Mike DeHaan on the Real Estate Maximalist Show

Alan Corey: [0:02] Welcome to the collecting keys Friday focus.

Mike DeHaan: [0:05] What's going on, guys? In this episode of the collecting keys Friday focus, we have a slight change of pace. Instead of our typical, you know, kinda monologue episode on a specific topic, we are sharing with you an interview that I recently did on the Real Estate Maximalist podcast. So, this is Alan Corey podcast. So if you listened to our episode that came out on Monday, you heard Alan's story. He is a real estate investor who's been around for a long time, runs a really good show of his own. And I did an interview over there about a month ago, and I thought it was just kind of a great representation of my backstory, which is something that a lot of people regularly ask me about. So we decided it would be a cool change of pace for our Friday show to bring his episode over here. So you guys can kind of hear me from a little bit of a different position as a guest, rather than just as a host all the time. So anyways, guys, I hope you enjoy it. You should definitely go and subscribe to Alan's show. He runs a really great show over there. And let me know what you think. If you like these kind of show shares like this, there's something that we could potentially do a little bit more of. If you don't like them, let me know that too.

Mike DeHaan: [1:07] I would like to know. You can let me know that by sending me a DM on Instagram at mike underscore infest. But besides that guys, enjoy the show. Regardless of whether you like the style or not, I do think that this is a great show that he puts on, and you guys help get a lot out of it. So thanks for listening, everybody, and enjoy my time guesting on The Real Estate Maximalist.

Alan Corey: [1:26] Welcome to episode 92 of Real Estate Maximalist. Are you looking for motivation? Need that kick in the butt to make your next move in real estate? Well, today's the episode for you. When most people try something new and fail, they don't wanna try again, let alone say, heck with it, and stay the course, and then fail multiple more times. But today, I'm joined with Mike DeHaan, who has failed his way to success. Mike left his job with no backup plan and then spent the following two years learning and studying real estate before launching a wildly successful business that has now replaced his previous income. Stay tuned to learn that stumbling right out of the gates is just part of the process. I'm your real estate and wealth building coach, Alan Corey at Real Estate Maxey on Twitter. Over a span of twenty three years, I've built a portfolio of 350 doors. I'm a top rated realtor and the author of three books, including A Million Bucks by 30 and House Fire. Each week, I send a newsletter with my favorite wealth building strategy. If you sign up for the newsletter today, I'll also send you a free ebook and property analysis calculator. Go to realestatemaxi.com/newsletter. And now let's get to the show.

Alan Corey: [2:49] Mike DeHaan, thank you for joining us on Real Estate Maximalist today. I appreciate you being here.

Mike DeHaan: [2:54] Yeah. Thanks, Alan. Appreciate you having me on.

Alan Corey: [2:56] Let me pick your brain here, Mike. How did you get into real estate?

Mike DeHaan: [2:59] I got into real estate kind of a roundabout fashion. And I think, like, a lot of people that we talk to on on my podcast are just, in the real estate sort of investment sphere. They typically have some sort of background in it, at least, like, a little bit or I mean, I got I asked for perspective, my parents, they owned a house, but they never had a mortgage. Right? So they bought it like a long time ago, back when, you know, you could buy stuff for cash that was relatively cheap. They kind of lived in the same house my whole life and before that. So the whole process of like real estate as an investment and leverage and those sort of things wasn't on my radar. Growing up, you know, I had kind of a traditional upraising. I went to college, I got an electrical engineering degree. I did that for about five years, and I decided that I didn't like it. I wanted something different. And I quit my job in 2018 with no real plan. I kinda just, like, pulled the the rip cord and, you know, gave up 75% of me and my wife's income because I gave up my engineering salary to just go and figure it out and started learning about business and wealth generation and all these sort of things. Because all I knew was that I hated being an engineer. And I didn't know what exactly I wanted to do.

Mike DeHaan: [4:07] But I knew that I wanted to be self driven, self employed, and have more control of my future. And over a few years, I kind of just dabbled in stuff. But the reoccurring pattern that came up again and again, across, you know, different business books, wealth books, passive income, you know, the FIRE movement was real estate and passive income, right, like rental properties and those sort of things. So as a result, I started getting into real estate, like so many people do reading books, and going to meetups. And ultimately, I tried different things, I got heavily interested in real estate, I guess, once I started to sort of see the potential and how it would be an opportunity that I could develop kind of myself locally without having to have like a super fancy products, like if I get ecommerce, or like a really strong marketing plan or things like that to start. It was something that I could literally go and I could rely on other people, realtors, wholesalers, whatever, and I could start generating passive income and wealth for myself. So the barrier to entry seemed significantly smaller to me than some of the other, I would say, like, guru ish endeavors out there that people tend to push when it comes to wealth and freedom. Right? So

Alan Corey: [5:16] Yeah. I love that. And so what was the first property you bought?

