yield spread, the points, that's net after considering all the overhead, the commissions that we pay, everything else. And that's kind of industry standard. Right? Like, if we if we were a true, like, balance sheet lender and we kinda just, like, did things super different or we were like some of these lenders that are like, I only lend to idiots. I do fourteen and four because they have no credit and they're desperate. We would potentially make more, but that would be bounced up by our losses we ultimately take.

Dylan Koch: [17:48] Yeah.

Mike DeHaan: [17:48] You know?

Dylan Koch: [17:48] That's the scary thing about loans. The more I was doing it... And I I did. I... You know, we issued it with colenders, like, over $3,000,000 of loans. And I'm like, okay. You make a couple grand per loan. Let's say you make $20 a loan. One deal goes sour, like, could wipe out all of your profit.

Mike DeHaan: [18:03] The downside risk is huge. People don't understand All of your profits. Yes.

Dylan Koch: [18:06] Yeah. Like

Mike DeHaan: [18:07] But not only that, it can knock out your principal if you're really doing dumb stuff. Yeah. You know?

Dylan Koch: [18:11] Yeah. Luckily, the people who we lent to, know have all great personal balance sheets. To your point earlier, like, if the deal fucked out, they would still be able to make it whole.

Mike DeHaan: [18:22] Yeah. See. And that that matters. That's what matters more to me. Yeah. But I don't know. The the industry will be changing a lot. We got approval from one of our institutional investors to do a 100% financing today. So, basically, that means if you came to us and you need... You want a 100% financing, the the requirements are relatively strict. You need to have seven twenty credit. I've done 10 plus deals in the last thirty six months. It has to be basically like a light or medium rental. So you can't be doing like a 100% financing to do like a fast position.

Dylan Koch: [18:51] Yeah.

Mike DeHaan: [18:52] So the credit alone knocks out most of the borrowers that claim the 800% financing because goddamn, some of you guys that are professionals, your credit's trash. Get that shit figured out. But, the fact that we now have an institutional investor that, like, essentially would provide us funds for... And we're not a broker. We're not... We're a direct lender. And so basically how it works is we would fund the loan. We can sell it to them, which traditionally hasn't existed with 100% financing. Like, the 100% financing stuff, it... It's always been like it's balance sheeted. Even if you're using, one of the big guys at Kiev or whatever, they're balancing that loan with their own private investors. So now that we have a third party that's going to come and buy that debt, it's really, really interesting. And I would say it is a... The ultimate sign of, like, a very, very frothy market in private credit. You know what They're getting desperate.

Dylan Koch: [19:38] It's a battle to what? For fees and leverage. Right? I mean, there's really only two avenues you can go down.

Mike DeHaan: [19:42] Yeah. They're getting desperate to to fill their their warehouse line or whatever their liability is that they're paying every single day.

Dylan Koch: [19:48] Yeah. That makes sense. It is weird. A little off topic or not. But, like, once you're around a bunch of wealthy people, how much of them are able to utilize their own balance sheet for better credit? Like, you can go get a... Like an asset backed loan for four or 5% right now if you have like a shit ton in in like the S and P 500. Yeah. And like, that's not a lot of thing that normal people can do. And they're like, so it just kind of perpetuates the wealth gap because those same people can go borrow at four or five percent backed on thing that's usually going up in price anyway. So their leverage automatically goes down, just on the math.

Mike DeHaan: [20:23] Well, that's always kind of one of the big things about why so many billionaires don't pay taxes, right? Is they get all that money on debt off of their stock in SpaceX. Right? But if things happen, like SpaceX dropping down to to $1.35 now, taking a massive shit off the high, eventually, you could get that called, which would be funny. But there's no risk there.

