The Danger of Scaling A Real Estate Business Too Quickly

Mike DeHaan: [0:00] Really quick before the show starts, in case you haven't heard, we have a growing community of investors called the scale community, which is full of people learning to make massive income with their real estate businesses, so they can reach financial freedom a little bit faster than building a rental portfolio solely over time, because honestly, that takes decades and who has time for that. So if you're an investor who is serious about growing and creating a scalable business without needing to be a slave to it twenty four seven, then go to collectingkeys.com/scale and apply. And if you're a

Mike DeHaan: [0:31] good fit, we would love to

Mike DeHaan: [0:32] have you join the community. So again, collectingkeys.com/scale, go ahead and apply, and we'll see if you're

Cody Cressey: [0:37] a good fit. Any big flipper that I know, that's the art that they focus on is their rehab budget and how to get that thing down.

Mike DeHaan: [0:45] What is going on, guys? Welcome to today's episode of the collecting keys real estate investing podcast. Today is Wednesday. It's our off market operator radio show, and I am Mike DeHaan here with my cohost, Dan Austin, and special guest today, Cody Cressey, because Dylan is out for a little bit because he just had his first little baby that he welcomed to the world.

Dan Austin: [1:10] He's on maternity leave from the podcast.

Mike DeHaan: [1:13] He's on maternity leave. Paternity leave?

Dan Austin: [1:15] We're not paying him. Yeah. Paternity leave. We're not paying him leave, though.

Mike DeHaan: [1:18] We don't pay him anyway in maternity leave.

Dan Austin: [1:20] It's unpaid man maternity leave.

Mike DeHaan: [1:23] Yeah. But if this is your first time to show, guys, on these Wednesday shows, we dive into the real estate market, things that are going on in our business, tactics, and marketing sort of systems, things that we are working on or finding success with. And today, we have Cody on because we are going to talk about kind of like a higher sort of pattern that we have started to see in this specific direct to seller real estate industry. And if you guys have not heard Cody before on past episodes, he is our local partner here in Spokane who kinda runs a lot of our acquisitions. And so we're gonna chat today kind of about what we are doing with our local market, why we have chosen to partner up with Cody, and some of the challenges that we regularly see with people that are trying to scale these businesses. And so if you guys don't know a lot of our background, Dan and I, we have scaled a national wholesaling flipping business over the past couple of years. We were doing I mean, continuing to do a lot of deals worldwide. Not worldwide. Nationwide.

Dan Austin: [2:24] World war champs. Worldwide.

Mike DeHaan: [2:25] Hey. As soon as someone could figure out how to, like, wholesale stuff, like, in, like, Europe, I would see that that would be a a game changing sort of play.

Dan Austin: [2:34] Let's do it. Let's be the first ones to do it.

Mike DeHaan: [2:36] Real estate doesn't transact the same there, though. That's the whole thing.

Cody Cressey: [2:38] Just need to do one deal that, like, has an easement in Northern Washington, like, right on the edge of Canada and then Oh, yeah.

Dan Austin: [2:46] Go to Vancouver, dude. Yeah.

Mike DeHaan: [2:48] Yeah. But in the last few months, we have started working with Cody more seriously here in Spokane. And it's been a very interesting sort of transition because all of a sudden, just because it is a kinda lower overhead, higher profit potential setup, we're starting to make more money in Spokane than all the national business even though the national business has more deals. And one of the takeaways, I guess, from this is that I think that when it comes to real estate businesses, people tend to pursue scale or trying to do more deals or trying to, like, grow their team or do all these different things. And the craziest outcome that typically tends to happen is you quickly realize that you're actually not taking home that much more than if you just, like, stayed smaller. Right? And this was this whole sort of thesis, I guess, was really emphasized for me. And I was I was talking to one of my good friends who has a very large operation, And he was basically saying that in, like, a bad month, they'll do 300,000. In a good month, they'll do, you know, 500, 600,000 a month. And their profit margin is typically, like, 20%. And so if you're able to do a huge month, like, $300,000 for the month and you still only take home 60 k, like, what's the point? Right? Like, honestly, versus I mean, that's what Dan and I have made when it was, like, just us in, like, an AM when we were each taking home 60 k in a good month. And so it's like the there's one of the challenges with this business is, like, how exactly do you scale it? You know?

Mike DeHaan: [4:20] And there's the overhead that tends to build up. The marketing expenses are very, very high. The cash conversion cycle is very long. And it sort of brings around this question of, like, does it actually make sense to try and push to grow something big, or is the better play with a real estate, like investing and flipping and wholesaling business to just stay tight and small and really just get good at a singular piece.

