How to Determine When to Wholesale, Flip, or Keep a Property

Speaker 1: [0:02] Welcome to the collecting keys real estate investing podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [0:25] What's going on, everybody? Welcome to episode 25 of the Collecting Keys Real Estate Investing Podcast. So we're a quarter what? Halfway halfway no. Quarter of the way to a 100.

Dan Austin: [0:37] Quarter of way to a century.

Mike DeHaan: [0:39] Quarter of the way to a century in weeks since this is a weekly podcast. Now it's it's funny looking back. I mean, back when we first started and everyone's like, if you're not, you know, only everyone always said, only plan to do, like, a few episodes of start, you're probably not gonna stick with it. I don't know if I've got a good routine now. It's a fun process. We know we're starting to get some traction, engagement with listeners, programs starting to build out. It's interesting how quickly things can start to grow if you're just consistent. I think that's business, whether that's, know, building an audience, whatever that looks like. Consistency is just the biggest key.

Dan Austin: [1:13] I think you and I have some really stick to it ness everything we do. We do. Is that a word stick to it ness? We're very sticky. Right? If we and that's the thing too, is it's like, when you want to do something, if you know there's value in it, we try not to do things that aren't valuable to us. Right? And but if there is value, it is that consistency show up every day and just do it. And I think I think we're doing it. We're quarter way to a century in weeks.

Mike DeHaan: [1:34] Yeah. Well, I mean, like I said, that's number one key to success in literally anything, you know, like personal life, you know, marriage, relationship, fitness, sport, whatever you wanna be good at. If you if you give up quickly, you don't give it a a a true thorough shot. It's not gonna go anywhere. But yeah. And that's that's a big reason that our I think our business has started to so well so consistently. I mean, even just this past week, yet again, we got another contract, which is a pretty fat contract, $50,000 assignment fee that is purely just one that us and the company have stuck to. This this lead came into our system. So I think it was January 2021, and we just got signed around this past week now in the end of March twenty twenty two. And, you know, this guy's fallen off the map several times. He stopped talking to us. You know, us or our team would follow-up with them. We've sent them more correspondence. And sure enough, here we go. We got it signed around. And now it's a awesome fee for us. You know

Dan Austin: [2:35] what I I didn't understand about that? So this this guy this this seller is not even in our market. Yeah. But like, we got him like, well, what how did that happen? I don't remember that. Like, he is what, five hour drive away from us. We don't find it in that zip code or anything.

Mike DeHaan: [2:49] So he's a cold call. If if you look at it. Right? So the initial contact was a cold call with a bunch of data that was mixed in with ours. I think it was actually a lead that accidentally came to us.

Dan Austin: [2:59] I think it did. Yeah. Honestly.

Mike DeHaan: [3:01] Be because back that back then, we were using a cold calling company that was calling for a number of Northwest companies. We And were getting a lot of leads from open that area that didn't necessarily make sense and belong to us. Yep. But, you know, our guys followed up with it and noticed there was an opportunity there. And lo and behold, here we go. Now we got a pretty sweet deal.

Dan Austin: [3:21] So Yeah. I can imagine who it was. Like, I there's probably handful of dudes at market over there that you could think of we got their leads. Gotcha.

Mike DeHaan: [3:28] Yeah. Well well, I I can also say that a lot of those guys, I highly doubt that they would have followed up with them like we have with this guy.

Dan Austin: [3:34] Yeah. Probably not.

Mike DeHaan: [3:35] You know, because that yeah. That's been the biggest thing for us is, you know, I was I actually met with one of our competitors just this past, week. You know, I went and stopped by their office because we we did a joint venture with them on something last year, so I did some tax documents, and he's a good buddy of ours. And he was saying that, you know, their overhead now is, like, multi 7 figures, you know, and this this 6 figure. Oh, seven figures. Seven figures. Yeah. Like, they have several million dollars in overhead. And I was, like, okay. Well, I guess that's cool. I mean, you gotta make a lot of money to cover that. But then I look at their operation versus our operation, and I think we can probably have similar total bottom line profit to them, but with way less overhead and me to do way less work. And at the end of the day, that's what matters. Yeah.

Dan Austin: [4:20] Yeah. Yeah. Know? Lean to me. But I will say also, we think out of the box on how to get things done because Yeah. If if you're traditionally thinking about building a business, you're like, well, I have to hire this staff here. They gotta be local. They have to, you know, be fit in this box. It's like, we've never really taken that approach, so

Mike DeHaan: [4:35] to speak. Absolutely. Yeah. I mean, we have a fully virtual company. You know, we have, obviously, a handful of people locally here in Spokane, but we also have staff, you know, other parts of the country. You know, we have staff that's international. I mean, I I've literally been on had had days where back to back to back, I have staff at our local meeting, then I'm meeting with our staff in East Asia, then meeting with our staff in India, then meeting with our staff in Eastern Europe. All like, one hour after the other, I'm like, cool. Just basically did a world trip all through Zoom, you know. Yeah.

