The Truth about Cash Flow, The HomeVestors Scandal, and Marketing to Entrepreneurs

Mike DeHaan: [0:00] Theoretically, if everything was operating as it should, including CapEx and maintenance set aside, we should be cash flowing, you know, with our joint portfolio about $9,400. Right? If stuff was going as expected. Instead, without these expenses, the bank account has been slowly going backwards for the last, like, two months.

Dan Austin: [0:20] Yeah.

Mike DeHaan: [0:20] Right? So that those are you know, do the quick math. That's like $20,000 in expenses that we've had.

Dan Austin: [0:25] Mhmm.

Mike DeHaan: [0:25] And now you think about these people that have, like, four properties and claim to make $4,000 a month. Liars. Liars. Like, it just doesn't it's just not how it works. Doesn't add up. What's going on, guys? Welcome to this episode of the collecting keys real estate investing podcast. On this Wednesday episode, you have the Mike and Dan show where I, Mike Tahan, and my cohost here, Dan Austin, talk about real estate investing business and anything else that's going on in the world that piques our interest. But first off, I am it's funny. I feel like this year has like flown by. I can't believe there's already the middle of May when we are recording this.

Dan Austin: [1:09] Yeah. It's tough.

Mike DeHaan: [1:10] It it is tough, man. Something that I always think about when it's like passage of time, right, is that that concept of people grossly overestimate what they can do in a month, but they grossly underestimate what they can do in a year. Mhmm. And how true that is, especially when it comes to business. But how I feel like it's so easy to I mean, even since we got back from our our business mastermind, you know, what week and bit ago, you set these goals for, like, the next, like, month, and it's kinda hard to, like, keep up

Dan Austin: [1:40] on them. I'm looking at it right now.

Mike DeHaan: [1:43] But then you but then you look at the goals that you set for, a year. It's like our our annual goals for our business, we've already reached

Dan Austin: [1:49] Yeah. We've already reached that. Yeah. Yeah.

Mike DeHaan: [1:51] It's I don't know what that is, but that's like a reoccurring thing that I feel like just sort of happens in life. I mean, even not too long ago, maybe a month or so ago, I made an Instagram post where I found in a book my five year goals for when I got started in real estate, which I coincidentally written about five years earlier. And the funny thing was is, like, a lot of the goals that were, like, my five year goals, had reached in, like, year three,

Dan Austin: [2:13] if that. And you thought you'd be set for life if you reached those goals, or were those just like, oh, those are just my stepping stone? Because that's my thing, is I think about a lot of these goals, and you're like, I totally blew those out of the water, but I don't have the sense of what I thought I would have when I reached these goals.

Mike DeHaan: [2:29] Well, for sure, right? And I mean, when I set those goals, those were like my set for life goals. Those were my retire early when I'm 30 goals, right, which are a bunch of bullshit. And because the thing is your you know, the goalpost change

Dan Austin: [2:44] Yeah.

Mike DeHaan: [2:45] Not necessarily because you get greedy, but because your perspective on life changes. For sure. When you learn how to make money and you learn, you know, sort of how to be in control of your own ship, all of a sudden, you're like, well, I thought I was gonna be happy with that living off of $4 a month, but I don't have to do that. Like, I can actually have luxuries.

Dan Austin: [3:03] Well, think as you mature, certain inconveniences just don't even they're not acceptable anymore. For sure. Certain inconveniences when you're younger and when you're struggling, you're like, well, if I just get to that level, you're like, okay, I'm here, but I don't like mowing my lawn. Mhmm.

Mike DeHaan: [3:20] So now I need a

Dan Austin: [3:21] couple $100 a month extra.

Mike DeHaan: [3:22] Yeah. And I also think that there is there is something to say about how you get to that position. Right? Because I think if you kinda like a grind there and it's super slow and methodical and you get to, like, your $5,000 a month number, which is always the number that every single person has when they join the instant investor program. 5,000? Yeah. They're a new, you know, they're a new person. Right? A new investor. There's, like I can't tell you how many conversations I've had with a new investor where they're like, my goal is to make $5,000 a month in cash flow for rental properties. Cool. Right? Mhmm. But if you I think if you grind to that really slowly, and you kinda just barely irk there, you can be more satisfied with that, versus if you have a big jump, and you suddenly have 5,000 a month, and you're like, well, I also made $700 last year, so $5,000 a month isn't that sexy anymore. Yeah.

Dan Austin: [4:09] That's a problem you and I have ran into.

Mike DeHaan: [4:11] Yeah. Exactly. Right. It's Like,

Dan Austin: [4:12] our rental properties at this point, like our portfolio, I kinda just think of that as a time sink and not a cash flow, like, center for us, which I guess it is, but sometimes it doesn't feel like it because the number gets to be so small when you're looking at higher higher ticket items. It's kinda like making a, you know, $5,000 wholesale fee versus flipping a house and making 80. I mean, I still am excited I made $5, but 80 is way bigger than 5. Well, if

Mike DeHaan: [4:38] you're if you're getting selling a house for a $5,000 wholesale fee, when you could flip it and make 80, you should freaking flip that house.

