How to Avoid the Scaling Trap in Real Estate

Dylan Koch: [0:00] I got sucked into doing a demo for AI driving for dollars.

Mike DeHaan: [0:03] So he's like a typical author, right, where he hasn't actually done anything. And so he went and wrote a book because he talked to his mentors who told him how to do it. And he goes, well, that sounds hard. I'm just gonna write a

Dan Austin: [0:13] book where I repeat what my mentor said and then pretend like I'm the genius. Oh, is he Boys of Dan Sullivan?

Dylan Koch: [0:19] Yes. He was like the co author on two of the big ones.

Dan Austin: [0:22] He's a yeah.

Dylan Koch: [0:23] Gap in the Gain and 10 x is easier than two x.

Dan Austin: [0:26] And every go, bro, was like, dude, it's you're in the you're in the gap right now, dude. Fuck you, bro. My dad just died. Fucking business sucks ass. Give me a freaking break.

Mike DeHaan: [0:38] What's going on, guys? Welcome to collecting keys. I'll be honest. I kinda like those little intros where we banter before the song comes on. I feel like it adds tempo.

Dan Austin: [0:46] I didn't even know we were recording.

Dylan Koch: [0:48] It could be dangerous one of these

Dan Austin: [0:49] times. Yeah.

Mike DeHaan: [0:49] It's gonna be good. Well, yeah. Well well, the good thing is our producers know that when Dan really goes off the rails, he cuts those ones out. We did have one not too long ago where our producer hit me up and was like, you know, you guys were, like, extra raunchy this episode. Do you want me to cut some of that out? And I was like, yeah. I was like, if you're saying something, we probably should. We probably should. Yeah. Why don't

Dan Austin: [1:07] you just delete that one?

Mike DeHaan: [1:08] Yeah. Right. But what's going on, everybody? Welcome to Collecting Keys Podcast. I'm Mike DeHaan here with my cohost, Dan Austin and Dylan And since, you know, it's a real estate show, but since that isn't really all that sexy right now, we're gonna make this a show about buying businesses or what's like the other like hospitality? That's because it's real estate.

Dan Austin: [1:26] Oh, this is gonna be fiery today.

Mike DeHaan: [1:27] What's the other stuff we can like pretend we know about to sell schmucks who work for Google and make $300,000 a year and wanna like pretend that they know how to own a plumbing company? I

Dylan Koch: [1:37] haven't seen any drop shipping things in a while. That used to be big.

Dan Austin: [1:40] Oh, man.

Mike DeHaan: [1:40] With the tariffs, that's never coming back, dude. That's gone forever. Because when you're upcharging people on some bullshit from AliExpress, the tariffs are gonna eat all of your profit margins on that pretty quickly.

Dylan Koch: [1:53] You know what? My favorite thing is though, is like, you just find a business that has a fax machine, and then you just, you know, upgrade them to email. And now you have you've 3x ed their business. That's kind of the promise.

Dan Austin: [2:02] That's the secret.

Mike DeHaan: [2:03] Well, what's funny is you're making a joke about that. That is literally what AI people are doing right now, is they are going, they're saying, I have this AI bot, you know, this GPT that can do X, Y, Z. It's like an agent, you know, it's a talking person, whatever they're doing.

Dan Austin: [2:21] I have an agentic AI. Yeah.

Mike DeHaan: [2:23] And it's all these people that figured out how to get the same scripts from somewhere to create a GPT and now they're trying to sell it to a larger company for $5,000 purely off the assumption that they don't know how to do it themselves. Very similar to upgrading from a fax machine to email. Like, that is the current phase of that. You know? And the reason I know it's a scam is because the dregs of society, like the people that are at, like, I would say, like the hustlers that don't actually make any money, they're like the people that are always like talking deals and, you know, you meet them in person, they're kind of like twitchy because they're obviously trying to sell you something. They're all about that AI train right now, dude, because that's their current gold mine.

Dylan Koch: [2:59] Before we actually this is somewhat of a good segue. I met with a really popular local syndicator who actually knows their shit. They're not one of these, like, fluff people, and that they don't really have an online presence, which is probably a counter indicator. Yeah. He's like, we're just talking. He's been backstage with, like, Ken McElroy, Brandon Turner. Really the the biggest names. And Ryan Pineda, all the biggest things like the Limitless Expo, all that stuff. And he basically said, god fucking damn it. I can't stand 90% of these people backstage.

Mike DeHaan: [3:27] Oh, they're the worst, dude. I can only imagine.

Dylan Koch: [3:29] Yeah. I know this was he's like, they're so much different of a person than they are in the stage versus in the back. Right? Like, they don't have time for you. They think they're gods gifted. Like, it's just a, I don't know, solidifying everything we talk shit about.

Mike DeHaan: [3:39] Absolutely. I was at a local meetup here. It was like North Idaho little real estate expo last year, and I was asked to come and speak on it about marketing for deals. Right? And so, basically, there's handful of speakers. There's me, Sarah Weaver, who does, the Mhmm. You know, midterm rentals thing was one of the speakers. AJ Osborne was one of the speakers. Right? And so we're all kind of like just hanging out, waiting for her to speak, whatever. Everyone was cool except for AJ Osborne who would not talk to anybody. Too cool for school. I was like, bro, you're in Coeur D'Alene at this event that there's, like, maybe a 150 people here, and you're acting like you're Big dog. I don't know, on, like, some big stage somewhere. I'm like, shut. Like like, we're in a, like, a Ramada Inn. What are you talking about? Like, I literally had to walk I parked in the hotel parking lot and went past, like, the shitty restaurant that for some reason had people eating there, right, to go to the conference room at the back of this hotel. I'm like, why are you on a pedestal? I'm just, like, trying to, like, make conversation because we have nothing else to do for the next hour while all the attendees eat their Subway lunch.

Mike DeHaan: [4:44] Like, what are we doing here? And he was a prick. And then he gets up on stage and he's like, let me tell you about how I got, like, syphilis and was in a wheelchair or some birthday.

Dylan Koch: [4:52] I'm like, I don't Gillian Barr. Yep. Nobody cares about that.

Dan Austin: [4:55] And how I'm getting my investors a 4% return on their money in our new self storage syndication.

