Viral Real Estate Strategies That Don’t Work

Mike DeHaan: [0:00] And what's great is then you get that buyer's information, and now they're on your buyer's license. With the 100,000,000 money mods, I start listening to the podcast, because it's released it as, like, free podcast episodes, which is pretty good. But I need to dive into the books. His graphics actually are, like, pretty good even though they're, like, kinda little Like sketches? Like, pencil sketches, I think, actually, like, adds to it. But it's such a weird thing to, like, apply to real estate. But, there is stuff to take away. You just have to view it from, like, a slightly different lens. Because if you try to do it verbatim, it just, like, doesn't translate well.

Dylan Koch: [0:27] We'll get into this later, but we had the conversation last night of who are wholesalers' customers. You know? Like Yeah. Yeah.

Mike DeHaan: [0:35] Yeah. And that's a huge thing people don't even think about. What's going on, guys? Welcome to the Collecting Keys Real Estate Investing podcast. I am your host, Mike DeHaan, here with Dylan Cook today. The, little bald guy, Dan Austin, is gone. He is out mowing lawns at, one of our flips because we have this flip up in Idaho, which if you guys don't know anything about Idaho, it is, like, everything red. Like, it is the most, like, Trump place right now, and they've had a pretty excessive ice presence up there with, you know, they're just want they wanna have their own country. And would you believe it? Getting people to go and do general labor is now fucking impossible. So it had gone so far that, like, all of, like, the landscape people and stuff that we know in that area, they're just, like, won't do it. They promised us that Americans wanna do the work, but none of the ones that we know actually wanna do the work. And Dan got so frustrated that he had offered a landscaper $500 to drive out here and cut the grass. And the guy was like, nah. I don't cut time.

Dylan Koch: [1:38] Oh my god.

Mike DeHaan: [1:39] I was like, so out of control. So Dan loaded up his shit today into his truck to go and cut the grass on this flip that we're gonna be listing. How far away is it for you guys? Two hours each way.

Dylan Koch: [1:52] Oh, fuck. God.

Mike DeHaan: [1:54] And there's like the people that are forty five minutes away, they just won't do it. I'm like, why? I don't understand.

Dylan Koch: [1:59] How big is this lot?

Mike DeHaan: [2:00] It's not big. It's like a standard it's it's like maybe, I don't know, just over a like, a quarter acre, half acre, probably point four of an acres.

Dylan Koch: [2:07] Okay.

Mike DeHaan: [2:07] It's so standard. And no one will do just like the little stuff. It's easy to get people out there that are going to do like a big job.

Dylan Koch: [2:14] Yeah. Right.

Mike DeHaan: [2:15] Right? But like the little knickknacky stuff that happens at the end of a flip, the stuff that you would traditionally hire kind of cheap labor for, or you would have maybe a person that is maybe legal, maybe not, that would go out and do. Impossible right now. You know? And then like from Spokane, two hours each way, like that's really a big ask for somebody to But go and do like most of them won't go out there. They also, a lot of them won't be like bonded out in Idaho. And if they have a real business, they're kind of concerned about that. But there's also like the whole just like dynamics of going out there and everything else, they just won't do it. So Dan's loaded up.

Dylan Koch: [2:47] It's so funny because, you know, we talk about the podcast, what's your best return on time? Like, you know, your dollar per hour task. Dan's out there mowing the fucking yard. Well, was He tried to pay for it and he couldn't I find know. Yeah. Know? I understand.

Mike DeHaan: [3:00] But because also too, there's the time component. So the house is hitting the market tomorrow and like it had to be done today. You're getting your pictures today? Yeah. So it's all getting done today, right? We could have had someone do it like next week that had availability, but like we just can't wait that long, you know? And so we were just kind of pushed up on that as well. It's just a whole scenario, man.

Dylan Koch: [3:18] Well, is also the other side of that same token is rolling up your sleeves when you have to, you know? And doing the shit that's necessary.

Mike DeHaan: [3:25] For sure, man. If you're a small business owner, that's always going to exist on some level, right? Like even if you go back to June, we had both of our main partners who were in our competitions were gone. Dan was gone and it was a Sunday. So I'm out walking houses again. You know, I haven't walked houses in like years. Right? But like the sellers come in, I'm not going to like not do the opportunity because I'm like, oh, sorry, our sales team isn't available. Like it doesn't make any sense.

Dylan Koch: [3:50] Yeah. That'd be dumb. And just think of the lost potential revenue if, like, something like that happens.

Mike DeHaan: [3:56] Yeah. Well, for $17,500 because I got a freaking contract signed. We sold it.

Dylan Koch: [4:00] There you go. Love that.

Mike DeHaan: [4:01] Right. So there's this old farce with small business where people think that you can kind of just throw money at it or throw people at it, But you can always try, but it's never a guarantee. And at the end of the day, no one's going to care about your business as much as you, and you do need to be able to roll your sleeves up after a little point.

Dylan Koch: [4:18] A 100%.

