Oil Spill at the AirBNB

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Speaker 2: [1:01] 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: [1:25] What's going on, everybody? Welcome to episode 18 of the Collecting Keys Real Estate Investing Podcast. I'm Mike DeHaan here with my business partner, Dan Austin. Hey. Had a we we had we had a fun week today. Dan, a true environmental disaster

Dan Austin: [1:42] that you've been dealing with. We can all the EPA.

Mike DeHaan: [1:45] It's just they it has some sometimes these properties that we get into what's funny because, like, it shouldn't be as big of a pain in the ass, but it just seems to be, like, every little thing with this property has sort of happened, you know, from, like, the foundation. We had to issue the foundation, and then we end up having to do the roof, which you weren't expecting. Now we've had the freaking oil. Yeah. We're even broke. I don't even know what happened. Yeah. All I know is there's oil in there.

Dan Austin: [2:14] Let's get into it. I guess, why don't we do, like, step back for a second, just talk about property ownership, landlording, flipping all the things because you hear a lot of stuff where it's like ideal state world. Right? Like, everybody that listens to our podcast kinda gets to hear different sides of our business and good weeks and bad weeks. That's like the point of the podcast. Right? Because it's not all roses. And if you're in the game long enough and you have enough you've done enough deals, like, have weeks where it's just like, oh, that kind of cuts deep. But also the benefit of doing a lot of deals and doing a lot of things is it doesn't feel like it's cutting as deep. Because you're like, well, we're producing income in multiple different areas of our business. And that's the point of growing wealth is to, like, get it all out there, grow it, and then you can stabilize it as a, like, a larger asset as that that's the way I look at it anyways. Right? And so started off, I think, the week with realizing a bunch of our materials that are flipped had gotten stolen. So that was so that was cool. So that increased our budget there. Right? And it was

Mike DeHaan: [3:09] Well, to be fair, that could have easily been avoided.

Dan Austin: [3:12] We could have been Oh, I mean, everything well, like, we could get everything that we've done, everything that happened to us could have been avoided. Right? And so, yeah, that one was just job site security. Right? Lost, you know, couple couple thousand dollars worth of our finished goods, which is it is what it is. But I

Mike DeHaan: [3:29] like it. And also who the hell steals doorknobs? It's like was it it was like doorknobs, like faucets, just dumb stuff.

Dan Austin: [3:35] Over a period

Mike DeHaan: [3:36] worried about.

Dan Austin: [3:37] Yeah. And it was over a a longer period of time. And that was kind of on me and the contractor not coordinating closely enough to get one of the garage doors replaced because it was easy to just break in. But we had to do different work to basically make it so we're able to finish the garage door issue because there's some framing and stuff and just the the project. Anyhow, doesn't matter. My assumption was on some of these items that I was leaving there or getting delivered that they were gonna get taken in, you know, but then they had to get taken out because of certain parts of the project. So either way, dumb mistake. So that was fun and figuring out what we had to rebuy and, you know, all that sort of stuff. It's not a huge deal, but you can see how quickly it could could be an issue. Right? Especially if somebody comes in and vandalizes, and that does happen to people's projects. Yeah. Hasn't happened to us yet, but so that was a nice way to open up the week. And then I don't remember which day it was, but or got a message from one of our Airbnb guests who is coming in with his wife and and two infant kids. And they walked in the front door and couldn't couldn't even be in the place because it smelled it smelled like I think he described it as gasoline and something else.

Dan Austin: [4:50] Propane. And propane or something weird like that. Right? So You

Mike DeHaan: [4:54] know you know what, though? That that came in. This is how I officially know that we're we're pros or at least I I am now because I heard that why I saw that come in on Airbnb. It was, like, what, 09:00 at night. And I was like, oh, that sucks. I did not lose a wink of sleep.

Dan Austin: [5:12] Yeah. No. I lose a wink.

Mike DeHaan: [5:13] Out tomorrow. But like, back in the day, dude, I would have been so stressed about that. I would have gotten in my car, like driven out there. Was like, oh, fuck. I guess I'll figure it out tomorrow.

Dan Austin: [5:23] Yeah. I I did not I'm I'm with you. I didn't lose any sleep over it. I was kinda frustrated because, you know, it's not the first guest issues we've had.