Dan Austin: [4:45] I think it's so we had a great conversation with scale community about that today, and it depends. Right? Like, what do you want out of this? And I think you get into the business for various reasons. And at least annually, if not biannually or or even quarterly, you need to continuously reassess where you're going and what direction you're headed because it changes. I mean, you and I have changed, like, our goals and what we want or expect for our business multiple times, you know, as we've kind of grown as entrepreneurs, also grown our income, grown our wealth, and saying, oh, well, maybe that's not what I want, maybe that is what I want. It's okay as your life evolves and things change, that you change what you want, but ultimately, what do you want your business to look like? Because if you want to come into the office every day, have your assistant or reception person there, have acquisitions manager running the day to day dispositions, like, you want, like, a business where you don't actually have to work in it, you can get there. You need more scale, and you need you're gonna take your margins are gonna go down. So instead of making $40.50 percent margins, you're probably gonna make 20, which is more in line with, like, a really profitable small business, which is okay.

Dan Austin: [5:51] But you're gonna take home less money if that's what feeds you. It's like, I wanna walk into my office and do this, like, make it like a brick and mortar almost, where Yeah. You don't have to do that in this business as the alternative option. Right?

Cody Cressey: [6:04] Yeah. I think it's just it goes back to exactly what you said. It's like, you know, people have heard what you just said from probably a lot of different podcasts, entrepreneurs, gurus, you know, but it's the the old adage that I believe you, but I wanna find out for myself. Mhmm. It's like, you know what I mean? And so everybody it's in our nature to grow and to increase and expand, and we can think pop culture for a lot of that and just movies and you know what I mean? Like, you wanna like you said, you wanna walk in there, have that. Some people enjoy that. They enjoy

Dan Austin: [6:35] that culture. Like you said, it goes back to what do

Cody Cressey: [6:38] you want? If you just wanna be like a master underwriter and looking at deals that you're gonna buy and stuff like that, and the day to day is all being ran by you, you're gonna make less money. If you wanna be involved and maybe work, you know, thirty hours a week and do two deals a month, you might honestly make or lean the same and have a better life.

Mike DeHaan: [6:56] Yeah. Well, I think in real estate, especially, the ego piece is huge. Like, when you go around, that's always kind of like the flex that people have is, like, how many deals you're doing per month.

Dan Austin: [7:04] Yep. Yeah.

Mike DeHaan: [7:05] The revenue on that's typically not necessarily discussed.

Dan Austin: [7:08] Yeah. I I think there's something to be said too about is what is a lot of money to you. Like, is making $300,000 a lot of money? Because you can easily make $300,000 a year in this business twenty hours a week. If you're willing to commit to marketing, and you're willing to, those twenty hours a week, you're willing to work, and like, bust your ass, find deals, sell deals, do all that stuff, you could do that wholesaling, flipping a handful of houses here and there, and that's easy. Then you could go work forty hours a week, you can make more money, but it's like there's this, like, threshold, and and there's a ceiling that you can hit, and that's, I think, the inflection point where Mike and I have hit that at several different businesses of ours, and you have to truly find out, do you wanna take it deeper and further, or are you okay with that being your ceiling? You know, that ceiling where you need to hire staff to get bigger, which means your margins drop, so then basically the take home dips. And to overcome that and get to where your take home's higher, even though you have a smaller net margin, so say instead of 40% margins, you're down to 30%, you just need to make more money. Right? And can you break through that little hiccup when you go to scale?

Dan Austin: [8:11] But I think the key is in the conversation is, do you actually want to? Because bigger isn't always better. It can be, but you have to want bigger.

Mike DeHaan: [8:22] Yeah. There are balances for it, though. Right? Because I think that if you have a larger business, even though you're making essentially the same amount of money as you get when you were smaller

Cody Cressey: [8:29] Mhmm.

Mike DeHaan: [8:30] What it does give you is a little more flexibility with your time and opportunity as well as stability. Right? And so, you know, if you build out a a decent little team that's turning off money, it give you the ability to not have to work in the business quite as much to spend time with your kids to do different things. First, if you're small and you're not working, you're probably not making any money.

Dan Austin: [8:49] Yep.

Mike DeHaan: [8:50] Right? And also, the stability piece is huge. So, like, a few months ago, had one of our acquisition managers quit while we were at KeyesCon.

Cody Cressey: [8:56] Hell, yeah.

Mike DeHaan: [8:57] Right? We were literally at the event, and they quit. If he was our only salesperson, that would have been kinda disastrous because we would have been out for two days. We had no backup. But because he was a member of a team of five, nothing really skipped a beat and just kinda kept going.

Cody Cressey: [9:10] Yeah. Yeah. That's a good point. That's the comfortability of being larger. Like you said, I think it's good to talk through it all so people can kind of identify different listeners are gonna attach to different things that we've just discussed, you know, like, maybe I would like that actually, or that midway one, maybe that's mine or the solo operator where you have no employees. Some people enjoy that because they're control freaks and, and don't trust people.