Mike DeHaan: [5:01] And how

Dylan Koch: [5:01] I brought in an investor girl, Britt, because she's hot.

Mike DeHaan: [5:03] Yeah. Totally. Because she

Dan Austin: [5:04] will raise capital for me.

Mike DeHaan: [5:05] Yeah. Man, her highest ROI on her money is between her hips and her shoulders right now, dude. I bet she makes so much money because of those things. Hey.

Dan Austin: [5:13] Good for her. I'm not gonna complain.

Mike DeHaan: [5:14] The craziest thing to me is there's like those people. Cause like she actually was very talented, like with her content that she was doing back when she was She was like a

Dan Austin: [5:23] front runner for sure.

Mike DeHaan: [5:23] Like working on the houses and she had like the stuff. Like my wife like loved to fall and all those sort things. And then as soon as that starts to dry up, right, or there's like the bigger money opportunity, it's like selling my body. I'm like, why do you got to do that? Why you got to do that?

Dan Austin: [5:36] Well, you accidentally post one bathing suit video and you're like, that got way more views. And then all of a sudden you just make that your thing, which is totally fine with me.

Mike DeHaan: [5:44] The thing is they all do it.

Dan Austin: [5:45] I know, but that's fine.

Mike DeHaan: [5:46] Because Cody Sanchez has done the same shit. What would you what would you do? Right? Like, come

Dan Austin: [5:50] on, man. It's just just do it.

Mike DeHaan: [5:51] You know what? You're right, Dan. I'm speaking from a position of envy that people do not fawn over the male body like they do the female one.

Dan Austin: [5:57] But you know what I mean? It's just like, I don't hate them for it. Like, I hated them for it, that seems like it'd be sexist. It's just the tool they have to use to get over all this male ego and misogyny.

Dylan Koch: [6:05] I think the crux of this is it just goes away from the business stuff. Right? It just selling the hopium. That's Yeah. All it

Mike DeHaan: [6:12] Yeah. It does. And that's the problem. Right? Is like and what you said, Dan, there is they have to do it. And that's so unfortunate, honestly. Like, it shouldn't be

Dan Austin: [6:20] that way. Well, let's how about this? They don't have to do it. That's just what everybody wants. Sure. It's called capitalism, and it's an open market and supply and demand. It's really what it comes down to.

Dylan Koch: [6:30] Or you can be, what's his name? Andy Elliott and put his kids on stage. We're like fucking 12.

Dan Austin: [6:35] Now you definitely don't have

Mike DeHaan: [6:36] to be that.

Dan Austin: [6:37] There is definitely no market for that. Like that is just being an idiot. It is, for sure.

Mike DeHaan: [6:41] But I don't know, man. And then, so one of the things you're we want to talk about on this show today, is I think is a really interesting topic, Dylan. So at the beginning of the show, the guy that Dan was talking trash on, he's an author. Inadvertently. Actually, books I've heard are decent, but I don't know. I don't read books. I'm not a nerd. I got other stuff to do. But so Ben Hardy, he has this science science of scaling, I'm guessing that's his new book that's coming out. That's his new book. Correct. And so give us breakdown. He was on the Better Life podcast with

Dylan Koch: [7:09] Brandon Turner and Cam, who we've had on the podcast, I think twice now at

Mike DeHaan: [7:12] this point. Yeah. Yeah. Two, three times. Yeah. Yeah. And his whole conversation was

Dylan Koch: [7:17] So they were started just breaking down the book. And once they basically got to the q and a, Cam was asking questions and revolving around basically what our business is, which is wholesaling and flipping. With the caveat that Cam is definitely more flip heavy than I think most of us are. Yes. And I guess the crux of it is he was saying, you know, I've sat down and thought about it, and there's no way to 10 x or even let alone a 100 x this business.

Mike DeHaan: [7:40] So Cam said this or Ben Hardy said this? Cam said that. Okay.

Dylan Koch: [7:43] Yeah. And then Ben Hardy was basically like, hey. Sometimes the current business model is not scalable. And then you have to go back to the drawing board and figure out

Mike DeHaan: [7:48] what is. Okay. So I have I have two pieces to this. First off, I really wish did you have to leave early on the show with Cam because we held you for so long? Oh, yeah. Yeah.

Dylan Koch: [7:58] Get it. That's right.

Mike DeHaan: [7:58] Yeah. So you missed, like, the goal that was, like, the hour long conversation that Dan and I had with him afterwards, where we basically just went through all of his business like, all of his numbers and stuff. And we're like, you're kind of, like, doing a lot of stuff, like, not how we would recommend that you do it. His cost per deal was super high.

Dan Austin: [8:16] Super high.

Dylan Koch: [8:17] Super high.

Mike DeHaan: [8:17] They were closing on everything. Right? Like, they had, like, all these different ways they were approaching the business that just didn't fundamentally make sense. And so he's coming through a lens where, correct, with how he is running his business is absolutely not scalable. He's still making money, he's still good at what he does, he's just doing it.

Dylan Koch: [8:32] He shared on the podcast, I mean, they'll do about 1,500,000 in profit with like a But that's like a 6,000,000 top line.

Dan Austin: [8:37] Totally.

Dylan Koch: [8:38] So think about those spreads, right?

Mike DeHaan: [8:39] Yeah, right? And so it's a 25% profit margin. And when you're a small business, that's the issue is with $6,000,000, that seems like a lot to the average person because it is. When you're looking at like business itself that has overhead, it's really not that much money.

Dan Austin: [8:53] Yeah. Know? Takes a lot to get there.

Dylan Koch: [8:55] Especially flipping too, because like you're going to get taxed at the Wazoo for that.

Mike DeHaan: [8:58] And also, I'm assuming Cam wouldn't do this. But when he's saying, I'm doing $6,000,000 top line, is he taking into account the top line value of his houses before he sells them?

Dylan Koch: [9:06] I would assume that's just net revenue. I would hope so. I would fucking

Mike DeHaan: [9:09] hope so too. If he's doing the realtor thing where he's like, I sold, you know, dollars million $2 in volume.

Dan Austin: [9:14] It's like, that means

Dylan Koch: [9:15] I don't think he's like that. I don't

Mike DeHaan: [9:16] know what I'm gonna do.