Dylan Koch: [20:42] I I just wanna be vindicated because someone messaged... Commented on our reel and said that This age like milk. Age age like milk. Yeah. And all it needed was two weeks. Well, now it's below the IPO price. Dude, stuff

Mike DeHaan: [20:55] like that. Like, it's just... It's so akin to gambling these days. It's crazy. There was something... It was a Chris Williamson post. You know that guy? He has the Modern Wisdom podcast.

Dylan Koch: [21:06] Yeah. Yeah. I don't listen to him, but I I like all of his skits on my Instagram.

Mike DeHaan: [21:09] I pretty much listen to only his his Hermosia episodes. Know, they're, like, nine hours long. But I do I do like his follow on Instagram because he'll post these little, like, musings. But he posted this one the other day. This is very prevalent to this. I also think that this explains, like, the current investing environment a lot. But it said Americans are more likely to place a gambling bet than read a single book. K? And it said fewer than half of adults reported having read a book of any kind since 2022. Only 38% had read a novel or short story, whereas 50% of Americans had placed a bet. I believe that. Right? And when you look at, like, the state of investing right now, I feel like that is... If we included that, it would be even higher.

Dylan Koch: [21:55] Oh, a 100%. But I think it goes back to the affordability thing. People don't wanna just put a couple $100 in an index fund every month. They wanna hit the next meme coin that takes their $10 to $10,000. That's the only way they they feel like they can get ahead.

Mike DeHaan: [22:09] Dude, you you wanna know what's the craziest thing ever that I've seen right now? So I follow a subreddit that is not like wallstreetbets, but it's kinda similar. And what people will do on here, there's, like, all these massive chats about it. They will basically trade, quote, unquote, Bitcoin fifteen minute prices. So, basically, what you can do is you can see, like, in the next fifteen minutes, Bitcoin's going to be above or below, like, 65,140. And it'll have odds. And they basically sit there all day, and they just, like, do that.

Dylan Koch: [22:41] My god.

Mike DeHaan: [22:42] And it's like just flipping a coin. Like, there'll have these people that build out, like, these bots that basically go and do it. I'm like, you're just itinerary gamblers. Like, you should just go and bet on, like, rock paper scissors. Like, what are you doing?

Dylan Koch: [22:55] Literally, let's go to the casino and throw it on black. I mean, it's like... I was listening to a podcast yesterday, and it was... The guy being interviewed was an old Wall Street trader, but, like, this was forever ago where they're actually still on like the trade floor to execute trades, not like digitally. And he's like, I remember, like, we... Even back in that time, like, it shut off at 04:00. Like, it wasn't until they mentioned the BlackBerry that we're inter connected 20 fourseven. And then he went on like how bad that is for even traders because now they're trying to time Asian markets at 08:00 at night, they're waking up and doing Tokyo, know, and they're just like going all over these places and you're never not connected, which is even true in our wholesale business. You know, if I get an Ari Simply notification at 07:00 at night, now my mind's thinking about that.

Mike DeHaan: [23:39] Yeah. Dude, I remember back in 2017 when I was super into, like, the whole crypto thing. That was when you had all, like, the ICOs and different stuff, which was essentially gambling at its finance back then. And you could, like, very regular. There would be, like, a new coin every week that went up, like, 2000%. We did crazy shit. But I had my, like, CoinMarket app, and I was so fixed on it because I was exactly that person. I hadn't left my career yet. I was so just like, I need something that's going to lift me out. And I had some coins that went huge. I think my total buy in on a couple was $5 and I would get $8,490,000.

Dylan Koch: [24:16] Oh, nice.

Mike DeHaan: [24:16] Of course, I never fucking sold them, so I

Dylan Koch: [24:18] just like Okay.

Mike DeHaan: [24:19] Yeah. But, like, I would just, like, wake up in the middle the night because it was twenty four hours. And I would go, and I would see that one had, like, dropped, like, 18%, like, while I was sleeping. You know? And then you go on

Dylan Koch: [24:31] bread and everyone's gonna be like,

Mike DeHaan: [24:33] oh, well, China just announced this, so all the Chinese people are selling. You know? And there was just this nonsense constantly.