Mike DeHaan: [5:30] But I

Dan Austin: [5:31] was just like, okay. Cool. And then I was working with our property manager. She's on it. And we are messaging back and forth that evening just to try to coordinate it. It was like, okay. So what do we gotta do? Like, we're pay for this guy's hotel room. We're gonna refund him everything. Like, you know, just trying to make it right for him. I mean, he like, that would suck. Right? And so it's our responsibility, I think, to do that as like an Airbnb host instead of like trying to, like, cost mitigate. Like, okay, what can we get away with here? It's just like, alright, take care of this guy, make sure he's good, and then start canceling reservations or figuring out which our property manager is great. She runs a bunch of other Airbnb's, and so she was able to offload them to other units that she manages. And we you know, that actually took a lot of work the last couple days of the week. Just trying to organize that so people had a place to stay, especially because some people aren't very responsive, and they might just show up to a locked house and they can't get in. So we did that. Called the the whoever, property manager, sent somebody there to take pictures, and I knew exactly what happened, and I didn't I just didn't wanna believe it.

Dan Austin: [6:31] But this has an oil furnace in it, which I wanted to replace. Had the HVAC guy come in there, and and Mike and I had the conversation. It was like, if it doesn't need to replace, let's not replace it now. So we could have avoided it. We knew it was a risk. Right?

Mike DeHaan: [6:45] It's kinda suck.

Dan Austin: [6:47] Kinda sucks.

Mike DeHaan: [6:48] Freaking gulf down there just

Dan Austin: [6:50] like Right. Yeah. Anyhow, so it flooded. There's a huge 500 gallon oil tanker. I don't know how big it is. It's pretty big. That just basically drained into the newly remodeled basement, carpet, drywall, bathroom. Just it just flooded it to where you like, the insurance inspector had to go out there. She she said she had to wear a gas mask. It was so bad. Oh, she's a bit wet. She's fine. I know. Right? So I still haven't gone there. I have no interest in going there. Like, I I haven't gone there. We've coordinated to get everybody to do whatever.

Mike DeHaan: [7:21] Judd went and checked it out, though. He, I mean,

Dan Austin: [7:24] he didn't complain about the

Mike DeHaan: [7:25] gas mask. Yeah.

Dan Austin: [7:26] Yeah. No. I I'm just making a point that, like, I have no desire to go there and look at it. Like, I know exactly what what the problem is. And so now we're we're at the point to where it's just like, replace the furnace. Well, one of the reasons we didn't wanna replace it initially was we gotta wait to get gas extended, like natural gas extended there, and then potentially upgrade the electrical panel. So it all adds up to, you know, $1,520,000 dollars worth of labor. But it was something that, you know, I've been kind of thinking we should do because the house actually doesn't have air conditioning. So it would have been a nice time to add that. So now we're faced with that in the middle of the winter with no heat. And the biggest problem is is getting it mitigated and working with insurance before some of the pipes burst because we're at in our market with no heat in a home like an old home like that, pipes will burst. We've actually had it happen on our other Airbnb. Actually, it wasn't a burst pipe. It was a frozen drain pipe. So every time the washing machine tried to drain, it would just hit an ice block and flood. Mhmm. Right? So we've had a couple of those issues. And so, yeah, that was that was nice. And it's pretty costly.

Dan Austin: [8:28] And now it's like, what what will insurance cover? What will they not cover? And kind of going through that battle. But, yeah, that was a that was fun.

Mike DeHaan: [8:36] It's such a nice surprise. It was a nice surprise. Oh my god. This is always something. Yeah. When you called me to tell me about that, I was on a Zoom with with Judd, who's our kind of he's our dispositions manager. He's kinda shifting to, like, an internal all around employees doing a bunch of stuff for us. And he has a really strong interest in owning rental properties. And that's literally what we were talking about was how he wants to, like, buy some properties this year and all this sort of stuff. And you call and you explain this whole thing. And I was like, well, I wasn't expecting to have to spend $17,000 today. But you sure you still want to own properties, Judd? That just sort of

Dan Austin: [9:10] happens sometimes. Exactly. Yeah. Yeah. It happens. Right? And like and that goes to, where are the I think you and I are on the same page as like, we are building a rental portfolio and as as like an asset. And as we're growing it, there's going to be cost to grow it. Right? And maybe at the end of the day, when we stop growing single family, small multifamily asset pool, then we really start being concerned about costs and those sorts of things. But right now while we're growing it, we know that that property needs a furnace at some point. Like, so you would normally budget for that, right? But because we're growing and we're we're accumulating income from different streams, it's okay to it's okay to have those incidents where you're not like sweating it. Right? And then at the end of the day, in five, ten years from now, when we're looking at our p and l for our properties now, it's a different story. But you're also, you know, looking at it from across this asset pool as opposed to one single house that you own. You're like, oh my god, that just wiped out three years of cash flow.