Dan Austin: [4:43] For sure, you should I'm comparing two houses. Yeah.

Mike DeHaan: [4:46] You should wholesale that deal for $40, and the flipper can make $40, and they'll be equally out.

Dan Austin: [4:50] It's like the other day when you you were talking to me, you're like, hey, by the way, like, I basically just found a $20 bill in my ski coat, which was a $5,000, like, loose $5,000 money that was hung up in one of our accounts. And it's like, Cool. I don't even think about that anymore. Where when you're starting out in business, especially every penny counts, and it's not that $5,000, not that we overlook that, but it's like the excitement around creating $5,000 is nowhere near as satisfying as it was when we first started.

Mike DeHaan: [5:17] Yeah. Because you know how to do it. Right? And that's one of the the things when it comes to rental properties that's kind of a farce too is, you know, you always hear these people that talk on social media. They're trying to sell you something or get on BiggerPockets or whatever, And they're just like, oh, yeah. You know, we have these seven properties, and now we retire. We don't do anything. It's like, well, I can tell you that they're not telling you the whole story. Right? They either have a windfall from somewhere. Right? They have a huge amount of money that they've got probably from selling you ebooks that you buy. Right. They like, with their properties, they're not telling you any of the expenses that they definitely have. I mean, we even have, like, some really nice properties, and those have expenses that come up with them.

Dan Austin: [5:56] They do.

Mike DeHaan: [5:57] And those e those they eat kinda like an entire year of cash flow, Or they are living such a meager lifestyle that if you're the average person, you don't actually want that. Even though they get to go to the beach every single day, like, it's not that sweet when you go home, and you have to, like, weigh out your spam and rice to make sure that you don't go broke by the end of the week because you're not getting your rent collected for another twenty five days. Some people love that, man. They love

Dan Austin: [6:21] that frugality lifestyle. Makes them feel like they're in control.

Mike DeHaan: [6:25] For sure. It's just not for me. Just different perspectives, I guess. But point being, as, you know, we get into this phase of the year all of a sudden, just looking at, like, our year long goals, and I'm starting to try to figure out how we can start moving the needle again. And, like, what we realistically should be shooting for. Right? And it's funny because there's a lot of people say, if your goals don't kinda scare you, then they're not big enough. But the thing is, it becomes kinda like this fine balance of when you're being mature about it. Right? You're not trying to put a put a line as your Facebook profile picture and motivate people with bullshit like that. Setting realistic goals about what you can achieve, k, and putting action in place for it, but also make sure that you're kinda pushing the boundaries a little bit, but you're not driving train off the tracks. Because, like, we could push and try to pay a $10,000,000 business by the end of the year, but we will probably fail because we will absolutely just, like, be fraying the boundaries of the business and the systems the entire time. Right? And then it comes down to sustainability after that. Yeah.

Dan Austin: [7:29] Yeah. Yeah. Like, what's your big, hairy, audacious goal? And, like, that's great, but the accomplishing of that, if you don't actually know how you're gonna do it, like, are use there's some dumb people out there. No offense to you guys that set large goals because I think and if it's a realistic timeline, it's great, but if it's a twelve month timeline, if you have this big goal, to your point, Mike, you're probably gonna fail because there you there has to not only be a path there. Mhmm. Okay. So for us, okay, what would we do? Step one, okay, increase marketing. Just like any other business, increase marketing, convert more sales. Alright. We've done it, but what about all the other systems and things that you need to do once you do increase marketing and career or sales? If you can't actually monetize those people because when they come in, you don't know what to do with them, it was a big goal that didn't freaking matter anyways, and there's no path to get there.

Mike DeHaan: [8:15] Yeah. Yeah. For sure. Right? And, you know, there's there's a difference between, like, deciding that you're gonna climb El Capitan and you're gonna free solo it. Yeah. Right? Like, you can free solo it and make it, but you're a freak in nature. Everyone's like, damn. Yeah. Or you could fall to your death. Yeah. Right?

Dan Austin: [8:30] The risk versus reward is super high.

Mike DeHaan: [8:33] Yeah. Totally. And then the same thing can happen in in real estate. Right? Especially because it's a leverage based business. So, far you can increase marketing, you know, people are trying to buy rental portfolios. And we saw this a lot in 2021. They're like, I'm gonna raise private money. I'm gonna buy everything. And then, you know, oh, well, I can't get any more loans. I'm just gonna personally sign on all these loans. And then shit gets weird. They can't exit properties, and now they went bust. Yeah. You don't quite fall to your death, but financially, it's pretty close. Right.