Dylan Koch: [24:40] Yep. Yep. It's all noise, man. It's no way that's good for your brain.

Mike DeHaan: [24:43] No. Not at all. Anyways, you said you sold one of your properties, Dylan, finally.

Dylan Koch: [24:49] I did. Sold a six unit two days ago.

Mike DeHaan: [24:53] I'm actually surprised that you sold a six unit of all things. So I feel like the multifamily has just kinda been your jam for a while.

Dylan Koch: [24:58] Yeah. No. It is. I think we don't really own any... We own one single family and one condo, but all the rest are couple duplexes, a couple quads, a six unit... Well, just sold a six unit, eight unit, and a 13 unit. And they all cash flow much better than the the smaller properties do. But I basically sold it because I put it out there for a price I thought was stupid and someone paid it. And then the return on equity for that was pretty low. Yeah. I took full depreciation on that two years ago, so I'm glad to pay that back. But we've already bought two other places this year, so I should offset that quite a bit. And then I'm just taking the equity. I'm gonna place in other stuff that has a higher yield.

Mike DeHaan: [25:34] Yeah. Yeah. Yeah. I mean, that's what you have to do. Right? If you're like a serious investor, you need to be analyzing performance, moving stuff around. That's like kind of the... I know we've we've pushed on this a lot, but the whole hold forever sort of thing just... Like, it can make sense to be a real estate person forever and build an asset, but you have to scale up or, like, level up at some point. If you just hold on to the same home forever, essentially as depreciating asset in the way that the actual property, sure, might appreciate in value, but the thing falls apart. Yeah. There's no way to avoid that. That's just how... It was a law of entropy. Everything moves towards chaos.

Dylan Koch: [26:10] And this was definitely, like... It was a C neighborhood. It was a... Like, everything else I know is down better better parts of town. It was on a boiler, so we had to pay for the heat, which was always annoying. But, I mean, there's not much other to it than it was just like, we're looking at the portfolio, looking at, like, portfolio architect. The loan was in, the sevens because I got this in, like, you know, late twenty twenty four. So got rid of, like, some of my higher debt that's on the balance sheet. And then just redeploying the capital is all it comes down to.

Mike DeHaan: [26:38] Nice. Is the return on equity, like, the primary thing that you look at every month? You look at that more more so than, like, cash on cash?

Dylan Koch: [26:45] No. I would say cash on cash is probably the number one metric I look at for buying rentals, but return on equity is part of that calculation.

Mike DeHaan: [26:51] Yeah. At what point... Like, so, like, when you calculate your cash on cash, if you put extra money into the deal, say you're... Have to replace a furnace, if you would have, do you update your cash number?

Dylan Koch: [27:04] Yes. Because I feel like you should.

Mike DeHaan: [27:06] You should. For sure. But a lot of people don't. Like, a lot of people, they will only consider, like, the down payment that they put, and that becomes their cash on cash forever. You know? A lot people don't even consider like the points and fees on their loan or like the closing costs.

Dylan Koch: [27:17] Yeah. That's dumb. There should be... Like total money invested in the deal should be your denominator.

Mike DeHaan: [27:22] Even though it's it's eternal. Right? So it'll... So like at what point... Because your your cash into the deal will always go up. There's no way to avoid that. The equity will also go up, you know, assuming debt pay down and essentially flat.

Dylan Koch: [27:33] My counter to that would be, Mike, what if you just said, like, let's say that place cash flow is a thousand bucks a month. And instead of counting it as cash in the deal, you're just saying, okay, I put it in a $5,000 furnace. It wiped out five months of cash flow. Now my p and l is just smaller. I guess this was on the accounting that you do with it.