Dan Austin: [5:05] These aren't and they they're not like VAs either. When you have VAs, These are like full blown like professionals yeah. That are Skilled people. So when you think about people might automatically think, yeah. I have VAs too. These are like, we have a marketing manager.

Mike DeHaan: [5:17] Yeah. I know. Right? Yeah. We have marketing manager from India. We have our our web web developer and designer from Romania. And they're awesome. They're great at what they do. Yeah. Honestly, I've I've gone through so many different hiring and staffing processes through American people. And honestly, would say they're better than a lot of the American candidates that I've looked at.

Dan Austin: [5:34] I agree. 100%.

Mike DeHaan: [5:36] And and not only that, but they communicate well. And something that's actually pretty awesome about having staff in other time zones like that, especially when they're so drastic, is they do a lot of their work when we're asleep. So, basically, our business is now being worked on twenty four seven. So cool. You know? And and and you you find you spend a lot less time doing kind of, you know, mundane stuff like managing them because they have their tasks that they need to do. They can't just, like, hit you up to ask questions. They're forced to figure it out because they're working at, you know, when it's three in the clock 03:00 in the morning for me, I'm sleeping. I'm not gonna answer that. They know they gotta get their stuff done, so they're just gonna do it. Yep. You

Dan Austin: [6:11] know? They figured out. They stick to it in this.

Mike DeHaan: [6:14] Stick to it. Yeah. They do as well. Exactly. But yeah. So aside from that, we are absolutely just rocking right now. I think last time I looked, we have like 14 properties in escrow. We've launched in our second market for the year, third market starting next week. I mean, it's not impossible to think we're going to be in five plus by the end of the summer. And then who knows by the end of the year. I mean, the direction that we're going now was not on the docket at the beginning of the year. But you know, as you feel the traction and system start to build out, kind of reach a point of like, the heck, you might as well give it a shot.

Dan Austin: [6:48] Yeah. You have to like, set your goals. Right? But you have to also be willing to adjust them.

Mike DeHaan: [6:53] Mhmm.

Dan Austin: [6:53] Or, you know, like, we I think our goal is still the same. It's just the path we're taking slightly different than we thought about in January.

Mike DeHaan: [6:59] Yeah. And and when it comes to this business, one of the easiest ways to scale once you start to figure out your marketing and your sales processes is to go to other markets, honestly, especially if you're in kind of a smaller area. Like, our area isn't small, but it's only, you know, 400, 500,000 people. It's easy to build up a business where you're saturating that that marketing, But she has other players here, like, there's not really that much more that we can do to get more deals locally. Like, we could probably spend, like, twice as much money to get, like, another, let's say, increase our our deal flow 10 or 20%. But that point, we might as well take that same budget and go somewhere else and start capturing that lower 75, 80% of the market.

Dan Austin: [7:40] Yep. Yep. Hit the low hanging fruit in a lot of the markets.

Mike DeHaan: [7:43] Exactly. The ROI can be significantly higher than trying to squeeze more juice out of something that you're already maximizing. So yeah. And I mean, I think that's also a big benefit of building out a remote business and having our our sales systems and everything like that be location independent is honestly, it's not that hard for us to do it because all we're doing is we're changing where we're doing our marketing and we're changing, you know, the area codes on our callback numbers. And that's literally Yeah.

Dan Austin: [8:10] And I mean, it's really proof is in the pudding too because we dropped mail in our second market and we already got contracts out there. Like, when when did we first drop mail, like, weeks ago?

Mike DeHaan: [8:19] Two two weeks ago. Right right now, we have we've made, what, eight offers. We have five verbals, and we've sent four contracts to people. So I I don't if you have any signed around yet. We must be getting close to one because a lot of those went out in the last day or two. But, yeah, I mean, like, good deals too. You know? And and and it was a benefit over there because we had a contact over there already who can sort of help facilitate getting comps and those sort of things. But same thing. Right? If you have if you've been doing networking, you've been connecting with people, you've been joining groups, you know, like, you know, like, our instant investor program, for example, or you join, like, other groups that have national presences, you'd be surprised at how easy it is to find people that are like minded and willing to work all over the country.

Dan Austin: [9:00] Oh, yeah. Absolutely.

