Stop Flipping Houses, Start Drop Flipping (Here's How It Works) w/ Aaron Bihl

Dan Austin: [0:01] Welcome back to the Pluck and Keys podcast, everybody. I have my fellow host here, Dylan, Dilbill, the man, the myth, the legend from Cincinnati, Ohio. And if you can tell, Mike sounds a little different today because he's galvanting, hanging out with his buddies in Vegas. And so we brought up a, fellow friend of the show, Aaron Beale. The... What do we call you? We used call you trailer boy. Now we call you like drop drop boy, drop shipper, drop house.

Aaron Bihl: [0:25] I can still be trailer boy. That's fine.

Dan Austin: [0:27] Aaron the trailer boy, Beale, is here with us. Good friend of the show. Glad to have you here today, Aaron. And I'm glad, as usual, I literally text Aaron generally. Like, I give you more time this time. But last time it was like twenty minutes. Like, hey, can you hop on and record with me? And you're like, yeah, I'll do it. So you're doing something right over there when you can just hop on the pod with me.

Aaron Bihl: [0:44] Yeah. You gave me more time this time, and I still I still didn't make it.

Dan Austin: [0:48] Yeah. You did good, though.

Dylan Koch: [0:49] We We did alter our schedule today

Dan Austin: [0:51] We did.

Dylan Koch: [0:52] That. Yeah.

Aaron Bihl: [0:53] Yeah. Appreciate it. Appreciate that, guys.

Dan Austin: [0:54] That's how special of a guest you are, man. Like, we would... I would change my schedule for you.

Aaron Bihl: [0:58] We're all just accommodating Dylan is what's actually happening.

Dan Austin: [1:00] That's a 100%. That's what we do every single day.

Dylan Koch: [1:02] That is not true. He's a And then we tried to do it earlier. Tried to do it earlier, and then you're like, yeah. That's good. And then we're like, I guess Mike just doesn't trust Dan and I'd do it by ourselves. He's like, you need a third person.

Dan Austin: [1:11] Yeah. He does.

Dylan Koch: [1:12] Yeah. Yeah. We were...

Dan Austin: [1:14] I'm down to just winger and stare at Dylan all day. Like, we'll talk about cool stuff. I... What I like to do is we could talk about all the stuff that Mike doesn't wanna talk about today if we want to. So like, usually if you're a listener and you can hear keyboards clacking, that's when Mike doesn't care what we're talking about. And you can hear him disgustingly... I don't know who he's typing it to. Maybe he's just typing in his journal. But, you can hear the clack. Can you guys hear this?

Dylan Koch: [1:36] A little bit.

Dan Austin: [1:37] Yeah. It's not even that bad. His, I swear, are 1,000 times way more clickety clack. Anyhow, we're gonna show Aaron. How's it going, Aaron? Actually

Dylan Koch: [1:44] I think Aaron needs a new reintroduction because of the whole new... What he's doing now. Okay.

Dan Austin: [1:50] Yes.

Dylan Koch: [1:50] I think he can let him introduce himself.

Dan Austin: [1:52] Aaron, please. Of Aaron

Dylan Koch: [1:53] one point o and Aaron two point o.

Dan Austin: [1:55] Yeah. I wanna hear about Aaron two point o because I actually don't... I both have a bone to pick with you. First of all, running. That's stupid. Stop posting about it on Instagram. I get it. You got a whole new group of friends. You're healthy. You're looking good, by the way. You look really good. You look happy, healthy, all that. Give us the new two point o intro. We wanna hear about you. What do wanna know? Okay. So you've always been a trailer boy, but I feel like on your trek to Mecca, the guru Mecca, which is where you're headed. I am. You've picked up this new term drop flipping. And I do wanna hear the definition of this if it's in Webster's or if it's the Urban Dictionary. Like, this is... You coined this term. You have your own term.

Aaron Bihl: [2:33] That's the goal. Yeah. Yeah. So venturing hard into guru world and, you know, started to do these land home packages, which I'm trying to completely replace the vocabulary for that with drop flipping because land home package is boring. And, you know, launching into guru world and have a coaching program now.

Dylan Koch: [2:54] How new is that program? Like, when did it launch? We started August 1. Nice. Okay.

Aaron Bihl: [3:00] And then recently we've brought on like a sales and marketing team to try to take it to the moon. It's kind of

Dan Austin: [3:06] Damn.

Aaron Bihl: [3:07] Where we're at.

Dan Austin: [3:07] Damn. I mean, you get the eye because you're you're a good person, and I've seen other popular guru types posting about you. So like you... You're well known and, you've got a, you've got a good background and everybody, I don't know that anybody that says your name is like, oh man, Aaron sucks. I say it. That's right. I can say, I can say that. Right? Other people, they're always, no, he's a good dude. He's, he's a good dude. And you've always been, I wouldn't say you were, you may have actually been anti guru. So what what's got you going into this?

Dylan Koch: [3:33] I think it depends on the guru. Yeah.

Dan Austin: [3:35] This is true.

Aaron Bihl: [3:35] Yeah. I guess I'm more anti like bad guru.

Dan Austin: [3:38] Yeah. Yeah. You've always called out the gurus, right? Which is good. But for your own program, and that's, I guess not why we brought you on the show, but since we're doing your intro, tell us about it. I wanna hear about the the program. Like, what... Is it like a community? You guys just talk about just doing drop flipping?

Aaron Bihl: [3:53] So kind of both or both. Kind of two things. So one part's just a community, of course, you know, the whole normal thing. Yep. And then... So I started doing these at the beginning of the year. And after doing one, was pretty much like I'm never flipping a house again. Like

Dan Austin: [4:08] Yeah.

