Tax Increases and Rental Cashflow, Applying vs Consuming Knowledge, Leveling Up

Mike DeHaan: [0:00] I mean, a lot of people's real estate, especially with the property taxes and things, have those been increasing everywhere. Most of those people are probably starting in trouble. I just got all of my my new mortgage statements for my rental properties here in Spokane. Yeah. Dude, my cash flow's getting wrecked by all of the property tax increases. What's going on, guys? Welcome to today's episode of the collecting keys real estate investing podcast. Today is Wednesday. This is the Mike and Dan show. I am your host here, Mike DeHaan, with my co host here, Austin. Hey. And this is the show where we get you to create massive income, not just passive income through real estate investing. You're sitting over there with this shit eating Grin Dan, so I don't know what the hell you were doing. What were thinking?

Dan Austin: [0:48] No, I just didn't realize you were recording. I had said some questionable things before before we started.

Mike DeHaan: [0:53] Well, the great thing about podcasts is that we are not live, so if there is anything that we picked up, we question it. I can see you frustratingly fiddling with something on your desk over there. So I'm sure you accidentally like slammed your dick in your drawer, whatever you're doing.

Dan Austin: [1:05] Of course, did that too.

Mike DeHaan: [1:07] Anyways, guys, welcome. If this is your first time here on these Wednesday shows, Dan and I talk about business, investing and whatever else we feel like right now. And currently we are sitting here middle of December, and it is always the kind of funny gray period in real estate because, you know, you kinda need to keep working to tee up all of your success for the beginning of next year, at the same time, marketing's kinda slow, transactions are kinda slow. For me as an entrepreneur, I always personally find the holidays to be kind of stressful and annoying because I just like to go all the time but you have your team members that wanna take a break and have vacation, those sorts things.

Dan Austin: [1:48] Yeah it slows down a bit.

Mike DeHaan: [1:49] It does. But the problem is too since most people are like part of just the corporate system, it becomes like the Slack month for most people.

Dan Austin: [1:57] Oh

Mike DeHaan: [1:57] yeah. And if you're an entrepreneur, can't be like slacking for one twelfth of the year, but you also kinda like need your team to be ready to jam for the entire month, right? Yeah. So they'll be picking up.

Dan Austin: [2:07] It is kinda nice though to have a little bit of slow time so you can like clean up stuff, right? It's like get to sweep up all the mess that's been, you know, behind us for the last quarter because Q four is always like a push, right, just to do things and if you have goals, you're trying to push to get those goals and you're also planning for the next year and you know, we're always planning, but like now it feels like we're getting ready to step into some cool planning and some strategic stuff for us, and it is nice to like, okay, take an afternoon here and there to do that, and really tighten things up.

Mike DeHaan: [2:34] Yeah, for sure, and I will say, know, in defense of those comments I just made, I guess contrary to those comments I just made, our team has had a huge week. Like we had some of the top outreach and, you know, sales lead indicators that we've had since before Thanksgiving. And we have a lot of great conversations going on. We had some massive deals sort of like come together. You know one of the ones we've got, like the initial ask from the seller was like $200,000 on this property that was worth like $140,150,000. And it's like a classic situation that we deal with a lot sellers and a lot of people that come into our instant investor group. Or just reach out on Instagram as well. They always ask like what do you do when the seller wants too much money? It's like, well, if you're marketing correctly, and you are targeting people that have recorded distresses and potential reasons to sell at a discount, engage with them anyway, because you never know the true story. And this one, the guy's been wanting 200,000 in like the last four months, 400 a month, probably too, he's owned it for a while. The last four

Dan Austin: [3:34] Three plus years.

Mike DeHaan: [3:35] Yeah, for the last four months he's wanted, you know, 200,000 over the value of the property. We knew that he was on a, I think it was a liens list, so we had some issues. And we followed up with him on a weekly basis for a long time. And you know, House is a major fixer upper and we got an acceptance this week at 52,000.

Dan Austin: [3:54] From 200?

Mike DeHaan: [3:55] Yeah, exactly. From 200. So that's 25 percent of what his initial quote unquote ask was. The thing needs about $40,000 worth of work, so when it's all said and done, it'll be into it between 90 and 100, sell it for 150. Yep. It's got a little flip right there, pretty straightforward.

Dan Austin: [4:09] Yeah, that's great margin. That's why I tell people that when they're talking about you, you had made the comment like, what do you do when a seller wants too much money? Don't let the seller's price dictate what you're going to offer, because what you're going to offer is based on what numbers you're running, what the after store value is, what the rehab costs are going to be, what your total costs are, what the market is going to demand. Sellers aren't typically up to date in the market, they don't know what those values are. Sometimes that can be irrational. But, here's the thing, it's like, because you're not letting them skew your offer, you should always make the offer 52,000, 25% of the full price because there might be some sellers that are like, F you, and they don't sell to But often there are sellers that eventually do sell to you, so you might as well make the disgusting offer what you feel like is disgusting based on what they're asking, and you might as well follow-up with them and keep working with them, because the chances that you don't do that in this business is huge from a like, loss of revenue, Yeah. Because that one deal, the way you just said off the top of my head, there's probably 40,000, $50,000 worth of equity based on a few phone calls that you made and a few uncomfortable offers that you have to make, and if you aren't making those offers, you're going to miss those ones. Yep. Right? You're just gonna miss them because you're like, oh, they want too much.