Dylan Koch: [9:17] I don't know. That would be like 20 houses.

Mike DeHaan: [9:19] Like Yeah. But he's also on, you know, Better Life podcast with Brandon Turner who's, you know, always talking about his big numbers and everything else. And then Ben Hardy, who's on there trying to posture for his new book.

Dylan Koch: [9:30] Yeah.

Mike DeHaan: [9:30] Or I wouldn't put any fault on Cam for doing podcast or influencer math on that. 100%. I try and sound better.

Dan Austin: [9:37] I mean, you know, everybody's gonna do a little bit. Right? Totally.

Dylan Koch: [9:39] I guess if you take what what we do and I think about my business and 10x ing that, I mean, it's a linear thing. Right? He he wants to think of like how you have exponential growth. And ours is just there's more marketing and there's more people. I really don't know how else to do it outside of that. And I guess Ben Hardy would say, scratch the whole model. What if you, instead of doing 50 deals at 20,000 a pop, you did 10 deals at a 100,000 a pop? Because now you're going after apartments or commercials or mobile homes.

Mike DeHaan: [10:06] Like Did Ben Hardy actually say that?

Dylan Koch: [10:08] No. This is but Cam and them were kind of and Brandon were kind of going back and forth with us. Brandon's idea was like partner with the biggest 50 flippers in the nation. Shout out. Raise the money for it. Was like, that didn't make any sense. So I'm trying to without bashing them too hard, the whole entire premise was your current business model might not scale. If you really wanna go 10 to 100,000,000, what's like the Ground Floor level of like, what do you actually have to think about? It just changes the questions in the frame that you have to ask yourself.

Mike DeHaan: [10:33] Well, so going from 0 to 10,000,000 and heading to 100,000,000 is very different.

Dylan Koch: [10:37] I would agree.

Mike DeHaan: [10:38] Right? Like that is a completely different sort of model and conversation. Totally different conversation. But you know, Dana, you and I have talked about this recently because we tried to really scale our wholesale business doing this national thing with like the partnership program and the franchise that we were pursuing, right? And we essentially, we discovered that it's possible. It's just not really worth the time. Yeah.

Dan Austin: [10:58] The juice isn't worth the squeeze at some point in time.

Dylan Koch: [11:00] I mean, you guys are willing to share, wasn't your net profit going to be the same at like 50 franchise locations versus your team of five or six?

Mike DeHaan: [11:07] Exactly. And so that was one of my big takeaways from going down to acquisition.com conferences was when I first started going to those, the intention was going to figure out how to grow our franchise with our Back at Home Buyers model, right? But at the same time, we were simultaneously running both our Nationwide sort of like partnership program, which is literally what Brandon recommend doing, Right? And then also running a local wholesale business. And so I had numbers on what the profitability of those were. And then we had projections off of the franchise that we hadn't launched yet. And so what they basically did, one of Alex Shmozzi's analysts, he was like, okay, cool. So if we forecast this, if you get to it was like 200 franchisees, that's gonna be like the same profitability as if you did what you're doing in Spokane in like two markets. And so they're like, would you rather have 200 franchisees or figure out how to really scale and grow Spokane and stabilize that and then add on another market? And so that was like kind of like the growth trajectory we're looking at. But then the other issue was because there's the economy of scale with the franchise, basically to equal Spokane, it was like a 120 franchise rights. It wasn't like it was like 50%. It was still like such a significant number. It was like, why would we do that? And he was like, there's no right or wrong answer.

Mike DeHaan: [12:27] You can be the franchise guy or you can be the real estate guy. He's like, just know that they're different models. And if you go and you franchise, and you're going to have to manage a 100 franchisees. And that's the big thing too, is they were like, if you go that route, realize you still owe those franchisees. You basically, you have a 100 different opportunities for their business to turn into a mess, and you have to come and clean it up anyway. They're still getting like 90% of the profit. You know? And I was like, yeah, that sucks. But then like doing it with our own partnership program that we were doing, we're running kind of all of them, nurturing the relationships is extremely difficult. Keeping up with the differences in state laws and how things change was super, super hard, knowing the nuances of all the markets. Like, really think that if you were gonna do that, it's absolutely possible to scale a company like this to 10,000,000 plus. I would just say in a singular location, it's gonna be tricky unless you're in a huge metro like, you know, like Dallas. I think Billy and Tara have been on the show, have probably pushed that $10,000,000 number. But that's also from a singular office is going to be tough. You're going to need to be in several different areas.

Mike DeHaan: [13:27] You're to have a lot of local expertise. And I don't think that your profit margin will scale very well with your revenue for it to make sense versus other models. Goes down.

Dan Austin: [13:35] The other thing to talk about too is like, why would you want to build a $10,000,000 company that's probably not sellable? Like who's going Absolutely. To buy Totally. So in my mind, if you're doing that, you're investing your time as the equity of the business. The cash flow is what's paying you yearly and you hope off of 10,000,000 that you're making 1,000,000 at least.

Dylan Koch: [13:50] At least.

Dan Austin: [13:51] Right? You know what I mean? But like your time in building that business, when it's done, what are you gonna do with it? Are you gonna shut it down? Yeah. It'd be probably on a wholesaling business. Wholesaling flipping business, nobody's buying or selling those.

Dylan Koch: [14:02] They don't yeah. They don't trade on any kind of multiple if they trade at all.

Dan Austin: [14:06] No. And it's usually because there's a key and there's definitely key man risk, like with like Bill and Terri's business, for example. Like, if they're not there, I really don't think their business does anywhere near what they do. Same with Cam. I think what Cam found with his business in which we didn't talk about was I think the fact that he's gotten to where he has before he started scaling is an incredible it's just so incredible. It shows he is like a key player in that. Because all of his deals were network deals that he was doing beforehand. He called them network deals, which is basically just going to meetups and telling other wholesalers to bring him deals, he would take them on and flip them or wholesale them. And so it's like he's like a key man in that business as he steps out and tries to automate it and make it more passive. So he's why he's in Maui. Like he's finding it as way more challenging and it's because it's like key man thing.

Mike DeHaan: [14:50] Yeah. I mean, exists in every business. Right? Like I can't remember where I heard it. I've repeated this a lot of times over the years, but when you bring on team members, you're basically trading 80% efficiency for 80% of your time back. So you still have to manage that person, but you're always going to see a reduction in efficiency from them.