Mike DeHaan: [10:11] Yeah. Exactly. Well I mean, I I think that's also why cash flow is kinda one of the overrated things in in real estate a little bit. I mean, I think it's obviously important because it covers those costs. But at the end of the day, you know, the other parts of real estate, like the appreciation, the debt pay down, tax benefits, like, are gonna net a significantly larger return than your cash flow on the average property.

Dan Austin: [10:35] Yep. Yeah. And looking at it as an entire asset, just like you would your stock portfolio that maybe you don't touch for twenty years is you're like, you know, it's gonna go up and down, but you don't sell it because, you know, it's over time those shares those numbers of shares are going to grow in value, and then your net worth grows. And so that's kind of the approach we look at it as.

Mike DeHaan: [10:53] Exactly. Yeah. But and I I think that's also the reason that you having that that cash flow, though, is important because it at least allows you to not have to come out of pocket when these two expenses do come if you're buying Totally. Flow. But, I mean, it was it's it's funny though because looking at back at the stuff that I bought several years ago, I remember when I first bought, like, my first duplex stuff 2018. There was these little things I had to do, and I was like, oh my god. It's gonna make $7,000. Like, I don't even really have this money. And I was so stressed about it. But now this past year, when I did a cash out refinance on that thing for, like, double what I bought it for, all of a sudden, that $7,000 doesn't really matter, like, at all. Yeah.

Dan Austin: [11:33] No. You're you're absolutely right. I mean, in it's not like we're advocating for not having cash flow because we both are cash flow investors. The cash flow to us isn't just necessarily a living expense where, like, if you're purely living off that during a growth, like, while we are growing like we are at such a rapid pace and kinda I don't know. It's just doesn't matter to me at this point. Yeah. It will at some point, maybe, but just not right now because I'm more concerned with the the ability to take that number of units and double in the next twelve to twenty four months as opposed to what this cat does to my cash flow right now.

Mike DeHaan: [12:05] Yeah. Exactly. Well, that that brings up an interesting question that I actually haven't even talked to you about yet. So I'm about to put you under the gun here. You know, and we both have these goals to grow this portfolio over the next year. What are your thoughts on, like, how interest rates and things like that are going and how we have to start adjusting offers and how other investors in general should be adjusting their offers, looking at, like, doing these burst out properties where you're gonna be locking in this longer term hard money. I mean sorry. Longer term money at, like, cheaper rates. But, yeah, out of out of this hard money loans that we typically get to buy with. I mean, one of the challenges we're gonna be facing is that rate is gonna keep creeping up. It's gonna be harder and harder to make things make sense, especially at the current market values.

Dan Austin: [12:52] Yeah. Yeah. I think you shouldn't be like, if you're planning to borrow a property, don't be and you should yeah. Don't don't expect that that you're going to get the rate that you're forecasting right now. At least when you do your analysis, add a quarter to half a point in there if you can do it within the six months. My, you know, my assumption is is everybody all the players know that the Fed needs to raise rates.

Mike DeHaan: [13:15] Mhmm.

Dan Austin: [13:15] And I think finally, everybody, like the big dogs, when I say everybody, not just real estate investors, but the banks and everybody are like, okay. Yeah. We've scraped enough profits. You know, we've let the government print enough money. We're all there's enough billionaires now through banking and all these other that they're I think they're going the market's going to react less than it has in past years, which to me means that we're going to start seeing interest rates for investors, even on the commercial side, like in that 5% range as opposed to where we are, you know, three and a half, 3.9 on some of these commercial loans. We're going to see that, you know, sometime by the end of the year, those those are creeping up. I mean, I'm already looking at getting doing like looking at some cash out refis on conventional loans at like four and a half, 4.65. And so, you know, where a few months ago would have been a solid on below three or below four. Sorry.

Mike DeHaan: [14:06] Yeah. Well, I mean, I got 3.75 in November. Yeah. Oh, my freaking, like, duplex and triplex. You know? Like like, those are typically even higher as it sits. Well, so what do you think that's gonna affect values? That's the other thing that we're also looking at too. This is what I've been thinking about a lot is how is that gonna start to adjust values? Because I think one of the biggest reasons that values have gone up so much is because people can just afford more house when interest rates are so freaking low. Like, all of a sudden, when you can buy a $500,000 house for the same payment that your $300,000 house was at 5%, because you're not able to buy at 2.9. That's gonna be really interesting to sort of see how that sort of changes everything.

