How I’m Getting More Cash Flow in 2025

Mike DeHaan: [0:00] What is going on, guys? Welcome to today's collecting keys Friday focus. If this is your first time to the show, this is the show by real estate operators for real estate operators. And on these Friday shows, we do a little bit of a shorter episode with a deep dive on a topic that is either asked by another listener or is about a deal that we are working on, or is about something that we are currently just excited about. And today, I'm gonna be talking about something that is very exciting to me, which is how to find cash flow in the real estate world in 2025 or in a high interest rate environment. If you aren't familiar with who I am, my name is Mike DeHaan. And my kind of origin story is I started as a corporate engineer. I quit that job, bummed around, worked in a gym, drove for Uber a little bit, got into real estate back in 2018. And I have now done over 500 off market transactions through wholesales, flips, buying rentals, and all that sort of stuff. And I run a decent little off market team, and I've been a real estate entrepreneur for, gosh, coming up on seven years now. Damn. It's been actually a long time. So a good portion of my adult life. And so today, the topic is going to be cash flow. And this is always a important one because most people, when they start in real estate, they do so with the goal being to get enough cash flow from a rental portfolio to be able to replace a w two job so that they can live a life of financial freedom.

Mike DeHaan: [1:24] And whether that means go to the beach and just hang out, whether that means spend more time with their kids, whether that means just not have to go into an office, everyone's sort of views of that are different. But the cash flow and financial freedom piece is typically one of the original things that people tend to pursue when they get into real estate. Years ago when I started, prices were lower and interest rates were lower, and it was much easier to find cash flow. Back then, you would go by what was called the 1% rule, which was if you bought a house for $200,000 and you could rent it for $2,000 a month, then you could obviously cash flow very, very well with that, especially low interest rates and low price points. And so that was how we would sort of quickly underwrite things. Now, what's the reality for most places is that same $200,000 property back then, the rent for $2,000 will now cost $400,000 to buy, and the rent might be like $2,200. So the property values have quickly outpaced the rent. And as a result, that combined with the seven, eight, 9% interest rates that we're seeing for investment properties right now makes it that cash flow is pretty much impossible. And so cue my current cash flow strategy, which is what I am currently heavily pursuing with my spare cash and my real estate investment this year, and that is hard money lending. Right?

Mike DeHaan: [2:40] So hard money lending, if you have if you flip properties, you probably have gotten money from a hard money lender before, and that is basically short term financing for real estate, usually fixer uppers or, like, real estate investors. Right? This income in the form of you're buying turnkey properties that you need, like, a quick close sort of situation or by doing a full flix and flip loan where you are giving money the funds and everything else. And so I'm designating hard money lending versus the term private lending, even though they are kind of the same, mostly because hard money lending typically comes with the connotation that you're gonna be able to lend it out for a little bit of a higher rate. What I'm I'm not necessarily advocating for this is becoming the private money lender that has like a four zero one k, you know, that you offer to pay them seven or 8% interest to come in, like, fund your flips. Those are great for you on the flipping side. But you can if you being the real estate professional can probably get a little bit of a better rate for your money by being a hard money lender for people that are a little bit more pressed for cash than by going out to your circle and trying to get cheap money to increase your margin on your own flips. Right? And so the reason I'm really into hard money right now is because there are so many different ways you can approach this game. And you don't need to be in a position where you have, like, $200,000 that you can just go and, like, fund an entire project for somebody.

Mike DeHaan: [3:54] Right? And sure that this help, that is great. But one of the things that's really awesome right now with the hard money game is we're starting to see a rise of different companies that are offering things like co lending or fractional lending. And so full disclosure, my company does offer this. It's called SLA Capital. We do work with co lenders a lot. But basically, what that means is you can buy fractional short term notes that you can put your money into for a four to eight month time frame, and you can get 11 to 12% interest APR on that money. And so what that means, let's say that you have $50,000 that's kind of like sitting in an account. You have accumulated that from your wholesaling business, and you know you wanna put it into something, but you don't know what. You're looking for duplexes. You're looking for properties, and you can't really find somebody that hits the cash flow that you want. Instead, what you can do, you can buy $50,000 worth of a note, and you will get 12 of that money back, basically, annualized over a monthly basis. So that means that for that $50,000 you put in, you will get $500 a month, just absolute passive cash flow. You will be able to collect for as long as the note is active. Right?

Mike DeHaan: [4:56] And in order to get $500 a month with a standard rental property right now, that has to be a pretty dang good deal. You're not seeing a lot of that. They are out there, but this is basically a more guaranteed way to get like true true cash flow. The downside of doing the hard money lending like this is you're missing out on the tax benefits of real estate and the appreciation that comes from owning rental properties. Right? But if you're looking at kind of like the big picture of rent of real estate right now in rental properties, we're seeing an increase in the cost of labor. Who knows how much appreciation we're going to get? You're still gonna get the tax benefits for sure, but you have a lot of upkeep that is going to sort of chip away at any free cash flow you get. All of a sudden, if true cash flow is your goal, true passive cash flow through real estate, hard money lending starts to look very, very attractive. And so how this fits into your business kind of just depends on your flavor, right, and what exactly you're trying to do. If you are somebody that has a generally high income, you have a successful wholesaling business, successful flipping business, you're a sales successful agent, even if you're like a doctor, right, or you do something else where you already make a lot of money, it doesn't necessarily make sense for you to be going and trying to buy these actual properties that you were going to be holding on to for a long period of time, taking out expensive debt, having to deal with fixing toilets, and all that other sort of stuff if your goal is past cash flow. If your goal is that you wanna hold assets and you wanna have a debt pay and everything else, sure. Go do that. But most people, if they wanna have actual cash money return in their pocket, then and you are sitting in a position where you're accumulating a lot of cash, then this this debt based strategy is perfect for you. Right?