Dan Austin: [9:34] Yeah, well, it seems like there's this in a lot of times, at least in our generation of real estate investors, like, lot of people got into it because, like, the idea of passive income, controlling your income, you know, f u to the man. So it's like you go through this cycle of, like, okay. You dive into it, and you wanna control your income. You don't want somebody else telling you how to do your job. You wanna be able to produce your own income, because that's actually financial security, being able to produce and generate revenue for yourself. So then you're doing it. Then you find out quickly, if I don't show up to work, I don't make revenue. So, you've now created it, but now, if something happens, you can't do it. So, then the next level is, how do I take vacation for my business? How do I be sick? How do I have a baby Is it and not have to get on the phone the next day? Now, that is where you have to build a team or build a business that supports a team.

Cody Cressey: [10:21] Yeah. It's the four quadrants from the book from Robert Kiyosaki.

Mike DeHaan: [10:25] From Rich Dad Poor Dad.

Cody Cressey: [10:26] From Rich Dad Poor Dad. You know? Totally. Yeah. You're trying to move out of those isn't that the b and I quadrants?

Mike DeHaan: [10:31] Whatever it

Cody Cressey: [10:31] is. I

Mike DeHaan: [10:32] don't know.

Dan Austin: [10:32] Seems like a lot of math for me.

Cody Cressey: [10:34] Are you trying to move into the b and I quadrants from the solopreneur and the employee quadrants?

Dan Austin: [10:40] Right. Right.

Mike DeHaan: [10:41] Yeah. Exactly. Yeah. I'm a little bit too young for Rich Dad, poor dad. When I by the time

Mike DeHaan: [10:46] I got in the real estate game, that

Mike DeHaan: [10:47] was a gold news. Everything was like Yeah.

Dan Austin: [10:49] I know. Exactly.

Cody Cressey: [10:50] You're a rich man, poor man.

Mike DeHaan: [10:51] Yeah. Yeah. Yeah. Right. Rich boy, poor boy pretty much when I

Dan Austin: [10:55] I've been rich and I've been poor. What does that mean?

Cody Cressey: [10:59] Fort quadrants. What what you talking about? Yeah.

Dan Austin: [11:02] Failed math class. Yeah.

Mike DeHaan: [11:04] Yeah. But from your experience as well, Cody, so before we all started working together, I mean, you were one of our competitors are here in Spokane.

Cody Cressey: [11:11] You

Mike DeHaan: [11:11] were a part of a different partnership, and you guys scaled to a much larger size than we did. I mean, I don't know. What were your kind of, like, biggest ahas that you noticed from going through that? From when we first met years and years ago, it was just, you know, you and and Ally, your sister as small operators. You scaled up pretty big. We scaled up with a smaller team, less revenue. But I think Dan and I might have made more money than you even though we were doing half the deals.

Cody Cressey: [11:38] Yeah. It's possible. It's possible. We have to compare 10 forties.

Mike DeHaan: [11:42] We we we can we can break out our rulers. We can measure our dicks after this society.

Dan Austin: [11:45] Let's do it.

Cody Cressey: [11:47] No. I'm just kidding. Yeah. No. I mean, like that, you know, speaking to that because I feel like I can 100% relate. We started a big wholesaling and flipping company with two of our biggest buyers in late twenty twenty. And we scaled up really big, and it was a lot of fun. So I like to speak to the culture aspect of things, to speak to the if one person quits, it doesn't sink you, you know, comment that you made, Mike. Those things are really true. We had a great culture we had, you know, I've told you guys about ping pong table on the bell we've had in the office. And, you know, we see that on Instagram from a lot of companies that are bigger nationwide. And it's a lot of fun. It's a lot of fun to have a lot of people in the office and everybody making money together. We also would do, you know, $300,000 months, but our overhead was also insanely high. We're spending and so there's a ton of risk there. You have these people coming in that are depending on the deals coming through and the marketing being on point and the wholesale deals closing and the flips not sitting out there getting beat up on inspection and just like it was a lot of different things that that and then we have partners as well. We're all kind of holding each other accountable and making sure that we're all gonna make it and all that stuff, you know. So it was tough. It's just like anything. There's with more solutions that you or with more problems that you take on, you have more solutions that you need to solve, so your your world gets a lot bigger.

Cody Cressey: [13:06] And some people do really well with that, and some people, it stresses them out a lot. I'd say I was kind

Dan Austin: [13:12] of in the middle just because we had we had good roles set out for everybody in the in our partnership group. You know? But, yeah, it was a challenge. But when you guys just for context too for size, like, think you we were talking this week and you you guys had a pipeline. You restricted yourself to 21 flips at a time. So you're doing several flips at any given time, and then you guys are wholesaling. Like, how many deals a month do you think?

Cody Cressey: [13:34] Oh, probably, like, eight wholesales every month. Yeah. That's pretty fair. And maybe, like, four of the four of the deals would be flips. So, like, 12, you know, so we were clipping our way, like, one fifty or something a year. Yeah.

Dan Austin: [13:50] So that's pretty good. I mean, that's for size.