Mike DeHaan: [5:23] Yeah, exactly. And and not only should you not let the seller's price dictate your offer, you also shouldn't let the seller's situation dictate your offer. That's another thing too we encounter with a lot of new investors is they sort of lean into like, okay, what is the seller's situation to try and figure out how much they sort of like discount to try and put on the deal. Like they're almost like fishing for people that are more motivated, which a, is slightly predatory, and b, it's a great way to miss out on opportunities that are probably there. And really what you should be doing with every deal is making your number based purely off of the asset, what you think you need to get it at in order to make some money. And then with the seller situation, you use that as your fuel to get the deal done and to be able to provide service to them as opposed to figuring out what exactly you're going to be paying for the house. Like, you know, you have someone that's in like more desperate need, you should not be overpaying for a house in a situation. Also, you have someone that's in desperate need, you should definitely not be going in and buying a larger discount because you seek extra motivation.

Dan Austin: [6:26] Right. Or doing the infamous price drop at the last minute because they have no choice.

Mike DeHaan: [6:30] Yeah. That's that's sleazy behavior and Sleazy behavior. Even though real estate investors get a bad rap, if you have good intention around what you're doing, it's really easy to not be that kind of person.

Dan Austin: [6:40] Yeah. Absolutely.

Mike DeHaan: [6:41] Anyways, so it's always just weird this time of year, but it has been good to have some downtime and I know we have been working a lot to figure out what our our mastermind group is going to look like going into 2024. And I am super, super excited about everything that we have coming together. So you know, of the, I guess, at face value, the biggest change that we're gonna be looking to bring to our community is we are looking to build the first, I would say like fully collaborative real estate wholesaling network, which is going to be not just like people that are building the same businesses, but we're working on a bunch of new things so that people that are within our community, that we opt to bring in, because we're also going to be making it a bit more exclusive than we have been previously. People that we opt to bring in will be able to benefit off of each other's success and off of the community's success as much as, you know, their own success. Right? And then also too, we are going to be doing a little bit of a rebrand away from the quote instant investor program name that we have. Because as I've been talking to people that were interested in that, for some reason, this is just a great learning lesson for us and for anyone that does any sort of online products. The word program implies that it's like a finite thing, which you know, once people get through the program, people are interested in like the actual education portion of it. Here's the thing guys, if you are looking at any sort of online real estate program, education, whatever, you can get a lot of the knowledge, the things that people are looking to sell you in a course. You can get all that shit for free by like listening to podcasts, watching YouTube videos.

Mike DeHaan: [8:19] If you go and you listen to all

Dan Austin: [8:20] of YouTube University.

Mike DeHaan: [8:22] Exactly. You go and you listen to all of our episodes, you will probably get almost everything that we give in like the fixed course of our quote unquote instant investor program. You only get some of the documents and things like that, but we're actually gonna start giving those away for free. The real value comes in the community and the direct coaching from people who are farther ahead than you.

Dan Austin: [8:45] All the value.

Mike DeHaan: [8:45] And so that's what you should be looking for. But point being, after having a bunch of different calls with people that Wrench did, everyone was always fixated on the word program, so we are nixing the hat. Just trying to emphasize that that isn't the true value add of joining our group, and instead it is the community of people that are doing very very big things in the real estate space.

Dan Austin: [9:05] So community's always just understated when people are trying to get into it. Once people have been part of a community, they realize like, oh, okay, I understand that, but if you haven't and you're trying to break into this and you think, well I just need to learn how to do it, I'm gonna learn the magic trick to this, there's no magic trick. There's in fact, there's a few things that separate people that create kind of this competitive advantage, right, because if you're looking at doing real estate investing and off market real estate, you're looking at that because it's competitive on the MLS, and you're like, I can only get so many deals on the MLS, I need another lead source. So you wanna scale, so you go off market. Well guess what, there's other people in your market doing this, depending on your market there's more or less. So what is your one competitive advantage? Because we all can go pull the same data for the same sellers, we can all go to the same mail houses, the same cold calling, the same SMS places. Your competitive advantage is your community and what you're able to do together because most people will start this, send out a bunch of mail, create some disruption and then fizzle out. And so you need that community to stay going forward because consistency over time in this business is where you actually become the the top competition in your city because most people will fall out after twelve or twenty four months and maybe lose money or never really get a lot. And the only way I've found to do that in this industry is that be surrounded by a community of people.

Dan Austin: [10:18] There's always somebody that's one step ahead of you, which is super helpful, and there's always the people around there that can kinda pick you up when you're feeling down, because there's ups and downs in this industry, sometimes it's daily, sometimes weekly, you need that community to kind of hold you accountable and keep you moving forward.