Mike DeHaan: [4:19] But yeah, the money models thing as we started and we were jumping in, you know, you mentioned like who are the customers of wholesale businesses? Or I would say any real estate business. Right? And fundamentally, you're a customer unless you're like, I guess, a listing agent. But if you're a buyer's agent, if you're a flipper, if you're a wholesaler, your main customer is your your buyer, right, at the end of it. Like, need to be putting together your quote unquote offer in whatever package you are, you know, putting together just like find a buyer for that property because that's ultimately the one who's going to be giving you the money and making the decision. And I think a lot of people, especially in wholesale real estate, because we use the term acquisitions and sales team to talk about, like, finding properties.

Dylan Koch: [4:59] Mhmm.

Mike DeHaan: [4:59] But really, that's your that's your procurement. Like, that's not that different from having people that are going to China to negotiate with the shoe factory.

Dylan Koch: [5:07] Mhmm.

Mike DeHaan: [5:07] Right? This jet probably just as frustrating in the conversations with the irrationality as talking to a crackhead in Eastern Washington. But the buyers, the offers that you can put together can be things like, you know, wholesale like holding back your wholesale fee if there's gonna be a holdback on the property.

Dylan Koch: [5:23] Mhmm.

Mike DeHaan: [5:24] If it's on the retail side, it can be buyer concessions. It can be things that you're willing to do to the property. We have one right now that we just listed that doesn't have air conditioning. It's quite hot here. So one of the things that we put on our listing was that we are willing to basically buy portable air conditioning units for people if that is a concern. That isn't like in the open notes, but our realtor has the ability to say that if that is something that comes back as an objection piece from potential buyers. You know, it's a few 100, maybe a few thousand dollars for those, but if that lets allows us to stand out, like, that is fundamentally the offer that you put together.

Dylan Koch: [5:55] We did something similar because some of our rentals have just been stagnant. And so I just had a first marketed my first concession of two months free rent.

Mike DeHaan: [6:04] There you go.

Dylan Koch: [6:04] It's a commercial building. So, like, getting the actual rent instead of lowering rent makes more sense in this scenario from an NOI perspective. But I have had to do that since we started, but now it's a marketing piece of, okay, you want two months free rent, which you're not paying until now, what, September, November? Someone should that appeal to somebody. Right? So

Mike DeHaan: [6:21] Totally. Yeah. And though I think the key with that and where a lot of Alex Moshe stuff with the money models really applies to real estate is using them to get eyes on the property. Mhmm. Right? Because, like, there isn't really like a coercion piece to real estate. It's not like you're getting someone to swipe their credit card on your ecommerce website. But the value and I would say the tricky part with real estate is getting the actual potential buyers to see it. Or, like, when they do see it, if they like everything but x y z, having, like, a plan for that already and knowing that that is probably a potential opportunity to get a deal closed at that point.

Dylan Koch: [6:58] One thing I know that I'm bad at is not marketing. Like, on the dispo side is probably as much as I should. Totally do. I text and call the same people, like, that I've sold stuff to. And sometimes your best buyer for that specific deal is someone who is newer looking for their first slip. They're like, hey. I don't care if I make 50 and $20. I'm looking for experience on this one. Yeah. Right? And like and those are gonna be the one off people, but I mean, this buyer that just backed out of the deal that I'm doing, I could technically go out and just market it again and try to do it, but I'm just taking the maybe the quote unquote easier route of just buying it myself, and then the dispo is just gonna be the MLS. That's not me procuring buyers. That's the MLS doing it.

Mike DeHaan: [7:36] So what do you do when you close in that property to limit your time on market going on the MLS? Like, do you do you have a way that you structure, like, your offer, your total package with the deal to make it stand out versus the other properties that are probably similar in the neighborhood?

Dylan Koch: [7:50] Well, I will be the lowest price one. I know that. Because I've already looked at that.

Mike DeHaan: [7:53] Totally. So that's a great way to do it, especially if you're wholetailing. We'll typically do that too. We'll be like 5% lower than any other property, but like not so far below where it's kinda like a red flag

Dylan Koch: [8:03] Yeah.

Mike DeHaan: [8:03] For Yep. Retail buyers, but just low enough that people go, oh, okay. Like, this is the deal that's gonna come up in the downward trending market.

Dylan Koch: [8:10] Yeah. And so something like that, and I will we have our final walkthrough on Monday. We're gonna close Tuesday, and I actually have the photographer that we use coming with me. And she's just gonna take pictures of some of the units while we're there too for, like, a professional style. So that way when we go listening, we'll have the professional pictures. We already did the appraisal upfront because the buyer had it. So I'll have that if I need it for like, you know, putting the additional documents on the MLS, something like that. Nice. Yeah. And just kind of blasting it out and see what happens. I mean, I don't know what it is in your market, but like you could spend a couple of days trying to wholesale or dispo a deal, and then you could buy it listed on MLS, and you can sell it to someone you've never even heard of before. Because, I mean, to be honest, there's so many agents, and the agents have buyers that won't show up on a regular, like, list polling thing.