Dan Austin: [14:50] So the the typical economic argument goes back to the supply and demand. Right? So the government has to control inflation. Like, that's the not the government. But, basically, that's how it's controlled. The the short term overnight lending rates, all that stuff that are set by the Federal Reserve. Like, that is a mechanism for controlling inflation, which goes back to just supply and demand. And so if you reduce demand, supply should naturally reduce. And when when we talk about that in real estate, basically, you make it more costly for people to purchase a home, and everybody thinks about it in terms of a monthly payment. Right? And so that's Mhmm. That's where we look at it. So instead of it being $1,200 a month for the average home or whatever it is, it's gonna be 15, right, for the average mortgage. So 1,500, like, that's a big swing for somebody in homeownership. And so that would likely reduce the demand for houses, which as we know in in a real estate market with less demand means lower prices. So in fact, the argument would indicate that you a would not be able to sell any houses or properties you're trying to sell for the price you think you're gonna get in the short term. Yeah. And that's scary to think about in, like, the worst terms. Right? Because the value your your your value crush your portfolio is gonna could potentially be reduced by a significant amount.

Mike DeHaan: [16:17] I guess the argument would be is because, like, is supply really gonna drop that much? Because I imagine there's gonna be so many people that have this low rate locked in, especially for, like, the next, like, five to seven years who have bought house in the last year. They now have this $700,000 house that they bought that's at such a low payment compared to what it could be. Like, they're not gonna leave. You know, these people aren't gonna long way because they're gonna have to be moving down and having a more expensive payment.

Dan Austin: [16:47] The so the I guess the other side of the argument, you're hitting on a great point. The other side of the argument is is that there's already there's now there's going to be reduced supply because there's people with 2.75% interest mortgages who would never have been able to afford that house in their lifetime had they at this point in their lifetime, had they actually had a three or 4% interest rate. The other the other part of that argument is that a lot of people continue to say this is that we're under built across The US. And so there's still people that need homes, they're still going to be building homes. But I think the answer is somewhere in between. So you've got the the guys who are still bulls on this saying, oh, we're under built. And what you just said, Mike, people won't want to leave their homes because they got this great interest rate, they're not gonna be able to afford step up in the near term. Or the argument of like, oh, man, it's all going to come down because interest rates are going up. And that's what we've seen in the past interest rates go up, everybody constricts, markets drop, everybody gets scared, nobody does anything. I think it's somewhere in between personally.

Dan Austin: [17:47] I think we will see some like contraction in the demand of things, but I don't think it's gonna go like completely away. And I think there's still money to be made in the market.

Mike DeHaan: [17:57] For sure. Yeah. I think one of the biggest changes investors will need to make is you're gonna have to have a better product to be getting those. I I think there will be less tolerance for people that are like, I'm willing to settle on this kind of crappy house just because I need to move into something, I don't wanna lock in a $1,200 a month monthly payment for the next thirty years. And I also think that if you do have flips or burs that are kind of tight, you better hurry up and get those turning because, you know, there's gonna be a little bit of risk there compared to past years, I think. You know, as as those rates start to go. I think especially on burs, I think flips, you'll probably be a little bit safer because there's still gonna be a large demand for it and people are still gonna overpay for stuff just because they need somewhere to live.

Dan Austin: [18:48] Well, even even besides that, you can you can reduce your profit margin on a flip. Say your profit margin was 30,000 on a flip, and you sell it for 30,000 less, but you're selling most flips are being sold at the median, you know, home and, you know, price. So that's a huge percentage to go down. But at least you didn't have to come out of pocket. On a bird, you're not getting your money back is what that relates to.

Mike DeHaan: [19:11] Exactly. Yeah. Your money gets trapped in there. And then also too, if the rates have gone up, pension, you're gonna be getting less cash flow than you were expecting, you know, and that can basically kill the entire deal at that point. Yep. So, yeah, either way, think it's gonna be more and more important over the next little bit to make sure you're moving fast, and you're supplying as good of a product as you can and be doing less of like the janky investor stuff that we've been seeing for the last