Mike DeHaan: [27:48] Sure. Yeah. Yeah. Yeah. There's no right or wrong answer. One of the things that I've really started to realize is how incorrectly a lot of people view their returns in their real estate because they're tied to these fixed metrics that actually change a lot. And they never update the the big picture. You know? Like, they never actually consider what is the market value today. Now when you bought it and you put it on your spreadsheet three years ago.

Dylan Koch: [28:12] Yeah.

Mike DeHaan: [28:12] Right? What is the actual sales cost of this property?

Dylan Koch: [28:15] Yeah. That's a huge...

Mike DeHaan: [28:16] It costs money to sell sell a home. If you sell it and you pay capital gains tax, you know, how much are you actually paying in tax at that point in time? That all should go into your actual equity calculation that you're giving credit to yourself.

Dylan Koch: [28:29] I agree with you, but no one does that.

Mike DeHaan: [28:31] Literally nobody. Because they're all lying.

Dylan Koch: [28:32] Especially if they're like submitting a PFS to like a bank or a lender. Right? Like...

Mike DeHaan: [28:36] So I did this exercise a few months ago with my GoPod, and my net worth dropped 35%. It was very, very significant. It was extremely humbling.

Dylan Koch: [28:49] Which if you count in the the... I mean, the taxes are a big part of

Mike DeHaan: [28:52] that. Yes.

Dylan Koch: [28:53] Right? And it's a minimum 20 percent, probably even higher if it... But then, yeah, the depreciation recapture, everything else, like... And the sales cost. I mean, if you're paying real to even do it, that's on a mat... In closing costs, 8% off of that. So just do closing costs and taxes, you're twenty eight, thirty percent. So there's your number right there.

Mike DeHaan: [29:09] Yeah. It's super significant. But, like, it it was a hard pill to swallow, but it's important that you know if you actually put everything, how much would you actually have? Otherwise, it doesn't matter. I might as well just go and, like, take my bank statement and just, like, write a different thing on there with a marker.

Dylan Koch: [29:24] Actually, I'll ask you a question here that I had popped in my head the other day. I mentioned it on episode 500. We have those 12 units, which are four buildings.

Mike DeHaan: [29:31] Mhmm.

Dylan Koch: [29:31] Well, at the end of that loan, and I go to refinance with a traditional lender, wouldn't it be wise to take... Like, the loan value will be around a million bucks, and I could probably only leverage... I have a really low LTV on all four if I put them all in the same loan together or have a higher LTV on three of the four, have one free and clear, then I could use that to get, like, a HELOC or something on it and then lend out with that fourth one.

Mike DeHaan: [29:57] You could, assuming you have a good HELOC provider or something like that. That's what I've come to find is it's pretty challenging to

Dylan Koch: [30:02] get HELOCs on rentals. But even it's 50% LTV, like, you know, you could do something like that.

Mike DeHaan: [30:08] You could. I mean, there's there's people that have done that aggressively, that's like their whole strategy. Right? Is they basically use that HELOC to almost take like a cash advance on their future revenue. Because what you do is you can... While you're not using it, you're banking a ton of cash flow. Use it when you need it. And then once you use it, you take all business revenue, all cash when you pay it down super, super aggressively. And so what that allows you to do is basically take that, say it's $200 as an example, to pull that now, so you need to save it over a period of time.

Dylan Koch: [30:41] Yeah. My thought process was I could just instead of having a low LTV on four properties, that sure, like... But the total equity amount really isn't changing. Yeah. It's just I'm able to free up a property to then hopefully provide additional income, which that would be harder if I didn't have that free and clear.

Mike DeHaan: [30:57] Yeah. And you could. It just like... Just depends on what your goal is. Like, do you wanna have that fixed rate debt? Do you mind having the alternating debt? Do you want that more cash flow? Right. Because also, the other thing with HELOCs is that's that's not thirty year fixed either, Especially if it's for a rental property, I would imagine it would be maybe a five year balloon Probably. Or a ten year balloon. Or, like, I have a HELOC on my primary that I'll use for stuff, but that's basically... It's adjustable for ten years. And then at ten years, it fixes, and I have to basically reapply for it or I have to pay it down.