Aaron Bihl: [4:08] That sucks and this is a lot better. You know, more scalable and more predictable. Don't

Dan Austin: [4:13] really

Aaron Bihl: [4:13] go over budget because you kinda do all your due diligence on the front end. There's several, like, you know, ways I could sell it to you. But I just like it a lot more than flipping. And, you know, easy to be done be done remotely, all of that. So me and then I have a business partner who kinda does all the project management side of this stuff. We started doing them, and then we realized, like, I've done some of the coaching stuff in the past and was kinda like whatever about it. But this is, like, so simple and so accessible that, like, we just genuine... Like, genuinely feel like anyone, if you have the funds, you could pull on these off, which I don't, like, feel that way about, like, wholesaling or flipping. So then we're like, okay. This is still... It's really big in South Carolina, but pretty new to... I'd say the Southeast in general. But still pretty new, like, in the sense of, like, I went to Kohl's event that we were talking about earlier and had to explain to everyone what I was doing and no one heard of it. Right?

Dan Austin: [5:07] Mhmm.

Aaron Bihl: [5:07] So in the, I'd say, general, like, real estate investor space, pretty new niche. So just kinda decided, hey. Let's let's build this out and start teaching other people and got a little traction with that. And then we realized, you know, we have all these lots that we've sourced ourselves, and the biggest place we can add value or where you add margin is getting really good deals on lots. So then we started in attempts to grow that, like, hey. If you join, we'll just, like, essentially have a deal that from our inventory we're gonna do anyway that, you know, if you join, we'll do it for you or run it for you, whatever. And people really seem to like that. So then that's been more of the side that's scaling with the coaching. So we'll kinda have your normal, like, community course, learn how to do this, and then kind of like a done for you option as well. So that's kind of the direction that stuff's going.

Dylan Koch: [5:59] I got a question. And this may be my ignorance when it comes to what you're doing. But I think about these, and I think that you would need a decent amount of parcels that are, you know, vacant land. Like Cincinnati, where I'm at, is very dense. So like, could you even do something like that? Like, does does the market depend largely on the city or area that you're trying to do this in?

Aaron Bihl: [6:20] Yes and no. I mean, so they're more rural. Sure. You're probably not gonna do it in a city. But the thing that we like about them is, like, I don't really care where, like, where we're at because most of them we don't go to. Like, once you have crews in the area, you don't really need to go see them. So we're pretty spread out in that sense, and it's pretty much like, hey. If the numbers work, like, don't care.

Dylan Koch: [6:40] Sure. Mhmm.

Aaron Bihl: [6:41] Most stuff's kinda in the, like, $2.20 to, like, $2.75 kind of ARV range. But there's people that do these, like, in Washington state or in Arizona or in the Northeast that sell for, like, well over 300, and they're paying more for them. So it just depends. And even, some... Like places around... Like, if you're around Cincinnati, if you're around Columbus, it probably works.

Dylan Koch: [7:02] Yeah. Yeah. There's a one county that

Aaron Bihl: [7:04] You know, just like you're not gonna be like in the city, but like, you know, it's the difference of, hey, I can sell this for $2.25 and a new build is gonna 300. And you're on Yeah. You're catering to people who probably want land too.

Dan Austin: [7:15] So

Dylan Koch: [7:16] Yeah. Your point, this... You can do this from anywhere. It's not like you go watch them put the septic in. Right?

Aaron Bihl: [7:22] Yep.

Dylan Koch: [7:22] So

Dan Austin: [7:23] So the the thing that makes me think about is like, okay, so the only place that you can really make your margin on is a land purchase. But I feel like there's probably something to do. Can you get the units like you work with like a mobile home seller? Or do you like become a vendor of mobile homes in a market? Can you do that?

Aaron Bihl: [7:42] Yeah. So I have my dealer's license in two states right now, which will probably expand to more. So then I can go directly to the factory, get them like wholesale price.

Dan Austin: [7:52] So that's the ticket right there. Can everybody do that?

Aaron Bihl: [7:55] Every state is different. Like in Georgia, it's literally like, hey. Pay us a fee and sign up. In Tennessee, I did take a class and take a test. And some places you have to, like, do an in person class, do a test, have two or three years experience, I don't give them, like, audited financials, like, have an actual lot with inventory. So in certain places, it just doesn't really make sense. Yeah. But that's a cool thing too because, like, you know, it's another. With this, there's gonna be, like, several verticals too of, like, hey. We can sell you a house and make some money selling a house, and we can project manage it for you and make money project managing it. And so there's several ways that, you know, we're able to monetize it that people are gonna be paying for one way or another. So just lots of options with it, which is really cool.

Dan Austin: [8:39] Yeah. The reason why I asked, there's a company in town that they they have a pretty decent brand name as far as... So they're a dealer. They kinda do what you're doing. I don't know that they do it at the scale that you that you could do it because I think they started out as a dealer. But then because they're a dealer and they have the equipment, they also do moves for people, which are costly, you know? I think they're probably 10 to $20 to move one of these things, like from one site to another, but then they bought properties for me and like land for me before. And that's what they'll do is they'll go and send one of their teams out there to go set the trailer on it that they source, they sell, and then they sell the whole package together.

Aaron Bihl: [9:14] Yeah. I mean, you could go... I don't think we wanna go that deep with it. Like, oh, you could have a land clearing company, and you could have a septic company, and a well company. And I mean, you could essentially build out companies for all the trades.

Dan Austin: [9:24] Right.

Aaron Bihl: [9:25] I don't have a lot of interest in that, but there's people that do it.