Mike DeHaan: [10:32] Exactly, and you know, a lot of people have different groups like that, it's like, oh, know, so and so can help you out with these different things, like this is their expert, this is people in this market. We're gonna try and do is build that out as like a fixed asset in the community. Mhmm. So we're going to be having, you know, bulk, I would say like discounts and different, system is bulk discounts on different marketing efforts that we're all using collectively. We're taking like the size of our group and we're gonna be using that negotiate better pricing with a lot of the different service providers. We're A

Dan Austin: [11:04] lot of different vendors.

Mike DeHaan: [11:04] Yep. A lot of different vendors. We are going to be building out a collective sort of platform for disposition, a collective platform for doing lead management and getting deals done, so that everyone that's a part of their group can be saving an incredible amount of money. We can all be running along similar systems and growing and optimizing together. And with how it's all gonna be coming together, basically, if the entire community is well, then every single person that's involved in it will, you know, make more money amongst themselves too. It'll be, you know, I don't think I'm leaving it kind of open ended as we're figuring out a lot of the details, but I'm super excited about it because I think it's almost like a, I don't know, it's like a co op, that sounds like a little woo woo y almost, but that is fundamentally kinda what we're gonna be building out, so it should be pretty sick.

Dan Austin: [11:47] Yeah. It's like kinda this idea of, as you come into a group, you said it, it's like, you know, the tide, all boats rise with the tide or whatever, but all too often, like groups, there's people that are doing really well and people that aren't doing real well, and we don't wanna be like the group leaders where we're just leading the group and without us the group can't succeed, because sometimes you'll see that in other masterminds and other groups, like people just show up to be in proximity, like that is not who we're trying to be and that's not the group we wanna create, although we're happy to engage and participate because we are a participant in our mastermind and we have our own business that we run as well, but I want, like for me the vision is like community members, helping community members and showing up that like you not being in the community is such a detriment to your success that you wanna be part of it for, obviously you just talked about all the monetary value that's going to come from it, because we will be able to negotiate as one. It's kinda like, if you were to go to a mail house, and your typical mail spend was $5,000 a month, well, what if you're coming in and saying, well, I'm actually gonna spend a 100, 150, $200,000 a month or whatever the number ends up being. They're obviously gonna give you a bulk discount so we can come and get all those sorts of things from any type of vendor in the value chain of being a wholesaler, flipper, buy and hold person, but back to my main point which is really that community members can help each other, can be community driven, there can just be a lot more dynamic and organic growth within the group and from the people.

Mike DeHaan: [13:10] Mhmm, yeah, and it'll be fun. It's almost gonna be, I guess, like with what like GoBundance guys try kinda tries to do with like higher income guys and, you know, it's sort of business agnostic, but exclusively for off market operators trying to grow real estate investment businesses. So it'll be cool. I'm excited for it.

Dan Austin: [13:29] That's the vision.

Mike DeHaan: [13:29] Yeah. That's the vision. Not the changes come into it. And if that's something that you wanna be a part of, and you know, you've been, you know, sort of coy on the instant investor program because you're like, don't really know if I need more coaching or like another program. We're building out something a lot bigger than that. So you should hit me up on Instagram at Mike underscore invest or head up Dan at Messerman Dan. We'll be happy to give you some more direct information that we're not ready to put out on air yet because in case we change a couple of details, we don't want there to be a permanent Exactly. Either way, it's been a been a great time for us as it's been slowing down just trying to go through that and optimize.

Dan Austin: [14:03] Really focus on that sort of stuff. Yeah. Yeah. I agree.

Mike DeHaan: [14:05] Yeah. I know. It was it was great to get into meet with our business coach here. He helps sort of put that vision together since he was up here as well. Just randomly on like Thursday, he called us like the night before and he's like, hey I'm gonna be in town tomorrow, we should go get coffee up here Right, from

Dan Austin: [14:20] was very steep thing to do. It was, yeah. Yeah, it was good seeing him, I always enjoy like talking to him and it reinforces the idea of like how valuable it is to be around people that are doing what you wanna do, or that are a step ahead of you, or at seeing him as mentors, as coaches, you know, we just talked about community, like, I don't know that we could be anywhere without that stuff, and he was kinda sharing some insight, and it really made me think about like, every time that I've like, given up something, like when I say given up, I mean like I paid for something, or I've put my own time into it, I've leveled up. Yeah. And like in life. And so if you're not leveling up, what are you actually contributing to what you're trying to level up? I just think, like I'll give a short little story that I was thinking about as Steve, as we were getting our coaching, is like, I joined the military when I was 18, and when you join the military, you have the choice to get the GI Bill. Like, it's not given to you, actually have to pay for the GI Bill. And so, every month for the first twelve months, you have to pay a $100 into that, to get your GI Bill when you leave the military, and you know, when you're making 800 to $900 a month A lot, yeah. In salary, a $100 is a lot, right?