Mike DeHaan: [9:02] That's such a huge advantage if you're doing looking to any sort of expansion is if you can have someone that you know and trust wherever you're trying to go. Well, and

Dan Austin: [9:09] right now, like, you and I, all the people we talk to, the biggest challenge I have is getting deals. And then they see how we're able to buy deals at $50.60 cents on the dollar. And like, they're so thirsty for that, right? So there's so many people out there willing to like, hey, I'm in this market, like, hey, do you want to set this up and you can drop, you know, plug and play your system right there, we have that rinse and repeat system. And then now knowing that there's just so many people out there wanting to partner up and find deals like that, it's just, you can see the growth, you can take it as big as you want.

Mike DeHaan: [9:39] Yeah. For sure. I mean and people always talk about in real estate using other people's money. So this I mean, the kind of method that we're starting to take now is in these other markets is we're using other people's money, but not necessarily to buy that buy the asset, but to do the marketing and to help build out the system. Because, you know, there once you do marketing, there is sort of a lag system to that. Right? Like, there takes time for money to come back between a, going through the sales process, which can take thirty to sixty days, and then going through the actual real estate process, which on average takes about thirty days. You're looking at about a ninety day cycle time from when your marketing goes out to when you start getting money back, you know, and depending on your your blow, like what your total cost is, that can be pretty significant, right? That can be 30 to $40,000 in outgoing cost. And if you are paying that yourself, you know, you can only do that so much, right? But if you're willing to find someone local, split some opportunities with them, maybe make them preferred buyer, maybe, you know, split some wholesale fees with them, whatever that looks like, you can grow very quickly, because all of sudden, your business having no money out of pocket, and you're basically taking on an investor that you're promising a future return, just like you will with a house flip. It's exactly the same. You know, that's a little bit riskier for them, because it's not tied to a levered asset. But the concept is exactly the same. And if you're confident in what you're doing, I mean, it's pretty easy sale, honestly.

Dan Austin: [10:58] Yes. And as the great Brandon Turner always says, part of a deal is better than no deal.

Mike DeHaan: [11:02] Honestly, though, you know, like, so so some of the places we're going, we have someone we're gonna be doing straight profit splits with, but they're funding our entire marketing process. And for that, it's like, We're gonna be giving up a portion of all of our proceeds to him, which realistically, if we were to go and get like a bank loan is significantly more expensive. Right? But, you know, that's easier money for us to get. There's no approval process. And he's a friend of ours, we're gonna get make him some awesome money. And for us, it's very easy for us to just immediately go and drop into that system without having to worry about any sort of cash injection needed on our side.

Dan Austin: [11:38] Absolutely. And like, yeah, we could fund these markets. It's not that's not where we're at. We're in a good cash position to it. But then it's the opportunity cost. If you're gonna, like you said, put all this money out in multiple markets at the same time, now you're you're injecting cash into these markets. And then when other opportunities come up, you can't continue to expand. So it's kind of a give and take.

Mike DeHaan: [11:56] Yep. Exactly. So cool. Well, on that that note of opportunities, this is something that's come up frequently with both our investors in our our instant investor program. And also to you, honestly, just with other people that we've been networking with is kind of how exactly to determine the best exit strategy for your deals as you get things signed around.

Dan Austin: [12:16] Whether Such a good topic.

Mike DeHaan: [12:18] Yeah. Whether you're gonna wholesale it, you're gonna flip it, you're gonna keep it as a rental. And this property, this question seems to be the biggest concern people who are looking to buy rentals, because they quickly recognize that, you know, first property comes in, if they keep it as a rental, they get the basic loan terms, whatever that looks like, all of sudden, their money's gone. And they're like, well, how do I keep marketing? And that's a super, super valid point. And we're gonna dive into that in just a second. But first, I wanna say a few quick things about our instant investor program. The instant investor program is our twelve week group coaching program, which includes a self driven course and access to our private investor community. We will take you through the full process of how we find our leads, how we market, how we do our sales and follow-up, and how we determine the best strategy for every opportunity that comes our way. On top of that, you will also join a community of other like minded investors nationwide that that are all marching towards the same goals. And you'll have direct access to Dan and myself, so you can continue learning and growing with us as we continue to adapt and grow our business. Whether you're a new investor or already established, our systems can help take you to the next level. If So you think you might be a good fit, go to the instantinvestorprogram.com and schedule a call, and we can have you talking to motivated leads in as little as two weeks. Alright. So how exactly do we determine what our exit strategy is on our deals?