Dan Austin: [9:27] No. It doesn't seem like it. That's one of those things where you can just contract most of that out, especially if you're gonna go to other states, go to a bunch of markets, get all the low hanging fruit for the lots, and then just pay people to to do the work outside of your business.

Dylan Koch: [9:38] Yep. And just for... When, you know, the end consumer is buying these, they're buying a mobile home, not in like with a bill of sale instead of like a deed for like a for a primary home, like a single family dwelling?

Aaron Bihl: [9:50] Yeah. So they're detitled in real property. So you go through the process of retiring the title. They get a normal loan. Most of these are your kind of low down payment, FHA, USDA, VA type loans.

Dylan Koch: [10:00] Okay.

Aaron Bihl: [10:00] But it functions just like a house.

Dylan Koch: [10:02] That's... I actually didn't know that, so I'm glad I asked.

Aaron Bihl: [10:04] Well, and then the nice thing too is, like, I've had really, flips I'm proud of that are really nice, they still get destroyed on every inspection report. And, like, we had one recently sold yesterday. They want us to fix the foundation that wasn't bad. And then I paid, you know, $500 for a foundation company or foundation engineer to say it was fine, and then it didn't matter because they still didn't think it was fine. But... So there's a lot of things like that with it being a new product that are just really nice.

Dylan Koch: [10:32] Mhmm.

Dan Austin: [10:32] Yeah. I like it, man.

Dylan Koch: [10:33] I I mean, especially right now, if someone who has three flips on the market, all greater than ninety days. Yeah. And you just can't be picky when it comes to, like, when the seller... When the buyers actually come in, and they're like, want x y and z. You really don't have a, you know, a leg to stand on. I'll be like, no. You know? But...

Dan Austin: [10:50] Yeah. Especially in this market, dude. Like, you've gotta... You know, we just sold one of our thorns that we've had for a few years and the inspection came back and there's certain things that you just always know are gonna be on an inspection, and you almost kind of want to leave certain things like hot water tank straps. You got to give the inspector something to call out. So... Because they're gonna call something out. Right?

Dylan Koch: [11:09] GFCI outlets.

Dan Austin: [11:10] That's a good GFCI outlets is another good one. Something that you can get in and out with like a handyman. But you know, another one in Spokane, one that they always call out is the chimneys. They want you to like repoint the chimney and that can be like $10. Like in Spokane, it's expensive. Like I've called chimney people and they want like 5 to $10 to do that. And so I always try to work a way around. All they're doing is shoving like grout in between the bricks. Yeah.

Dylan Koch: [11:32] It seems expensive.

Aaron Bihl: [11:33] It's very expensive. Yeah. Seems crazy.

Dan Austin: [11:35] There's only a couple true chimney people. So you just, so, you know, we ended up having to do it, which it's a nonfunctional, it's like a fireplace that's just for looks. Like the people don't... I mean, it's in the middle of the city. Like why would you think about burning a fire in this thing, right?

Dylan Koch: [11:49] Yeah. Dude, a lot of ours get converted to like vent stacks or like the water heater or the furnace. Exactly.

Dan Austin: [11:55] Yeah. And this one is such a sort of right on the end of the house in the living room. They could have done that and they didn't, but it's just like, just not even safe to use. So it's... But they want you to do that. So we had to pay a couple grand to do. I feel like we got off pretty scot free, but as far as the inspection goes, but the houses sell in this market. Right? But it has to be priced the best and be the best house. That's kind of what I'm seeing in Spokane anyways. And just like that whole motto, like I, I haven't flipped a house in probably a couple years now. I, I don't know that I could do it anymore.

Aaron Bihl: [12:29] Like, I don't know if

Dan Austin: [12:31] I could. Like, it's so hard, Dylan. Like, you're dealing with it. You've got three in the market. I mean, it's like once you get off the grind, it's like hard to even imagine getting back on.

Dylan Koch: [12:39] Well, here's the telltale sign is not only do we have our own stuff sitting obviously, but we have, like, trades people that are reaching out to me, like, hey, man. You got any work? Yeah. And I'm just like, no. And I don't really want to give you any work right now.

Dan Austin: [12:53] Yeah. So that's, actually an interest point. So I've got these just down the road from my house, like five minutes from my house. They're seven really nice lots. They're view lots, really beautiful. Like it's an area where like you build a really beautiful home, probably 800 to 1.2 would be like what you'd want to historically sell it at. Will they sell for that anyways? I don't know. And my thought is, is some of these like guys that work, you know, in construction, there's not really a lot of people building houses. So the labor's gotta be cheap. Right? They've gotta be willing to flex on on labor. I don't know. Do you see that within what you're doing right now, Aaron? Or is the labor just kind of the labor?

Aaron Bihl: [13:31] I mean not on on our flips and stuff, not really. I don't get super involved with a lot of the project management stuff on

Dan Austin: [13:38] Okay.

Aaron Bihl: [13:38] Our new trailers. But

Dylan Koch: [13:41] Okay.

Aaron Bihl: [13:41] It's all pretty consistent,

Dylan Koch: [13:42] I would say.

Dan Austin: [13:43] Yeah. I don't

Aaron Bihl: [13:43] know if it's... But a lot of it's just like, hey. This is If

Dan Austin: [13:47] it's high or low right now.

Aaron Bihl: [13:48] Much a debt cost. I don't really, like Yeah. Think about it that much, honestly.

Dylan Koch: [13:51] Yeah. Has there been any shocks? Like, you install a septic system in one... I think you're in South Carolina, like, jurisdiction, and then you're in a different state, and that same septic system is twice as much or any, like, surprises like that?