Mike DeHaan: [5:19] It's funny because I was at that time, I'd quit my my engineering job. I had some savings, but I had no income really. Like, my income was coming from working at a gym as a weightlifting coach and driving for Uber. And so I was super risk averse. Right? So I wanted stuff that was easy. So I found some houses that were local here in in my market in Spokane, Washington that were actually like new builds. And I kinda analyze them with a view of, you know, like, 1% rule. Like, I knew that I could rent them for point 75% of what else to be able to purchase them for. So it wasn't 1%, but they were safe because they were new. So I liquidated my old corporate four zero one k, paid all the penalties, what I actually did was pretty foolish, because I could have rolled it over into a self directed IRA or things like that and use that money. But, you know, I had a decent four zero one k from having a strong engineering job and investing in that diligently doing the corporate thing for five years. So I liquidated it, and I went and I bought two single family turnkey properties. So you know, my total down payment on that was it was like 70,000. And I put all of my money into those thinking that I was just going to be able to start getting a decent cash flow return on it.

Mike DeHaan: [6:31] But of course, I failed to account for vacancy, property management, basic, you know, maintenance that would occur on the properties. Basically, my view was my monthly payments going be $1,200 a month, I'm going to be able to rent these for $1,600 a month, I'm going to make $4 a month per property, that's $800 a month, That's already almost as much money as I'm making per month from my other two gigs. Like, that's gonna be a pretty sweet investment. And I sort of learned that that's not obviously how things work.

Alan Corey: [6:59] Alright, newbies. What did Michael do wrong here? That's right. He didn't budget for maintenance, repairs, vacancies, capital expenditures. So it's gonna be tough to just say, I rent this for 1,600. My mortgage is 1,200. I'm gonna make $400. It doesn't work that way. Typically, 35 to 50% of the rental income is just gonna go

Mike DeHaan: [7:20] to

Alan Corey: [7:20] expenses, then you gotta look at the mortgage payment. Kudos to jumping right in and getting started because I think a lot of people know that, but they never buy a property. So with this quick learning, how did you pivot or adjust or continue investing?

Mike DeHaan: [7:36] I immediately learned that that wasn't, like, the best decision because I ate all of my capital, like, right away. Like, I still had, you know, my emergency funds and that sort of things because I I used that four one k almost exclusively to buy those properties. But I realized very quickly that if I wanted to keep buying, wanted to keep investing, I needed more capital. So I was, you know, interested in the real estate space at that period of time. Was getting very involved in local community. So I was like, well, what do people do when they are, you know, needing to generate capital in the real estate investment space, they start flipping houses, right? If you're not a realtor, you're not doing it for your job, I didn't really have an interest in becoming a realtor. I decided I'm gonna flip houses. I didn't have any money. But I did have time. And I had some gusto and some hustle to get things done. So going to different meetups and connecting with people on forums, I ultimately found someone that was in the opposite position of me. K. They were also new, but they had the money, and they didn't have the time or the hustle to get things done. And we basically just connected and said, we have equal goals, we both want to generate more capital to invest.

Mike DeHaan: [8:38] But, you know, we need to sort of figure out how to do that together. And so we decided to partner up and start flipping houses. Our first sources of house flip deals were coming from REOs. So we're looking at bank owned properties, we connected with a realtor here in Spokane that was selling bank owned properties. About a month after I met this person, we bought our first flip together, which was an REO property, ton of stuff that I didn't know when we went into it. Like I didn't even think to notice the fact that there was no h fac system, or the fact that the the plumbing and, like, the water system hadn't been winterized properly. So, you know, we bought it in the middle of winter. I mean, when we turned on the water and immediately all of the pipes burst, right, in the entire house, we had to redo the plumbing. So it was a huge learning lesson and, like, all the stuff that you need to, you know, inspect when you're getting into these properties. And after about five months of super hard work, so many trips back and forth between my house and this house, you know, negotiating contracts, doing all this sort of stuff, we were able to flip the house, and I made a whopping $4,000 as my share after five months of work, but I got a great education.

Alan Corey: [9:45] Alright. I know you're thinking, I know Alan. I know I need to get a home inspection. That's obvious stuff. But this is the main point that I wanna focus on right now. He didn't have money to buy real estate. So he just sits back and waits? No. He goes to a meeting and says, I need to find someone who has money. I promise you, if you are sitting there thinking, I need money before I start in real estate, there's just as many people out there that say, I have money, but I don't have anyone to invest real estate with. They're equal problems. You gotta go meet people, introduce people, say you're a real estate investor. Find those partners. They're out there. I promise you. I love that you mentioned that because it's the education component that a lot of people quit after that. Right? Like like it's, you know, that the you bought two houses that weren't cash flowing as much as you thought. A flip, a lot of work, hustle, a lot of surprises. You came out $4,000 profit. Why did you say let's do more of this?