Dan Austin: [19:33] year and

Mike DeHaan: [19:33] a Which you you could

Dan Austin: [19:34] get away within, like, and I have gotten away with a few things that you're like, whew, that was good. But it also just makes you if you're if you're going to be an investor, this is where I always talk about it's like, you an actual are you like an entrepreneur who's in this real estate game to stay beyond just investing in like in parking some of your your excess cash flow or your excess cash? Because then what you do is you pivot and you look at other ways to increase the cash flow that you because you've maybe you thought you're gonna get 3 or $400 cash flow interest rates go up. Like, shit, I'm getting no cash flow. What are other ways you can get cash flow out of that same unit? Well, multi tenant housing is starting to get like, rent by the room is starting to get big in some markets. Is that gonna be more popular? Rent by the room is where I started out as in the student rentals because the cash flow is higher there. And it was it's easier to to pivot those because that's by the room. So your your actual dollar amount you're asking for per person is is less, but when it gets accumulated up to the entire property, it's higher. So if you get a six bedroom house, you can rent that by the room for $800 a room where before the whole property only rented for 2,400. That's cool. Yeah. Again, like again, like student housing is like a is another one that you can jump into or you get creative. We've got some other creative type of options that where we rent to the government essentially, that allows us to get higher cash flow on some of our properties.

Dan Austin: [20:52] And so like you have all these options out there, you just can't expect that the exact same model is always going to keep working in every single market condition.

Mike DeHaan: [21:00] Yeah. Exactly. And being being flexible and and yeah. I think I think being strategic about that. I think that where a lot of people are gonna get stuck is if they're exactly strictly one thing or another. Like, all these people that are so, like, hard on, I'm only gonna do short term rentals on all these sort of areas. Right? And it's like, if that's your only thing and you're overpaying for all these properties, determine the short term rentals because they cash flow, it's like, well, what happens when, you know, there's sort of shift in the market, you need to offload that and you overpaid for it. And now you can't be x ing without losing money. You know? Like, you gotta be able to have another strategy there. I was like, or even people who are strictly long term rental investors. You know? It's like, after a while, what happens when the rental rates don't cover the mortgage payment anymore? Which just happened in a lot of markets.

Dan Austin: [21:47] What about rent control, which is, you know, always looming and and especially where we're at in Washington?

Mike DeHaan: [21:52] Yeah. Yeah. Exactly. Right? So just weird stuff. Mhmm. But yeah. I mean, one of the things that I think will be sort of ever looming as well, which is sort of an unknown, is just gonna be this I don't wanna say, like, conflict, but, like, the sort of haves and the have nots in society as these sort of things go, especially pertaining to properties. You know, as properties get more and more expensive and the buyer pool becomes smaller, and then there's gonna be more and more people that are, like, reasonable people but just can't afford properties anymore. It's like that's when when the majority of the population all of a sudden can't be, you know, living the American dream, that's where you gotta start worrying about, you know, some sort of political action being taken that may or may not be completely irrational. Yeah. But that's not something you can predict, but it's always something you gotta make sure that you're at least monitoring for.

Dan Austin: [22:48] Yeah. Yeah. Make sure you're on the on the on the right side of that as in the property owner, as in the wealthy guy. Exactly.

Mike DeHaan: [22:56] Right? Yeah. Honestly. Yeah. But yeah. So yeah. So we got all that going. And then we've been dealing with this new duplex that we just bought. This is like the tenacity of some people. We felt like, I can't get over this whole situation. It's just so ridiculous.

Dan Austin: [23:13] I forgot about that.

Mike DeHaan: [23:14] So we bought this duplex, kind of it's like a it's like a single family with an ADU. And the people that lived in it, like, they the reason they needed to sell to us at an extreme discount was because they had a hard money loan on this property. They had illegally moved into it. The previous I guess, the lender had found out and was like, hey. We're gonna, like, foreclose on you now because you violated the terms of your note. And they, like, needed to liquidate it in a very quick period of time, and we were able to do that for them. So we got them out. They have another house that they've already bought, and they're like, yeah. We're gonna move over to that one, which they were supposed to be out beginning of February. It's now February 6. They're still there. But then they freaking put in a maintenance request because they're renting it back to them all through our system. They put in a maintenance request to have us come, like, fix this stuff in the kitchen. And it's like, how the hell has that been that way? You've been in the house for, like, ten years. You know? Like, let me just tell you. Been in the house for, like, three years. Yeah. They didn't tell us about all this stuff.

Mike DeHaan: [24:17] Now they're like, oh, well, you're the landlord, so you guys need to come fix the broken sink. It's like, screw you. Get the hell out of the house. Like like, what It's like part of

Dan Austin: [24:27] the deal here. Like, saved your house, and now

Mike DeHaan: [24:29] you want us to fix

Dan Austin: [24:29] the sink. It's like, makes me curious, like, how long do you plan to stay? Because this is one of the ones where typically we do, like, a lot of rigor around the holdbacks and all that sort of stuff, but we didn't do it on this one. And so, like, they're not as incentivized to leave when we want them to.