Dan Austin: [15:29] Like, I think my paycheck every two weeks was like $420 or something like that. And so, that's a significant amount of money Yeah. Back then, but when I left the military, I had this GI bill and I was able to go to school. So that like was my first like level up, right? And then I met you at Gonzaga, where we both went to school, I got an engineering degree, and from where I was standing in life before all this, graduating with that degree was a level up, And then of course you and I created a relationship there, I got into real estate, I committed time into real estate, made some relationships, leveled up, you and I partnered, we've done different communities, every different Mas masterminds, and each time we did the mastermind, like when we first joined up in 2020 in our partnership, we joined a mastermind and that was a level up. Then we hired our business coach recently, another level up. And so it's like, I really was reflecting back on all the little times in my life where I made a sacrifice, where I took time and effort and financial means sometimes to contribute into something, into my personal growth. It really does actually work when you do it and you focus on it.

Mike DeHaan: [16:30] Yeah, well I mean the big thing is you invested in yourself every single time and you applied what you learned through that investment. Right? That's that's kind of the big thing.

Dan Austin: [16:39] Oh, that's a good point too. It's Alex Shmozzi, he talks about

Mike DeHaan: [16:42] this a lot. He's like, intelligence is the ability to learn something and then apply it, not the ability to learn something. Something along those lines. He's talked about that a few times. He's like, anyone can like learn something and like repeat it or like parrot it back to somebody else. But people that are intelligent, a sign of intelligence is how quickly you can take what you learn and you can apply it to yourself, to your business, to your life, whatever you're doing. And that's what you've done. And I think that's where a lot of people tend to get lost when they are pursuing anything, whether that's reading a book, watching YouTube videos, listening to podcasts, hiring a coach, joining a group, is they will learn a lot from it and that's great, but they never actually apply any of it. You might as well not have done it, or you just wasted your time or your money going through that exercise. And so that was a big thing that you took away from all those. And I think one of the challenges that a lot of people have is just because there's so many opportunities to learn, that people never have the discipline to actually step back and apply it. Yeah. Know, it's like it's reinforced by all the dick measuring contests that people do. It's like, oh I need to read like 52 books this year, I'm gonna read a book a week.

Dan Austin: [17:44] Yeah.

Mike DeHaan: [17:44] I'm like, why? Like you're you're better off reading like three books, and studying them, and applying everything that's in those books, than reading 52 books just to check off your star chart or whatever you do so that you can, I don't know, go and buy yourself ice cream on the weekends? What do you do with kids? You get to do this chore chart, get like, they can pick an ice cream. Oh yeah. Yeah. This

Dan Austin: [18:03] is very true. I do know what you're talking about. We have a chore chart at my house. You're absolutely right.

Mike DeHaan: [18:07] I feel like adults do the same thing with like this feel good like mental masturbation of like, oh I need to read these books, I need to do my cold plunge, I need do my meditation. They never actually apply anything, but they learned it.

Dan Austin: [18:19] What is it building up to, like anything, like that's kinda what I'm wondering, like when people have their goals, you could use the 52 books a week, or whatever their goals are, could be well intentioned too. It's like okay, so let's start out, what are you building up to, like what are you doing, how is that going to help you, and then as you're saying, you step down into like, if you read a book every week, there's not even a time to apply what you learned in a book, it's a fricking waste of time. Yeah. And then same thing if you go and you pay for 10 different coaches to do 10 different things, like in the same year, like you're going to like not learn anything. There's so many people out there, they collect that, they go from group to group to group, and they are not finding the success because they're never actually digging in and truly figuring out what it takes to be successful and applying even one of the things that they're learning. They just think, oh, I just need to learn something else, that'll be the key to my success.

Mike DeHaan: [19:04] Yeah, for sure. And where where it gets even more toxic is you have these other groups out there now that people pay a lot of money to be in. And it's funny, I think some some people end up in GoBundance. They sort of lead this way a little bit, but most people with GoBundance aren't like this, but I've seen a lot of other groups that are, where it becomes like an echo chamber where everyone's kinda just like it's like a giant like circle jerk of people that are being like, good job. You tried to do it, and then you tried to do it. And then we're gonna have like a meeting about how we all tried to do the thing, but we're still trying to figure it out.

Dan Austin: [19:33] Totally.

Mike DeHaan: [19:33] And as a result, you end up with a bunch of non starters who are just like, you know, playing a game with

Dan Austin: [19:38] grab ass. They make themselves feel good.

Mike DeHaan: [19:40] For sure, right? And and it's funny because I've I've been in a couple of groups like that. I'm in I'm still in a couple of groups like that and I just like see the circles that people go around. People have been in these for years, never done anything. And then, you know, we have like Billy Fernandes on the show on Tuesday. Who I'm really excited for you guys. Know, this episode's gonna come out in January. It's a episode. Because he's literally been in this business for two years. He has a massive team. Just the wholesale arm of his business, not even counting his flips or his rentals. Just his wholesale arm is doing $2,000,000 this year. Right? His flips, he's doing like probably another 2 to 3,000,000 I would guess. And then he's been buying 25 properties a year for the past couple of years. And he started in 2021 with a zero real estate experience. Yep. He's the antithesis of the I'm gonna sit around and just learn,

Dan Austin: [20:29] right? And it just like He's taking action. He's learning my doing.

Mike DeHaan: [20:32] You know, and he's one of those who's like, I feel like we've been pretty glad taking action. I look at his stuff and I'm like, dude, he's done a lot.