Mike DeHaan: [10:39] I'm a little bit of a I'll take a trial by fire person. Like, like, growing up, I've always had different situations like that that were just I guess, like, whenever I faced challenges, I would become obsessed with, how can I use this to grow? Whether that was, like, in sports or in school, I missed out an opportunity or something I cut from the soccer team, whatever. Would say, like, how can I use the challenge that I had here to get better at my next attempt for it? And I took the same approach when it came to this house. So with that house, for all intents and purposes, like, almost everything went wrong that really could have in the deal. Right? The way that I viewed, I was like, well, the next one can't possibly be any worse than that. Right? I mean, obviously, it could have for sure. But I but the view what I had was like, that was almost a worst case scenario. And that was really, I guess, like, emphasized to me when I would tell all the things we went through on that property to like some of these other people that I flipped a lot of houses, they were like, wow, I have never had that same situation before. So you really went through it on that one. And so we decided like, hey, let's just see what happens going forward. And so I took that money, you know, they were able to recover all their capital they made, you know, the 4,000 split too.

Mike DeHaan: [11:47] And we just went and bought another house that we went through the same process, we were much more efficient, it was much cleaner. And at the end of that one, I ended up making about 28,000. And that was when, you know, I I guess I started to get the bug a little bit more and realized what the possibilities were. And then with them, I went on to flip two more houses, bought a couple more units with the proceeds that I was making. I didn't keep any of that money. Almost all of that money, I went and put right into other rental properties that I was looking at. With that, the flip proceeds I was getting, I bought two properties myself. At that point, I had some credibility with a look a hard money lender, so I was able to get funds. I bought a duplex and a triplex with my flip proceeds, both of which were burst out properties. So I bought them from wholesalers. They were discounted, and I was able to refinance out the entirety of my money after they were done. And after that, I had a little portfolio going, and I was kind of off to the races at that point, I guess with the full, like, real estate bug now that I had these properties that were basically getting infinite cash flow because I had no cash that were left in the deal, and I was starting to make actually a little bit of money from the flipping and the rental income that was coming in.

Alan Corey: [12:50] And the reason they had no money in the deal was through the BRRRR method?

Mike DeHaan: [12:53] Exactly. Yep. So, you know, if you're unfamiliar with that, basically, you you buy the property, you repair it, you rent it out, you refinance, and you repeat. It allows you to keep using the same capital over and over and over again. And I was able to do that because I bought them at a discounted price from wholesalers. And then I was able to increase the value of them by doing repairs and fixing them up and getting them rent ready. And then in the eyes of the bank, they're worth more than what I bought them for. So when I refinanced out the money, I was able to recover all of my capital.

Alan Corey: [13:25] The one of the best strategies out there. What's it like working and buying from wholesalers?

Mike DeHaan: [13:30] So it obviously depends on the wholesaler. Wholesaling is one of my main businesses now as I've sort of started to scale and I started looking for better deals for myself. But back then, wholesalers, it's it's a tricky thing because it's kinda like working with a a realtor in the way that they facilitate the deal with the seller, you know, they work with you on both sides. But the difference is, you know, they're completely unregulated. And the barrier to entry in most states to being a wholesaler, pretty much like do you have a deal? Like, that's all it is. There's no licensing, there's no education, there's nothing involved. So pretty much anyone can go out and get a property under contract and wholesale or sign that contract with somebody else. And they make their money in the middle, and they only get paid if the deal closes. So I was fortunate in the way that my first two properties, I had a good experience. Right? Some people, they'll buy things from wholesalers, they don't know how to do their underwriting, they feel like they get ripped off, they overpay for the properties, all that sort of stuff. So my first two properties, I had a good experience. But that did give me a false sense of security. Because in the third property I bought from a wholesaler, this is actually right before I started going off market myself, I definitely was on the other end of that, where the wholesaler did not disclose things to me appropriately.

Mike DeHaan: [14:36] You know, I had a lot of red flags that came up during my due diligence in the process that I ignored, because I thought that I was the smartest one in the room at that point since I'd done, you know, like, four deals at that point. So as far as I was concerned, I was an expert. And I ended up ultimately fast forwarding quite a bit after I bought that third deal. I ended up losing about $25,000. So point being, working with a wholesaler, they can be great if they're good. It can be terrible if they're not. But either way, you need to make sure you're doing your own due diligence and, you know, looking at the property yourself and not taking their word for it.

Alan Corey: [15:07] Is a wholesaler required to disclose anything? No.

Mike DeHaan: [15:11] Not. Like like like a good one will. Like, if they're if they are in it to be in the business for a while, and they're not trying to make a quick buck, they should disclose things to you. But you still need to do your own due diligence on it regardless. Because also to, I guess, as as a wholesale myself, we've we shifted over to a direct to seller model. And as a result, started hosting a lot of properties we've done coming up on 200 now in the last two and a half years. But a lot of the time we a are incentivized to do a super deep due diligence, and, b, because we are doing such high volume of transactions, there's stuff that we just don't even, like, think to think about, if that makes sense. Right? So you need to make sure that you're looking at everyone as much as you can. So, you know, listen to them, but I would I would say trust, but verify whenever you're working with a wholesaler.