Mike DeHaan: [24:45] Yeah. It's it's such a weird situation. Well, then it it's so odd too because they've been I've been texting with them. They don't talk on the phone. They only text. I've been texting with them, and then Judd's been texting with them trying to figure out the situation. And they keep doing, like, all this, like, really passive aggressive stuff towards towards everybody. But then, like, all day yesterday, she was, like, texting me, like, we're best friends. Like, just, like, asking me things about real estate and, like, investing and all that sort of stuff. And I'm complying because I want her to stay friendly and not freaking trash our property before go. She's But I was like, what is like, the tenacity of people. It's just insane.

Dan Austin: [25:23] The whole rent thing, like, whether you just try to collect rent, it's like, no. It's says it's due on the fifth. And I'm like, well, the lease says it's due on the first. It's late on the fifth. But it's like

Mike DeHaan: [25:33] I know.

Dan Austin: [25:33] Why couldn't you just pay on the first? Like Exactly.

Mike DeHaan: [25:37] Weird shit. It's it's just so weird. What's it's that definition of people? I think they're they're, like, pretty entitled with the whole situation. Like, I don't know why, but they they own, like, quite a few properties themselves, but they're I don't know. They fancy themselves be pretty smart, but they're obviously not that smart if they, you know, were, like, got themselves

Dan Austin: [25:59] in a situation. Well, do you know they're killing it because, like

Mike DeHaan: [26:01] cost at a fat discount.

Dan Austin: [26:03] They're killing it when you told me the other property they own, the one that's adjacent, like, part of the deja the deja vu complex. I'm like, oh, man. I bet we should get we should buy that one from them. Right next there. Oh, boy. The boys love Yeah.

Mike DeHaan: [26:15] Well, it's not only it's that. They they own that. And then the other property they own is, like, a retired marijuana farm up north that isn't even, like, operational, but they bought it with, like, all the machinery, like, a few years ago. And I'm like, why don't you why don't you at least go grow pot then if you're gonna buy that? Like, you could make some money. I don't understand.

Dan Austin: [26:35] Probably because I imagine it's way harder than you think to grow pot. That'd be my guess. And, like, sell it as, a business. You probably have to have, like, armed guards too if you're up north. People are weird.

Mike DeHaan: [26:45] I mean, I think in general because the banks don't work with them. I remember watching the thing about that a while back where people were hiring, like, retired SF guys to transfer their unmarked vans worth of cash for their marijuana business because they couldn't do anything with it. Because no banks would take it.

Dan Austin: [27:01] Yeah. I think they take it now. Like, there's some, like, local NFDS c type banks. Yeah.

Mike DeHaan: [27:07] Oh, yeah. There's credit unions. I mean, even the credit union that we use, I've seen on their website, they have, like, a new plan for marijuana entrepreneurs on there. So that's our

Dan Austin: [27:18] next venture right there. We're gonna buy it for an all cash offer.

Mike DeHaan: [27:25] Right. Fine. No. No. I don't wanna deal with these people anymore. It's just fascinating to me.

Dan Austin: [27:29] Just want them out. Just want them out because that is that is a bigger loan for us typically on these properties than we get on most of our properties. So the carrying cost is a lot. And it's just timing of our contract. We're finishing up a flip. We just acquired another flip, and we have a little bit of time in between to squeak this guy out because this one doesn't need a lot of work, the duplex. And so it'd be nice to get that thing done and and then just complete, but I can't imagine it'll work that way.

Mike DeHaan: [27:53] No. No. They'll drag it out forever. So I don't know. Either way, like, on the plus side, if they're paying rent, it'll at least cover our hold. Which, I mean, they have to pay rent. Because if they don't pay rent, we can kick them out, and they don't want that. Yep. So Yep. Because they're not they're not, like, I don't know, really trying to cause problem. Like, they're not gonna not pay rent. I'm very confident about that. Yep. Yep. So anyway, the tenacity of people that you meet in this business is just like never ending. You know, I just can't even like fathom it 90% of the time. And I think that's one of the things that makes this whole thing so challenging is, you know, I've I've talked to so many people that, like, wanna get into this business and, like, they'll ask about it and, what, you know, what are the most challenging parts? And everyone thinks it's the marketing and it's, like, the whole process of, like, have like, find the opportunities, all sorts of stuff. That's easy. Honestly, the most challenging part is dealing with a completely irrational nature of the kind of people that you market to in this business. You know, not saying that they're, like, necessarily bad people, but they're the kind of people who are facing a city foreclosure because they didn't pay, like, you know, a $147 utility bill. You know? Like like, they like, nine years passed, and they never paid that, and now they're gonna lose their house because of it. You know? And it's just like it's it's just challenging.