Dan Austin: [8:59] Well, and you have a lot of road bumps along the way as you're doing some of these things. I think we have a whole list of road bumps to talk about today that just slow you down, that just deter you, that just kind of make it hard to climb El Capitan even with a rope.

Mike DeHaan: [9:14] Yeah. Alright. So the I mean, the speed bump show. I feel like we were on a high horse last week coming out of the the bit of a business

Dan Austin: [9:21] Oh, now, yeah. Now you want the dose of reality?

Mike DeHaan: [9:23] Yeah. So so now that was the dose of reality. This is what's really been going on in the world after coming back from our our mastermind.

Dan Austin: [9:30] I don't know. Where do you wanna start?

Mike DeHaan: [9:31] Let's go to the rentals because we've given a lot of mindset, like, sort of business shows the past couple weeks. But I know our rentals are absolute fucking shit show right now.

Dan Austin: [9:38] You did text me and you're like, man, it feels like the bank account that keeps going backwards, but not forwards. Should it be going forwards?

Mike DeHaan: [9:44] And then you listed off nine problems

Dan Austin: [9:46] that we're having across our portfolio. We have had a rent collection issue, some that are justified, others are just stupid. So we had a person that worked for us that put on the lease that we collect first and last month's rent, right? Uh-huh. So this is setting context. I looked at the lease, I was like, yep, it says that. We said that we collected first and last. That is not our policy, by the way. Yeah. Anyways, we gave a sixty day notice to a tenant two months ago and said, get the hell out because you're trashing our place, basically. We don't want you as a tenant. Same tenant. And they waited till April 30, which was a couple weeks ago now, to actually start applying for apartments and houses, and they were supposed to move out on April 30. Right? And of course, and tenant did not pay April rent. We have a property manager, and the property manager's like, yeah, so I see the lease, and she's telling me that she paid first and last. I was like, okay. Let that figure that out. And then I started digging into it, and I was like, she did not pay last. We said we were charging her for last, but she did not pay. And so now she's gone two months, still hasn't moved out without paying. So we're mitigating that, right? So that's one problem with collecting rent.

Mike DeHaan: [10:58] What's our goal with that? We're evicting her or what?

Dan Austin: [11:01] We're playing nice for now. Why? Fuck this lady. Well, so she's actually she she's going to pay us, like, for sure. She's gonna No. Pay

Mike DeHaan: [11:09] She's not.

Dan Austin: [11:10] Well, she's going to have to pay us because her deposit's not enough to cover the damage that she caused. So she's going to pay one way or the other. Whether we actually collect it, I don't know, but she's going to have some issues, so to speak. K. First goal is just get her out. That's what I mean by playing nice. We're just saying to cook, like, you gotta get the hell out kinda thing. And then what else do we got going on? Anyways, we got like four or five other rent collection issues from people that just know, things happen. Right? We got some section eight people that the housing authority hasn't paid us yet, because that's always a transition for those of you that are looking to add section eight, which is great, good tenants usually, but there's this whole process when you wanna switch to a property manager, change property managers where you have to do this whole rig and roll to request payment to a new account, and usually you have a couple months lag typically. So we've got all that. And then we've had some maintenance issues. We are replacing a sewer line. We've had a couple more hot water tanks. Those have kicked our ass this year.

Mike DeHaan: [12:06] What's up with the hot water tanks? Why have you had so many of those? Are they all old?

Dan Austin: [12:09] I don't know, man. I honestly don't know.

Mike DeHaan: [12:11] Is it like is it the hard water in Spokane, do think?

Dan Austin: [12:13] No. We've never had hot water tank issues like this. I think it's just luck of the draw. We had some that were old that we just chose not to replace because we weren't planning to keep the property that long anyways. But yeah, those are the hot water tanks are a funny thing because they're really not that expensive, but they kind of are. When you hire a plumber, when you talk about you can go to Home Depot and buy one for $500, but when you throw in the plumber there, next thing you know, you're $141,500. And then you add in the fact that you can't find a stinker plumber in Spokane, and you're gonna go up to $181,900, $2,000 for a stinking hot water tank, which for many of you out there, if you're at $200 a door cash flow, that just wiped out maybe your set asides for the year, because that's a decent capital side. So say maybe you're putting away a $100 a month for capital replacements like a hot water tank, twelve months, dollars 1,200, and kinda start seeing how this goes, and that's why you have those set asides to make sure that that 200 cash flow stays as $200 as possible.

Mike DeHaan: [13:08] Yeah. And so, I mean, and here's how impactful all this can be. Right? For, you know, talking going back to before these people trying to live off of the cash with their properties. So, you know, I have our numbers here. Theoretically, if everything was operating as it should, including CapEx and maintenance set aside, we should be cash flowing, you know, with our joint portfolio about $9,400. Right? If stuff was going as expected. Instead, with all these expenses, the bank account has been slowly going backwards for the last, like, two months. Yeah. Right? So that those are you know, do the quick math. That's like $20,000 in expenses that we've had. Mhmm. And now you think about these people that have, like, four properties and claim to make $4,000 a month. Liars. Liars. That's not how it works.