Mike DeHaan: [13:33] Whether we're gonna, you know, wholesale it, flip it, keep it as a rental. And then on the rental side, like, there's obviously so many different strategies whether you wanna, like, long term, Airbnb, lease to own. Like, how exactly do we we figure out what makes sense for each deal as they come through? What do you think, Dan?

Dan Austin: [13:48] Yeah. Well, like, starting with wholesale. Right? Like, that's the easiest way to just get some revenue. Right? So a lot of times you're looking at it is like, where what is your financial and cash position? Do you have the cash to sustain a four to five month deployment on a flip or a BRRRR. Because like, those are about the same timeline, right? Like, you're going to flip a property, you're to take it down, you're going to renovate it. Same exact process as a BRRRR. You're to you're going to sell it or refinance, which all takes the same time. So where are you at in a financial position? Because you and I, we've wholesaled some deals that we didn't want to, but to continue the marketing machine and also to build up coffers for, you know, expected, you know, other properties we're gonna be taking down, we've just wholesaled them. You know, just wholesaled one right now for a great fee that we know we can make more money flipping, but it's just not the right time for us with where we're at in our other opportunities.

Mike DeHaan: [14:34] Yeah. One, I think that that's that's so key that which when people start out, it's harder to think that way, especially when you're trying to generate wealth and buy long term properties. Everyone's like, I don't wanna miss out. This would be such an awesome rental. But you need to understand that it's more important that you keep your marketing machine going and build out that process and sort of have some consistency there. Because once you do that, and you have, you know, shots on goal every single week, all of a sudden, you don't really care that much if you miss an opportunity because you know there will be more. Like, you know, I'm I'm I'm not gonna say that we haven't, like, lost stuff or wholesale stuff that I'm like, damn, we should have kept that.

Dan Austin: [15:08] Sure.

Mike DeHaan: [15:09] Which we definitely have, but at the same time, we still made money. And we know there will be more opportunities that will be equal or better. You know, real really, the only I can only think of one property, like, really big picture that I really regret wholesaling, and it was that little duplex that we sold to one of our competitors out in the South Hill because it was kinda janky.

Dan Austin: [15:27] Oh, yeah. It was kinda janky.

Mike DeHaan: [15:29] Yeah. It was that little this little duplex, was kinda janky, but It's been

Dan Austin: [15:33] and down, 100 years old.

Mike DeHaan: [15:34] Yeah. You know, and they're like, the tenants had just signed on for a year, and for but even then, for where we were at that time, we could not afford to buy that property, hold it with under rented tenants, and just wait for a year to be able to do anything with it. Right? Yep. Now we do that all day Yep. Because we'd have the ability to do so. But back then, it made more sense. I think we made, like, a fifteen or twenty thousand dollar fee. It made sense for us to do that, to be able to keep the marketing machine going, even though that property now would probably sell for double what we had under contract

Dan Austin: [16:02] for Yeah. That's unfortunate.

Mike DeHaan: [16:05] Yeah. With relatively limited work too back then.

Dan Austin: [16:08] Yeah. It was stabilized already. Yeah. And also, I think another point on that too, sometimes it's also effort versus pay payoff because it's okay to be in a different season of where you're at too of saying, I just don't want to put the effort into it. Like we just were kind of negotiating on this property. You're like, Hey, should we flip this thing? What's the price point? Was like, Oh, it's kind of tight. And then I looked at it, was like, this is going to be a renovation that's just going to be like, we're going to be fighting it every way, right? Every direction we go, we're going to make money, we have our system styled in. But it's gonna be a lot of talking to contractor, you know, run into this, run into that. And it's just like, it's not really worth our effort right now. Like, that's okay too. If you're just like, I'll make a quick $10.15, $20 on as opposed to the $5,060,000 dollar flip because I just kinda don't wanna deal with it.

Mike DeHaan: [16:51] Yeah. For sure. And what I think also as well as you build out more opportunities and more marketing systems, it's easier to project where you're gonna need cash, especially as you get properties that you know you're gonna be closing on sort of down the line. And, you know, you need to make those decisions based off the immediate needs of the business. Because I think something else that is very easy to do, and we've run into this with this business, is, you know, you tap all your money in properties, the marketing machine slows down, and then you start being like, okay. Well, I'm going to pay off. You know, I'm gonna get this money back from this payoff, this flip, you know, this burr, this this refinance, whatever it is, you know, at the end of the month. And then that rolls around, and for some reason, it doesn't happen.

Dan Austin: [17:35] Yes.

Mike DeHaan: [17:36] Right? And now you're completely screwed. And we're dealing with this right now, actually, on this, you know, this condo deal where I mean, who who could have predicted this this situation when we got into this project? But you want to explain that, Dan?