Aaron Bihl: [14:04] There's been... Not really. The biggest one is probably wells, which we've not done many of. Yeah. The ones we've done, like, on yours is like a surface well, so they're, like, easy, like, or $7. But some of these... Like, in Tennessee, I probably wouldn't touch one that needs a well because a lot of them can be really deep. And with wells, you're paying for how far they dig, and they don't know till they hit water. So Yeah. But I would say some of this stuff is just like... There's just nuances with it of, like, you know, you have to get perk test to see where you can put septics in, but, like, the requirements might be different state to state.

Dylan Koch: [14:40] Yep. They're in different county by county. Like, if I have a septic in Hamilton County, which is, like, the the main Cincinnati County, there's not many, but there's a few, I'm running. Because, like, with all their regulations, it's, like, $60. Whereas you can do one out in Claremont County, which is the more rural part out in, like, the, you know, the sticks. You can buy one for 15.

Aaron Bihl: [14:59] Yeah.

Dylan Koch: [14:59] It's all from, like, the timeline and regulations about who the jurisdiction is.

Aaron Bihl: [15:03] Yeah. All that kind of depends. The permitting is a little different everywhere. Even though, like, the types of foundations are are a little different different places. But nothing... There hasn't been anything, like, crazy. I'd say.

Dylan Koch: [15:15] Are these moving? I mean, I'm biased because I have one with you. But are these moving pretty quick? Like, when they when they go up right now, is this like a product that's in high demand? I wish they were moving quicker. Yeah. And we... Don't we all?

Aaron Bihl: [15:25] Honestly, anything I've been selling right now has been random. Like, sits on the market forever. We get a decent offer. Don't expect it. We've had several of those now, and then the stuff that I think will sell quick isn't. So we are targeting more stuff in Tennessee right now because days on market for these are a lot lower.

Dylan Koch: [15:40] Yeah.

Aaron Bihl: [15:40] You know, most of stuff you look at in Tennessee, people are buying these new new mobile homes, and they're they're in the market, like, less than two weeks. Because that's the one part that, like, we can't control. Like, we can get the the process down of, like, getting them done pretty quick of, like... You know, we had one that was, like, forty two days. Most of them are probably, like, eight to ten weeks. And we can get that process down. And, like, I feel like we're, like, rushing to, like, get on the market, get on the market. And then, like, get on the market, and you're like, okay. Now it's like, you're the Like, please Yeah. Please someone buy those, which is... And I don't know. Like, I know the whole, like, oh, it's always a price thing, but I feel like it's not on a lot of stuff right now. Yeah. I don't know. Because there's stuff that, like... We're pricing stuff competitively too. And I'm like, I don't know. Maybe if you drop it $50, someone comes in and swoops it up tomorrow. But the, like, the price doesn't seem to be like... Like, people aren't complaining about it. It's not like they're not buying because of the price. Yeah.

Dylan Koch: [16:37] Things wouldn't go... Stale too.

Aaron Bihl: [16:39] I don't know. It just always seems to be the sentiment.

Dylan Koch: [16:41] Because, like, we have one of our flips that, you know, we run our contract. It fell out. So, obviously, that never looked good. Did a couple price drops. And then we... I was like, just fuck it. Take it down. So we took it down for, like, two weeks. We And put a little bit more money into it or whatever, and we just relisted it. And the days on market reset. And for some reason, that triggers a whole bunch of people to come look at it again. Even... Nothing changed other than just, like, what appears to be a new listing.

Aaron Bihl: [17:06] Well, and we've had some of those too where we list and they get a ton of action the first weekend, and they either just kind of fizzle out or, you know, we get a good offer. We take the offer, and then, you know, we get two weeks in and, like, the boyfriend doesn't like the house, you know, whatever. And then we go back on marketing as it's forever. Yep. But you... Like, you initially have all that interest where you're like, oh, we probably had potentially more than one offer here, but we like, hey. This was full price. Like, why would you not take it?

Dylan Koch: [17:32] And then every time you go back to the people who were originally interested, they found something else or whatever. Like, it never it never actually works when you go back to those original people.

Aaron Bihl: [17:41] So Yeah. Well, and I don't know. It just seems like everything that this year, like, everyone's, like, finances have been so shaky.

Dylan Koch: [17:47] Yes. Yeah. Like, we've

Aaron Bihl: [17:48] had deals fall apart at, like, the week of closing, and it's like, oh, like, if they... Like, just like random things. Like, spent $500 on something and don't qualify for a house anymore. It's like everyone's finances are super shaky, it seems like.

Dan Austin: [18:02] Well, yeah, because their interest rates are freaking 8%.

Dylan Koch: [18:05] Well, it's not only that. I mean

Dan Austin: [18:06] They're they're dead

Dylan Koch: [18:06] too. Too. You're right for that. But, like like Aaron said, or, like, they'll do something stupid, like finance a car or buy a boat or something like during their due diligence process. And it's like, bruh. Now you're just screwed yourself, and you screwed me in the process.

Aaron Bihl: [18:19] Well, and we've also... I don't know if it's just a thing here. We've also just, like, really bad and really new agents on everything.

Dylan Koch: [18:25] Yeah. Mhmm.

Aaron Bihl: [18:25] Like, we got an offer yesterday. You guys will love this. It's a cash offer, so I'm like, it's decent. We're taking it. But on their cash offer, ask us for concessions, and we're like, do you guys not know, like, how that works? They're like, we want a, like, $4,000 appliance credit. I'm like, just lower the price. Yeah. Exactly. But then they also ask us to pay for their home inspection, which I was like, I've never been asked that in

Dylan Koch: [18:47] my life. I've never heard of that before.