Alan Corey: [16:00] What was the $25,000 hit on the one that went south?

Mike DeHaan: [16:04] It was actually the first solo flip that I took on by myself. So I had my partner, and at that point, you know, I started buying rentals. They moved to a different part of the state. So we basically just parted ways mutually, which is fine. They moved on with their life, and I moved on with mine. So I bought this property looking to flip it to generate some more capital. And as I was going through it, it was a big house. It was a larger project than I had ever taken down before. And as I was going through it, right before closing, I was using a a hard money lender. And they were like, hey, listen, man. This is a hard money lender. Do a couple times. They're like, hey, listen. I don't think this is a good deal. Like, you shouldn't buy this. You know, the the comps of like, you know, the after repair value are not there. Like, I think you're gonna get yourself into trouble. And I was like, I don't know, like, this wholesaler seems like he was talking about. And so I went and told him that I didn't know if I was gonna be on move forward because my hard money lender wasn't into it. And he goes, Oh, I got a better hard money lender. Your guy just doesn't know what he's talking about. Connected me with his hard money lender. Right? He was like, yeah, absolutely. I'll fund the deal.

Mike DeHaan: [17:01] Won't even think about it. And I was like, perfect. So my guy just was ignorant. You know, the guy that I trusted on three deals, he just doesn't know what he's talking about. He doesn't know this neighborhood. I'll just use other hard money lender who, you know, I'm sure had some sort of referral fee that he paid the wholesaler. You know, he robbed me on fees upfront. He did all this sort of stuff. And ultimately, I trusted people on the process who are only fully incentivized to get the deal closed. Right? And I ignored the base due diligence. And then in that too, I hadn't I did a full inspection on the house, which isn't come with wholesalers because of the big house, they let me do it. They had a bunch of red flags that I was like, I dealt with worse on the first house where I only made $4, so it'll be fine. And ultimately, there was red flags from several experts along the way. And due to my own, I would say, like, stubbornness and ignorance, it just led to me losing $25,000 after it was all said and done.

Alan Corey: [17:49] That's painful to hear. I'm sure it was painful to go through as well. But I admire you to just say, Hey, I got a $25,000 education. If I quit doing real estate, then I lost money. But if I continue to do real estate, I'm not going to make that mistake again. I'm going to get better at this, and I'm going to make $30,000 on the next deal or whatever it is. I think that's where a lot of new real estate investors quit, if the first one goes sideways. And to me, it's like, listen, you'll go pay $100,000 in college tuition, and there's no guarantee that a job is there waiting for you. A job is going to pay you, but you believe enough that, yeah, I will be able to pay off the student loan. That's sort of like you're getting a real estate education in real time. It's cheaper than a college tuition. And you're just saying, hey, I lost money, but nothing. You don't learn better than losing, right? Losing money is the most valuable lesson more so than success because you know exactly what you did wrong. But sometimes you don't even know why you were successful, but you just keep doing it and hoping and praying that it works again. I love that you just kept moving forward, kept moving forward, and didn't give up. That's the attitude. This is a long term business, you're living it. So congrats. Yeah.

Mike DeHaan: [19:02] Yeah. Thank you. And I think what you said there is super valid of that's when you learn your lessons. And I think that's that's a reason too that so many people that got into real estate in, you know, late twenty twenty and 2021 are really struggling right now. Because back then, you it was impossible not to win, right, with how hot the market was. Like, if you were buying any deal, you could make money. But that's not the reality. Right? And so when I when I started the first rentals I bought were in late two thousand eighteen, but the house flipped shortly after that. So, you know, that was before the market started getting a little bit crazy. You know, things were still you know, if you went and lifted a house, you expected it to take six to ninety days to sell. That was sort of the the normal expectation. You know, stuff was underwritten a little bit more conservatively and all those sort of things. But from when I started to that that loss that I took, that was only fourteen months. So I started moving really, really aggressively. And once you know the process, you start to make basic connections, you can scale up. Yeah. Like, your ability to scale up is limited purely just by your own willingness to work a lot and the connections that you can make to get things done, whether that's from deals, from money, or whatever that looks like. Right? And ultimately, because I guess I had that momentum in my growth that that started growing very, very quickly, the fact that I had those losses, I was like, I just gotta be a little bit quicker on the next one to be able to keep functioning.

Mike DeHaan: [20:23] So

Alan Corey: [20:24] You've taken this experience, this buying from wholesalers, doing the deals themselves, and you turned the off market house hunting into a business. Is that correct?