Mike DeHaan: [8:53] Yeah. For sure. Yeah. We run into that a lot. Or what we've started doing is working more with agents on dispo. Like we've had several deals recently that they have like a one time investor buyer that thinks that they need to go through real estate agent for that. And, you know, we just have people that kind of have that clientele and they will bring buyers to us. And what's great is then you get that buyer's information and now they're on your buyer's list.

Dylan Koch: [9:14] Yeah. Well, we've done that and they're like, I need to run this to my agent. I'm like, I have no idea why, but okay, it's coming out of your pocket. I

Mike DeHaan: [9:22] know, totally. Do you have anything with that property that you think will limit you from being able to get what you want for it off the back? Like, if you're looking at it, you're like, well, it's kind of on a busy street. The layout's kind of weird. You know, the roof is kind of old.

Dylan Koch: [9:35] The only thing that gives me sudden hesitation, which is what the buyer is doing, is the area is not super great. So I don't know. It's not like a long term hold for me. And it is on a busy street, but it has off street parking on a side street that's not busy, if that makes sense. So Yeah. But the roof's less than three years old. It has vinyl windows. It is on a boiler, which is kind of like a red flag to some people here because they don't wanna pay for the heating. Oh. Other than that, the but we're buying it at such a good price compared to the rent that it's bringing in.

Mike DeHaan: [9:59] Oh, it's a rental.

Dylan Koch: [10:00] Yeah. Yeah. It's a three unit building. My holding cost is like me collecting rent during the time that I'm holding it, even with hard money, will be breakeven.

Mike DeHaan: [10:09] Nice. That's awesome.

Dylan Koch: [10:10] Yeah. So it's like a protecting my downside, I guess.

Mike DeHaan: [10:13] The fact that you guys are even still able to sell I mean, we've been doing loans in your market. Your guys' market cash flow is pretty strong still. The fact that you can still sell multi families like that on the market is pretty Like out here, we're getting so many MLS leads right now that are multi family properties, like, you know, duplexes, triplexes. And the properties are fine. Like, they're decent. But the problem is people have been dropping the price for property price. There's just no buyers for them at all.

Dylan Koch: [10:40] Is it because they don't, is don't cash flow

Mike DeHaan: [10:43] at all? Well, can, but like not enough for like the property values. Right? And the issue we have as well here is, so the rents have basically capped, the property values reached a certain point. And so now the issue is as property values went up when interest rates were low, people are getting to the point where they're starting to like get them listed at like below tax assessed value, which is like feels bad to people. And they cash flow like enough that people are like, well, if I can't get the price I want, I might as well just like sit on it. Yeah. Yep. You know? And so you just have this big stalemate. But then people that do want to sell them, they have kinda like unrealistic price expectations. And even if you're trying to negotiate seller financing or something like that, they always wanna have like a really short balloon because their goal was to get the capital out. Then just like, well, I don't want my problem to be your problem. They I mean, they cash flow okay. Like, it's not great, but it's just not like what you see. It's not a freaking triplex for mid 2 hundreds. You know? Here, a triplex is gonna be like 600.

Dylan Koch: [11:42] Yeah. Exactly. You know? Then we have a purchase price of $1.75, and the rents are 3,100 a month as it sits.

Mike DeHaan: [11:47] Yes. See, that's insane. Yeah. So like like a duplex here, have one right now. We're trying to negotiate seller finance on. It's a the duplex is probably worth like $4.50. And then the rents on both units is, I think, is like between the two is like 34, 3,500. So it'll cash a little bit, but not a lot for the down payment you have to bring. If you are a real estate wholesaler and flipper and you want to be around other people that are looking to grow and expand your businesses in this ever changing economy, then you need to check out our scale community. Go to collectingkeys.com/scale, and you can get all the details there. But long story short, we are a small tight knit little group of serious real estate entrepreneurs that are looking to really make massive income and not just passive income to this ever changing economy. So if real estate wholesaling flipping is kinda your thing, go to collectingkeys.com/scale. You can book a call with me on there if you want. I'd love to see if you'd be a good fit.

Dylan Koch: [12:37] There's a guy that I know who's in Paces sub two group, but he's like somewhat confident. And they just bought a place where they the seller they basically used a DSCR loan for a 50% LTV, and then the seller carried another 25% of the LTV. So he was able to get some of his money out, like the 25% equity, but then carried a second at a very low LTV to him at like a 0% rate. There's one of times where I'm like, okay. You can't make a business out of this, but this actually makes sense where everyone kind of wins.