Aaron Bihl: [18:49] But if also, if I buy your home inspection, it's gonna be very clean.

Dylan Koch: [18:53] Yeah. It's like

Dan Austin: [18:55] the opposite of what you would want. Like, you would never advise your clients to do that.

Dylan Koch: [18:59] No. That... I Yeah. But like, you look

Aaron Bihl: [19:00] up these agents and they have like no clue. Like, we had another one a few weeks ago or a month ago or whatever. It was falling apart the week of closing, and it was this, like, 19 year old girl. And she's like, I'm on vacation. And, like, I I need to unplug from work. Woulda answered her phone as the deal was falling apart the week of closing.

Dylan Koch: [19:17] Oh my god. I dry... That kind of stuff drives me nuts.

Dan Austin: [19:20] Oh, yeah. Yeah. I'd say, the real estate agent world is... There's some one percenters in there, but it's a pretty low pretty low bar. Pretty low bar to be a real estate agent.

Dylan Koch: [19:28] You can usually pretty tell with, like, the first, like, five minutes on the phone with them too once they, like, call and stuff.

Aaron Bihl: [19:33] Yeah. Or, like... I mean, it's

Dan Austin: [19:35] a tough market. I get it out there.

Aaron Bihl: [19:36] But we just don't have a choice.

Dylan Koch: [19:38] Yeah. You're right.

Aaron Bihl: [19:39] If that's your only offer, you deal with it, which is how we've been on a lot of these. And and I think some of the just low price point, like, the good agents are still doing well, and they're probably not selling $200,000 houses. I think that's just the reality of it too.

Dan Austin: [19:51] But you know what? If they were, they would probably do a really good job at it.

Aaron Bihl: [19:54] Yeah.

Dan Austin: [19:54] Let's be honest. You know what I mean? Like, that's why they're not. And maybe that's a good argument for you guys to to sell more expensive things. You know? Solve rich people problems that pay better kind of attitude. I don't know.

Dylan Koch: [20:04] Are you the agent on these, Aaron, that you're selling? Nope. No. Yeah.

Aaron Bihl: [20:08] I'm like the world's worst real estate agent.

Dylan Koch: [20:10] Yeah. I'm licensed too. And like, I'll list some of our flips just to save the 3% commission. But lately too, I just got a a buddy of mine, and he'll do it for 1%. So I'm just like, go for it. Like, I'm

Aaron Bihl: [20:20] That's how we it.

Dan Austin: [20:20] Yeah. Yeah. That's a good deal. 1% for you. That's awesome.

Dylan Koch: [20:24] Yeah. Yeah. So $300,000 house. You save $6. Pay him 3. You give him volume. Works out.

Aaron Bihl: [20:31] Yep. That's kind of where we're at.

Dylan Koch: [20:32] I guess we're gonna change subjects a little bit. I'll ask you the same hypothetical I asked Dan when you got cut off. We have a a property that we have in our contract for $2.40. We already have it assigned for $2.65. And the buyer's using hard money, so he has to get an appraiser in. And it's a four unit building. Keep that in mind. And so we have to get in each individual unit per the appraiser. It's something that's hit or miss sometimes. Yep. Anyways, the seller is like like, you're not getting back in. If you're not gonna close it, like, I'm gonna cancel the contract. Even though our contract says that we can get access again, and, like, we have every right to do what we're

Dan Austin: [21:04] asking for. Yep.

Dylan Koch: [21:05] And so it's like, hey. Do you play hardball? Be like, hey, man. Like... And he says he has another offer higher than ours, all this kind of stuff. Do you play hardball and say, hey. Like, this is gonna happen. We'll sue breach of contract, all that kind of stuff. Or do you just pay him a little bit more money or find a middle ground and just to make it a clean transaction and move forward?

Aaron Bihl: [21:23] I'd probably just try to pay him more to make it easy.

Dylan Koch: [21:25] Yeah. The second part. I guess it depends on what that means. Like...

Aaron Bihl: [21:29] We've had one of those before and that why does the seller not... I guess, why does he not want you to have access?

Dylan Koch: [21:34] I don't really know. Like, he feels inconvenienced. I I really don't know.

Aaron Bihl: [21:38] So we've had one of those and he's like, oh, I live forty five minutes away. I don't wanna drive there again. So we gave him like a $100.

Dylan Koch: [21:43] Yeah. That's fair. I'm... Literally, when this ends... Because my AM has been having the conversations, I'm gonna I'm gonna call him afterwards and be like, bro, what's going on? And see if we can cut some kind of middle ground.

Aaron Bihl: [21:54] But Yeah. I mean, generally, I feel like if you get to the point where it's like, hey. We are good. You will get your money if this happens. If not, you don't get your money. They normally come to their senses. But Yeah. You never know.

Dan Austin: [22:07] What if you referred your buyer to a really good friend of yours that was a lender that would not require the inspection? Oh. Oh.

Dylan Koch: [22:14] You know what? I gave him Chance's number. So I don't... You'd have to ask Chance if he actually

Dan Austin: [22:19] reads He's

Dylan Koch: [22:19] like, no.

Dan Austin: [22:19] I got this old guy that will do it for 4% and half a point in Cincinnati. He's just an old billionaire guy, and he requires an appraisal.

Dylan Koch: [22:27] No. You're gonna love who he's using. He's gonna... I think he's using Renovo.

Dan Austin: [22:31] Oh, dumb. We don't require appraisers, so whatever. I mean, on on hard money anyways.

Aaron Bihl: [22:37] Is it hard money or it DSCR?