Mike DeHaan: [20:34] Yep. Yep. Exactly. So after that last situation with the wholesaler where I lost money, I started going to these these meetups kind of right before COVID that I would say they were, like, kinda like the higher level meetups. So one of the wholesalers that I bought one of the first properties from was putting it together, and it was for the people that they knew were actively buying flips and were doing deals in town. And I was like kind of like an invite only sort of thing. So I went to that, You know, it was, like, pre COVID. And a lot of the discussion was about the, you know, the virus that was going on, and it was starting up in China and, like, the economic impacts that were gonna happen. Things are starting to get weird. Nothing had shut down yet. And so the premise of this was, okay, how are we gonna be able to, you know, all of us is like the core people in this town be able to really capitalize on. So let's create a little mastermind. And at that point, I felt, you know, honestly, like a bit of an outsider just because there's a lot of people that I knew were very active in the market. But a lot of the people that I knew them by name, knew they were active. I met them, and I was like, I can be this guy.

Mike DeHaan: [21:35] Like, this guy is definitely not any smarter than me. Like, he just has a different strategy than I do. So my main takeaway from that was like, how can I start to be that source of deals? How can I start to, like, do what these guys do and find the deals myself? My primary focus when I started was that so that I could find better deals. I wouldn't have to pay a 25, you know, $3,040,000 dollar wholesale fee to somebody. Right? Because I thought, like, I could generate that, you know, that income for myself.

Alan Corey: [22:03] I just wanna quickly explain the wholesale process, what it is. You find a property off market, someone at church, someone in your neighborhood. You go knock on some doors. You make them an offer. So let's say the house should be a $100,000, but a wholesaler with their charm and negotiation skills gets it under contract for $50,000. They can go assign or wholesale that contract for whatever cost that they want to. They can assign it for $60,000 or $70,000. They keep the difference of the $50,000 purchase price. When Mike says he pays a $30,000 wholesaler fee, that's because someone brought him a house and says, hey. This is a $100,000 house. I'll sell it to you for a 100. Okay. It's worth it to me. He doesn't know what the wholesaler got it under contract for. So that is how the wholesaling game works. And Mike decided I'm gonna be in that business instead of buying from those wholesalers and flipping the properties.

Mike DeHaan: [22:57] So I went and partnered up with my college best friend who was dabbling in real estate a little bit too and said, like, hey. Let's start this business. And beginning of March, in 2020, we decided to go off market and start marketing direct to sell ourselves. And as with everything turned out, it was much more difficult than we thought. We joined like a mastermind group that was national. And we started, you know, building out a business process and learning how to pull data and, and you know, market determine who was a stress seller to do this whole thing run a sales process took us about five months to get our first deal. At that point, we're about $30,000 in the hole. When we got our first deal, think I was currently I was down to like $12,000 in my bank accounts, we were getting a little bit desperate. And I was relying pretty heavily on my business partners funds. We got our first deal, and we needed the money, we needed some money back. So we assigned it to another investor for a $7,500 fee. And then I learned another lesson because they proceeded to vacuum the carpet and put the house on the market, and I think they made about $85,000. So that was another lesson that I learned there of trusting people.

Alan Corey: [24:04] Well, what is it trust? Or did you just miss value the ARV?

Mike DeHaan: [24:08] It was that and it was a little bit of trust because also to when these these guys, they knew that we're getting into this business, I'd connected with them a little bit. And we first brought them the deal. We tried to get a $15,000 fee, and they're like, I don't know. I just don't think it's a deal at that price. Like, we could pay this. They basically cut our fee in half, and we were desperate. So we're like, yeah, sure. Take it. And then they would they would have still made a killing if they hadn't done that. So we were like, again, it goes back to doing your own due diligence on stuff as much as you can. So anyway, though, that that first one gave us a little bit of momentum. I still remember when we got that deal assigned, me and my business partner, we were standing outside in the yard of another property. And I was like, was like, oh, you know, we just got it. We just made this money. We like literally like, you know, jump high five, like Anchorman style in this yard. We were so pumped. And then obviously, what that all that unfolded. But then the next month, we got three more deals that we got signed around and we assigned. I think we grossed, I guess, about 40,000 that month. That was in I guess that would have been in August 2020.

Mike DeHaan: [25:11] And then in October, things really started to take off. We had our first 6 figure month, and that's when we knew that we had something super serious going on.

Alan Corey: [25:18] Well, congrats. Is this through SEO, Facebook ads, cold calling? What what's Hey, everyone. Before Mike shares where he's getting his business from, I wanted to take a moment and thank our sponsor Jasmine Mortgage Team. I've worked with Jasmine and her team for over ten years, done over 15 of my own personal mortgages with her. Go and get a free mortgage quote at jasminemortgageteam.com today.

Mike DeHaan: [25:45] Yeah. So it's direct mail. That was how we started, and it's been our core for the last several years. We pull distressed seller lists from just public data that you can get pretty much anywhere. The system that we use is called PropStream, which is a very common one that that people use. We just go and we look for, you know, absentee owners. So basically landlords, we go and we pull lists for people that are have, like, filed bankruptcies, have liens on their properties, are going into pre foreclosure, all the typical things, and we send them letters. You know? And it's it's nothing that's like super complicated. It's very standard. We just focus on sending high quality letters. And as we've built out, what's given us the competitive advantage is that we have a brand that's behind it so that we look more credible than other people. And it's just doing that consistently over time. And that's given us a very consistent source of deals over the last couple years.