Mike DeHaan: [6:27] And so in order to set this up, it's relatively simple. All you really need is a borrower. You need an attorney to go and help structure your notes and your paperwork and everything else. Every title company will have an attorney that can refer they can refer you to that can help you solve this together. And then you need to have the basic knowledge to be able to underwrite the deal and just make sure that you agree with what this borrower is trying to do. After that, it's all pretty simple. You don't need to have, like, a fancy note servicing company. You don't need to have, like, any sort of fancy loan software or anything else. When I first started doing hard money lending, literally, the people just sent me a check every single month. I was getting 12% interest on it. My money was staying active. And then every quarter, I would reach out to them, just ask for a little update to see how things were going. I worked out like clockwork. My first hard money loan I did, I lent out a $150,000. Now I'm making $1,500 a month every single month right to my my bank account. Right? So it was some of the easiest cash flow I was getting versus trying to squeeze that out of another rental property. And that's really all you need. And then if you are looking to scale this, you can start to get into more some more of these sophisticated technology and things like that that are out there. But if you are somebody that's just trying to keep some active cash working, this then you don't really need to make anything overly complicated.

Mike DeHaan: [7:40] If you're uncomfortable with kind of the underwriting everything else, then what I recommend is you start by trying to do loans on some of the deals that you are wholesaling. So these will be deals that you've already seen the full picture, hopefully. You've talked to the seller, you know the situation. And then if you're able to provide funding for your own wholesale deals, some of the power of that is that you are not going to have to deal with the risk of them not being able to close because of funding or lender situations. And instead, you can give them a guaranteed close. And as long as you believe in the deal and you're not ripping off your buyer, then it's about as secure of a deal as you can get because you've already spent so much time looking at it. And hopefully, you got that original contract at a price that you would have been willing to buy it at anyway. Right? And so what you do if you don't have enough money to kinda get started with this? Well, if you have friends, what you can do is you can bring in multiple people to do loans at the same time. So, like, let's say that you've been looking for private investors, but you can't really find ones that have enough money to fund an entire deal. But you got one friend that has 30,000, one friend that has 50,000, you know, and you have a 100,000 yourself. Together, you have a 180,000. You guys can pull all that money together, and you can go and you can co loan on the deal. So you take your 180,000, you go and you fund a deal, and you guys all collect your 12% interest or whatever you're charging for the loan, and you're able to collect that and just split it appropriately based on how much of the debt each person owns.

Mike DeHaan: [9:00] And so for me personally, I have been running successful real estate business for a while. I have accumulated a lot of cash, and I'm going all in on lending this year. Like, I'm actually in the process of liquidating a very large portion of my portfolio strictly so that I can go and put it into more loans because the passive cash that comes in ultimately has been my goal with real estate for like a while. But now with interest rates being so high and everything else, like, I'm not only not finding new opportunities, but the opportunities that I currently hold, I've been seeing a mass reduction in cash flow year after year after year as more and more maintenance comes up, my property tax increase, my insurance increase, everything else. And I'm more than happy to let other people deal with those issues right now, and I'm just gonna be the bank. Because banks are some of the biggest companies out there, so I might as well try to be like them. If you're hearing all of this and you're going, that makes sense. I don't really wanna get too involved with it or wanna try to figure this out. That's where companies like mine come in. SLA Capital stands for sir lends a lot. We do have that's why we have SLA Capital is kind of like our more professional name. But we do offer co lending on that. And you can buy fractional notes as small as $10,000. And so let's say that you have anywhere from 10 to $200,000 or anything even more than that that you wanna keep busy, you can go and you can buy portions of notes that we are carrying. You will get the portion of the interest for whatever you buy, and you can keep that money just working for you.

Mike DeHaan: [10:21] And you'll get it back in the next four, six, eight months, depending on how long it takes for the flipper that we lent the money to to sell the house and pay it off. You're fully secured by the debt. You're fully secured by the insurance. You're fully secured by the promissory note. You're fully insert secured by the personal guarantee that we require. And all you have to do is just put in the money. You get your 12% or 11% APR, whatever the note is paying out. And you can just sit back, relax, and you can collect your easy cash flow. And that's always gonna be so much simpler than trying to acquire or manage a bunch of rental properties. So in 2025, I am all in on lending and becoming the bank. It's one of those things that I think people think is much more complicated than it actually is. Once you kind of understand the basics of underwriting how to piece deals together, it's about as easy cash flow as you can get. And if that is really your goal, then it's definitely something that I recommend you should explore. If you are interested in partaking in some of the notes that we are selling, you can go ahead and hit me up on Instagram at mike underscore invest. You can also send me an email at mike@collectingkeys.com, and I would love to show you the opportunities that we have available.

Mike DeHaan: [11:26] And let's do some deals together and make some money. So thanks for listening, everybody. And we'll talk to you guys next week.