Dylan Koch: [31:26] Yeah. There's still six years left on this loan, so this could all change by the time I have to... Or if it wouldn't make any sense to refinance before that piece at at such a low interest rate.

Mike DeHaan: [31:34] Well, awesome. I mean, there's there's always too much to go about. I had a great philosophical question. I'm gonna save it for next time because I want Dan to talk about it. I'll I'll share it with you afterwards so you can think about it, and we can ambush Dan with it.

Dylan Koch: [31:44] That sounds good.

Mike DeHaan: [31:45] But I've really been doing a lot of thinking around, like, that kind of stuff and, like, wealth and how people actually view, like, what that means. Because, like, the main thing that I've sort of realized over the past couple of years is... I I say especially, like, the past, like, year where it's often gotten challenging for people, is how many people's personal worths they put in their balance sheet and how silly that is. Because, realistically, most people that are, like, kinda, like, in our shoes, have had a little bit of success over the past couple of years, they can currently live the lifestyle that they wanna live. They are actively choosing not to for some reason, and it doesn't make sense to me. Typically, it's out of fear. It's out of, like, lack of belief in themselves. It's out of, like, I don't know. They're... They've prioritized the wrong things, and so they've kind of, like, overleveraged themselves in the short term. But, yeah, there was a... When I was in TSA yesterday, this girl in front of me, I was just over here in their conversation while we're waiting. And she asked this question. I was like, that's really good. I'll ask you guys on the podcast tomorrow. But then fucking Dan didn't show up. So

Dylan Koch: [32:51] You know what's crazy to me? And then we'll we'll wrap up. There's some people out there that if you were say, hey, you'll have a true $10,000,000 net worth, but no one knows who you are. Or you could have a $1,000,000 net worth, but you're Instagram famous. Most people would take the second one.

Mike DeHaan: [33:07] You think so?

Dylan Koch: [33:08] Not the million dollar I mean, that's just what it feels like lately. It blows my mind that they would rather be Instagram famous or be an influencer over actually having the real wealth.

Mike DeHaan: [33:16] It's funny. I would say that that is your bias from the fact that we have a podcast and we're kind of in that circle because I would say that most people would take the other one. Yeah. Like, if you went into a room with, like, 200 random people from all walks of life, they would probably take the second.

Dylan Koch: [33:32] No. Here's my point. All of them are gonna say they'll be the 10,000,000 ones, but I don't know if they actually I guess this

Mike DeHaan: [33:36] my point. So if it was like a blind test, like, they, like, they gotta go and anonymously do it? Yeah. That would actually be interesting. I wish we had, like, a big enough following that we can do something like that that was substantial.

Dylan Koch: [33:46] There's obvi... There's a logical answer there that people are gonna like, well, I don't wanna look dumb, so I'm gonna say this.

Mike DeHaan: [33:50] But Yeah. So I will say wrap up with this, the... One of the things that's been very refreshing as we've sort of transitioned more into lending business, which is like an old school kind of business. When you're in the real estate business, a lot of the people that you meet that aren't successful, whether it's at meetups, whether it's at conferences, whatever, they are either... They've been around forever. So, you know, they buy a house and he's like, oh, yeah. No shit. You're rich. Like, you did it at the right time. They've been around a long time. Or they're, like, so into, like, the guru, the brand, whatever, that that definitely, like, propelled their growth. You don't really meet a ton of people that have like, hey. I like round round out a thing and I've been... It just... That's just a minority. And so people tend to think like, oh, well, I can't control the 2,008 aspect, so I gotta be an influencer. Right? And that's what will get me successful. In the lending space, which is like old school money, we go to these things, and we meet these people. It's like, yeah, maybe they've been in the industry for, let's say, ten years, 2016, like a little while, like a long time, but not crazy long.