Dan Austin: [17:48] Yeah. So we have a condo. It's more of a side by side duplex, but it's set up as a condo with its own HOA. And the HOA fee is like $50 a month, which pays for the insurance. So you technically don't need to pay for insurance. So not a total bad setup, except for the condo associations had three claims in the last three years. So their insurance company they use is like, sorry, we're only going to give you this much insurance, which isn't enough to cover the actual value, like the replacement value of the property. And then on top of that, the HOA bylaws, whatever you call them, basically state you can't get your own insurance, which is a farce because the neighbor has its own insurance, so you can, but just the way it was written back in the 70s, it says that. And so now we're trying to connect the dots, get the HOA president involved, get the insurance company involved, get the lender involved for the buyer so that we can be like, alright, guys, what do we need to do? Because like you and I are like, I will pay for anybody's insurance for the next two years, three years. I don't care. It's cheap, right? Like, just tell me what we can do to close this because yeah, we're expecting in a week, we should be getting payoff, which is all of our costs and rehab costs and and down payment on this thing out. And now it's like, are we gonna get it?

Mike DeHaan: [18:55] Yeah. Well, I mean, because it's a huge amount of money. Right? Not like profit aside.

Dan Austin: [18:59] It's a $150,000.

Mike DeHaan: [19:01] A $150. You know, and and we're projecting taking, you know, the principal on that and rolling that into other deals that we have coming up here really soon. Yep. You know, and we plot it out and, you know, even with our experience, it's so easy to fall into that trap, especially when it just seems if it seems too easy, always be suspicious. Because this one, it felt like it was in the bag. You know, we put it up, we accepted an offer for, what, $20 over ask, you know, house was clean, inspection was clean, you know, and then classic lender. I don't know why freaking lenders always do this. They wait until, you know, five days before closing, and they're like, we decided to finally look at your file, and it sucks. It suck. We're not gonna do this. Every lender does that. You know, my my lender from my own personal house did that this past summer when they we were literally three days out, we started, like, packing and moving. And they were like, actually, we're not gonna close your on your house because your debt to income isn't high enough. You know? And I was like, what that makes no sense. And that made then that's the problem being an entrepreneur as well, is they don't respect entrepreneurial income unless it has a long track record. You know, in two years ago I guess now we're across two year threshold. Back then, we're only one year into this. We're making good money, but a bank was like, we're not gonna count that. So then, you know, I had to go through this whole process of basically renting the house back from the previous owner, and then, you know, going through this whole thing because the lender decided to just screw it up at the last second.

Dan Austin: [20:24] Yeah. You and you changed lenders after, like, you

Mike DeHaan: [20:26] had to change. Right?

Dan Austin: [20:27] Yeah. Completely changed and redo it all.

Mike DeHaan: [20:29] Yeah, I went and found a different lender, which was more expensive, but they kind of got it. And they were able to work with us and figure out what we needed to do.

Dan Austin: [20:35] Yeah, I think the moral there is don't accept no for an answer. I mean, that's right where we're at too with this one. I'm not accepting no for an answer. We're going to make it work. It's just yeah. And I think the other moral and like this whole kind of story here is, is like cash management. And that might determine what you do on your exit and trying to forecast your cash is not super easy, because you're relying on third parties to do their job to get you your cash when you think it's coming in. So, like, we always have to have a buffer to when we think that money's gonna come back in. And fortunately, we're there at this point where we have other levers to pull if we need to as well. Yeah. So what about flips? Like, when what do you think? Like, when we think about doing a flip, like, what is in your mind that pops off? Like, yeah, we're flipping that? Like, what are those indicators?

Mike DeHaan: [21:19] Yeah. So I mean, for us, I mean, we're big value add guys, anything that has a very clear easy value add, I always am heavily inclined to flip that rather than wholesale that, particularly because in our market anyway, most other buyers are not value add buyers, which is shocking to me. But I think they are though. They they think they are, but they they don't understand that value add doesn't mean, you know, oh, I made the kitchen look pretty. I'm talking about value add about increasing square footage, right? Like like rebuilding the inside of the house to make it more desirable to at the modern level. You know, we've done stuff like knock down walls, do garage conversions, finish basements, anything that you can do to, like, measurably increase the value of the property that's more than cosmetic. You know, if you like, especially if you increase the square footage of a house, you can mathematically determine what that's gonna do to the value. You know, when you go and you run comps, you can say, okay, the average cost per square footage on, a house to say is like a $100. If you increase the square footage now that house by 500 square feet, you just increase the value by $50,000 You know, it's not, it's it's not complicated.