Alan Corey: [26:37] And those sort of things take six months before they pay off. So a lot of people quit before then as well. Yeah.

Mike DeHaan: [26:41] Yep. Exactly. That's what I always tell with anybody that's looking to get into off market real estate, regardless of if you wanna put the capital into direct mail, you wanna sit on a cold call dialer yourself, you know, you wanna try to build out like a SEO lead funnel online, whatever it is, you need to expect it to take at least three to four months before you start to get a a return on it. And I think one of the challenges people have is when they go into that realm, they focus on getting contracts. When what I always tell people now is if you're looking at that, focus on the progress that you are making through, the conversations that you're having. Like, people actually reaching out to you? Are you being as consistent as you think you are with your follow-up with your lead generation processes and all those things. And if you have improvement in those as you go month by month, you're getting more leads, you're having good conversations, you're following people like you're supposed to, you know, you are building rapport with sellers, it's only a matter of time before you're gonna be successful. You know, it's not really an if at that point. It becomes a when very, very quickly if you're taking the the strong active steps.

Alan Corey: [27:45] So in these letters, are you making offers in the letters? Are you saying reach out to us, we'll make an offer, and then when they reach out, you're making an offer on the phone. Walk me through the offer process here.

Mike DeHaan: [27:54] Yeah. So it's super basic. This is from Ballpoint Marketing. They have a envelope that stands out. And it's important that you send stuff that looks like legitimate mail because not everyone knows this if you're gonna do mail. But everyone's post office zone has a day where the post office delivers everyone's junk mail. So if you're sending, like, cheap postcards and things like that that look like junk mail, you'll get lumped into that. And you'll basically you'll show up with, like, the stack of, like, coupon catalogs and all those other things that people get that everyone just throws away and you won't stand out. But if you send an envelope, you know, that is addressed from a person, has their name on it, this will show up with their mail on, like, the good days when they aren't getting a bunch of spam. Right? So that's key number one. And then within the letter, we give ourselves a brief introduction. We keep it simple. We say, like, hey. We're a local real estate investment company. We always try to mix in something that is slightly local to the area in terms of something that's happened recently. So, like, you know, let's say you had a heat wave. You know, it's middle of summer. You just had a heat wave. You say, hey, mister seller.

Mike DeHaan: [28:56] I hope that you were able to survive those 105 degree temperatures. Definitely not our our favorite situation. Anyways, we're a local real estate investment company. We're interested in buying your property at 123 Main Street. Can you please call or text us at this number? We would love to speak with you. And I want to emphasize the caller text because having that call to action be specific is more important than you think as you go through it. And it's really that simple. And we just do different iterations of that over and over and over again with slightly different custom tweaks depending on what's going on in the local market to show that we are actually aware of the area.

Alan Corey: [29:32] Okay. And then they call you, and then you sort of your line of questioning, you kinda ask about the condition of the home, their their situation, how fast they have to sell, what they owe on it, and you're you you kinda get your due diligence on the property and the seller. Is that correct?

Mike DeHaan: [29:46] Yep. And so the key with distressed working with distressed sellers is they're all calling you for a reason. K? So we actually try to make the property itself kind of the last part of the conversation. Because at its core, what what happens when you get into direct to seller marketing? Very quickly, it becomes more of a marketing and sales business as opposed to real estate business. So the things that make you successful are better marketing and sales systems. And basically, your collateral, your your payment is the is the real estate. Right? Whereas a lot of people, they get into this business, and they focus on the house. So they they have somebody who you don't know why they called you. K? And you go to them, you're like, hey. Well, your kitchen needs to be done. Your roof needs work, all this sort of stuff. You know, we gotta fix the plumbing. This is what we can offer your house. But they never thought to ask about why the widower is calling you for this distress, you know, from from the situation. Like, what is her situation that she decided to reach out to you versus going to a realtor or giving it to her kids or doing something like that? When people call in, the conversation that we typically have is like, okay.

Mike DeHaan: [30:56] How come you're not looking at listing the property? And then they'll sort of, like, give their general motivation, oh, I'm getting divorced. Oh, I just need to work. Okay. What sort of timeline are you looking at to get out of this property? And then that'll sort of give you a little bit more on their situation whether it needs to be ASAP. They're, like, just sort of floating around ideas, that sort of stuff. And then, you know, why did they they choose to, like, reach out to you from your mail if you ask that? It's like some people will say that, you know, oh, I looked up your company, that sounds good. People say I'm looking for an easy option. But typically, when you get to those three questions, like why are they not using a realtor? Why do they choose to reach out? And what is their their general timeline and their expectation with the closing? Naturally, after those three questions, people will start to tell you kind of the details about what they're going through. And from there, you can make better decisions about how to actually help this person to their situation and how potentially buying the house could assist with that. And then from there, you say, like, okay. Great. So I understand now you've listed off all these issues. Selling this house is gonna either reduce your liability, k, or it's going to give you capital to be able to solve whatever problems you're going with. Let's see what we can

Mike DeHaan: [32:05] pay you for this thing.