Mike DeHaan: [13:05] So they got the DSCR at 50% so they get a lower rate on the DSCR. That's called fraud, homie. Like like you will you will get that shit called. That is one of the big sort of scenarios that we've seen a ton of fraud in the Northeast right now is these kind of false second positions that are like that. Because what it's doing is it is affecting the underwriting on that first loan and getting people a lower rate. And then so what'll happen is and this is what I've learned about this industry, which is actually interesting is you will have the company that you get your DSCR loan through, whether it's Kiovi or somebody else, right, or SLA Capital, you should be getting them through. And it will go through and we'll have our hedge fund provider that actually gives them money for that. They will then take that fund, that loan, and they will sell it again to like cheaper money, like bigger money, right? And what that bigger money though can do is they can do what's called a callback. Whereas if they go through and they decide, and they have five years to do this by way. Holy crap. And they can do a callback and they can go to like our fund provider and say, Hey, you need to buy our loan back from us. Because what you sold us is not actually what you told us it was. And that's part of like that relationship that you have to set up with, like, the big, big money to sell us off at cheap rates. And so what can happen is they do that.

Mike DeHaan: [14:22] And then who is the fund provider gonna go after? They're gonna go after your lender that you talked to. And then who's that person gonna go after? They're gonna go after you. And they're gonna sue your ass, and it's gonna be extremely easy. Because at the top of the chain, the lawsuit is ultimately coming from the hedge funds, and they're not gonna let some little punk and paste Morby's group walk away with anything, dude. So that's essentially where that risk comes from.

Dylan Koch: [14:47] Yeah. And you just had that lending conference. Maybe we can take away your takeaways from that too. But like

Mike DeHaan: [14:51] Yeah.

Dylan Koch: [14:52] I when I actually just first heard that, it didn't sound like fraud was the intent, but I guess intent doesn't really matter as long as it's illegal or not.

Mike DeHaan: [15:00] Well, I guarantee you that it played into their numbers because they probably went through and they were like, well, we bought it because they they put 25% down at one point.

Dylan Koch: [15:07] Yeah.

Mike DeHaan: [15:07] Right? So they I guarantee that they went, well, if I put 25% down, just get a DSCR purchase with 75%, that I would they would probably be at like, I don't know, seven and a half, whatever it Sure. But if I go and I put quote unquote 50% down, I'm gonna get it at six and a quarter. Right. Right? And then I'm probably gonna get the second position from the seller at like an extra 5%. So my blended rate's gonna be significantly lower.

Dylan Koch: [15:33] Yeah. And it was principal only payment.

Mike DeHaan: [15:34] Yeah. Principal So yeah. So he's he's basically just adding on to the equity at such an immense amount he and probably overpaid for it a little or paid full market, so the seller stoke. Mhmm. Yeah. And so that DSCR lender could absolutely call that, and he's in big trouble. Oh, yeah.

Dylan Koch: [15:50] Well, I won't disclose any more information on that one.

Mike DeHaan: [15:53] Yeah. I'm I'm guessing that I know who they are based off your things. So I'll stuff like that is is they're cracking down on it. So yeah, Dan and I, we went to this big private lending conference in Newport Beach last week. And one of the things that I realized right away that's different from like real estate meetups is like lending guys. Because this is like a pretty bigwig conference. So the company that put it on was like the biggest law firm for private lenders in the country. And they basically put on those things for all their clients. And finance guys make like actual money, Right? Like you go to a lot of real estate stuff, people have like wealth going like you don't really meet a lot of dudes that are like making money. And so I would imagine that probably half the people at this thing are taking home personally 7 figures plus Mhmm. Through their businesses. And like, they're like just normal dudes. They're not even like douchey finance bros. They're just like everyone else that you meet. They're all cool.

Dylan Koch: [16:47] Was there a Patagonia shop set up somewhere?

Mike DeHaan: [16:50] Yeah. Lots of vests. Yeah. But there were a few, dude. It was honestly a racket. And Dan and I were the I don't wanna say we definitely weren't the degenerates, but we were definitely like the misfits. Especially, like, they all have, like, really serious, like, family names. You know? And we're over here with sir Lenzalot LLC.

Dylan Koch: [17:07] Oh, that's hilarious.

Mike DeHaan: [17:08] Which was a hit, by the way, honestly. People dug it. Like like, a lot of people sought us out because they saw us on, like, the list and like

Dylan Koch: [17:14] You guys have downloaded for me, the the title of people are like, is this legit? I'm like, yes. I guess it is. I know it doesn't sound like it, but it is.

Mike DeHaan: [17:22] Yeah, it is. Yeah. So people like are making like actual money. And then being around people that are talking about things in like hundreds of millions of dollars instead of hundreds of thousands is pretty nuts. But one of the biggest topics right now is around all the fraud that's happening, like the stuff that you're talking about. Right? And so you're seeing it there. And the second position fraud is like a big thing. They're talking about a lot. Because what you'll see is, as they put it, you will have a not arm's length second position loan, either with like a seller or a business partner or a parent or whatever. And what they use is they use that to get better rates than if they were just doing it as a full like standard loan. Right? And then what happens if it's like a family member or something is they go and they get that DSCR loan, which has the quote unquote, you know, second position or whatever that's on there. And it's people that were kind of doing it legit. And then what that person does is they just like give them the money back. Right? So then it becomes not really like a a fully, not like a full LTV loan, right? But then what they'll do a lot is you'll see people that have these first position, second position, they go to do a rate and term refinance with the full debt, but they're basically treating it like a cash out.