Mike DeHaan: [22:27] And if anything, in my mind, those are the best flips to do. Because you can, like I said, you can mathematically determine what's going to happen, and actually hedges a lot of the risk. Because if you're just doing a cosmetic rehab, you know, sure, in the most recent market, it doesn't you probably turn stuff pretty quick. But historically, you know, buyers are gonna not like whatever decisions you make. You know, back when I was flipping houses, like, thousand eight, 2019, before it was just a buyer's friends like it is now, you know, I'd get feedback of like, the buyer doesn't like your door handles, they're not gonna buy the house. And you'd be so pissed. I'd be like, I picked those out. Like, I'm taking it personally.

Dan Austin: [23:01] Yeah. Absolutely. You know? Yep.

Mike DeHaan: [23:03] So like like, for us, anything that can be a value add like that because those things aren't that complicated, and it's very easy to determine. And then besides that, I mean, if it's mostly cosmetic stuff, we like easy deals, you know, if they're Yeah. Like, the people that are doing, like, large cosmetic gut jobs, not our favorite just because it's expensive. Like, you have to have a much better deal to cover that cost because you're not forcing any value appreciation. And, I mean, recently, I mean, you know how it's been with, like, materials and stuff.

Dan Austin: [23:32] Yeah.

Mike DeHaan: [23:33] Just like having to plot all that out.

Dan Austin: [23:34] It's hard to It's hard to get them. It's hard to get what you want. So if you have a systematized approach to, like, your your build package, you might have to go search for new stuff to try to fit that. And so it's a pain in the butt.

Mike DeHaan: [23:45] Yeah. You know? And and I I would say, honestly, I would prefer to do a house that was, like, kinda outdated, that we just left to the outdated part alone, but we're able to, like, finish a basement.

Dan Austin: [23:56] Totally.

Mike DeHaan: [23:57] Right? And and just, like, make the basement, like, good enough rather than have to do a house that was, like, outdated and we're gonna completely renovate the entire thing. Most people are gonna be opposite though.

Dan Austin: [24:07] What also sometimes too, like, if you look at a house and look at the square feet of it, how big is it? Because if it's above 2,000 square feet, like you start getting like 2,500 square feet, you're starting to really have to touch a lot of things. And it gets expensive when you talk about per square foot cost. And so, like, we've passed up on some great deals, but they're like a 3,000 square foot house, because we're just like, the risk is too big of like, once you start into something, have to keep going, right? And you're renovating this thing, you can't just renovate like one bedroom and call it good, right? You hit the kitchen, maybe the bathrooms, all that sort of stuff. And then all of a sudden, you still got 1,000 more square feet to throw flooring on. Right? Yeah. So that gets really expensive. So I look at that too. Like if it's a three bed, two bath, four bed, two bath, like those are typically super good slam dunks for us. And then just to close out what you're talking about in the appraisal value. If you're out there and you've got an appraisal from like a recent property you've done or purchased, look at that, that will tell you exactly what these button pushers called appraisers are doing. They're going to have fireplace counts, bedrooms above their, you know, above the basement count, all that sort of stuff.

Dan Austin: [25:08] Square feet is a big one. And then also look at the properties they're choosing for comps, and kind of understand that kind of that methodology they use. Sometimes there's no methodology to it. It's like looking at that, that gives you the map. And that's kind of how we've hacked dealing with these sorts of things and understanding like, well, in this this property, the extra two, three hundred, 1,000 square feet is gonna kill. It's gonna be awesome. Mhmm. Some other places, when you look at it, it may not actually make sense because of the neighborhood you're in.

Mike DeHaan: [25:33] Yeah. Well, I think that's a super valid point, Dan, about about the appraisers. At the end of the day, honestly, the only thing that matters is what is an appraiser going to look at for the value of the property. You know, you can make a property so desirable to an individual that are gonna be willing to pay so much more than it's actually worth for it, you know, because it looks great, like it has all the fun features, whatever. But if an appraiser comes in, and they're like, well, this property is way overvalued for the neighborhood, that can literally destroy your entire deal. You know, unless you have a situation where buyers willing to pay that much extra in cash out of their own pocket to cover the appraisal gap that the appraiser just made, you know. And that's even more so the case if you're looking to refinance into a rental, where literally the only thing matters is what the appraisal thinks, because there is no market opinion on it. An appraiser does not care that you have this beautiful property. They will go ahead and pick the worst properties that have sold nearby that are, like, the most like kind in terms of size and age and all that sort of stuff and completely brewing your entire thing.