Dan Austin: [13:52] It doesn't add up because of the fact that we've owned enough. We've grown our portfolio or shrink our portfolio right now. We've owned enough, we've stabilized enough properties to understand, and we're in a pretty and you and I too have owned in cash flow market and appreciation markets, and our experience in Spokane alone, right? Spokane used to be a pretty good cash flow market, now it's more of an appreciation market. So we've lived through a few things in just a short period of time. And so, yeah, the tough thing people don't talk about, especially if you're growing a portfolio, is it takes years to stabilize properties if you're not adding them to it, because every time you add a property, you add risk, and guess what? You don't have a reserve for capital expenditures and operating expenditures. You don't have that reserve yet. So if something does happen to that property, you're taking that from another property's reserves until you've saved it up for the cash flow for that property. And so if you're always adding a property, and I guarantee you, the longer you own properties, the more things that fail, so if you're always adding one to two to three properties a year or more, you're always dealing with this churn and attrition of your capital, CapEx and OpEx reserves, meaning that you can do two things.

Dan Austin: [15:04] You can say you're living out the cash flow, or you actually take that cash flow to build up those reserves a lot quicker and not have the cash flow fixed to you directly. You're still putting it in your bank. Yeah, you're just not getting it to go live off of. And so when you see these people saying that, yeah, they're like, we bought a quadplex, and now we're financially free. It's like, no, you're not. And even savvy investors that I know that own quite a few properties, they still look at top line revenue minus PITI minus the principal interest tax and insurance and call that cash flow. And I can't believe we're even talking about this. It's basic fundamentals. That's not your cash flow.

Mike DeHaan: [15:37] Yeah. But they I mean, they gotta feel good about all the time they're putting in, though, man. That's all they care about. I mean, I don't know. I think that's why it's so important that, you know, if you're going to do real estate, that you should do it as a business, and you should have an active component to it as well where you're making massive income and not just focusing on the passive income. I found out why I stole that from you, by the way.

Dan Austin: [15:56] If you're leaving your w two quote, right, to be a real estate investor and and you think your only path to success is passive, don't put yourself in that that box. Make sure you add it, like, your point in active development. Maybe it's flipping three houses a year, maybe it's wholesaling deals, whatever it is, maybe you do get to that point to where you can actually hit $5,000 a month in really good, clean cash flow. You still want that option and opportunity to make some real money to go and have fun and blow on things.

Mike DeHaan: [16:25] Yeah. Even if you don't wanna do the traditional investing style businesses of flipping and wholesaling, there's other stuff you can do. Right? You could be a realtor. Mhmm. You could be a contractor. You could go and start some kind of contracting business. It doesn't even have

Dan Austin: [16:38] to be real estate specific.

Mike DeHaan: [16:40] It doesn't. Well, I mean, like, if you wanna be kind of in that realm where

Dan Austin: [16:42] you still

Mike DeHaan: [16:43] have a reason to network with investors. Right? Start a landscaping company. Start a door hanging company.

Dan Austin: [16:49] Maybe you're a handyman. Maybe you wanna be a handyman and start charging people a $100 an hour.

Mike DeHaan: [16:53] Maybe you're not a handyman, but you're good at networking, so you bill people $80 for handyman work, you pay a handyman $50.

Dan Austin: [16:59] You

Mike DeHaan: [16:59] make $30 on the spread. That's called a business.

Dan Austin: [17:01] And I think the cool thing, key to that is if you can actually get to this point to where your basic needs are met with the cash flow real estate, then you can start trialing and airing things that you actually wanna do, because oftentimes you find that, yeah, maybe it was a good thought to produce active income in a certain way, but it was just not, because it was like going to work every day. And so you don't wanna do that, so you try something else, because your basic needs are met, you don't feel like you have to be stuck into that. Mhmm.

Mike DeHaan: [17:30] Yep. And that's a super huge point, you know, and that that massive income versus passive income Dang. That I've said past couple times. I found out who I stole that from.

Dan Austin: [17:39] Oh, you found the

Mike DeHaan: [17:39] No. I didn't. So so Nick, one of the guys in our our instant investor program, he heard of me today on the last one, and he sent me a video from Brandon Turner from, like, 2018. That doesn't count. It doesn't count. Right? Like, it's like one thing that he said a long time ago, and it's never been from anywhere.

Dan Austin: [17:57] And he is not branding it, so you can get a notebook with massive income versus passive income on the front, and that could be your thing, that could be your daily planner that you sell.

Mike DeHaan: [18:08] Absolutely, mean it should be, right?

Dan Austin: [18:09] That's the thing everybody's selling right now, that the daily planner goal setting.