Dylan Koch: [22:38] No. It's hard money. It's the front end. So... No. You know what, Dan? We might have another conversation after this.

Dan Austin: [22:44] I'm gonna want an inspection at some point, but I'm... You know, we can negotiate that post close. You already have photos?

Dylan Koch: [22:49] Yeah. I technically could just buy it and then just increase my own holding cost a little bit.

Dan Austin: [22:54] Yeah. I mean, it's one of those things where, like, for us as a lender, like, Renovo is not gonna be able to do it because they're gigantic. They're, one of the number three three largest private lenders. I think they're number three out there. Tiavi being number one. It's like, they have no choice in their sales reps or just like some dude off the street that's, you know, college grad making $65 a year plus some commissions maybe, you know? So they're just like, hey, man, I could do it, but I gotta, you know, I'm gonna get you the cheap rate, but it's gotta fit this box.

Dylan Koch: [23:21] This is actually good, Dan. I don't know if you know off the top of your head, but like, let's say it's a well qualified borrower and, plenty of equity. On a hard money term right now, what is a standard product? Is it 9.5 percent, one point? Like, what what does that look like?

Dan Austin: [23:34] Probably, I would say the lowest you can probably find right now, because they're actually... The rates are actually going up, is probably like ten and one. If it's like a true, like Renovo. And then there's gonna be other fees on top of that, like a Renovo or a KIABY. But the problem with that is they're gonna want a certain percentage down. They're gonna want like an appraisal or some sort of inspection, you know. That bought rock bottom rate's gonna require you to to do a few things and jump through a few hoops. And you gotta be, you know, a 700 plus credit score and all that stuff.

Dylan Koch: [24:01] Yeah. Yeah. Yeah. I know that you gotta be a good applicant. I just... I didn't know what to go. I haven't used hard money in that sense forever. I pay more for private money. It's just the convenience of it.

Dan Austin: [24:10] Yeah, it will. Exactly. Yeah. I mean, if you're willing to pay like eleven and two, you got a shit ton of options. Ten and two, you know, you still have a lot of options too. Like the rate isn't really always like the most important thing to the lender. I'll say that. You know, as long as they're making the money that they need to make, they don't need a huge spread on that. Like that's how we operate. It's more so about the deal itself. You know, it's an asset based loan, right? So it's about the deal. Yeah. And the borrower's experience. Like those things matter a lot more to a... In my experience to a lender than, you know, oh, I wanna get 10... Like, it's not about 10.875 versus 10.5 is... That's usually... Yeah.

Dylan Koch: [24:45] Yeah. Especially for, what are they called? The RTL loans. Right? Because there's a short duration anyway. Why why do give a shit about tenth of a percent?

Dan Austin: [24:52] Exactly. It's twelve months. What you're really looking at on the on the grand scheme of things is what is your default rate? And then what is the credit box of this person? Where do they fit? Because then it... Then you're gonna apply some sort of percentage as far as risk goes. And what is that, you know, how that rolls up into a default rate. And so default obviously is more costly than an eighth or half of a point on the rate.

Dylan Koch: [25:10] Yeah. Yeah. That makes a lot of sense.

Dan Austin: [25:11] Yeah. But if you, if it's like coming from like a wholesaler, like you, like you're selling to some dude and we're like, Hey, Dil, is this like a legit good deal? And is the buyer like decent? You And might be like, no. It's a really good deal. Borrower's kind of idiot. Like, we'll probably still do the loan. You know what I mean? But it's

Aaron Bihl: [25:24] like Yeah. Like Yeah. It's a good deal for Dylan.

Dan Austin: [25:28] But Yeah. I hate exactly. Dylan's literally

Dylan Koch: [25:30] There's something to be said about having the network even as a wholesaler to get deals across the finish line. So if you didn't know a chance or somebody like

Aaron Bihl: [25:38] Yeah. Yeah.

Dylan Koch: [25:39] You might just throw your hands up and be like, I don't know what else to do. You couldn't get hard money. That's on the borrower. Like, no, you should be able to be able to put those pieces together.

Dan Austin: [25:45] Totally. So. Well, and I would say like the... Just on the same thread, like the vast majority, like the... When I say majority, I don't mean like the awesome dudes like you guys that like go out and do good business and have experience and have logic. But like the other two thirds of people operating in the business that do a third of the business you guys do, if that, they're kind of dumb. Oh yeah. Like they're just not, they're just not good. And I say that very nicely because I want you guys to come and get loans from me. But some of the folks that we have to do deals with, you're just like, man, you're making this hard on yourself. Like, because I've been on that side of the table a 100 times, right? Where they're like, the seller's doing this, the seller's doing that. I'm like, okay dude, like just pay the seller more. Or like, there's usually a solution within a deal when a deal is falling apart because of a seller or a buyer or a wholesaler. Like, people just do weird stuff. That's why I'm like, they're dumb. It's like, just apply logic to the situation and it'll go away. Like, you can solve the problem.

Aaron Bihl: [26:36] Part of me

Dylan Koch: [26:36] is always like, how did you ever get this contract in the first place?

Aaron Bihl: [26:39] Like, Exactly, dude.

Dan Austin: [26:41] You're sometimes just like, what is happening here, man?

Dylan Koch: [26:43] The the easiest $20 I ever made was when a relatively newish wholesaler got a deal under contract, and he sent it to me. He's like he's like, hey. Basically saying, it's like, is this a deal? I was like, hey, man. Like, if you want, like, I pretty sure I can, you know, dispo this for you. You'll probably make, like, $20.

Dan Austin: [27:01] Mhmm.