Cody Cressey: [13:52] Which a lot of companies are doing, a lot of the bigger companies are doing that. Mhmm.

Dan Austin: [13:57] And when it comes to the business, the size in like that, would you go back to doing exactly like that? What part of that business would you not replicate?

Cody Cressey: [14:08] Yeah, no, I I don't wanna do that again. Mhmm. I'm pursuing, you know, with you guys, that the middle of the road option, Right? Mhmm. And so for everybody listening, like, I've learned these these hard lessons firsthand, and then I've already been at the bottom. I've already been the solopreneur that made pretty good money my first year with zero employees. And so now I wanna see what it tastes like to be in the middle, you

Mike DeHaan: [14:33] know Yeah.

Cody Cressey: [14:33] And have a small team and have some hires and not have to do everything on our own like we did in the beginning. But at the same time, the pressure with that amount of overhead and everything when the I saw when the market swung, when the interest rates went up, so many people lost their jobs. You know what I mean? So many things were uncertain. A lot of different companies were taking losses, and I don't want to position myself, and I don't think you guys do either, to put ourselves in that place if something happens, especially with a big election on on the horizon. There's a lot of unknowns economically. Yeah.

Dan Austin: [15:09] Was you say a lot of that overhead staff was basically committed to running the flipping side of the business as opposed to the wholesale side? I mean, you guys had a couple acquisition managers that worked underneath you and TC and all that stuff. But as far as like the complexity of it, do you think it was more towards flipping or is it just because you guys were scaling for growth? And and so you guys just had all the staff?

Cody Cressey: [15:28] Yeah. The biggest line items on our spreadsheet was hard money payments and insurance, actually. Yeah. For the flips. Okay. And that's if you don't the salary was number one, obviously, for all the employees. But below that, it was hard money and insurance. So, yeah, the flipping side of the business ate up a lot of cash. But also back in 2021, you know, our Yeah. Average flip profits on our deals was around 65 k was the average, you know? Wow. So High risk, but high reward kind of thing. Yeah. Exactly.

Dan Austin: [15:58] That's why I bring that up because I have a strong opinion on, like, flipping. I think there's a sweet spot in flipping where I don't know too many flippers that are doing a 100 plus flips a year, which could be considered small compared to some of these big cities where they got big time flippers. Like, I don't know anybody that consistently does flips like that and does it throughout, like, a decade. Mhmm. I would say, which was interesting, Mike was when you were down in Austin talking to Aaron Michisteg about how he does this stuff, he doesn't have like, whole thing is about his staff and how that can sync up business when the market turns. And so he doesn't hire contractors in house.

Mike DeHaan: [16:33] Yep. They're all subs. That's like his whole thing. You'll have like one or two in house people that basically manage those, or if there's, like, a very recurring sort of thing or, like, like, you'll have a handyman that do, like, the weird stuff that's hard to find subs for. When it comes to the standard things, flooring, drywall, roofing, whatever, they're all subs, but it just keeps them so busy that they pretty much work just for him. But then if things get weird, he just says, bye.

Dan Austin: [17:01] Turns it off. Right? And he's he's monitoring that. And the thing that I think right now is actually an interesting time to do something like that. I could see you scaling up a flipping operation now because the labor is better than it was, say, eighteen months ago, two years ago. And if you think about it, like, I look at D. R. Horton as a national home builder. And if you talk to all the contractors, that they're all subs that build these houses for them, and they're like, oh, they don't pay shit. But guess what? They still build houses really fast, and they still have a line of contractors willing to work for them, because they do pay, and they do have a lot of work. And so a contractor who does foundations is like, okay, I can see the next twenty four months of my life right here is 20% less than I would make if I was scraping together jobs, but I can see that lot, that lot, that lot, that lot. I'm gonna build foundations every week, the next two years. Same thing goes when you're somebody that's sizable, and you're you're a big pillar. And I remember when we had Aaron on the podcast, it's like, he was kinda like, you either work for me or you don't. This is our standard. This is how we paint. This is what we pay you. And guess what? He didn't have any problems getting people.

Dan Austin: [17:57] I think that's the fear is you won't have people if if you're having to dictate terms. Instead, a lot of times, what we do is we allow those subs dictate the terms of how we work with them. Yeah. Instead, they and so then we think naturally, let's bring those in house and we dictate to them. Well, Aaron, prove that you can do that outside of your company with subs.