Mike DeHaan: [29:22] It's just so challenging. I was trying to not, like, sound belittling towards people like that. Yeah. But, like, you know, it's just it's just a certain type of individual and it's makes it it's hard to hard to work with people like that sometimes.

Dan Austin: [29:37] Yeah. I don't think we've in in our markets, like, ever ran across a person where you're like, damn, that was just bad luck. Most of our folks that we're dealing with, it's most Very, very rarely where you where you're like, you did nothing wrong. You know, when when you're talking about, you're trying to build this this persona for the majority of our our sellers and and tenants people we deal with. A lot the reason why they're irrational, I think, towards us is because like they have they have no control in their life because they've inaction has created their problem. Most of it most of it is just inaction on their end, which is how they got into trouble. It's not that like they don't work hard or they don't whatever. And they're in their financial in financial distress most most times because it's inaction. It's like, well, they're at home all day. Why aren't you, like, trying to track this problem down for yourself? Instead, they're not taking action and relying on other people to take action for them. And then they get bitter sometimes.

Mike DeHaan: [30:32] Yeah. For sure. Oh, I know one that was just bad luck. That one that we assigned that had the tenants who claimed to have ownership of the property.

Dan Austin: [30:45] Oh, yeah. That was a bummer.

Mike DeHaan: [30:46] That that was the super bummer for those people because the people that we worked with were the children of the owner, and the owner was basically in the process of trying to evict these tenants. And in the in that period of time, this is all during COVID, he had a really severe stroke. And now the children were like, I don't know what we're supposed to do. These people are like threatening our lives. This is just a crazy situation. That one was just like, you know, a lineup.

Dan Austin: [31:14] So I would say like, the only one I can think of. I've got a good question for you then. Like, when you're talking about, like, the most challenging part of the business, obviously, there's a lot of challenges. But in the sales cycle, these these are the types of people that you're gonna be dealing with. Like so, like, what what is your advice or, like, how do you deal with these during the sales cycle? Because, like, once you get the contract and still a pain in the ass to deal with them and you can still go out of contract, things can happen. But during that sales cycle, like, how do you handle it? Because you can be a nice guy or you could be bad guy. There's gotta be something in there that works more naturally for people.

Mike DeHaan: [31:51] Yeah. I mean and and that is a good question, and that's something that we work with our sales guys on on a regular basis is trying to figure that out because there's kinda two directions that it can go, and you gotta stay in the middle. On one end, you can be too aggressive, and it can kill the deal because they don't trust you. They feel you're too salesly. You know, just like just come off as an asshole. Right? Like, people don't wanna do business with you. Yep. Or you can be too nice. And then what ultimately ends up happening is you get basically friend zoned by the seller. And now they just you know, they don't wanna they don't wanna date you. They don't wanna get married anymore. They just wanna, you know, be your best friend. And that that has happened with a lot of sellers that we've worked with, especially, I think, the when we've had people in the crew that aren't, like, natural hard salespeople, very easy for that to happen, especially with older sellers. Right? So I think that kinda what you need to do is you need to be firm but fair. And you need to make sure that all of the conversations that you have, you're basically creating, like, a like, a mins, like, a most important next step with them on every single touch point. So, you know, even if you're calling to check-in, you're, like, really at the root of it? You're, like, okay. I'm trying to figure out if they're ready to sign a contract now.

Mike DeHaan: [33:15] If they come out no, then I think what you need to do is schedule with them your next time that you're gonna communicate and what figure out what is sort of inhibiting things moving forward and establish with them over the phone or in person, whatever, how you guys are each going to accomplish that. Right? For example, we have one right now with the people. They have accepted our offer, but they won't sign a contract because they don't know where they're gonna go with their seven kids. And I'm like, that's great. You know? So we get on the phone with them, but we don't want us to become the mosquito in their ear to saying, how about now? How about now? How about now? Because eventually, they'll tell us to f off. You know? But at the same time, you can't just go, okay. Well, just let us know because what's gonna happen is it's gonna kick it down the lane four months, and they're gonna be like, oh, yeah. I forgot about you. I just signed with one of your competitors because they managed to reach out to me at the exact time we got it figured out. You know? So I think it like, in that sort of situation and say, okay. So what markets are you looking at? Awesome. Here's what I'm gonna do, mister and missus seller.