Dylan Koch: [18:25] Yeah. Because they didn't have the second part of that loan disclosed in the first part.

Mike DeHaan: [18:29] Yeah. It didn't actually exist. Right? And so it there's a lot of stuff that's going on. And there was like this multi 9 figure fraud that went on in the Northeast with a ton of properties up there. And so that's put it on a lot of people's radars. And I would imagine stuff like you just talked about is going to start getting investigated here very, very soon.

Dylan Koch: [18:47] Well, I remember when rates started going up so two points to this is when rates started going up, everyone was like, hey, you know, these lenders kind of turned a blind eye to the due on sale clause because

Mike DeHaan: [18:56] Mhmm.

Dylan Koch: [18:56] You know, they they were making money regardless. But if they have a a loan out there at 3%, 4%, and they see it change hands so they can reissue that loan at 7%, now they're incentivized to go do that. When they were rates were going down, they were not. So we could definitely see more of that because lenders make more money on the front end of the loan. Everybody knows that. And then the second part is I listened to a podcast with Melody Wright, who's I've talked about on this podcast before. And she said that she's starting to see a lot of crackdown on the false owner occupied mortgages.

Mike DeHaan: [19:25] Oh, yeah. Tons.

Dylan Koch: [19:27] Like where people basically say, I'm going to move in this. And they either, a, they never do, or b, they move out. I think it's a year if it's of HSA. But they basically, they just said, hey, I attend till they turn. I never did.

Mike DeHaan: [19:37] But yeah, you're seeing that. Or on the investor side, what you're seeing a lot of is people getting quote unquote bridge loans. And they're moving into them because they can't qualify for a Fannie Freddie loan because of debt to income. But it's easier to get a bridge loan, right, which is basically like a that's rental ready, short term loan. And they will get these bridge loans. They will move into them. And then they will basically just keep extending the bridge loan. And sure, it's at 10%, but they don't care. But they can't actually pay off the loan. They've overpaid for it, all these different things. And so we're seeing that a lot as well.

Dylan Koch: [20:09] There was a time we were flipping a house, and it was a good part of town. And Amanda my wife and I were like, hey. We might move into this. And the hard money lender is like, I'd never heard that from you.

Mike DeHaan: [20:18] Yeah. Don't say anything

Dylan Koch: [20:19] for sure. Because, you know, my entity owned it, and then me personally is going to buy it. That's not an arm's length transaction. Getting a 95% LTV, they would be very frowned upon, right, on something like that.

Mike DeHaan: [20:30] So Yeah, man.

Dylan Koch: [20:31] I mean, I didn't even know that at the time, but that makes sense now that you think about it.

Mike DeHaan: [20:34] Yeah. And it's funny. Like, now that I've been on the other side for the most of the year as a lender, there's so many things that used to piss me off as a borrower that totally makes sense now, honestly. And it's like, it's annoying. It's unfortunate. And it's frustrating how much time getting some of these loans and stuff takes. But there is like a lot more reason behind a lot of the little quirks.

Dylan Koch: [20:55] I still think it's an example of how a few bad actors make it worse for everybody else though.

Mike DeHaan: [20:59] Totally, dude. Well, and it's been made worse as well because a lot of the bad actors are people that are overseas. Right? So they can't even be sued. Right? Because there's a whole other like ballgame if people are doing stuff overseas and they're kind of like concealing who they are. So a lot of stuff in the Northeast that was like a big issue is it was these people that were out of like Dubai that were like doing all these things and essentially just like stealing all this private debt. And so there's that piece of it. And then you also have a lot of people that are doing it with ill intent from the start that fully know what they're doing. And so it's not even driven by ignorance, but like they are gaming the system. And that's what really passes it down to everyone else is because once the loopholes have been intentionally exploited, they really, really try to make sure that people can't do it again. And then everyone is facing more scrutiny because they don't know if you're also one of those people.

Dylan Koch: [21:52] Yeah. I just can only imagine when was in like the seventies, eighties, nineties. Like my dad told me about his house and like no income verification. Basically, it's like it was a handshake, and then, like, the deed was exchanged.

Mike DeHaan: [22:02] I know, dude. That's why all the freaking boomers do. That's why that's also why they believe weird stuff. Like, we you had this in our notes. The Oh, yeah. This, like, Facebook thing that's been shared around. I've seen it a couple of times. And I feel like this is the perfect example of just, like, fake news just going viral with if you use comments, this doesn't make sense. So basically, the story is that a guy held like this he he wasn't able to sell his house for, like, say, million dollars, whatever it was. And so he held the lottery and tickets and sold sold them for, a dollar or $5, whatever it was. And and essentially sold $2,000,000 worth of tickets. And then whoever won the lottery got the house. And so he actually made $2,000,000 out of $1,000,000 in selling his house. And I've seen this shared by like smooth brained freaking social media people that just latch on to everything. Doesn't make freaking sense. And they are always like, you know, this is like such a great idea. Like, can we do this in our market? All sorts of stuff. And I'm like, I read this. I'm like, first thing I think of is you can't just hold, like, an illegal lottery.