Cody Cressey: [18:16] Yeah. Yeah. And we're doing that now. I mean, know we've only done a couple of flips together, but Mhmm. That's also what I'm doing. And I've learned that from my old partner who was very good at flipping. Mhmm. They did have it in house, but I just sort of took those lessons exactly what you just said, Dan, and I've implemented those with subs as well so that it can be turned on and off at any time. You know? Uh-huh. And an example is I had a you know, we have a couple projects going on right now, and we only have a couple of crews that we trust. And so I needed to go to my Facebook group here locally to find someone to turn a duplex unit. Right? And I had some interviews out at the property last Friday, and they went great. These guys were really great. Probably got lucky, you know, but I had three really solid dudes to choose from. And every single guy, I said exactly the same thing. I said, this is how much I'm paying for labor. This is the scope of work. This is what I want done. And that's that. So if they weren't able to do my job for $3,000 is what I was offering for this one whole week of work, you know Mhmm. It's a bigger job, but in a whole week, it'll be knocked out, then they were gonna work with me. And all of them agreed that that would be fine. I'd be okay with that.

Cody Cressey: [19:27] They know it's a lot lower than their normal handyman hourly rate that they're putting out to the owner occupied general population. Uh-huh. But that's what people it's like you just dropped a great tip for people that are wanting to flip and do lipsticks is the money is huge okay. If you buy a fantastic deal, sure. Go overpay a contractor to flip it. But you can make even more money by getting your rehab costs way down. Totally. And any big flipper that I know, that's the art that they focus on, is their rehab budget and how to get that thing down.

Dan Austin: [19:57] Yep. So true. And like, and spending time, because the labor is the biggest component of that. You know, vanity is a vanity. Exactly. Like, you're not gonna save a ton of material cost. You you can go and buy quantity and scale, all that stuff, and that that'll save you like 10%, But the biggest part of your budget is gonna be the labor costs, and we've seen it go through the roof recently. Exactly. I mean, that's

Cody Cressey: [20:14] all Lowe's or Home Depot in stock stuff on our the flips we're doing, you know, because we're doing that first home buyer product that's around the

Dan Austin: [20:21] $300

Cody Cressey: [20:22] range, which I think a lot of people have product nationwide. And so, you know, that needs to be a standard. So if you're not doing that, then you're already doing it wrong. If you're on Wayfair buying a $1,300 vanity, you know, and you're listening to this, you need to stop doing that. You know? It's super cute,

Dan Austin: [20:36] though. Sure.

Cody Cressey: [20:38] And that's the that's we can thank HGTV for that. And the sec that's the sexy part of flipping. You know?

Dan Austin: [20:43] Yeah. Exactly.

Mike DeHaan: [20:44] Well, I think a big takeaway from all that too, right, is the key to scaling any sort of real estate business is learning to kind of, like, manage those, I would say, operational expenses that tend to creep up and make so they aren't fixed costs, but they're kind of variable cost dependent on need. Right? And that ultimately, you're gonna do so in a way that limits your downside risk. So if the market does turn over like it did in 2022, you're not losing your ass all of a sudden and throwing away years worth of success that you've had. You know? And that can be done by having subcontractors. One of the benefits that we have now is that Dan and I did make a decent amount of money over the past couple of years. We've also raised a little bit of money. So for us to be able to do some of these flips like Cody's talking about, we're able to do it at a much cheaper rate than going and getting a hard money loan. They're gonna have doc fees. They're gonna have points. They're gonna have all these sort of things. We basically just pay a straight interest rate, which is very simple, which, you know, goes into our fund. So, you know, here's the thing is if we were gonna lose on a deal, right, we're partners on it. We can have more flexibility.

Mike DeHaan: [21:49] We're not gonna foreclose because we missed a payment on it. Right? Because it's our money technically, and you're not carrying that overhead cost, which I think is what tends to really cost a lot of people over the, like, middle term as they're growing.

Cody Cressey: [22:02] This is but the only way you got there was through taking those high interest, hard money loans.

Mike DeHaan: [22:06] Exactly. And

Cody Cressey: [22:07] learning those lessons, hiring the wrong contractor. Like, it's it was the price of your education when you agree.

Mike DeHaan: [22:13] Yeah. Totally. And also to be completely honest, we did that when the market was freaking red hot where you couldn't lose. Right? And so we were able to really capitalize on the situation that arose that sort of came around at that time. Like, you know, and is for a comparison for Dan and I, that period of time, that, like, was our, like, Bitcoin boom. Right? We're buying all these properties, making money hand over fist. We owned a bunch of properties that we, like, bought that doubled in value in three years. We have since been able to recapitalize and use that to grow our business.

Cody Cressey: [22:44] We didn't know that. So just to know that so that we don't discourage people listening because it's like, I feel like I remember that. You guys probably do too in 2020 of, like, these older guys that are like, oh, we bought properties for $20, and I would never pay a $100 for that piece of crap. Like and so there's always that new challenge, like, in the in the current market. And I know people are looking at this market, sitting on the sidelines, and they're making up all these excuses for this current market, which are the inflation that you just talked about, Mike, and how the prices have doubled in the last four years. And, like, they're using all these excuses when I look at it as there's so many properties on the mall sitting there not selling. These rates are keeping a lot of buyers on the sidelines. You know what I mean? The glass is totally half full, and you can make money in any market, especially in wholesaling.