Dan Austin: [20:38] He takes action for sure, and he does like, he's part of different groups and he's joined different coaching programs, and he's hired consultants and all that sort of stuff. The difference is, is he's trying to take action and trying to figure out what works, and when it does work, keeps doing it. If it doesn't work, he peels it out. Yeah. Which is what you really should be doing. Yeah.

Mike DeHaan: [20:53] So, anyways, it's just interesting, and as you're getting into the end of the year guys, and we're starting to prepare for the new year, you're looking at different things to join, just make sure that the group that you are joining is some of this are going to be full of people that are taking action and aren't just Mhmm. Trying to live a false dream, or like drive false hopes that they're never gonna do anything with themselves, which is a mixed bag. And you know, something that I've come to find as we've, you know, had this show, we've had a lot of guests on here, you guys might not even know we've had a lot of guests that we've had on this show that we've never even released the episodes, Sometimes because there was issues with the episodes, right, technical Sometimes it's because we went through and like, that person didn't actually do anything. Why?

Dan Austin: [21:33] Yeah, there's no value to be brought to our audience.

Mike DeHaan: [21:36] Exactly, and you start to realize very quickly that there are a ton of people out there that they love to talk about their quasi success or they understand the theory of what it takes to become successful, but they're not action takers. They're non starters, and they, you know, they're seeking the fake pats on the back. You know, it's just like I get so many people that reach out to me on Instagram. Some of them I'm sure it's by like their VAs or whatever, and they want to get on the show, they want to talk about different things. A lot of them seem to be like, I would say like the same demographic of they are middle aged, they're white, their parents, male or female, and they like have this thing about how they escaped the rat race, and they you know, now travel with their kids, and like they cover photos like them with their kids at the beach or whatever. And they have 18 to 25,000 followers, and all of their posts are the same style, and they get like 200 views. So I'm like, I know all your followers are fake, like you're trying to do this like fake thing just Or buy followers. Yeah. You know, and what's even better is when they have like a business page and you can see that their business page like comments on like their main page, I'm like, God, it's so printed by why you do it.

Dan Austin: [22:51] Yeah. Don't fuck around with Mike because he will do his investigation as well, and Mike's quick at it. So, and he'll he'll find you if you're lying.

Mike DeHaan: [22:58] Well, I'm I'm a skeptic first with anything like that. Yeah. Like I'm just naturally a very skeptical person when it comes to people. I think it's from when I used to train a lot and I would, you know, I competed at CrossFit at a pretty high level and I was good at that, right? And I taught at a gym, I was able to go into most gyms and be like one of the best people there. And so I think that made me a skeptic because you would always see these people, they'll look like they should be really fit, but they weren't. And I kind of had my brand where I would walk in in like the oversized t shirt, and I'm just kind of a goofy looking dude anyway, and I would go in and I would just be able to smoke plenty these work, right?

Dan Austin: [23:42] What happened to oversized t shirts, bro? You're filling those things out these days.

Mike DeHaan: [23:45] I am, Well, back then, dude, I just got off of my big weight loss from college. Yeah, yeah, And so I was still wearing yeah, the same clothes because I'm frickin' cheap and I don't like to buy clothes. Always. But point being, I learned that what visually appears to be there is not always their reality.

Dan Austin: [24:02] Absolutely. And there's so, there are dime a dozen of those type of people out there too, which is the craziness.

Mike DeHaan: [24:07] There is, know, and it exists in fitness, that exists in business, that exists in people's family lives. It's just like how, you know, they say that how much someone posts about their relationship on social media is universally related to how good their relationship actually is. I was just telling one of our

Dan Austin: [24:23] guys that while we were driving out to one of our properties, I was just telling that same thing, like, had the exact same belief. I was like, you know what's interesting is when you see these sorts of things, generally speaking, blah blah blah blah, and then I gave an example of a mutual person that we know, and I was like, proof in the pudding right there.

Mike DeHaan: [24:39] Well Yax, they used to post all the time that he's in jail for domestic soul.

Dan Austin: [24:44] How did she know? There's two people that you could have chosen from on that one.

Mike DeHaan: [24:47] That's the one that came to mind right away.

Dan Austin: [24:49] Yeah, that's hilarious. You're absolutely right, going back to like the whole Instagram thing, what people are trying to do, it's like, I think there's a huge lack of authenticity online and it's really easy to basically kind of put up a veil or a facade of whatever you want it to look like, but what you're saying is like there's no depth to it and it's really easy to identify if you actually pay attention. And there's two things I hear from that, like people are kinda dumb for thinking that, and then also they're kinda dumb for like not actually just thinking that them authentically might be way more valuable or way more valuable to them of an asset to give to people. You know, because it doesn't have to, you don't need to look and be just like everybody else you're seeing, in fact nobody wants that. Yeah. They want you, they wanna authentically know it's you when they DM you, or it's somebody on your team at least, if you're really big, you know what I mean? But like, they want to have that connection and they don't need to know that you have the, what else, same profile, like you said, 16 to 20,000 followers, this whatever, you've got a van and you're traveling the country with your family, this and that, and you're financially independent on your $200,000.04 $0.01 k Yeah. Scraping by with rice and beans.