Mike DeHaan: [18:13] You know, what a business model to be in right now is, especially I feel like post COVID, the entrepreneurial hustle mindset, just like bullshit of everything. Like like like, all the people so so I have I have a really good friend of mine. He's probably gonna listen to this too, and I'm about to shit on him. They bought a cold tank, k, which is cool. Like, I get that. I haven't seen it, so I don't know what it is. He told me it's like an inflatable cold tank. Right? I'm like, so you bought a kiddie pool for $200 Yeah. In I don't know if he's I haven't

Dan Austin: [18:49] seen an inflatable one yet. I've always seen the fancy ones that are $12,000.

Mike DeHaan: [18:54] Yeah. And I don't know what the difference is. I haven't seen it. But I have in my image that it's literally a industrial designed looking inflatable kiddie pool with kick ass whatever branding on it, and that's the thing.

Dan Austin: [19:09] Well, because cold plunging is the hot thing right now, the hot health thing.

Mike DeHaan: [19:12] I know. It's just so crazy to me. Not as big

Dan Austin: [19:15] a thing in the GoBundance crowd as the IVs that everybody gets.

Mike DeHaan: [19:19] Oh my god. And I don't know if

Dan Austin: [19:20] those are good. I have no idea, but I just know a lot of people do that, a lot of people that have money to go get their vitamins injected into them. The only time I've given myself an IV is when I was younger in the military, and you get really hungover and you just hydrate yourself with saline. Like, that was

Mike DeHaan: [19:35] Yeah.

Dan Austin: [19:36] That was cool, but never vitamins.

Mike DeHaan: [19:37] Here's also the thing too. There's always people that do that, and none of them drink. So I'm like, what's the point?

Dan Austin: [19:41] Oh, they don't the guys that do that, the people that do the vitamins, they don't drink alcohol?

Mike DeHaan: [19:45] No. So so, like, because because you do that. Right?

Dan Austin: [19:47] Because they're too healthy.

Mike DeHaan: [19:48] They're too healthy. But the point of that is so if you're dehydrated and you have problems, you can level out your body.

Dan Austin: [19:52] What? You get the insulin like, what do they call that stuff?

Mike DeHaan: [19:56] What? The IV fluids? They had some the name for saline solution.

Dan Austin: [20:00] Well, I knew that. Like, just saline, but there's I'm talking about the guys that go out and get, like, their cocktails of, like, energy and b twelve. And it's like they're just slamming, a five hour energy into their arm, and they're like, I feel great.

Mike DeHaan: [20:13] Totally. Guess you just put put a bunch of freaking caffeine in there. It's like the poor person's version of the blood boys that they used to do in Silicon Valley, which I'm sure they don't do anymore. They made fun of it on on that TV show, but it was actually a thing where you have the billionaires that would go and find, like, a young, like, super healthy 20 year old that had the same blood as them. And they would, like, pull out their blood, and they would whip it through these things, and then they would put it in their body. It's kinda basically like blood doping Yeah. But with somebody else's blood.

Dan Austin: [20:40] Yeah. Which is kinda gross, but So your point is is that the hustle culture right now is making it so people buy inflatable dip tanks.

Mike DeHaan: [20:49] Well, my my point is is that if you're an entrepreneur, entrepreneur, right, if you can find somebody to appeal that crowd, you can do so absurdly well if you can get a good marketing team behind it.

Dan Austin: [21:00] Right. Well, it goes back to its marketing. Right? I'm curious to know who started the like, what did the main was it Joe Rogan, like, that's the main cold plunge? This is several years ago now. I mean, because like of like, what was the purpose of that? I don't know that I believe in any the studies, and I haven't read any the studies behind it that it's actually good for you.

Mike DeHaan: [21:19] So there's always been kinda like the alternate health crowd, you know? So I remember hearing about some of that stuff god, decade and a bit ago. Started with that company Onnit.

Dan Austin: [21:28] Yeah. Yeah. And that's Joe Rogan's company. Right?

Mike DeHaan: [21:31] With Joe Rogan has ownership in it. That guy that owns that company is

Dan Austin: [21:33] a freaking sleazebag. Aubrey Marcus. Is that his name?

Mike DeHaan: [21:36] Oh, yeah. He's he's such a snake oil salesman. Yeah. Aubrey Marcus.

Dan Austin: [21:38] But Oh, now cold plunges are snake oil salesman?

Mike DeHaan: [21:42] I mean, they they have they have they have some proven stuff. It's just not the way that people use

Dan Austin: [21:45] them. Yeah.

Mike DeHaan: [21:46] Yeah. He's the one that first started with, like, the nootropics, and then he was doing the hot cold therapy and all. But, like, the biohacking thing kind of started mainstream from them, I'm pretty sure. And then, obviously, we have

Dan Austin: [21:56] He's like, dude, I feel great all the time. I do all these things and HGH.