Mike DeHaan: [23:34] Well, the funny thing is I would even say this is still an easier market than it was in 2018 in terms of, you know, actually making money on deals because the properties are more expensive. So you legitimately just have more margin. You know, because a house that's $400,000, you can make more money on a house than a house that's $200,000 because there's more money there's more margin to be able to work through the deal. But I remember when I started flipping houses back in 2018, and so many of the old guys that you're talking about, Cody, were like, oh, this market's so inflated. The thing's gonna turn over any second now. And, you know, you would go in and you would list a flip. Like, the first flip that I list I listed, the realtor that we worked with, she was like, so a typical expectation right now is stuff sitting on the market for three to five months. And that was what you started with, was you're expecting that, you know. And now people get discouraged if things sit for thirty days.

Dan Austin: [24:26] Two weeks a week without an offer. Oh my gosh.

Mike DeHaan: [24:29] Yeah. Yeah. But, like and but stuff was tight. Like, the first deal that I ever flipped, I bought it for, like, $1.40. You know, I put 50 into it. I didn't know if I went 90. I sold it for $2.67. You know? And so after cost and everything else, like and

Cody Cressey: [24:43] Maybe netted $30.

Mike DeHaan: [24:44] No. That's that first one. I think I well, very first, netted $4. That one, I netted, yeah, $30,000 across all that. But it was still I didn't know how long it was gonna take. I remember I was so stoked when I sold it in, like, six weeks. That was, like, crazy because the expectation was three months. But stuff changes. And, like, the whole thing is you guys gotta be taking action and making your decisions off of data and what the market's actually doing. And honestly, like, find people that are doing the business. So this is one of the values of things like our scale community, right, or, like, other communities or listen to podcasts. Find people that are actually operating currently and just do what they're doing and surprise because there's 140,000,000 houses in The US. You only need, like, a couple dozen to make a very good living.

Dan Austin: [25:30] You don't need a lot, dude. Yeah. You don't need a lot. One a month, you can make a really good living. Easily.

Mike DeHaan: [25:35] Yeah. Like, honestly, if

Mike DeHaan: [25:36] you're as a one man operator.

Cody Cressey: [25:37] Totally. Yeah. 12 deals a year. Absolutely. I think most people would die to

Dan Austin: [25:41] do that. Exactly. You gotta play the game to win, though. You can't. Like you said earlier, Cody, there's lot of times people are setting up, you know, sit on the sidelines, making excuses. And you could see it, the right I mean, as we went in, as 2023 started, going into 2024, there's so many people. I still talk, I'm waiting for interest rates to come down. I'm gonna it's gonna be a yard sale, man. I'm gonna go out there. It's like, no. You're not. It's not how it happens. It's not how it works. People that are playing right now are the ones that are gonna win.

Mike DeHaan: [26:04] Totally. Everyone wants to be prepared to capitalize when it actually happens.

Cody Cressey: [26:07] Mhmm.

Mike DeHaan: [26:07] When you're trying to start the war, you know, during the bloodbath, you don't wanna you don't wanna be doing that. Right? You wanna already be.

Dan Austin: [26:14] Well, and if you have the crystal ball to what's gonna happen if whatever your metric is, interest rates go down, the president gets elected, whatever those metrics are, like, if you have a crystal ball, like, you should go gamble because you know you you know the laws of physics and everything really well and how things work. You're you're super smart. Right?

Mike DeHaan: [26:29] Like yeah.

Cody Cressey: [26:30] Yeah. If you have the crystal ball, call now at 509993. Mail that

Mike DeHaan: [26:35] shit to

Dan Austin: [26:35] me, dude. Please tell it.

Cody Cressey: [26:37] Yeah. Yeah. No. You're right, Dan. 100%.

Mike DeHaan: [26:40] I hope you guys are enjoying this episode. We are seriously trying to grow this podcast so that the voice of what it really takes to grow a real estate business becomes kind of the norm versus the guru get rich quick b s that everyone is fed on a daily basis. With so many podcasts out there, it is hard for us to get discovered on our own. So a quick ask, please share this episode on your social media accounts. Be that a real story, whatever. And if you tag me at mike underscore invest, then I will give you a follow. And I will also send you a DM so that we can have a little chat about your business and anyways, I could potentially help you grow. So again, please share on your socials. Tag me at Mike underscore invests, that's with an s at the end, and I'll follow you, and we can have a little DM and convo about your business. And maybe I can help you grow a little bit, or you could just say what's up to you. That'd be awesome. But appreciate everyone, and thanks so much for helping us grow.

Mike DeHaan: [27:33] So as we start to really scale our Spokane stuff here, Cody, what do you think for people that I would say I've been around for a little bit. They probably had a little bit of success. You know, they're trying to figure out this current phase of their business. What do you think is the most important thing for people to keep in mind to be successful in this current market from your experience having operated through all, like, the same phases?