Mike DeHaan: [25:56] Yeah, right. Well, think the big thing is you see a lot of those people and they talk about their financial independence from real estate. I mean, lot a of people's real estate, especially with the property taxes and things, how those have been increasing everywhere. Of those people I are starting in just got all of my new mortgage statements for my rental properties here in Spokane. Dude, my cash flow's getting wrecked all of the property tax increases.

Dan Austin: [26:19] At the same time where rent is stagnant in our market this year. Mhmm.

Mike DeHaan: [26:23] Oh yeah dude. Right. But like some of my properties are having multi payment increases of 300 to $400 a month. Like all the cash flow for it, gone.

Dan Austin: [26:31] Right.

Mike DeHaan: [26:32] It's insane.

Dan Austin: [26:32] And that's the interesting thing you have to think about too, so let's dive into this, the numbers on that really quick. This is kind of my theory here is, like we were able to, I actually heard this term recently, was COVID babies, is what they call a lot of real estate investors now because they thought that's what real estate was like. But anyways, you could raise rents and you could just throw it out there and there's the same demand, but there's just less people willing to pay that now for many different reasons. But when you're talking about as a landlord, your prices are going up, we've experienced inflation, and here's where I believe the challenge is. We've experienced this inflation, mean, materials buying costs, people want, it just costs more to do things. However, like the general population's wages did not go up the same amount, right? So although as a landlord it's more expensive to operate, the government's getting their money. They're increasing property taxes, like they're valuing my house way more than it's valued, should be valued, right, on my property tax statements, which is not common where we're at. So that's a new thing that we're experiencing. But anyways, my point being is wages have stagnated at the same time all of our costs are going up, so you can't increase rent.

Dan Austin: [27:35] Mhmm. Right, the market's not able to demand it, and so you're kinda stuck eating into your profits. So if you really were super tight, it's easy, depending on where you're at, the state, like if you're really down at $200 per door, it's easy to see that, I mean $50 of that can easily go to taxes, $75 of that can easily go to a tax Yeah. Right? Not including your insurance, which we're seeing. I was talking to a guy who owns an insurance company, and he explained to me what what happened to insurance companies was that they weren't able, they weren't legally allowed to raise rates for like two or three years during COVID, and now they can finally raise rates. At the same time, to repair a dent in your car is x amount more, to repair the roof on your house is x amount more, so they're just, they're now raising all their rates that they have to catch up with inflation, which we didn't have to worry about that. So now that's hitting us as landlords, like there's all these things eating away at you, it makes it tough out there when rents aren't increasing.

Mike DeHaan: [28:26] Yeah. I mean, the wild thing is, it's even gonna affect homeowners as well, right?

Dan Austin: [28:31] Mhmm. Of course.

Mike DeHaan: [28:31] You know, especially so many of these homeowners that were stretching to buy homes. I actually was a guest on a podcast yesterday, and it was with a realtor, and he's like, why do you hate realtors so much? He's like he's like, you posted this thing about how you rip on realtors who were trying to encourage everyone to buy a home right now. And we talked in this a little bit. We were talking about the FHA situation that existed in 2021. Hit the rate, dog. And I was like, the problem is, you know, and this is our experience, is we had this one particular property, was that one on 11th that we sold to the FHA buyer. And he was he paid like $35,000 over ask. Mhmm. I believe it was that one that we also had to come to the table. We had to give him a $27 credit so he could pay off his credit card. Was that that property or was that a different one?

Dan Austin: [29:15] Cameron, that might have been a different one, think. Something like that. Yeah.

Mike DeHaan: [29:19] Yeah. Either way, those are both FHA situations. And because I guarantee you what those people were doing back then when rates were low, is they were going, okay, this is the maximum monthly payment that you can make

Dan Austin: [29:30] Mhmm.

Mike DeHaan: [29:30] In order to get qualified for this loan, so let's back into what we can offer. And then the realtor is like, well I wanna make as big of a commission as I can, so we are going to do a maximum offer on this property. So one that we sold for 35 ks over asking, we had no other offers on. They had no other reason to do that, other than they were stupid.

Dan Austin: [29:47] Yeah, the realtor was telling them to do that.

Mike DeHaan: [29:49] Yeah, correct, It makes no sense. The other situation is we had a deal where we had to bring a $27 credit to closing, so that the FHA buyer could pay off their credit card, so if they paid it off themselves, that $27 is gonna make their liquidity too low to get approved for which their is insane, right? And again, I guarantee the same thing they did was they were going to the maximum monthly payment to get approved for that loan, and that was probably a stretch for that person. Now, you have all these property taxes that are increasing an exponential amount here in insurance, and all of a sudden their monthly payment is 300, $405,100 dollars a month more, that person can no longer afford that, guarantee it.

Dan Austin: [30:31] No, absolutely not, no. So a good example, I moved into my house in 2020, I think it's like mid twenty twenty, going into 2024 between property tax increases and insurance increases, I think my mortgage is going to be $500 more

Mike DeHaan: [30:45] a month. Mhmm.