Mike DeHaan: [22:00] HGH. Right? Yeah. Just, like, weird stuff. And then also, mean, Ben Greenfield, who's just up the road from us here, like, literally fifteen minutes from our house.

Dan Austin: [22:08] He's a nerd.

Mike DeHaan: [22:08] He was super into that, but he was also doing it from like a kinda came up with like the paleo sort of movement, you know, in like the twenty tens of like, oh, we only eat and do things like cavemen did. And cavemen were exposed to Yeah. I eat pig feet. Extreme temperatures all the time. And then they just decided, oh, maybe we can productize it and turn it into a thing where we convince CEOs that they shouldn't make too much money, or people that wanna be like CEOs. Just top down model. Yeah. Well, the thing with all that stuff, and this always drives me crazy too, is people get so into it, and they have, like, these crazy routines and all those sort of things because, like, people like Joe Rogan or Tony Robbins or whoever else is, like, doing these things. Right? Those people, they can do all that. They can have their five hour morning king because they're already fucking loaded. They can do whatever the hell they want. They don't they're not successful because they do things. They do those things because they're successful and they can.

Dan Austin: [22:59] They did decades of grinding so they could have their five hour morning routine.

Mike DeHaan: [23:02] Exactly. Yeah. You know, tell you what. You know, when Joe Rogan was on the rise, he wasn't doing any of that. He was was he on Fear Factor?

Dan Austin: [23:10] Was that

Mike DeHaan: [23:10] Joe Rogan?

Dan Austin: [23:10] Yeah. Yeah. Was. I remember that.

Mike DeHaan: [23:13] He was there making girls with fake tits eat spiders off casino tables. That's where he came from. Like, partially scripted. Oh, yeah, dude. He was probably in the back, like, just hating himself, taking a shot at tequila, going out there trying to encourage people to eat more of the spiders off the blackjack table. I remember that in particular, one of the Fear Factor episodes where they have these big ass spiders with, like, these claws, and they're making them eat them. Gross, dude. Or the worst one I remember now we're getting in all the fringes. There was one episode they did where they cracked an ostrich egg.

Dan Austin: [23:45] Oh, I remember that one. It's slightly down.

Mike DeHaan: [23:48] Remember that. Yeah. And they had to drink Yeah.

Dan Austin: [23:50] That's gross.

Mike DeHaan: [23:51] Yeah. That shit was

Dan Austin: [23:52] terrible, dude. Let's talk about this We Buy Ugly Houses article instead. Let's talk about that. I think

Mike DeHaan: [23:59] that's Yeah. Good Give some background on that.

Dan Austin: [24:02] Okay. So I was sitting there. Actually, was like this is stupidest.

Mike DeHaan: [24:06] I just can't get off the ostrich.

Dan Austin: [24:07] Was like So funny. Probably four thirty on a Saturday morning. I probably sent it to you while I was awake. I don't know. But it was I can't remember who wrote that article or I guess what company. It was like some kinda it was kinda like a fringe.

Mike DeHaan: [24:18] It was a yuppie super liberal apple crybabies.

Dan Austin: [24:22] It was. Right? It was something that because I'm super basic, and I have the news thing on my Apple thing on my phone, and so once it pops up, I was like, oh, we buy ugly houses. I got the notification that a new article had posted, and that's one of the few, because I don't pay for Apple News, one of the few that I have access to. So I read quite a long article about this reporter who kind of dove into the brand, the way we buy houses, the Homevestors franchises, which is the biggest off market real estate company based out of Texas, it's been around a long time, and the article started from a son of an older lady who had dementia, who had sold her house to a local franchisee of the HomeVestors group, and it was obviously at a discount, and because the lady had dementia, the son got involved, and was like, what the hell? And then the guy, it sounds like, was a dirtbag. I was like, nope. I signed a contract with her. We're slowing it at this price, and it got kinda messy from there, and I don't remember the results if there were any from that one, but then the person went and investigated the corporate home investors, and was having all this dialogue with all these different people, and really painting it in a very, very bad light, and kind of that stealing money from old ladies, and taking advantage of people, and buying houses at a discount, but didn't really talk about any of the why people would be selling at a discount, or speak to any of the positives that come out of that. And this was, again, just targeting home investors, franchisees only, which I'm okay with.

Mike DeHaan: [25:47] Yeah. I mean, you know, it's people that are anti real estate investor. Right? Right. But a funny thing to me about that article well, first off, whenever I see something like this, I always think it's funny, because the people that are in this, they fall into a certain political demographic 90% of the time. They're anti capitalist, usually super liberal, whatever. And all of sudden, care about old people when the rest of time, all they do is bitch about how old people made it so that they can never live the American dream. Yeah. So it's like, stop fucking pretend like you can. Exactly. That's the best part of it. Two, the language that was used in the article was so, like, inflammatory in a way that was just very silly that made it sound, you know, really bad. And, you know, there's there's bad apples in every industry.