Dan Austin: [15:05] But the systematization of this business is you can get it to a certain point, but it's hard to do it to where you can get a person that's 80% efficient and have an SOP because you don't have an SOP for a seller that comes to the closing table with a gun and says, you. I'm not closing.

Mike DeHaan: [15:19] Totally. And I think that's such a key point, Dan.

Dan Austin: [15:22] That takes the special key man like a Camcath or a Dylan or whoever's running the business, because they have a lot of passion and desire to make that go well. And they are doing that successfully because they're adaptable and can overcome those situations.

Dylan Koch: [15:33] I think that's just an overall theme in the real estate business, though. Like, we're not a SaaS company, software as a service. We're not a widget company. Right? I just think when you're dealing with real estate, all the different nuances that go with that with every part of the transaction, and the emotional thing when sellers, it's their largest financial, you know, thing that they'll probably ever spend on or or sell on. Like, all of those build up to something that's going to be complex. And when you try to scale complex systems, it very rarely goes well.

Dan Austin: [16:02] 100%.

Mike DeHaan: [16:03] Hey, guys. Quick little ask for you if you don't mind. We would love to continue growing this show, and being a small podcaster right now is honestly really hard. Pretty much everybody that I know that has a small show has been seeing a downward trend in listenership and downloads for like the last year and year and a half. So if you support what me, Dan, and Dylan do with this show, if you could please go and share it on your Instagram, tell your friends, share it on Facebook, wherever you hang out and do your social media, just go and like spread the word about what we do and the value that we bring to you and your business, And that will continue to help us grow and expand our listenership within your circles. So if you wouldn't mind doing that, we'd really appreciate it. And thanks, guys. We'll get back to the show. Well, not only is it complex systems. Right? This has been one of my biggest pushbacks on anyone that's claimed to have like some system or process or whatever to make like streamline wholesale real estate is it says a lot with people that have like these chatbots and stuff right now. What they always fail to take into account is that our acquisitions, right, our procurement of product is dealing with the it's fundamentally the dregs of society. Right? There are people that have financial issues. They have emotional issues.

Mike DeHaan: [17:11] They are sporadic in how they approach you and what exactly they're expecting. And you can't processize irrationality, right, like, at all. It's not possible. Illogical. If you're selling, like, widgets to people or you're if you're like a b to b business, you can processize a lot of that because the people that you're working with are fundamentally, you know, with it.

Dan Austin: [17:30] Yeah.

Mike DeHaan: [17:31] Right? You know, and not only that, but their individual situations are also equally as complex because with the crazy seller also comes the crazy family, also comes the years worth of extremely complex financial and legal baggage they're bringing with them. And having somebody that's like an employee that's gonna be able to work through that to make their, you know, 10% commission that you're gonna make them, their $2,000, like, hell no. Yeah. They don't wanna do that. They're never gonna be willing to do that quite as much as you are.

Dylan Koch: [17:59] Especially when the sellers like, I run-in this a lot right now. They don't have anywhere else to go.

Mike DeHaan: [18:02] Dude, that's like the biggest problem. We were literally dealing with that this morning.

Dylan Koch: [18:05] Yeah. You have to try to solve their problem, but then they need the money from the sale to afford somewhere else to go. So now you're holding the money back in escrow. It's it's always everything is a mess, and that's why we get paid to solve problems. There's two sides of that token.

Mike DeHaan: [18:17] Yeah. I think something that gets pretty dicey is what you're starting to see now is people that don't have adequate lead flow to keep up with their growth plans. They're now going and I know you've been doing this, but I will say your market's pretty sweet, honestly. Having seen your market now from Michael Leonard perspective, I'm like, goddamn. I should've gone to Cincinnati. I'm damn.

Dan Austin: [18:35] Go way out.

Dylan Koch: [18:35] Stop sending you guys my loans. Yeah. Exactly.

Mike DeHaan: [18:38] What a lot of people start doing is they say, well, I'm not getting enough from my wholesale. I'm not getting enough revenue. I need to like, am I getting deals, I'm going start flipping houses. So then if you're going that route and you are now scaling it, the issue is you are now living off of accounts receivable, right? And that accounts receivable isn't just accounts receivable, it's accounts receivable that is also levered because you have debt to get to that accounts receivable. And so it's constantly diminishing. And that's how people lose their ass, is because they're saying, well, I have X amount of revenue I'm making per month. This is my projected revenue. If If everything closes on time, I should be able to pay my bills. I'm gonna go and get more debt to be able to do more of that. And so you kind of have like this tug of war that constantly happens that can get out of hand very, very quickly.

Dylan Koch: [19:20] A hard money loan, depending on the loan amount, could be anywhere from $50 to $200 a day, like in carrying costs.

Mike DeHaan: [19:27] Yep.

Dylan Koch: [19:27] Right? And that's one property. Yeah. You know? So every week that goes by, that's less money that you're getting. Or if you have as you know, your lenders that has the stupid three month seasoning period even though you've been done for thirty days.

Mike DeHaan: [19:37] Yeah. Yeah. That does happen. That's small deal. So Cole Red Johnson, he's also been on the show. He's been really harping on this on his social media, like this sort of way to view this business. And I really like it. I think it's so correct. Is that the perfect size of this business is like 1.5 to 2,500,000 top line revenue. You have a team of like three to five people. Right? And you have a way to do outbound marketing and inbound marketing. And you can expect to make like a 60% profit margin on that. And you can get to that. That's a size where you can kind of set it and forget it. You can have enough money that you bring in like an operator that's getting paid well, like well enough to be a part of like the entire process. And then you use that to basically like buy your freedom or pay your basic bills. And then if you want to be more of an entrepreneur, you go and you find something else that's more scalable. Yeah. Right. I fully believe that. Because I think the good thing about this business is it's a business where somebody with, I would say, like a relatively simple skill set can go and make like life changing money without needing a team, without needing like some crazy education or anything else. It's a lot of work, but it is possible because it is every piece of marketing that you send out, there could be a deal in there that comes through that pays like what your old salary used to be. Yeah. You know?

Mike DeHaan: [20:55] There's not very many businesses that do that.