Dylan Koch: [27:01] And just literally send it to another buyer. Bought it right then. We each made 20, and, like, I wish, like, had more of those come across my plate.

Aaron Bihl: [27:08] That's pretty good. So, Dylan, my question for you. Do you know who they're using for hard money before you sign into them, or do you not dig in that much?

Dylan Koch: [27:16] Typically, won't. Well, actually, if it's a new borrower and a new buyer that I haven't worked with, I will ask if they're cash or hard money. If they say hard money, I usually ask because there's really three or four that people you... Like, probably do 80 to 90% of the business here in Cincinnati.

Dan Austin: [27:29] Yeah. Because I

Aaron Bihl: [27:30] just know, like, when we used to do a lot in San Antonio, it'd be like, if I know, hey, you're using Longhorn or Searchers or... There's two or three that, like, I know are good and the title companies used to, so I know it's gonna be an easy process. If they're, hey, I found whoever on the Internet that no one's ever heard of, I'm more likely almost to take the lesser assignment fee with the better hard money lender. Just because you know you know it's gonna get done or you know how they work or, you know, those things.

Dylan Koch: [27:57] For this specific deal, I don't think I anticipated him being such a pain in the ass about getting back in a second time. Like, this will only be the literally the second time we've gotten to the place. And I'm trying to word it as just like a final walkthrough, which is clearly in our our agreement. Yeah. But, you know, it is what it is. This is kinda... These are things that happen.

Aaron Bihl: [28:13] Well, it's that's like how some of the sellers are. They can be completely reasonable and then just surprise you with something like that, and you're just like Totally. What in the world?

Dylan Koch: [28:20] Yeah. Yeah. I was like, do you think I'm gonna find something that I didn't see the first? I I don't.

Dan Austin: [28:24] Well, it's like, this is why these people, like, they just don't understand the game. Like, dude, anytime you sell a property, there's always a final inspection. Like, always. Because they wanna make sure you didn't trash the house before they close on it, dude. Yeah. Like, I have to... What a risk is that? You know what I mean?

Dylan Koch: [28:37] Or even the process of like... He's like, why can't we close it? Like, I'm the title is not clear. And he's like, do you mean? I was like, I know you bought this, like, thirty years ago, but I'm sure you had a title search done, like, when you bought it.

Dan Austin: [28:47] Like It probably took way longer than it does today.

Dylan Koch: [28:49] Yeah. And that process is still the same. It's... I don't know. I'm I'm rambling at this point, but... Bitching is better word. But like, it just... It is what it is.

Dan Austin: [28:56] It's alright. It's alright. We gotta let you vent once in a while. Yep. You know? You deserve it. It's good for your mental health. So let me ask you this, Dylan. When do you go to this auction? So Dylan, if the audience remembers, you got this, like, what is it? How many props? 40? 10? Four fourplexes at auction?

Dylan Koch: [29:11] Long story short is there is a 40 unit deal. It's ten four unit buildings, all adjacent to each other on one street. All with... You know, they each have it's four one bedrooms, one bed, one bath, very cookie cutter, built in nineteen forties, and it's going to auction starting next week. And my hope on it was it's too small for, the bigger players. No one really wants, like, 10, four unit buildings. And it's probably a little bit too big for, like, the newer guys. It's, kinda in that middle ground. And you have to show, like, decent liquidity to even be able to register to vote. Like, I had to submit, like, bank statements and, like, all this kind of stuff just to get, like, approved to register. So we toured the units. We toured the building today, the building's today. I was up to see five of the 40 units because that's the only vacancies that they have. And then all the common areas and basements, so boilers, water heaters, that kind of stuff, roofs, windows. And so you base... You do have to take some risk because if you do win the bid, it's not like you're making a non contingent offer. So it's not like I can be like, oh, I saw the rest of the units. Now I'm backing out. But I don't know. At the same time, if you get it at a steep enough discount, then it's something that would be cash flow crazy.

Dylan Koch: [30:21] That cap rate would be nuts. Or you can probably make $500,000 just by turning around and selling them.

Aaron Bihl: [30:26] Are they separate parcels, or is it all one?

Dylan Koch: [30:28] They're all separate parcels. So

Aaron Bihl: [30:29] you could you could, like, piece them off and sell them as separate quadplexes or whatever?

Dylan Koch: [30:33] Yeah. Mhmm. Yep.

Aaron Bihl: [30:34] That's kinda

Dylan Koch: [30:34] And that's actually the the play, Aaron, because if you just do this on a pure, like, NOI cap rate basis, its end valuation's probably around, like, 2.2, 2.3. If you do it as a... Okay, I'm gonna sell this to a house hacker, as an owner occupant, because you can because they're all four units. It's probably like 2.65.

Aaron Bihl: [30:50] Nice.

Dylan Koch: [30:51] So you're getting an extra 3 to 400 k just from doing that strategy. So I'm hoping, you know, if everyone underwrites the same as far as like the CapEx concerns, like that spread would... Could be the winner. But I mean, that Yeah. That process is still gonna take probably two to three years to come to fruition.

Dan Austin: [31:05] Yeah. It's a long play. It's a big deal. So do you like drive by these things? What do you do? Because I know you can't get in them, but like I know back early on when I first started, real estate and they actually had auctions, which they don't really have anything that they auction off in Spokane anymore. I mean, do, but it's like so... It used to be like every first Friday where there'd be like 20 properties. Now it's like one every couple months. So it's not like a strategy, but like you would still drive by. You might pay some kid $10 an hour to like peek through the windows and take some photos, which you're not supposed to do. But you know, door might be open. There's a lot of like tactics these flippers that go to auction use. What are you doing? Do you kinda, like, at least try buy them, make sure that they're, like, okay?