Dan Austin: [26:26] Right.

Mike DeHaan: [26:27] It's gonna happen. Real estate's no difference. Real estate is almost more prone to it because there's a lot of money on the line, and the barrier to entry is relatively small. Yeah. You know? So it's gonna happen. You can go find a car salesman. You can go find it in health. The same people that are peddling nutrition stuff at different doctor's offices or shops, they have just as bad ethics as these people. So that's gonna happen. And the last thing though that I really noticed was how the person that was in question was the top performing We Buy We Houses franchise, I think it said. And they've only done, like, was it 50 deals in the last two years?

Dan Austin: [27:01] Right. Yeah. Yeah.

Mike DeHaan: [27:02] Yeah. I was like, that's really bad.

Dan Austin: [27:03] Like, that's pretty bad.

Mike DeHaan: [27:05] Like, honestly, for the cost to operate that business, I've only done that because We Buy Ogley Houses is insane.

Dan Austin: [27:11] Yeah. They pay a franchise fee, plus they pay a fee per lead. It's a pretty costly model. It is. Is it a great model? I don't personally know. We know a guy locally, really good. He's great. Does good. He does a lot of work outside of his home investors model, not like outside of it, but like he sources a lot of deals locally from people like us and all that sort of stuff. Yeah. Great guy. Honest, high integrity, I would do business with him any day. We've also met other guys where it's like, you suck. Oh, yeah. Like, you paid for this franchise for this franchise. You suck at everything anyways, and you're desperate because you're losing money every month because you don't know how to run a business regardless.

Mike DeHaan: [27:46] Yeah. And then so what it costs well, no. Shout that out. It's like an $80,000 upfront investment to get all of their stuff, which I even know what it entails. Then they require you to spend a certain amount of marketing money into their pool Mhmm. K, that they use to operate. They operate it for you in your market. And then they make you share those leads with the other we buy the houses, home investors, people in your market. Right? And then on top of that, when you do the deal, you have to give them a portion of the deal. So you're kinda getting wrecked all the way around.

Dan Austin: [28:16] Yeah. I think some of that when you give them a percentage of your deal, I think some of that does go into that local marketing pool, like the local larger pool because they do all the billboards and all that bullshit for them, which is funny though because they drive them all to their website on everything, and so you don't actually have control of the leads coming in there. You basically have to buy the leads from them. So you just basically get whatever they give you.

Mike DeHaan: [28:38] Exactly. Yeah. And I remember talking to Jake, who's the guy here today, and what was he saying? Their average cost per lead was like 11, per deal was like $11,000?

Dan Austin: [28:46] I don't remember, but I'm sure it's gotta be pretty high.

Mike DeHaan: [28:49] It was really high. It was like three or 4 x what ours was.

Dan Austin: [28:52] Which is why a lot of those guys end up flipping almost everything they get. Yeah. Because they don't have as much opportunity, and their cost per deal is so high that they need to flip it to make that extra margin.

Mike DeHaan: [29:02] Yeah. I mean, and and the crazy thing is too is they don't provide any, like, real estate education or anything else. So people buy into it, they don't even know what they're doing. We had a guy that we worked with in our partnership program for a while that didn't even know how to comp houses. Yeah. I forgot about that. So what a freaking nightmare.

Dan Austin: [29:16] We didn't know much at And

Mike DeHaan: [29:17] yeah. But the pitch when we decided we gonna work with him was he had a home investor. Oh, cool. This guy knows what he's doing. Yeah.

Dan Austin: [29:23] Nope. Does off market real estate. Does not

Mike DeHaan: [29:26] No idea. Did not know it. Yeah. Yeah. And that that's, like, kinda directly we're trying to compete with, but we are competing with with our partnership program is so let's say you wanna do an off market business. K? You wanna do an off market real estate, a wholesaling business. You don't wanna do any of the Instead of paying them $80, come pay us a fraction of that. We'll run the entire thing. We'll do the sales. We'll do all of it. And then, you know, you can have most of the deals too. We're not even gonna rip you off like those people. And you don't have to have a stupid caveman as your logo.

Dan Austin: [29:52] You don't have to have this You don't have to have the sunk cost bias where you just paid $80 upfront, it's like you pay a smaller fee ongoing, so that you can make clear decisions. The problem with a lot of franchises, even non real estate ones, is you have to pay so much per month, and then they cripple you with franchise fees throughout of taking a big chunk of your profit, and so it's like this almost this pyramid scheme, where basically, the person that paid up front is getting the shit into the stick. Like, we kind of flipped that model on its head, because we would never buy that business. So flipping that model on its head, where we give all the upside to our clients, and we just take the small pieces of pie that we think is fair for our business to keep running, and make profits for ourselves.

Mike DeHaan: [30:33] Yeah, exactly.