Dylan Koch: [20:57] One thing you said about Cincinnati being a good market, and I this jogged my memory. I was talking with my close friend who's also in this business here, and we sat there and counted up, like, the legit operators that we that we know. There's 14, including us.

Mike DeHaan: [21:12] In Cincinnati? In Cincinnati that live in. More than I would expect, honestly.

Dylan Koch: [21:15] It was for us too. When we wrote them all down, we're like, holy shit. This is actually a lot more competition than we thought. And then we I'd legitimately closed one of them, ZonPay, to do 6,000,000 this year. And so they're, like, the largest here. But I guess my point being is the prices come with the competition. And I I never talked to a seller that has already talked to somebody else.

Dan Austin: [21:31] Right. We're finding that more and more.

Mike DeHaan: [21:33] At this point, there's never a seller. They they at least are familiar with the concept of a cash buyer.

Dan Austin: [21:38] Mhmm. Totally. They're they're like, well, I'm gonna call three more people or I have two more appointments, like, every time. Every time. It's just that's a business, though.

Dylan Koch: [21:44] I will report back because I got sucked into doing a demo for a AI driving for dollars. And so I I'm not optimistic about it, but it's like a free trial where they say they're gonna take AI and scan, like, Google Earth and whatever, and they're gonna find the rundown houses. Conceptually, this makes sense to me, but I'm gonna learn if it's are they already on list that I already have. Right? Are they you know, that kind of stuff.

Mike DeHaan: [22:05] Here's how it would be actually sweet. So you can get, like, a AI driving for dollars, but it's like a Wemo car that, like, goes out and just, like, actually takes pictures.

Dylan Koch: [22:13] Yeah. That would be sweet. That would be dope.

Mike DeHaan: [22:15] What they do is they have, like, a little camera. They go and, like, they stick on a Wemo car without them knowing it. It just basically drives around, which is

Dan Austin: [22:23] Yeah. Not a bad idea. Just just Teslas too. Just have just tap into the hack into the back of the end of the Teslas and steal all the photos.

Mike DeHaan: [22:29] There you go. That's a good idea. So it's just important to have, would say perspective for that if your goals are to go bigger. But like I shouldn't turn people off from starting. Because frankly, if you haven't grown a business to a million or $2,000,000 yet, you shouldn't be worried about growing it to 10,000,000. You Yeah. You should focus on making your money first, getting yourself some financial flexibility and a little bit of financial freedom, and then you can choose to kind of swing for the fences. But I think this business, like I said, is great for that. Know? And also too, if you're somebody that has long term wealth aspirations, there are very few businesses that allow you to make a pretty solid income while also having the ability to buy discounted assets.

Dan Austin: [23:08] Which is the goal. That's the goal right there.

Dylan Koch: [23:10] Yeah. When I was deciding to leave my W-two and like what I was gonna do, because I wasn't really whole set on doing wholesaling at that time. But it was like, I have the skill set. I kind of know what I'm doing at this point. And I can make just as much as I was as a pharmacist, but the whole purpose was to buy discounted deals. Like, you know, so you can do both in this business. What did Ryan Dossi's old saying was buy the best wholesale arrest, something like that?

Dan Austin: [23:35] I was just happy about that.

Dylan Koch: [23:36] Yeah.

Dan Austin: [23:36] Yeah. It's true though. And I think going into this to finish off what you were saying, Mike, is like, if you're just starting out or you were thinking about getting in, it's like just plan to spend four or five years building a business. And if you don't think you can do it for four or five years, you're probably not gonna build any business. So like, don't even try. But if you spend four to five years, you'll build a very solid business and you'll figure out the sweet spot for the amount of effort you wanna put in for the pay. And you have access to all these just kind of deals Dylan's talking about, which will help you build passive income. You'll hopefully build some additional wealth from the excess cash you don't need if you're a smart business person, you're a little bit frugal with your accounts and save some money. And then you can use that money to do other things. Whether that's start another business, Mike and I started lending that extra money out. I mean, there's lots of opportunity. And I think within that four to five year period, you'll find a very awesome place where you always have a way to make money and always have a way to get discounted deals. Which is really what the goal should be. Like, if this is the business you're even looking at.

Mike DeHaan: [24:33] Yeah. I think the time component of that is so understated. Right? Just like with any business, you know, and people get impatient, especially with the the FOMO sort of environment that we have now with social media and everything else. So like if I look back on sort of my journey when I left my w two job in 2018, I started doing real estate stuff shortly after that. I didn't really make any like actual money until the end of twenty twenty. Right? And so at that point, I mean, that was three years of trying to figure it out. And that was with no, like, mentorship or anything else. And that was also too when I would say the market and the industry was significantly easier than it is now. Because it was way less sophisticated. Right? You didn't have as many ways to like learn how to do a lot of this stuff. There was less options for marketing, like going and finding like a cold calling company, like, or someone to do like lead gen for you was kind of not really a thing.

Dan Austin: [25:25] It's definitely harder.

Mike DeHaan: [25:26] Right? Yeah. It was definitely harder.

Dylan Koch: [25:27] The biggest wholesaler back in, like, Cincinnati in 2018, 2019, he was basically the first one to figure it out like, oh, I can send mail and get people to sell me their houses. And it it was simultaneously where we had two or three hedge funds that were buying a shit ton of stuff. The dude made millions and millions and millions of dollars and then just went off the face of the earth.

Mike DeHaan: [25:47] Yeah. So we were talking about that on our scale call on Tuesday. One of the old guys here I say old guys. He's a young guy. Think he's actually younger than I am. But when he started his business in 2016, 2017, on the wholesale real estate, he's like, yeah, we would just like text people and they would text back and be like, sure. And they would just sell the property. And he's like, we're doing like 10 deals a month just off of like SMS.

Dan Austin: [26:08] Pretty wild. You know?