Dylan Koch: [31:43] So today, like, they they allowed some touring today, which is what Oh, we nice. Yeah. So I I saw all the common areas. I saw everything. And then I saw five of the units, and they're all the same thing. It's just like the ones that are tenant occupied are probably, I don't know, less clean, obviously, because they turned the ones that were vacant.

Dan Austin: [31:59] Oh, okay. So they're rentable at this... As is, the ones you saw?

Aaron Bihl: [32:03] Are they in decent shape?

Dylan Koch: [32:04] I mean, are they rentable? Yes. I'm gonna say you probably need to put anywhere from five to 10 in probably in each unit.

Aaron Bihl: [32:11] Okay.

Dylan Koch: [32:12] These are small. They're like 600 square feet.

Aaron Bihl: [32:14] So your plan with these, if you buy them, is to dump a bunch of money into them, resell them, or just cash flow them the way they are? Or, like, what would you do with them?

Dylan Koch: [32:21] Or put a money in much of them and then refinance. And if you get a steep discount, you can probably get a 60%... 65% LTV loan and sell cash flow like nuts even at today's

Aaron Bihl: [32:30] Yeah.

Dylan Koch: [32:31] Higher rates. Right. Because it's 82% occupied as it sits. So some of that rent can offset your holding costs while you're, like, you're renovating the buildings as such. So we'll see. I tried to ask the touring agent today who's like, with a broker, how popular it's been. And there's eight independent tours that were set up. So basically, it's me and eight other people... Or seven other people. So just kinda, you know, am I gonna win that? I don't know.

Dan Austin: [32:56] But I can tell you how you'd win it.

Dylan Koch: [32:58] I don't wanna overpay. So I'm not crushed if I don't win this. It's just I feel like it's a different opportunity that doesn't normally present.

Dan Austin: [33:06] So

Aaron Bihl: [33:06] When does the auction start or end or whatever?

Dylan Koch: [33:09] Starts on the second, so Monday. And then it ends... So, like, by Friday next week, by the next podcast that we record, I'll know if I'm on it or not.

Dan Austin: [33:18] Hell, yeah. I'm excited.

Aaron Bihl: [33:19] I'm looking

Dan Austin: [33:19] forward to it, man. We're coming to, that time of the show that we get to every time where we have to say goodbye to our lovely audience and each other. Aaron, anything you wanna say before you sign off? And also, please share, your Instagram or your your social handles with people.

Dylan Koch: [33:35] Yeah. Looked it up. He's got, like, 13,000 followers.

Dan Austin: [33:37] He's a He's a big dog.

Dylan Koch: [33:38] Well on his way to guru status.

Aaron Bihl: [33:41] I don't know what you're talking about. It's just aaron dot biel.

Dan Austin: [33:44] B I h l. A with B I with two with two a's as is traditionally spelled. A a wrong. Yep. A a a wrong. It was good to see you, dude. Glad you're doing so well. Like I said, minus the running part, I respect everything that you're doing. And I say that with all the love and and faith in you.

Aaron Bihl: [34:00] Why do you hate running so much? Last week's whole episode was you guys, like, hating anyone who, like, takes care of themselves.

Dan Austin: [34:06] Yeah. I would've said, dude. Like, why do you Who runs? Like

Dylan Koch: [34:09] Aaron's got his high rocks training after this.

Aaron Bihl: [34:12] Oh, no. I know. I'm not not

Dan Austin: [34:14] that That's next. That's level two after you've figured out that you can't run.

Aaron Bihl: [34:18] High rocks is the worst. Yeah.

Dan Austin: [34:20] But after you figure out that you can't run 50 miles a day because your knees hurt, then you transition to high rocks. That's what you do, Aaron. It's okay, man.

Aaron Bihl: [34:27] The reality is I'm just bad at everything. Like, I used to be decent at CrossFit. Now I'm just weak. And I'm still not good at running either. Yeah.

Dan Austin: [34:33] So You just do it. Well

Aaron Bihl: [34:35] I'm just bad at it all.

Dan Austin: [34:36] Yeah. You're doing well, man. It looks good on you. I appreciate you coming on with us, dude. And, always good chat with you, man.

Aaron Bihl: [34:42] Yeah. Thanks, guys. Alright. See you.

Dylan Koch: [34:44] See you, guys.

Aaron Bihl: [34:45] See you.

Mike DeHaan: [34:47] This episode is sponsored by Sir Lenzelot LLC, also known as SLA Capital, which, if you didn't know, is Dan and I's private lending company. So, yes, we are sponsoring our own show, but what you're do about it? It is our private lending company that offers hard money and DSCR loans to real estate investors of all types. So you can be a new investor, an experienced investor. You can be buying flips. You can be buying rentals, whatever. We can do everything. And not only that, but the rates that we offer are just as competitive, if not cheaper, than pretty much every other company out there. So whatever big company you've been working with, bring us their term sheets, I guarantee that we can probably beat it. We have the same connections they do. We just don't have all the overhead and middlemen. So if you wanna come and check us out, go to slacapital.com/keys, and I will know that you came from the show. And by seeing that you came from here, when you get the closing, you will save $500 on your first loan with us. So slacapital.com/keys, we would love to fund your next deal. Thanks for listening, everyone. If you want more from us, you can shoot us a follow on Instagram. I am at Mike underscore Invest. Dan is at investor man. Dan and Dylan is at Dylan underscore does underscore deals. Choose to follow and send us a DM to let us know what you think of the show.