Dan Austin: [26:33] Yep. Yeah. And and like, yeah, if you're relying on that, you know, and well, I should say, let me step back. And this is where people get themselves into trouble is they over renovate. They get they get this like, oh, I need to do this. I need to make this that cute. And that's where you get yourself in trouble on that appraisal, because you over renovated, you bought the extra, the $4 square foot tile instead of the $2 a square foot tile, you know, those sorts of things that really add up over the whole project, which is actually a good pivot point too. Because renovating a flip and a bur property are two different types of renovations. And most seasoned investors are going to tell you their rental properties have less quality, should I shouldn't say less quality, but less fine finishes in them as compared to a flip. Because if you're selling a flip, you're selling it to a retail buyer that you need to get the house up to the neighborhood expectation. And you do want it to look shiny and clean. Doesn't mean you over renovate it, but you might have a higher end faucet fixture, higher end light fixtures, a little bit different few things do dads in that. But like with a rental property, you know you're going to rent, like you need to make that thing as bulletproof as possible. And you don't need to buy the $200 faucet. You need the $79 faucet.

Dan Austin: [27:38] That's going to work just as good.

Mike DeHaan: [27:40] Yeah. Well, I mean, you can say the same thing as well on a flip though by neighborhood. Right? Like, people will over renovate properties in a c class neighborhood. And it's always always see this too. The people are like, oh, what? C class neighborhoods serve to have nice houses as well. And I was like, you're so right. But if you're if you're flipping, like, two houses in your life, go ahead. Make it freaking awesome. If you're doing this as a business, those little charges are gonna come out to hundreds of thousands of dollars, if not millions of dollars worth of revenue when you get into volume. You know. And and if you're willing to give up a million dollars that have, you know, some nicer fixtures and flooring and c class neighborhoods, you're a better person than me. Like, honestly, good for you. That's awesome. But I'm not willing to do that.

Dan Austin: [28:21] You know what? This is like a point of attention for me too. Like, I this is a little rant here. Because like, I'll see, you know, local guys or other people on Instagram. I know a neighbor neighborhood there and I'm like, you over renovated that place way too much. It's not right for the neighborhood. But the thing that pisses me off most is they not spending the money that's actually good for the neighborhood, actually good for the homeowner because they still have a jinky ass electrical panel, the roof is not right. Know what I mean? And so I'd rather fix those things that actually make it like a good home for somebody long term, then adding, you know, expensive ass fancy, you know, light fixtures that that are cool, but not for that neighborhood.

Mike DeHaan: [28:56] Yeah. But instead, what they do is it looks good, they get some out of town or that's moving in here that's like, I don't know that there was a shooting down the street last night. Yeah. This is a

Dan Austin: [29:04] beautiful home. Just cover up the bullet holes with caulk and just called it good.

Mike DeHaan: [29:09] Yeah. And and and then when the inspector comes back, he's like, yeah, this, you know, circuit panel is is completely messed up. They're like, oh, we'll give you a $1,500 credit, you know. Did they just, like Yeah. Make it a whole situation for the future buyer? Oh, god. It's a it's a weird deal. Because, it's it's like a it's like a different form of of ethics, honestly. Right. Yeah. You know? And it it's like, I don't know. Is that more sales? I I don't know what's what's what's less ethical. Is it skipping those things to make the house look nicer, or is it fixing those things and leaving the house crappier? But as a result, the neighborhood, like, isn't gonna be as nice. I don't I have no idea.

Dan Austin: [29:44] I don't know. You know me. I'm an infrastructure mechanical guy because if you can keep a house operating well, it's going to still be a good house the next time they sell it. But Yeah. I don't know. So so to summarize it, I guess, between wholesale flip and rental, I think one of the top ones, and I'll let you kind of throw yours in there is what is your your financial position at that time in your business? Can you take this on? And also, what are your goals like long term, maybe the next twelve to thirty six months with your cash position? And so, like, that's a big indicator of what we're going to do in our business.

Mike DeHaan: [30:14] Yep, absolutely. I guess one quick thing on that too, when it comes to rentals, people have been asking about the best way to determine the ways to rent stuff, whether that's an a short term rental, rent by the room, you know, a long term rental, always, you know, look at the different options for it. It's relatively easy to crunch numbers these days. You just look at like market rents or, you know, there's, like, different platforms like AirDNA going for Airbnb stuff like that. But I think one of the biggest things is don't try to force a rental property to be a deal by doing something that's too wacky just because you're so desperate for cash flow. Because tight right now, I was about to some of these air these Airbnb's we bought. I mean, I don't know. They're a slight like, they're ones that were pretty tight as, like, long term rentals. Now we're into, like, this Airbnb game. Sure they're in town, but we know so many people that are, like, Airbnb's are just awesome here. And Yeah. I don't know what the hell they're doing because ours have been freaking booked. Yeah. But they just don't make that much money and they're such a headache. Yeah. You know, like like, they they are not awesome at all.