Mike DeHaan: [26:09] And he did exactly like you said. He just made fist loads of money, and then he was like, cool. And now he like travels around with his young family in an RV and just like kinda reduce their expenses and nothing. And like, got my nest egg. I'm just gonna hang out now. My thing. But if you go back even further, you'll see even more of that. So like one of the big he's like a home builder now in Spokane. I met him number of years ago. We went to lunch. And he was telling me that when he started trying to find deals in like the early two thousands in in Seattle Tacoma, He's like, yeah. He's like, we knew that if we we needed to market the people, the Internet wasn't really, like, a common way to do that. So we could only call or mail people. And he said that, you know, there was no mail houses or skip tracing. So we had kids that would, like, run around and, like, tag crappy houses. And then he had a bunch of, he said, like, retired ladies and, like, stay at home moms that have, like, good handwriting that would come into work every day and would just be handwriting letters. He had a freaking sweatshop.

Dylan Koch: [27:06] I already know this guy killed it because no one else is probably doing it.

Mike DeHaan: [27:10] Yeah. Like, he is. Yeah.

Dan Austin: [27:11] Crushed it. Because you're creative. You're so creative. Like, you see you see something, you see an opportunity in a market, and then you build that business. And I think I think we like to joke about how easy it is, but that wasn't an easy thing to do back then because he had to come up with those ideas.

Mike DeHaan: [27:26] Well, if you're

Dylan Koch: [27:26] talking about scaling, you don't that I mean, that's even harder to scale. Right?

Dan Austin: [27:29] Right.

Dylan Koch: [27:29] But he had also had 10 x less the competition.

Mike DeHaan: [27:32] Yeah. Yeah.

Dan Austin: [27:32] Way fatter deals, way more deals.

Mike DeHaan: [27:34] Yeah. I think the key with that is he was willing to do stuff that other people weren't. Yes. You know? And I think that that still exists now. And I think the difference is back then, the things that people weren't were complex. Right? I think that now the things that other people aren't willing to do, it's more around like being patient and consistent. Like, they're afraid of doing the hard work, so they're trying to optimize everything. Back then, people were afraid to do the hard work because there was uncertainty around it and it was you had to like figure it out. Because like so many different pieces of this business. So like the people that are making the most money, they have a great follow-up process. Right? They're like working through their old leads I've missed in for a while, and they have a consistent marketing process. Almost everybody that we talk to, whether it's like in scale or it's on the show or it's like in passing, whatever, where they get stuck is they have a small marketing budget, and they're trying to spread it across way too many marketing channels because they're too afraid to commit to something or their follow-up process is trash. Right? And then once a lead comes into the system and goes through, like, the we're friendly stage, it kinda just goes into the pit of despair of dead leads where it dies. Mhmm.

Dylan Koch: [28:42] Right? Then they'll stumble upon it four months later, it's sold to somebody else. Totally, dude.

Mike DeHaan: [28:46] One of my favorite sayings, and I don't know if you stole this from somebody, Dan, or you you made this up on the spot. This is at the very first Keyes Con that we did years ago. And you said, with how this business works, right, and, know, we all kind of market the same people, every lead that is old to you is a new lead to somebody else. It's Dan Austin copyrighted. That's a that's a great quote. That's honestly a great quote.

Dan Austin: [29:07] I came up with it because it's true. Right? I mean, are we're all marketing the same people. This is where people are like, well, how do I get one inch better, 1% better than other people? It's like, well, don't even worry about that yet. Don't worry about the fancy AI bullshit. Just go mail and call the same people. I know. Because we're all doing the same thing, and it's just about getting in front of the right people at the right time. That person's in foreclosure, pre foreclosure for six months. Guess what? It's gonna take time.

Dylan Koch: [29:30] Way too many people focus 80% of their efforts on, oh, I need to make sure my copy is a 100% correct. Right? Or something like that.

Dan Austin: [29:37] No. Just send them a letter.

Dylan Koch: [29:39] Yeah. And it it just doesn't make a difference. You know? And it doesn't.

Mike DeHaan: [29:41] And they're yeah. They're so worried that, like, the little details are gonna be what matters when 95% of the time, it is persistence and timing. Right? Honestly. So and that's why this business is so hard to optimize though because you can't schedule that out. Like, you can't make that any better. You can't, like, force people to sell to you. You just have to be there. You have to be the one that is top of mind when they decide that today is the day they need to get their act together. And you

Dan Austin: [30:08] can't forecast what that person's revenue is worth. Right? Like, if you're Andersen Windows, they know exactly what a window is worth to them. So they know if we can get somebody to call, it's gonna be on average worth this. Sometimes it's a $50,000 wholesale fee. Sometimes it's you lose $5 on a flip.

Mike DeHaan: [30:23] That's another piece, right, that's so hard is the your lead indicators, your lead KPIs will be the same. Your cost per lead, your cost per deal. But your actual revenue on that can vary an incredible amount. So and, like, you'll always have an average, but sometimes you'll have a period where, like, you exceed the average in a very short window. Other times, you'll have a period where you are way below the average in a very short window. So you can be going and getting your five, six, seven deals a month like you're expecting, but all of those deals could be under $10,000. Or all of those deals could be over $30,000, and you never know what it's gonna be.

Dan Austin: [30:54] That's why you have to have good cash flow management and don't spend all your money all at once because you don't know if the next three months are gonna be those $5,000 deal months. Yeah.

Mike DeHaan: [31:02] I do also think that's one of the reasons that this industry kind of draws degenerates is because there's constantly like this slot machine effect. You know, you're pulling the wheel, and you don't know if this time you're gonna hit a jackpot or you're gonna bust out. It's a little gamble. It is every time.

Dan Austin: [31:17] You know? Feels good. Feels good when you win. And when you lose, you're like,

Mike DeHaan: [31:20] I can get it back. I can get Yeah. I'll just double down. I'm just splitting tens, dude. Like, we gotta go and just go go all

Dan Austin: [31:26] out of Split in twos.

Mike DeHaan: [31:27] Split in two. Shit.

Dylan Koch: [31:30] Have you guys I guess even when you're doing the national stuff okay. If you do think about what's different marketing wise, the only thing I I haven't seen people really do are like billboards. Or like I even tried those door hangers from from Ballpoint for a while. I got zero deals from them. Granted, I would probably put out 500. But

Dan Austin: [31:48] Yeah. That's your problem. You need to put out 10,000.

Dylan Koch: [31:50] Yeah. You know?