Dan Austin: [30:34] I think this article, though, speaks to a few different points that we should also be aware of, is there are bad apples in any industry, and they can give you a bad name, and so for you to compete with them, all you have to do is not be a ship bag, and actually take care of people, and don't try to rip people off, and don't try to be this person, because there is the risk that you do end up on the front page of the newspaper, and you don't But want also recognizing that that's your competition, it's not that hard to beat it. That article kinda lays it out there of who's the worst case people you're dealing with, and you don't have to work with those people. You just have to be better than them, and I can assure you, you will always outperform people that act that way, because we know enough people in this industry on both sides of the fence, and the ones that tend to be more honest, high integrity always win. Mhmm. Yeah. Doesn't feel like it in the moment sometimes because you will lose deals to scrupulous dirtbags.

Mike DeHaan: [31:26] Yeah. Transparency is really all that takes too, is being honest with the sellers you're talking to with your intentions about it. You are trying to make money. Tell them, you're a business. You will make money on their house. If they get upset about that, I know what to tell

Dan Austin: [31:38] you. Right.

Mike DeHaan: [31:38] Like, they're gonna find out about it anyway if they want to.

Dan Austin: [31:40] Right.

Mike DeHaan: [31:41] And and honestly, if you feel like you need to be doing that to get all your deals, you need to figure out your own systems because you need to have more

Dan Austin: [31:47] of an

Mike DeHaan: [31:47] abundance And if you're doing it right, you should have enough opportunities that that shouldn't

Dan Austin: [31:51] be And a when in doubt, like, you're not feeling good about what you're doing, then step back and take the high road, in my opinion. Like, if you're dealing with a lady that has dementia, you might maybe you don't know. Maybe this guy didn't know. But after you build that rapport after a while, you know somebody that's probably not you know, we've had to deal with this where if they're not sober, we don't close. Right? That's not something that we do. If they can't cognitively make a decision, we're gonna back out of it. If they tell us they wanna back out of it, they're like, I just don't wanna sell my house anymore. It's like, okay, fine. That's the deal. We might try to make some arrangements outside of that to still give ourselves an opportunity because we have some invested in that person and that property, but we're not gonna take somebody's house for a while.

Mike DeHaan: [32:33] Yeah. I mean, it comes down to the situation, and we've been in this realm. If someone has dementia or they're a little bit off, you can tell. Right.

Dan Austin: [32:41] And that's when you get their kid involved. This person had a this lady on an article had a son. Bring him in the loop and say, hey, just so you know, this is what's going on. If their kids are there to help them and can help serve their parents, which you hope that's the case, then everything should be good for you still, as long as you're doing a good job.

Mike DeHaan: [32:57] Yeah. And if you call the son and they're like, no way am I letting you sell my house at that price, say, awesome. That's totally cool. How can we help provide services? And here's the thing that'll happen very regularly, I promise, because we went through this. We have an older person. There's something a little bit weird going on. We can tell they're not all way there. We talk to the kid, the husband, the brother, whatever, and they say, no. I'm not gonna let them sell for this price. And they say, okay. That's cool. Will you come look at the house with me? Sure. They show up. They see the absolute freaking disaster that's the house, and they're like, what? You wanna buy it for again?

Dan Austin: [33:31] Yeah. Exactly.

Mike DeHaan: [33:32] Yeah. And you're there. Right? You're you're making yourself available. You're being honest about the situation. Most people will take the convenience in that, and that is solving people's problems and providing a service, which is what this business is all about. So but anyways, yeah, that that was it was an interesting article. You know, it's just funny when stuff like that comes out. But if you're interested though, in the partnership program we just talked about, which is our direct competition with home investors, you should email me at mike@collectingkeys.com, or you could also hit me up on Instagram at mike underscore invest. I'd be happy to chat with you about it, and see if you're a good fit for it, because it's definitely not like something for everybody, but if you wanna get something done, and you're serious about it, we should chat about it. It's like a premium version of our instant investor program that you've heard us talk about. But anyways, that's a good place to stop, I think. Anything else, Stan?

Dan Austin: [34:17] Yeah, gosh, it's already been almost forty minutes here.

Mike DeHaan: [34:19] Sweet. Right on, guys. Well, thanks for listening to this episode of the Mike and Dan show. I hope you enjoyed it. If you did, please share it with everybody in your network. It is the easiest way to grow this show. Just think about however you heard about this show, whether it was like seeing a review or on Instagram, or you know, someone told you about it, and just share it the same way. That's the easiest way to be like, how should I spread the word about this? Just do the same way that you learned about it. Because, you know, it's obviously working. So just copy that very simple. And it does is a huge solid. Aside from that, you should go to clickingkeyspodcast.com/free, get your free five step guides are generating off market leads. And that can get you you know, competing with home investors on your own very, very quickly if you want to do Aside from that, thanks for listening, everybody. And we'll talk to y'all next week. See you.