Dan Austin: [30:46] Yeah. Crazy. I can sustain that, that's a lot, of course my value is probably higher than the average, you know, homeowner, but like, that's a $100 for somebody, right? Yeah. That's a lot of money, and that's really doable, because we've seen, just on my rental properties, I've seen the taxes go up, like one of the properties, it's like from 3,000 to $4,000 a year, that's a big bump. Yeah. Dude, that's basically a 100, that's your $100 a month damn near right there, Totally. Just crush people, and their wages are not going up, You know, it's really tough. Here's another good story about this, a mobile notary I used recently on some properties we were buying, I actually hustled her to come out of the UPS store where she, where I usually, where we do our, whatever. Mailbox. Our RTS mail gets sent there and all of our different stuff. Well, she's a notary, and so she came to my house and it was $75 to do three properties worth of of signing, which is actually a really good deal.

Mike DeHaan: [31:36] That's a really good deal, yeah.

Dan Austin: [31:38] Yeah, with witnesses, I had to get two witnesses and all that stuff. So anyhow, she came up, did the signing, she's like, oh man, this is so, like the timing of this could not be more perfect. I was like, oh really, what what's going on? She's like, well, somehow somebody got into my Cash App and like wired themselves $600 or something like that, she's like, and they won't refund it. She's like, I can't pay my rent. This was like December, I don't know, like fourth, and I was like, right there is a great example, and like very average. She's a hard worker, she's employed, she's not a slouch, right, but she's a renter, right, that's just her financial situation, and $600 wrecked her to where she wasn't gonna be able to make rent. And you as a landlord are sitting there, this could very well happen to us, in fact we do, I haven't told you, we've got a guy that's MIA, like our part of managing can't even find him. And so, that's a problem. He's not paying rent and like, he's a guy who notoriously, if he gets hurt on the job, can't pay his rent, right? And so there's these people out there that that is going to start happening more and more going into next year as well.

Mike DeHaan: [32:32] Yeah. And you know, a lot of these realtors too that are pushing like you need to buy right now or you need to like sort of stretch yourself to get into these houses, you know, date the rate, buy the house or whatever. A lot of what's pushed with that sort of message is around stability compared to being a renter, which there's a little bit of truth to that because, you know, they always say that you know, your landlord can increase rent to whatever amount they want. The unfortunate thing is when you have a mortgage, the city can do the exact same thing and the insurance companies can as well by increasing your tax, increasing your insurance rates. The problem is, now can, it's now a lot more complicated to get away than just not renewing your lease. You now have this frickin' liability that you have to deal with? And you overpaid for it, which a lot of people are still, then you can't even sell it because it's gonna cost you 9% to sell the property up here in Washington. So there's a lot of people that if they were to sell it, they'd have to bring money to the table to get out of this payment they can no longer afford, right?

Dan Austin: [33:27] No, those just go sub two to pay some mortgage. Just like five deals a month.

Mike DeHaan: [33:31] Yeah, right, get out. But the problem is nobody else wants that at this point because it doesn't cash flow at the current payment.

Dan Austin: [33:35] Right, totally, yeah. It's a tough situation and I mean that's where, even when we're talking about like acquisitions, going off, like this is one of the reasons why we went off market, now I'm very thankful we have this skill, we can go and find these deep discounted properties that make sense for us as like, as buyers, and make those things work, right? We can go and we have the systems and the tools to find it, to do whatever we have to renovate it, get it rented, you know, do the whole brew process and feel good about it, where if I didn't have that skill right now, I'd be like, I'd throwing my arms up like I can't find anything to buy.

Mike DeHaan: [34:06] Yeah, I mean, and at the very worst case as well, even if like all of our cash flow does go away, because we have an active business as well that makes money, it's not the end of the world, And also two, because we bought everything at a discount, which every single person should do. You should never buy a house at retail value, even if it's subject to or whatever the fuck else they're trying to sell you, right? Because once you do that, you are now stuck with that house. You cannot sell it with the associated cost. You have some major obligations.

Dan Austin: [34:36] You have some serious obligations.

Mike DeHaan: [34:38] It costs money to sell real estate, you guys. Yep. Like in in a standard market, it costs 7%. If you're in a market like Washington that has excise tax, it costs 9%. Right? And if you don't have that much equity in the property at a minimum, you will have to come with a check to get out of that house, I guess unless you sell a subject to you to somebody else again or something weird, which you probably could do right now to be fair.

Dan Austin: [35:00] Right. Yeah and I think that's a really valuable insight too because when you wanna talk about how much equity you have in a property, don't forget how much of that is going to fees when you're So gonna sell if you're like, well I have 30% equity, well you more like have like 25. 25 or less, right, because of whatever your sales cost ends up being. And so it's like when you're building out your numbers for what you want from a property, you gotta think about that. Especially immediately if you wanna be able to refinance it and get all your money out, like really think about what those things cost to do every step of the way in that ownership. Yeah. I heard this like really good quote, which is along the lines of what you had mentioned about having business income, it actually was really cool, was like, if you wanna be wealthy in twenty years, invest in index funds. If you wanna be wealthy in like ten years, invest in real estate. If you wanna be wealthy in five years, start a business. Mhmm. Yeah. Those timelines kind of actually aligned. Was like, that's, know, and just for a cheap quote like that, I was like, that's so true. And so having that active business, the active arm of your real estate investing company, the wholesaling, maybe you're an agent, you know, all these other active types of income, where you can scale those through better marketing and better sales.