Mike DeHaan: [31:51] You didn't even do enough of like a sample size to there's a our mosey bit where he talks about that where he's like, I went and put out things on people's windshield. And he's like, man, I put out like 500 on the guy's like, 500? He's like, I do 5,000 a day. Right? On that piece, that's what I would say. When it comes to like the billboard and so we run radio ads. And what that does, that's not a good, I would say, lead generation technique. What it does is it starts to skew the odds on your targeted marketing to people to prefer you over your competition because you're more familiar. In my mind, that's more like politics. Right? So if you go and you look at any election, the number one indicator of somebody winning an election is what is their name recognition. Right? Presidential election kind of aside because everyone knows those names and it's always very, like, media heavy. But like if you're looking at local elections, it's like, do people know this person's name? Is it familiar? Even if they know zero about their policy, they'll be like, oh, I know who this guy is, so they'll vote for him. Right? Because they saw billboards. In my mind, this business when it comes to how competitive it is, we're all marketing the same people. If they've seen your name on a billboard, they've heard you on a radio, they've seen you show up on, you know, an internet page and like the side panel, they're more likely to call you versus x y z home buyer that just sent them a letter and has nothing else behind them.

Dan Austin: [33:06] Reinforces brand too. And I think it'll it'll helps you on the monetization if you're trying to wholesale because other wholesalers see your stuff and they automatically are like, oh, that's a they have a billboard. They're a real business. Yeah. And so it makes it easier for you to sell deals.

Mike DeHaan: [33:18] Just legitimate. And I think that's why it's a mistake. And this goes back to people kind of getting, like, bought into stuff or trying to skip the hard work. It's a mistake for, like, new people to be pursuing, like, SEO and PPC. And the problem is that they all go through the same freaking lead funnels of these marketing companies that are like, let me tell you why this is going to be better and way less work than doing direct mail. But the problem is if you have nothing backing your online marketing, it doesn't really like mean anything. It's going to be a really expensive form of marketing. The best place to be is where you've called these people, you've sent these people letters, they've seen a billboard of you, and then they see an Internet out of you. Right? And so that basically reinforces your more targeted direct marketing that's brand heavy. Know, that's where you wanna be. Right? But that should be like in addition to all the hard work marketing that people don't wanna do.

Dylan Koch: [34:04] Yeah. And that should come later. You know, six months being or a year being in this business. Right? You have somewhat of a track record. One other thing that we were bitching about, me and the same guy I referenced earlier was there's a lot of people that come in though, and they're okay with a $5,000 wholesale fee. Mhmm. Because, like, they don't have overhead. That's just them. Right? So, like, they're like, $5? Hell yeah. And so now their their offer is 10 to 15 k above what I can offer. And I've lost a lot of deals actually that way, which might just be part of the business, but it's a pain in the

Dan Austin: [34:32] ass. Yeah. Little ankle biters that come in and screw things. They disrupt the market for a little bit, then they disappear because you can't run a business that way.

Dylan Koch: [34:38] Some of it's just incompetence. Exactly.

Dan Austin: [34:40] Yeah. It is incompetence. Yeah. You can't run a business long term that way. It just doesn't work.

Mike DeHaan: [34:44] Totally. Because here's the thing, think about it, right? They're making their $5,000 deal. If you go over a long enough time domain, their cost per deal is still gonna hit the industry average.

Dan Austin: [34:53] Yep. As they try to scale.

Mike DeHaan: [34:54] Which is about $3,300 in an average market. You know, maybe getting into the high 2 thousands in certain markets if you're optimized. Right? So realistically, on that $5,000 deal they're happy with today, you go forward six months, they're really only making $2,000 a deal, but they're still working just as hard as you trying to get the, you know, $20,000 deals. Right? So they always wash out. Then they quit. Yeah. They quit. We've seen those guys forever. Unfortunately, they're part of the game.

Dylan Koch: [35:19] Yeah. But they always keep coming back too. They're new ones. They do. It's like a cycle. Yeah.

Dan Austin: [35:24] Yeah. There's new ones. You're absolutely right. You're absolutely right. There's always one of those guys or two of those guys.

Mike DeHaan: [35:29] You know, that is the challenge with any business. It's a low barrier to entry. You know, anyone can go and get a contract signed and then find a buyer and send them the contract. Yeah. And it's becoming simpler every day as like there's more contract templates, There's more free gurus out there. There's YouTube videos. It'll continue to happen. But, you know, at the same time, what we should do is we need to make like fake shiny objects for them to go and pursue instead.

Dylan Koch: [35:53] Divert your competition. Yeah. Just divert your competition. Yeah.

Mike DeHaan: [35:57] We're gonna go, like, straight, like, psyops on it where we're gonna create, like,

Dan Austin: [36:00] a whole brand. It would not be hard to do. It wouldn't. I can already see the faces of some of the people here locally that I could just get to buy stupid things.

Mike DeHaan: [36:07] Well, it would be hard for us. We just got to go and get investor girl Brit to put on a swimsuit and do it for us, then we'll be good.

Dylan Koch: [36:12] The most recent real estate thing was slow flips. Like, they're advertising slow have you guys heard of those?

Mike DeHaan: [36:19] Slow flips? Is that yeah.

Dan Austin: [36:21] I briefly heard about this, and it sounded the stupidest thing ever.

Mike DeHaan: [36:24] Is that called a rental property?

Dylan Koch: [36:26] Essentially, Mike, is their whole strategy was you buy it, you rent it, you place a tenant, and then you try to sell it until, like, 366. So you're saving 10%, you're not taxed on an income basis. Your taxes on a capital gains perspective.

Dan Austin: [36:40] Oh, the cap cap gains.

Mike DeHaan: [36:42] Who cares?

Dan Austin: [36:43] Yeah. But who cares, dude? Because if you're doing stupid shit like that, your actual taxable income bracket's probably gonna be, like, probably

Mike DeHaan: [36:49] gonna be stupid.

Dan Austin: [36:50] Like, you know

Dylan Koch: [36:51] what mean?

Dan Austin: [36:51] Like, what is your what are you in the 10% tax bracket, and now you're gonna pay 10% capital gains? Like, it doesn't make any sense.

Mike DeHaan: [36:57] You're joking about that, Dan. But, honestly, I think that it's so easy to sell people on tax savings. It is. Look at the entire, like, red side of the aisle. Right? Like, everything they do is about here's how people are gonna save on taxes. But the funny thing is a lot of it's targeted are people that don't make any money anyway. Right. You know? Like, no tax on Except

Dan Austin: [37:17] for Jeff Bezos and all the guys that moved to Florida.