Dylan Koch: [23:00] Yep.

Mike DeHaan: [23:01] Like, you're just having this that you're having an underground, like, gambling thing. And then also too, if he does get $2,000,000, the IRS is gonna come and be like, hey. What the fuck? Like, you you don't just, like, get that money. Like, people don't understand is when you have $2,000,000 go through an account, the bank tells the IRS that happened. That's why audits

Dylan Koch: [23:20] I think it's anything over, like, it used to be, like, people were bitching about the $600 Venmo transaction, like, whatever.

Mike DeHaan: [23:24] I

Dylan Koch: [23:24] know. But now it's, like, $10 I think anything over $10, they're like, that gets audited no matter what. Easily. You know? Yeah. And in real estate, those transactions happen a lot.

Mike DeHaan: [23:34] Yeah. They're like all the time. Right? And like it can be even if you have one large transaction that goes through an account that isn't quote unquote seasoned, that will flag the IRS. So like what can happen is if you have like, say, an old checking account, like I know people this has happened to, they start their real estate business, they've kind of been someone that lives paycheck to paycheck, then all of a sudden they close like a $5,060,000 dollar deal. And for the first time in twelve years, $50,000 suddenly goes to that account. Boom. The IRS just found out, and your chances of getting audited over the next three years are significantly higher.

Dylan Koch: [24:07] I'm surprised I didn't get audited my first year after I quit my w two. Because we had a pretty big income difference change.

Mike DeHaan: [24:13] Yeah. I mean, but you were coming from a career, right? You were still having some money coming in. Right? Like Yeah. Like you it wasn't like you were a gas station attendant, and then all of a sudden you're flipping houses and making $50 a pop. Yeah. Yeah. And I do think that they they look at that. Also, your chance of getting audited are relatively low in general. But if all of a sudden you had $2,000,000, I bet that that would be

Dylan Koch: [24:32] Yeah. And they look at it and they're like, the deed exchange stands for a dollar, and you have 2,000,000. Like, this doesn't make sense. Right?

Mike DeHaan: [24:39] Doesn't make sense to me. Yeah. But, you know, the fake it's just I don't know. That's just how people are.

Dylan Koch: [24:44] You said you had another piece of fake news that went along with it though.

Mike DeHaan: [24:46] Yeah. Well, this is a sad side side piece. I was just I was literally saying this when I was getting on here. Of how shameless everyone has gotten with, like, even, like, creating fake news for clout or, like, fake things. I don't know if you've seen Will Smith's tour he's been going on. He's been, like, doing his, like, hip hop tour with his current midlife crisis after slapping Chris Rock a while ago. And there was like this hype video that I've been seeing can you share around Reddit? And it's obviously AI. Because like people have like these signs and stuff that like don't make any sense, and you see people's like hands like morphing into their faces and different things. I'm like, they had like meetings. Like, they like put this together. I'm like, yeah, this looks great. And then they sent it out as like a promotional thing. Did they intentionally make it so bad that people talk about it? Or is it like they're just that ignorant to, like, how like, they just think people are that stupid now and they're not gonna question anything? They're gonna they're gonna just pass it off as legitimate? I have no idea.

Dylan Koch: [25:42] I don't know. The more that the word goes on, I think people are just dumb.

Mike DeHaan: [25:45] I mean, that's a big part of it. And, like, honestly, recognize now how hard it is to believe anything. Yeah. You know? Like there's so much stuff that's out there that's being AI generated and is falsified and, you know, is spun from like different angles, you know? And it's politically, it's on both sides of the aisles. It's like through all every company that you talk to, it's so easy to create fake reviews, fake testimonials, fake everything. I'm like, it's all bullshit, honestly.

Dylan Koch: [26:11] Even in, like, in our world and the and the local thing, like so I had I had dinner last night with two guys who are legit operators. We all do about the same size ish of volume a year. But we've talked about other people in our market who we don't have great opinions of, to put it lightly. But one of these guys is used to own a hard money lending company. And I don't know how much he can legally disclose or whatnot. But basically, he's like, these people are not doing as well as they say they're doing on all, you know, social media accounts because he's seen the financials. Right? And so it's just kind of going back to the you can't believe fake news or the merchant news. You also can't believe the people who might even be in your local market that are saying, we're killing it. We're doing five houses a month or whatever, and they're not making any money.

Mike DeHaan: [26:52] Totally, man. And that shit happens a lot. We had a borrower request from somebody that quite a few people know, and their credit is poor. And we saw that they currently have four collections against them. And I'm like, what is that? Like, when you're going through and you're trying if you've been doing slimy stuff, when you try to do legitimate business, things will eventually come out. You know? But like you said, it's all illusions. It's all smoke and mirrors. I don't know, man. It's kind of frightening to think about what that will lead to, I would say, just not even just in terms of like marketing, just with people's brains. You know? Like, is it there's also this inclination right now for people to question everything and nothing at the same time. Like, everything's just such an echo chamber that if it is if it confirms their existing biases, they'll believe it. If it questions it at all, then they won't.