Mike DeHaan: [36:07] Mhmm.

Dan Austin: [36:07] That's the key. If you can scale those through those two things, that's amazing because the one thing I do not like about rental properties is you can't scale that.

Mike DeHaan: [36:14] Mhmm.

Dan Austin: [36:14] Like, you can't scale it other than buying more properties. Yes, you have rent growth, but you can't control that, the market dictates that, right? You can't just all of a sudden tomorrow put more money into marketing for renters and increase a meaningful amount in your income. Yeah. But from a business, if you're running wholesale, flipping business, other business even outside of real estate, if you can use marketing to increase your lead flow and get better at sales, convert more people, you can almost overnight increase your revenue and your profit.

Mike DeHaan: [36:42] Yeah, well and I would say, let's put that a different way is, you can't scale rental properties like asymmetrically without a huge amount of capital. Right, you're always going to be fixed without return and it's never going to be asymmetrical to the amount of capital it takes to get into that deal versus with a business. I mean, you can make your $1,020,000 dollar investment in your own business and you very literally can 10 x that or a 100 x that. Totally. Which will never happen with a property.

Dan Austin: [37:12] I will say this, there is a caveat because you do, when you're in the game long enough and consistently enough, there are those deals that are the asymmetrical upside For sure. When you're marketing for off market real estate where you're like, holy crap, I got this dude who wanted to sell me a ten, twelve, 20 unit apartment building, who's gonna do seller finance, and next thing you know, you're picking up $5,000 a month in cash flow, like net clean. Because we have friends that that happens to.

Mike DeHaan: [37:34] Mhmm.

Dan Austin: [37:35] It's happened to us. Like that is really cool and but you gotta be in the game to have that happen to you.

Mike DeHaan: [37:39] Yeah. Those are the exception, not the rule.

Dan Austin: [37:42] The exceptions, absolutely. Good for you.

Mike DeHaan: [37:44] And if you're expecting that to be every deal, it just isn't gonna happen. No matter how many people tell you that it's gonna do that through bad split, or as a senior living facility, or whatever else, it's never that simple.

Dan Austin: [37:54] And that was the problem, as BiggerPockets, you know, grew into its adolescence, or out of its adolescence, is like every single person they brought on was the person that had the exception to the rule. And you see, and so that create, I think that created like a whole ecosystem of podcasts around it, and education around it, it's like every time this happens, and we know in reality it doesn't happen every time. But if you're putting somebody up there that went, you know, zero to hero overnight, homeless to a millionaire overnight, like a, we're finding out a lot of those people are lying, and b, that really sets the stage for just a false sense of opportunity that doesn't exist out in that way. Yeah. And it makes people spend money on things and then give up too soon. It's like, well, it didn't happen for me, I must be doing it wrong.

Mike DeHaan: [38:36] Totally. Yeah, because it's, you know, it's like people seeking newbie gains. It's the equivalent of someone expecting to walk into a gym and squat 400 pounds when they've never done an air squat before.

Dan Austin: [38:46] It's like, that's just not how it works. No.

Mike DeHaan: [38:48] Cool. Awesome. I think that's a good place to wrap up. Thanks for listening everybody. We appreciate all of your time today. You should go and share this with your friends. Anyone who's interested in real estate or anything else, that would be awesome. You should also go to clickingkeys.com/subtwo. You can get our free subject to course that we just released there. It's basically everything that Pace Morby teaches for like $10, except it's completely free. And all we require is some contact information for you, so that we can push you on our email list and follow-up with you to see if it's good or not. And if you get a call from Nick, who's our guy that will probably be reaching out to you, let him know if this sucks, like we wanna know.

Dan Austin: [39:28] Yeah, want the feedback, if it's not what you guys need to see out there, like let us know if there, or if there's gaps and we need to add some modules to it, we totally will. Yeah. We just wanted to get it out there, because we thought that there was a need for somebody just to throw it out there, and like actually go through hard examples, and talk about the things that are actually, like the risks of the, of sub two. You and I know these very well, and so it's like one of those, one of those things like we were hoping that this would kinda cover that gap and be kind of the truth among whatever else is out there.

Mike DeHaan: [39:54] Correct. And our way of being the antithesis of all of the sort of non starters out there, the people that are throwing out a lot of nonsense is we're gonna start just releasing stuff like that for free for you guys. So go to collectingkeys.com/sub2 and get it. And again, if you get a call or text from Nick, let him know what you think. Have a call. Be nice to him. He's in our community. He's a he's a great guy. And he's just doing his job of trying to get feedback so we can make sure that we are bringing you guys as much value possible. But totally. Besides that, everybody, we appreciate you all, and we'll talk to next week.

Dan Austin: [40:24] See y'all.