Mike DeHaan: [32:06] Then from there, you go through it because now they feel like a person instead of like a transaction where you're just focused on their asset. That is probably for most people, you know, the largest piece of of any sort of property that they own. Right? It's gonna be their house.

Alan Corey: [32:19] It sounds like you started this as a way for yourself to find leads, and then you're almost the problem of success, you had too many leads that you can buy. And now you've become the wholesaler yourself. Is that right?

Mike DeHaan: [32:33] Yep. Yep. So that's a huge part of our business. Going back to what I was saying before about when we got our first deal and we decided to assign it. Like, I had no money left to buy anything. So we needed to assign it. And even then, we only made that $7,500, and then we still had marketing overhead for the next month. So we needed to start generating some cash. And honestly, after that first month where we made $40, you started to get a little itchy for that. Right? You're like, this is some serious money I can start to put in the bank here. So we started to lean heavily on wholesaling for the first little bit. And then what we did once we had that lead generation process, we had strong opportunities that were coming in. Me and my business partner, we kind of defined our buy box. We said like, this is the cash flow that we want. This is like the type of property that we're interested in keeping. This is the different neighborhoods and all that sort of stuff. And from there going forward, every opportunity that came through, if they didn't meet that buy box, then we would just go and we would assign it and we would add that revenue to our to the bank, right, to be able to do and buy more properties in the future as they came through. And so, like, you know, we just basically decided to keep the properties that fit our box, and we would wholesale everything that didn't.

Alan Corey: [33:40] And where's your portfolio now?

Mike DeHaan: [33:42] Sitting on about 55 units right now. It's, I think, 28 or 29 individual properties that we've bought consisting of single family homes, duplexes, couple triplexes, an eight unit.

Alan Corey: [33:53] And so at this stage, do you find yourself being more of the wholesaler or or acquiring properties, or it really depends on the deal by deal basis?

Mike DeHaan: [34:00] As interest rates have changed, obviously, doing like the BRRRR method. So I say the thing too, I'll say is with everything that we kept, we would still try to get it at prices where we could refinance out all of our money. So we didn't really do a lot of fix and blips. We would do, like, fix to rent. That's kind of been our main models. If it's a fixer upper, we're gonna keep it. We're gonna go, and we're gonna fix it up to started to keep it for long term rather than to sell it. Right? So as interest rates have started to get super high, that isn't as possible as it was before. So now, instead of just having like our buy box, we'll keep everything that fits that. It mostly comes down to can we get a debt structure or a deal structure that makes sense for us to be a, you know, a long term hold that we would be interested in holding. So we've started to get more into creative financing, you know, seller carries, we've done several several carries over the last little bit of properties that we bought that kind of they fit our buy box of what kind of problems needed to be. But then we were able to negotiate a seller finance term that made sense for us. And then we've started working recently on a couple of different sub two purchases that are, you know, similar sort of thing where we're buying people's debt that's out like 4%. And even if we're having to bring a little bit of money into it to, you know, keep locked up for a short period of time to get get them money so they can get out of their their deal in a comfortable way.

Mike DeHaan: [35:14] We're willing to do that at this point just because we have the revenue generation to be able to park some cash like that.

Alan Corey: [35:20] If you don't know, seller financing is basically you buy someone's house, but you can't get a mortgage for it for whatever reason. So the seller says, hey. I'll give you a mortgage. You don't have to pay me all the money of this $100,000 house today. Why don't we create a mortgage and you pay me $2,000 a month until it's paid off just like a normal bank would? That's called seller financing. The second thing is called subject to, and that is saying, hey. I wanna buy your house and the mortgage that comes with your house. This requires a lot of legal finagling, but it's fairly common. You basically say, move out of the house. Don't tell anyone. Keep the mortgage in place. I'm gonna make your mortgage payments to make you whole and pay you a little bit for your house. And that way, you can lock in and keep that wonderful 4% interest rate that's already there. This just comes back to creative financing and meeting the right people, asking the right questions, trying different angles. You don't need money to buy real estate. You just need to not quit. This is great. Is this a two man shop, or you have systems with VAs and automations? And and how how can you kinda walk us through the setup?