Cody Cressey: [27:55] I would take it back to the wholesaling, to be honest. I mean, the wholesaling is the best way to get your capital raised. It's the best way to get a lot of experience with messy deals. It's the best way to put yourself at the center of your market between buyers and title companies and sellers and all these different people. You know? Like, you talk to wholesalers. They know everybody. And a lot of times, flippers and buy and hold people that are higher net worth individuals, they never start there, and they are always sort of on the outside trying to get the attention of the wholesalers. And, you know, wholesalers are cute girl at the bar, so to speak. You know what I mean? And so I think a lot of you know, I watch a lot of realtors and a lot of investors too in Spokane that are like, you know, I'm gonna kinda get in wholesaling. Like, how much is marketing? How do I do this? How do I you know? Because they see that. They see how attractive it is to be at the center of your own deal and have all of of that control. And then after that, that's when you can start to buy some of your lipsticks. You can start to spend your profits on rental properties. You can take the risk and do an Airbnb because you have a couple of deals in escrow, and you have that security and also that fast money because we've talked about before, like, flips are five to seven months. That was about around our average was, like, five and a half months.

Cody Cressey: [29:15] You know? That's pretty quick. To be honest, for a newbie, I'd say it's, like, at least nine till you're gonna see that cash off that flip. So I don't know. I think that's probably one of the main things I would highlight for anybody in this current market with all uncertainty.

Mike DeHaan: [29:31] Yeah. What what are your thoughts, Dan? What do you think?

Dan Austin: [29:33] Okay. So the most important thing for somebody to scale from where they're at right now, I think, is try to go back to the beginning of the conversation. But I think it's really truly focusing on what you want out of your business. I'll just, like, simply put it because, like, if you don't have a road map for where you're going, you're just gonna do shit. And you're gonna keep adding shit on to do, and it's not actually going to be helpful to you at all. And so really necking down everything of like, what do you want the business to look like in the next twelve months? You don't have to have a thirty year vision where you wanna be, but what do you actually want your business to feel like and execute from there. I think you need to focus on getting really good at wholesaling. I think you gotta keep doing that because I think as we know this, there's that's a good way to make really good, really good cash without taking undue risk and and stretching your cash and your your money too quickly. And then I say, if you want to, pick up a flip here and there. Don't pick up a flip because you think you need it to make the extra income. Pick it up as an opportunity and saying, have excess capital in my bank account. So now I can instead of taking a $15,000 wholesale fee, I can make $40,000 split. It's like

Cody Cressey: [30:44] an

Dan Austin: [30:44] opportunistic play, not an essential part of your business. That's my opinion for scaling, being consistent as well on your marketing to feed that machine so that you can seriously keep going and keep winning.

Mike DeHaan: [30:55] That's the same advice as you'd be able to give somebody years ago versus now, or do you think anything's changed with that sort of philosophy now? Like, in 2024, just the market's kind of changed a little bit.

Dan Austin: [31:06] That's the advice I give now. Has that changed from the beginning when I didn't know shit? Probably.

Mike DeHaan: [31:12] Probably. Yeah. When you will I mean, like, literally from you, but, like, in in hindsight, do you think that that that same principle applies, though?

Dan Austin: [31:19] Yeah. No. I think that applies 100%. That advice of how to operate your business, going backwards, how we operated, how I would have operated, how I would change my mind. I think the problem deal we get caught up with in this is just for firsthand experience, is they think that they need to to do everything, or they think that they need to be real estate owners to be in real estate. And so you get caught up in this very slow game while you're trying to build a business that converts cash quickly. And the slow game is buying rental properties and buying flips.

Mike DeHaan: [31:50] Yeah. I think on my end, like, the big thing that I would say is definitely different that I would really emphasize for people is the market now and the industry has become so much more sophisticated than it was three or four years ago. And anybody that's gonna try and get into this and think that they can spend I literally talked to a guy on Instagram the other day that told me he has a $100 a month to spend. Just save your $100, dude. I was like, just do anything out. My literally, advice I was like, bro, he's like, I have four hours a day. I only have a $100 a month to spend on my business. What should I do? I said, go drive for Uber for four hours and save up, like, as much money as you can. Then once you have, like, 5 or $6,000, then invest in, like, getting some data and a dialer and then just, like, start grinding because that's what you're gonna need to do. And so I think one of the big things right now is, like, the industry has become so much more sophisticated. There's a ton of people like us that, like, were born when the market was really strong and then survived when the market sucked ass

Dan Austin: [32:51] for

Mike DeHaan: [32:51] eighteen months. And we're those of us that are still here, we've built a lot of resilience. We built a lot of systems. We know how to operate. And, you know, we're and we're honestly kinda ragtag compared to some of the other people that are out there. Right? And to think that you can come in and do, like, the old bigger pockets sort of, like, just drive for dollars and with, like, a notepad and, like, write down shitty addresses and, like, you know, call those people. You're leaving your success up to luck, right, which is not realistic. And so I think it's so important that if you're gonna pursue this, you need to pursue it from a position of, like, you're willing to invest money, you're willing to kinda take a quote, unquote risk, you're going to have to really work a lot harder than you feel like you probably have to. And if you're not willing to do that, then you should probably go and do something different at this point.