Mike DeHaan: [34:53] They have never made a TikTok in their life. And they're freaking rolling. Right. You know? Their business is so successful. They built it out super traditionally. They generate leads. They built a company. They found investors. They went to the country club. They did all things. Like, I might even... My social media friends, followers that are lending people, zero. I have people that I've seen at so many conferences that I've never even seen on social media. I don't know if they have one. Right. Because that's just not a part of the industry. And I think that's a lot of industries. You know? Like, how many people out there that have, like, successful plumbing businesses are big on TikTok? Not very many.

Dylan Koch: [35:31] Not very many.

Mike DeHaan: [35:32] You know?

Dylan Koch: [35:32] And the ones that are probably just got bought by private equity and they're gonna be injured anyway. Yeah. It's a double edged sword too. Mean, there there is something to be said for personal brand, like, in getting yourself out there and people know who you are. But at the same time, it's definitely not a prerequisite to be successful.

Mike DeHaan: [35:48] No. And and, like, that's kind of Akshay Moshe's whole thing with why he started his brand is because he was crushing it. Like like, here's the thing is he was already crushing it at a point when he got on social media that every single person that we've ever met would be so stoked with that. Yes. You know? He was taking home a million dollars a month in pay, like, talks about all these things. Right? He'd already sold whatever. But then he, like, saw, I forget the one he always talks about. It's one of the... He was the one that became, like, the youngest billionaire.

Dylan Koch: [36:14] Oh, the Kardashian woman, wasn't it?

Mike DeHaan: [36:15] Yeah. Is that who it was? Yeah. Either way.

Dylan Koch: [36:17] I... That's what I thought it was.

Mike DeHaan: [36:18] So it's like a billion dollars, and he was like, what the hell? And he said, it's purely because of a brand. And then, you know, Rock sold... Like, like, Caramana was worth a ton. George Clooney sold his tequila thing for a bunch of money. Ryan Reynolds sold was it like a scotch thing, whatever it was, all because they had this brand. And so it can absolutely give you multiples more. But here's the thing is, like, for most of us that would be more than happy just making a couple million bucks a year, you don't need to do that shit.

Dylan Koch: [36:44] Yeah. Honestly. No. That's true. No. That's a good that's a good point.

Mike DeHaan: [36:47] Yeah.

Dylan Koch: [36:47] Normosie has made more money than collectively any of us will probably make in our lifetime.

Mike DeHaan: [36:52] Absolutely, dude. And and a lot of that was before he had the brand in our business. Anyways. So...

Dylan Koch: [36:57] And that's okay. I don't wanna be Alex and Rosie.

Mike DeHaan: [36:59] So No. I don't I don't either. They... He never seems very happy. Yeah. And even meeting him in person is exactly the same. A lot of those people, they never really seem that inherently happy. You know? I think that's why a lot of them, they end up posturing, and they try and do like, here I am with my family, but they're, like, never smiling with their family. You know? They're like, alright. We need the kid... The picture of me riding the lawnmower with the kids so I can Yeah.

Dylan Koch: [37:20] It's just that it throws him off

Mike DeHaan: [37:22] and it's

Dylan Koch: [37:22] like, alright. That was his shit.

Mike DeHaan: [37:24] Go over there. Go see your mom. Yeah.

Dylan Koch: [37:26] Yeah. Oh, man.

Mike DeHaan: [37:29] Alright, man. Cool. You good? Yep. Thanks for hanging out, buddy. Dan, bet you shoot over one forty today. And

Dylan Koch: [37:36] That's a rough score.

Mike DeHaan: [37:37] He's he's not a great golfer. But if it's alright, maybe we'll forgive you next to him. But either way, thanks for listening, everybody. We'll talk to guys next week.

Dylan Koch: [37:44] See you.

Mike DeHaan: [37:45] 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, 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 you think of the show.