Mike DeHaan: [36:22] My actual wholesaling team is seven people right now. So it's me and my business partner, three VAs and two sales guys. We do the wholesaling in a bunch of different markets around the country now. So as we started to scale, we kind of maxed out the return on investment on our marketing in our local market of Spokane, Washington. And it got to the point where we could keep trying to spend more to squeeze out more and more deals. But ultimately, we said, like, what if we just took our same system, and we went into different markets, and we tried to catch the low hanging fruit at in these other markets. Right? So that's what we did. So we're in been in 12 different markets. We're currently active at eight. We dropped out of four of them because they just weren't a good fit for us doing exclusively wholesale in all of them and all of that's managed by our four VAs and our two sales guys. And then for our buy and holds, we're still primarily looking here in Spokane because that's where all of our properties are. That's where we know them. You know, we're just taking that wholesale revenue and applying them towards deals here in the Spokane market.

Alan Corey: [37:22] If you had to start all over from everything you've done from scratch, the single families, the new construction, the partnerships, what would you do differently now that you're educated? Because you got your education on the fly. Right? What would you do differently?

Mike DeHaan: [37:35] The main thing I would do is I would focus on learning skills to generate rapid income, massive income as opposed to passive income. Like, this is something that I've become so I guess, say somewhat passionate about is you look at, like, the, like, the financial independence space, right, or, the wealth building space. So much of it is focused on this is how you calculate how much passive income you're gonna need to, like, leave your w two. And this is sort of, like, how you can go about buying assets to do that. These are the things to look for. And I understand in theory why it's like that. It's kind of like a conservative, safe viewpoint of looking at it. But the argument that I always make for people is honestly, I think it's easier, in my opinion, from, like, having done all this. It's honestly easier to make a million dollars than it is to replace, like, a decent w two with truly passive income. Like honestly. So like right now, my passive income from my rental properties surpasses my old engineering salary, my old wife and I's household salary, but I also own 28 properties. So like, that's that's a huge step to get there versus I made my first million dollars in revenue. Like, my personal income was in 2021. And that happened way before I had 27 properties. Right?

Mike DeHaan: [38:48] And that was also while building that portfolio over that period of time. So there was revenue that I could have generated that I left on the table. So what I tell a lot of people when they're looking at, like, financial independence and being able to generate wealth, have, like, a plan for how you're gonna generate that investment income, that passive income, but focus on the skills to get that massive income, which, you know, is honestly typically sales and marketing and learning to network with the appropriate people instead of because, like, if I had done that from the start, I wouldn't have taken my $70,000 that I could have gone and turned into an incredible amount more and put them into two turnkey properties that just ended up being parked there for a really small amount of money at the end of the day.

Alan Corey: [39:24] So you would take that $70,000 and go to networking events and masterminds?

Mike DeHaan: [39:29] Or Yeah. So I joined a group. You know, I would if I put that towards marketing to sort of learn how to wholesale back then, I would have been able to go into that at a much higher caliber. I would have probably started flipping houses with that money instead of bringing on a partner where I was giving up half of it. There's a whole different melee of ways you can take that money to, like, grow it much faster than going and parking it into an asset where you're gonna make, like, a tiny bit of return at the at the end of it. Especially, like, if your only income is through a w two, which most people's w twos, unless you have, like, a sales job or something that's commission space, you can't speed up how fast you get that money. So, you know, it's going to the best of, like, increase the increase your income as much as you can, and then you can increase the velocity of that income, you know, once it's sort of coming in and stabilized. The biggest thing too with off market stuff is it's not rocket science, honestly. Like, so many people, they get dazzled by, like, the Instagram folks who have, like, the high production value, and they're talking about, like, these crazy systems and all this sort of stuff that they're building. And, like, this is how you you have to be an expert at subject to use, and you have to spin all these complex things and whatever.

Mike DeHaan: [40:37] If you just have a basic process that's super consistent over time, you can start to get traction. And then, honestly, what it comes down to to grow, it's learning how to systematize it. But once you sort of understand the basic process or even if you don't, like, there's so many people out there that are willing to coach and teach you how to systematize things. And don't feel like it needs to be this huge super complex thing to compete with the people that are doing it forever because it really doesn't. You know, you can have a really basic process and go and get deals if you just have some intention and some longevity with it.

Alan Corey: [41:09] If people want to learn more about you reach out. What are some ways?

Mike DeHaan: [41:13] I have my own podcasts, the collecting keys podcast. We talk a lot about the business side of real estate and off market real estate. It's me and my business partner, we host it. And we do three episodes a week collectingkeyspodcast.com. It's a great play to, I guess, hear more long form stuff for me. And then if you want to reach out to me directly, the best place is on Instagram, which is at Mike underscore invests. And don't be afraid to shoot me a DM on there. I'm always happy to chat with people. One of my goals for 2023 is to do an Instagram post every day that's that brings value to people. So I'm pretty active on there these days.

Alan Corey: [41:44] Mike DeHaan, thank you for joining me today. Follow Mike underscore Invest on social media and listen to his collecting keys podcast. Thanks for listening to this collecting keys Friday focus. Be sure to subscribe wherever you listen to your podcasts.