Dylan Koch: [27:44] Dismiss it a 100% from the start.

Mike DeHaan: [27:46] When and they're like, there's this there's not a desire to learn anything.

Dylan Koch: [27:50] Yep. It's funny because we, like, rail on boomers a lot, but they're the ones that grew up. It's like, don't believe everything you see on the Internet. And now they're the most triggered people that you see on the Internet of all time. No, dude.

Mike DeHaan: [28:01] They'll believe everything on the Internet. Goddamn. And they're they're complaining of putting our kids in front of iPads. Just stop putting grandma in front of a fucking iPad. Jesus Christ, dude.

Dylan Koch: [28:11] Yeah. And I you know, someone who's has a almost one year old now, I'm just like, fuck. What are you gonna do when that kid wants to, like I I was like, I don't know, man. We're gonna try to limit screen time, but don't get too far into that. It's just wild.

Mike DeHaan: [28:21] Yeah. It's just wild. But so, yeah, what are you seeing business wise right now? I know we we had a good KPI discussion with our scale group on Tuesday.

Dylan Koch: [28:29] I missed that call.

Mike DeHaan: [28:30] And you had some notes here. I know you missed it, but I'm bringing it up because on Tuesday, it's funny. A lot of the trends that you're seeing are very similar to what a lot of other people are seeing as well. So go through your stuff here, Dylan.

Dylan Koch: [28:40] Yeah. Yeah. Yeah. So like at this dinner last night, these guys were basically just going over all business stuff. And I'll just remind my notes I have here with Mike. Is the cost per lead slightly increasing overall, but mostly in, the PPL slash pay per click channels? It's still about $2.50 ish for direct mail, but it's like $4.50 to $4.70 for really any other channel.

Mike DeHaan: [28:59] Really?

Dylan Koch: [28:59] Yeah. And cost per deal, slightly increasing overall in general. Mine's still hovering around 2,500, but the guys I was with around 3,500 to $4. The flip's taking longer to sell, more seller concessions, that kind of stuff, both seasonality and just the how the market is. And the last thing I wanted to point out too is, like, the revenue per deal. Mine was the lowest of the three with about 15,000. And what we kind of talked about last night was that could just be a self fulfilling prophecy for the fact that maybe we're just underwriting for a 15 k deal, and that's just what we're hitting. While if they're underwriting for a 20 to 25 k deal, they're getting that more often than I am, not because we have different leads. Our dispo process is much different just because they're getting it at a price that they underwrote for from the beginning.

Mike DeHaan: [29:47] Yeah. And that could also be affecting their cost per deal as well.

Dylan Koch: [29:50] Am I

Mike DeHaan: [29:50] gonna say higher if they are being less competitive because they're chasing larger profit margins? But our numbers actually in Spokane are super similar to yours too, which is interesting because I we're pretty different markets. We're similar I don't know. How big is Cincinnati?

Dylan Koch: [30:03] Think We've asked this question before. I don't know. The MSA is pretty big.

Mike DeHaan: [30:06] It's like a million people. So it's it's it's bigger than us. Right? But price points are quite a bit lower over there versus here. But the investor population population there there is is much much larger, larger, so so it's it's gonna gonna be easier to find buyers. But like so our our cost per deal as of yesterday was right at $3,000. So was like $2,909,198. Right? So like right there, that has stayed pretty consistent since, like, last year. It's increased, a tiny bit. Like, last year, we're, like, 2,800, so it's increased, like, $200, our cost per lead. So our cost per lead last year was, like, a $180. Now we're sitting closer to 300.

Dylan Koch: [30:41] That's actually really good, though.

Mike DeHaan: [30:42] It was. And now we're close to 300. Right? So it's almost doubled. The big thing for us is our revenue period. Right? So I was looking at it. And so right now for 2025, we have done 62 transactions. And our current revenue is like right around $900,000. K? If you go back to 2021, when it was just me and Dan, like back when we started the show, it was just me and Dan in 1AM. Our total revenue was about 1,450,000 on 42 transactions.

Dylan Koch: [31:14] Wow. That's nuts.

Mike DeHaan: [31:15] Right? Because we had some home runs in there. We have like a huge, like, $100,000 deal. Our average deal size at that point was 27,000. Our average deal size right now is 15, just like yours. Right? And so that just shows how compressed the market has gotten. And our return on ad spend right now, you know, sitting at about a five x on average. So the market's changed, Right? And like, I think that a lot of that is just the general sentiment around real estate, stuff getting more sophisticated, more people advertising to the same people makes it so that there's just generally less opportunities. Also buyer appetite is significantly less than it has been in the past.

Dylan Koch: [31:52] Yeah. Buyers specifically, you could sell to at least here, you could sell to people who wanted rentals. And now a lot of times, they just don't because they don't really make any money. I know. So now it's only flippers. And then a lot of the rentals you could sell in worse off neighborhoods.

Mike DeHaan: [32:08] Mhmm.