Mike DeHaan: [34:22] I'm gonna go back to my office. I'm gonna work at finding you a realtor, maybe get some listing details for you on stuff over there. And I'll get that over, and can we reconvene maybe on Wednesday and just sort of explore some options together.

Dan Austin: [34:36] Yep.

Mike DeHaan: [34:37] Right? So now they know what you're doing, and they are basically in the thought process of cool. You're here to help me. You're here to work through this process with me. And that way, there's always forward momentum going and you're not stagnant. Because at the end of the day, this business, it's a people business. You know, it's all about people and should be people first, and you're solving problems. Whether that's legal problems, that's personal problems, that's financial problems. I mean, we've done stuff like helping people with really difficult tenants that we have fronted money to start the eviction process for. You know, we have covered people's bills or, like, moving expenses before transactions are closed. We basically just have to write into our contract that that's gonna be reimbursed. And if you're gonna do anything like that, by the way, make sure that you're paying the vendor and not the individual because otherwise, they could very well take the $1,500 that you're supposed to go to U Haul, and they could just run away with it, and you'll never see it again. So we do that or, like, I mean, even some of the more personal stuff that I guess you help me with, like helping people move, helping people find new homes, doing anything. Right? Like, driven people to closing, to and from closing, like, worked on, like, helping them getting documents signed or, like, going to the county and getting, like, deeds claimed over, stuff like that.

Mike DeHaan: [35:59] At the end of the day, if you can solve those problems, that is gonna be what gets you deals in this. You know, very rarely are you gonna find someone that has a motivation that is just like, cool. This is clean. I'm just gonna sign this contract. Here you go. Thanks so much for buying my house at 70¢ on the dollar.

Dan Austin: [36:15] Right. That that doesn't happen very often, but when it does, it's cool. But a lot of times, it it's the work you gotta put in for. Like, you're not you're not gonna get a, you know, $1,520.30, $40,000 wholesale for you for free. Like, you gotta you gotta do some work. You do have to help these people out. And what's $500 for a moving truck and having a couple guys show up to help them pack it? Big deal or finding an apartment that they can get it because the grand scheme of things like, we are investors, we are kind of tied into kind of the market, and we understand how that stuff works. And so we can help them much just a lot easier than they can help themselves a lot of times. Because we know all the details of these transactions because this is a once in a lifetime transaction for them. This is the once in this week transaction for us.

Mike DeHaan: [36:58] Exactly. Right. And that thing gets a very good point too is it's easy to take for granted how big of a decision it is for people when you're doing, you know, several dozen of these a year. You know, we did what? Almost 50 last year. When you do, like, a weekly transaction, it's easy to forget that the person that bought their house fourteen years ago that now is in a really, like, terrible situation. That's a big deal for them to be, you know, making that move again. So Yep. Anyway, so I guess long story short, when you're doing these negotiations with people, make sure that you're very intentional about what the next step is and the intention of every single conversation, you know, in a way that is firm but fair.

Dan Austin: [37:41] Yep. Yeah. So cool. I like it.

Mike DeHaan: [37:45] I think that's a good time there, Dan. Thanks for listening, everybody. You should follow us on Instagram. I am at Mike underscore Invest. Dan is at investor man Dan. You can follow the podcast at collecting keys podcast. If you go to our website collectingkeyspodcast.com, you can get our five step process to start generating off market leads. You should definitely go check that out. And we have some pretty big stuff coming underway, where you could potentially have the opportunity to work with us and learn our system. More details will be coming up on that this next week on the podcast. But if you want some more information in the meantime, you wanna be on the list, also go to eclecticgeesepodcast.com and just put in your email to grab that guide. You'll get the guide, and you'll be one of the first people to know. And, yeah, I'm excited for that, Dan. It's gonna be a fun endeavor that I think a lot people will be able to get a lot from. So

Dan Austin: [38:40] Yeah. I'm pumped. It's gonna be fun. It's gonna be good. Cool. It's gonna be good for everybody.

Mike DeHaan: [38:44] Exactly. Right on. Well, thanks so much, everybody. Have a good week.

Dan Austin: [38:48] See you.

Speaker 2: [38:50] 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.