Dan Austin: [33:37] And I I wanna add one thing. If you're taking advice from somebody about driving for dollars that hasn't driven for dollars in a decade, it's probably not good. If you're taking advice from a dude who dyes his hair pink on novations, I mean, we're past the novations season. Like, that got hot for, like, six months. We're past that. From a guy that's never done a novation, you probably should just turn turn them off on your Instagram profile. Don't get advice from people that don't actually do what the hell they're talking about because that's probably outdated information.

Mike DeHaan: [34:06] Yeah. Totally.

Dan Austin: [34:07] The business is sophisticated, it's moving it moves quickly. That shouldn't discourage you, though, because for every city where there's a big operator that's doing a really kick ass job, there's still a shit ton of low hanging fruit that you can

Cody Cressey: [34:19] go and grab and nibble on. Totally.

Mike DeHaan: [34:21] And that's a big reason that we moved our our Monday shows over to being the scale show. We're interviewing operating members of our community is because we are in such this pattern where every guest that would try to come on to the show, they haven't done a deal since 2019. Right? And I'm like, I don't care about what this person has to say because it's not relevant That's wild. Years later.

Cody Cressey: [34:39] We did a deal yesterday. Yesterday.

Mike DeHaan: [34:41] Yeah. I know. Right? Yeah. Exactly.

Cody Cressey: [34:44] I mean, we're not that big. We've done four deals this month. We're halfway through. You

Mike DeHaan: [34:48] know? Right?

Cody Cressey: [34:49] Yeah. No. That's good. That's good. I like that, Mike. I think that market is is or the environment is way more sophisticated than it was in 2018, and that's that's really good wisdom for anybody listening. And that kinda back into the I know you weren't trying to do a plug there, but that highlights the value of, like, your guys' scale group or anybody else that that you trust and is offering quality education. I know that you guys did a lot of education in the beginning, and that's why you were able to move so quickly. That's exactly why Ali and I were able to move so quickly is because we joined programs and paid for coaching and paid for mentoring, and it quickly got us in the game. You know what I mean? It also gives you that accountability. Whether it's good or not, when you spend, like, $5,000 and you've done, like, two deals, that's massive for your soul. Like, you're like, alright, whatever I just bought, I'm doing everything. So it could be crap, but at least you're, like, doing so much stuff, and you're so desperate to, like, get an ROI on that education spend. Totally. And so I don't know. I mean, people have said that for years, but it's like, it's because it's true. You're you're paying for the shortcut, you know, like I played in a bunch of golf scrambles this this summer, and they'll give you, like, string and stuff that you can buy for, like, $5 so you can lay out the string on your putt and cut it so you don't have to take the putt. It's like that. You're buying shortcuts.

Cody Cressey: [36:15] You're buying a quicker path. You're also buying great friends and a great network that you do deals with. So I'm a big believer in doing that or just getting involved locally. Taking people out to coffee, get you know, that's the way that you can sort of shortcut what Mike talked about and understand what these sophisticated tactics are. You know what I mean? Compile your own list that way.

Mike DeHaan: [36:39] Yeah. And you can learn anything on the Internet right now from watching YouTube, listening to podcasts, you know, reading blogs, reading books, whatever. But when you join things like that and you get around people that are actually doing what you're trying to do, you're paying for speed. You know? And it comes down to do you wanna spend years learning or, like, trying to piece together what actually is relevant for you, especially because the things that get promoted on the Internet aren't always the best content. They're the ones that are produced by the highest performing content creators that are willing to pay to play. And that's why you see a lot of people that are spewing bullshit with pink hair that are, you know, selling things that aren't fully relevant. Right? But you can actually pay for speed with that and get a package of exactly what you're supposed to do. That's why guys like Alex Schramozi have blown up because he gives you things that are super actionable that are like, this is exactly what you should do. Here's why you should do it. Here is my exact, you know, case study about why it makes sense. And, you know, you can you can pay to get that knowledge a little bit quicker. Exactly. Cool.

Mike DeHaan: [37:36] Alright, guys. Anything else to wrap up before we go?

Dan Austin: [37:39] No. I'm good. I'm good.

Mike DeHaan: [37:40] Alright, cool. Well, thanks, Cody for joining us today. Hopefully, you guys got some good insights there on, you know, how you should be viewing the growth of your business and scale and sort of where the market's headed and everything else. So go ahead and share this with anybody else that you know in the real estate space. It really helps to continue to grow the show. We appreciate it. And appreciate you guys listening. We'll talk to you guys next week.

Dan Austin: [38:00] See you. See you.