Mike DeHaan: [37:19] Well, yeah, of course. But that's the other extreme. Right? Where they're they're manipulating the system. They're the ones that actually pay the taxes. But I think where that comes from is if there's always been this sort of concept that it is easier to sell on fear

Dylan Koch: [37:31] Oh, that's true.

Mike DeHaan: [37:32] Than on gain. Right? And so people have this fear of loss of having to pay taxes. And if can tell them, like, you won't have to pay that anymore, you won't have

Dan Austin: [37:39] to lose as much money to taxes, people are always gonna jump on that more frequently. It's because also nobody can understand the tax code. And if you can, nobody really spends time to actually dive into it because fundamentally at the top level, you kind of look at it and you're like, well, it's not that big of a deal to pay the taxes on this situation. But you'll have a guy on the other side of the screen telling you like, I am going to help you save taxes. You should never pay taxes. You don't have to pay it. It's like, well, I mean, I might save $3 on taxes here, but it would just cost me $4 to get my money back. Right? You know, like the whole like $10.31 exchange kind of idea of it's like, sometimes it actually makes sense to. And so people overcomplicate it for a reason.

Dylan Koch: [38:14] If you're deferring like a $100,000 tax liability, sure. If you're deferring 5 to $10, just pay the fucking taxes.

Mike DeHaan: [38:23] Right. And pay attention to

Dan Austin: [38:24] your income. Like, there's years, especially in this business where you're gonna super high income. So you should actually think about if you're going to make certain moves, like selling property, don't do it that year. You know what I mean? Do it the following year and, know, like look at, you know, your taxable income doesn't always go up usually, especially as a business owner, sometimes it's this way. And that's called planning and make take advantage of those those low years and those high years.

Mike DeHaan: [38:44] Yeah. But post people don't think that way because they have such a limiting belief around making money that they are constantly trying to save.

Dan Austin: [38:51] Save. Yeah. That's a good point.

Mike DeHaan: [38:52] Just one story to round out this piece, and then we'll call it On the Sub two group yesterday, they posted as an anonymous person, what I found hilarious. They were saying, I'm really considering pulling the $7,000 out of my four zero one k, and I wanna know what my tax liability is. And does anyone have any idea about strategies I could use to reduce my tax liability and penalties for pulling my $7,000 out of my four zero one k?

Dylan Koch: [39:17] It's gonna be like 40%, by the way. Like

Mike DeHaan: [39:21] It's gonna be a, it's gonna be significant, like, in terms of, like, the amount that's there. And who cares, dude? It's like $3 you're gonna be paying.

Dan Austin: [39:28] It's not gonna get you anything,

Mike DeHaan: [39:30] though. It's not gonna get you anything, dude. But he was, like, posting it as he was and and anonymous just so no one would go and hack him and steal his $7,000 from his Fidelity four zero one k.

Dylan Koch: [39:39] Look. Everyone's gotta start somewhere. They just gotta learn that those are the he's the same one that's asking for Gator lending for his EMD. So

Mike DeHaan: [39:48] Yeah. Dude. Yeah. $200 EMD. I need a need a a Gator line of credit for all of my EMDs.

Dylan Koch: [39:54] Well, that was fun.

Mike DeHaan: [39:55] So anyway, guys, anything else before we wrap up? That was a good combo.

Dan Austin: [39:59] I just wanna add add this in there that 10 x is easier than two x along the lines of making sure that you

Mike DeHaan: [40:05] are

Dan Austin: [40:06] in the gap.

Mike DeHaan: [40:06] Oh, there you go. Thank you, mister mister Ben Hardy. But any other tag ons? What's your book gonna be called, Dan?

Dan Austin: [40:14] I don't have a book yet, but I'll I'll come back with another one.

Mike DeHaan: [40:16] Bro, you you just turned 40. You're getting that midlife crisis crisis thing, dude. You got you gotta start thinking about Gotta write a book. What your legacy book is gonna be like everyone else that's had a midlife crisis. And what's even better, you can just have a chat with GPH write the book for you now. Not midlife. I'm planning to

Dan Austin: [40:30] live to a 120. I'm one third of the way.

Mike DeHaan: [40:33] One third of the way. Still, like, middle. Right? You're in the middle middle quadrant, middle third.

Dan Austin: [40:36] I'm not a I'm not a car guy, so I can't buy my Ferrari. So, yeah, I'll just write a book about my life story because it's so fascinating.

Dylan Koch: [40:43] You'd likely be like a, you know, a vegetable from 90 to a 120 anyway. So, like, it's still,

Dan Austin: [40:47] like, midlife. Yeah. Just might as well just let it go.

Mike DeHaan: [40:50] Yeah. Right.

Dan Austin: [40:51] Just let just let go at 80.

Mike DeHaan: [40:52] Dude, by that point, they're just gonna, like, plug us into, like, the virtual assisted living home. You know? Just, like, eat cruising. You'll they'll, like, take your old mind, put you in, like, your 35 year old body and just be like, here you go.

Dan Austin: [41:04] Have fun. You could just live forever in a virtual environment.

Mike DeHaan: [41:07] You know? And then then it'll be like the matrix. They'll just, like, generate power off of us. But if you're as far as you're concerned, you're a 35 year old in a virtual world, is that bad? I don't know. That's the philosophical question for everybody to answer.

Dan Austin: [41:17] Sounds lonely if you know. If you know you're there, it sounds lonely.

Mike DeHaan: [41:21] Nah. But everyone else is there. It's like an online video game.

Dan Austin: [41:23] Okay. Okay. I guess I'm not an an immersive video game guy, so I don't know. I don't know what to expect.

Mike DeHaan: [41:28] Well, then you're gonna miss out, Dan, because it would be pretty great.

Dan Austin: [41:31] I promise. Do they have Pac Man

Mike DeHaan: [41:32] there? Sure. Just just for you. Just for you, boomer. Well, I didn't Pac Man. So That's right. Anyways alright, everybody. Well, thanks for listening. You guys have a great rest of your week, and we'll talk to you guys next time. See you. See you. 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.