Dan Austin: [31:16] I think people, especially right now that I see get in Airbnb's, not a lot of them are experienced long term renters, so they're not comparing it to anything else. And so they also don't know the actual cost of owning a property. Sure. That is super important. Besides just your your budgeted set asides for vacancy and CapEx and OpEx, like what are those actual costs? Like, we're looking at it as long term rentals, we know what those costs are, we've done it enough. And so when you fold all that into a property ownership, and you're like, is it really worth the effort? Yeah. For me, it may not be still yet to be determined, but it may not be in our market locally. This is not everywhere.

Mike DeHaan: [31:52] Well, that same note too, I've noticed that those people that are really into that, they aren't necessarily buying well. They don't have the buying opportunities that we do running our own marketing systems. So their their context is if I buy a property on the MLS, and I do a long term rental, it's gonna make me like $70 a month, that's not even worth it. But if I do it as an Airbnb, it's gonna make me $400 a month, you know, and from when you look at that perspective, that makes a lot of sense. But, you know, when you're from our perspective, we're already buying with such a huge equity position, you're already making so much money up front, and you're like, okay, long term rental, I've I've cashed out $25,000 more than I had into it when I did my refinance. I'm already at base zero. At that point, to be completely honest, you know, 70 or $100 a month versus $400 a month doesn't really excite me if it's gonna mean I'm gonna have to do a bunch of work every single month. Like, I would rather just go and focus on the next thing, then I'm gonna make way more than, you know, $6,600 a year spread on that. They know when I can just go and do more deals.

Dan Austin: [32:53] That's a good topic. I maybe we'll save that for next week is like cash flow versus equity versus long term and short term investing. Just kind of that whole concept of like how we make those determinations and what you should be looking for and that sort of stuff, because it may evolve and it may change as you as you go as it has for me. But also, there's some fundamentals in there that I think are super key for people to pay attention to when they're actually trying to take down properties to not press on a deal and make something work that shouldn't actually work.

Mike DeHaan: [33:18] Yeah. Absolutely. That's a great topic. We should definitely write that down so we don't forget to do that next week.

Dan Austin: [33:23] Yeah. So Done.

Mike DeHaan: [33:24] Perfect. Alright. We're coming up on time there. So thanks for listening everybody. You should all go and subscribe to our podcast. Start downloading some episodes too. We're told by our producer that that's one of the best ways to start boosting our algorithm. So go ahead and go just go like download all of them, then just delete them off your phone if you stream them. I don't even care. Like, just go and just go and do that. And then what that'll do is that'll start to on the back end algorithm of all the podcast players start to make us look show up a little bit more for people, and then go and subscribe to them as well. Those are two metrics that really, really matter to the podcast hosts out there. So do that. Go ahead and follow us on Instagram at collecting keys podcast. We're starting to do some different reels and things on there with different highlights that I think are going to be super viable for people. You can follow Dan and I on Instagram, I am at Mike underscore invest Dan is at investor man Dan, same thing there, we're going to be starting doing a lot more reels in that sort of things talking about kind of what we do day to day and different things that we are learning with this business, you can benefit from as well. And aside from that, go check out our instant investor program, it's at instantinvestorprogram.com. It is a twelve week course to help you build a business exactly like the one that we've built in a twelve week span, rather than the two years it took us to do it. It's literally the exact playbook. And along with that, you'll get to work directly with us.

Mike DeHaan: [34:42] And with the other community of investors that we have in there, that are basically going through the same path, you know, all around the country, got people in, think, five states now. And everyone's starting to get after it, people are starting to some great opportunities. And I think we have our first guys gotten a deal out of it. And you know, the three weeks that it's been going.

Dan Austin: [34:58] So there we go. That's awesome. Yeah.

Mike DeHaan: [35:00] Proof in the pudding. Exactly. Yeah. So instantinvestorprogram.com. Go schedule a call. I'd love to see if you're a good fit. Besides that, Dan, go ahead, send us off.

Dan Austin: [35:08] Yes. Investor man Dan signing off. Come back next week. Mike and I have some awesome stuff in the works. We're actually getting organized on this whole thing. And I think it's gonna keep getting better.

Mike DeHaan: [35:17] Try less cowboy in a little bit, but yeah, we're figuring it out. So perfect. Alright. Thanks, everybody. See you next week.

Dan Austin: [35:24] See you.

Speaker 1: [35:27] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.