Dylan Koch: [32:08] These people were just seeking cash flow, and now like that this won't touch them.

Mike DeHaan: [32:12] I know. For sure. And that's the thing is you can't sell the bad ones. The really good properties you can't sell. Right? Because people can't afford them. So you're kind of stuck with just like the middle tier, which traditionally have been like the least profitable deals, honestly. Yep. You can't get them for quite as big of a discount as the shitty ones, and they don't have as much potential upside as the nice ones. And so you're kind of stuck with that.

Dylan Koch: [32:32] It's also so ironic. I don't even know if ironic is the right word, but how many deals that we talked about last night that we all three had touched at some point? Oh, talked about the time, like, how someone else's new leads are your old leads and vice versa. Literally, there was a deal where I offered first at $50. She wanted to take it, so we went to 75. Couldn't dispel it, canceled the contract. My buddy got it for like 65, couldn't sell it. Well, sold it for like 65, then they price reduced it to 50, which is my original contract, and they agreed to it. And that's kind of because the seller had already gone through the ringer a couple of times, and she's probably just fed up with it at this point.

Mike DeHaan: [33:09] Mhmm. But I

Dylan Koch: [33:11] was first, and that sometimes being first is a first mover advantage. Sometimes it's not. Mhmm.

Mike DeHaan: [33:16] This entire business of being in the right place in the right time. So we had one not too long ago that we were competing with another guy. He offered we offered $1.90. He offered 210,000. He's a direct flipper. So he'll always buy it higher than we will. She has a lot more flips. Rejected both of us. He went and did his other stuff. We followed up, followed up, followed up. Six months later, we got it at a 190,000 and we sold it to him for $20.05. There you go.

Dylan Koch: [33:40] But that's exactly the process. Yeah.

Mike DeHaan: [33:42] I know. Yeah. It's an interesting time. I don't know. It's still a good time to be doing the business because there's not a lot of people. And that's what we spent a lot of time talking about last week. So I think this is still a really strong business in general. Yes. But it's just changed a lot. And I think that when it comes to, I would say, the expectations around what things look like, you just kind of need to be prepared for that and kind of like the volatility of it. Because the cash drag as well, like that isn't going away. It's still an expensive business to run. Mhmm. You know, your return on Aspen goes down, but you still have to be spending the same amount every month to make money.

Dylan Koch: [34:14] Yeah. The other two guys I was with, they spend more than I do. And they both were like, Dylan, I don't know how you like because I think my return on ad spend is like 7.5, almost eight right now, which is really good. Yeah. But I need to to me, that just means I need to spend more money. Right? Like, because it probably should be down a little bit more. And I don't care if my return on ad spend is six, my revenue goes up more than right? That's a machine you just keep feeding.

Mike DeHaan: [34:36] Yeah. For sure. Anyway, is there anything you're going to be changing about your business after having that meeting? I think it's always good to touch base with some experienced operators.

Dylan Koch: [34:45] Yeah. I'm quitting PPL.

Mike DeHaan: [34:46] Probably a good idea.

Dylan Koch: [34:47] Yeah. Quitting PPL. Dial up some more direct mail more frequently. And then I think I'm gonna start marketing to Northern Kentucky, which I haven't done in a while. But it's such an easy thing that I could tap into. So

Mike DeHaan: [35:00] Yeah. It's like right there. That's a pretty hot market, dude. We've done a handful of loans down there. And I know that so Lexington is a pretty popular

Dylan Koch: [35:08] That's a little bit too far for me.

Mike DeHaan: [35:09] That's too far?

Dylan Koch: [35:10] Yeah. It'd be like an hour and a half for me. But like there's Northern Kentucky, there's like three counties. And like they have similar numbers to Cincinnati, honestly. Mhmm. Like, as far as, like, price or rents, prices and stuff. And

Mike DeHaan: [35:20] I just assume Kentucky in general only has three counties. It's like has, like, Kentucky County, Whiskey County, and Lexington County.

Dylan Koch: [35:27] You should come down and if you like bourbon, man, there are bourbon trails over here. It's people come from all over the world for that.

Mike DeHaan: [35:33] No, man. I don't drink alcohol. My body's a temple. Okay? I

Dylan Koch: [35:37] have literally seen you drink alcohol, Mike. So I know that's not true.

Mike DeHaan: [35:41] I would never do that. But well, awesome, man. Well, anything else here to wrap up?

Dylan Koch: [35:45] No. I think that's it for me, man. Unless you got something. I don't

Mike DeHaan: [35:48] think so. Man, that was a productive phone call without Dan to chime in and fuck it up every ten minutes.

Dylan Koch: [35:53] I did get four or five phone calls So see if these are

Mike DeHaan: [35:56] Oh, there you go. You go. She better get on those. Yeah. No. I'm just kidding, Dan. I know you won't listen anyway because you're listening to freaking k pop, demon slayer, whatever you listen to with your kid.

Dylan Koch: [36:05] He's listening to the native Taylor Swift and Travis Kelce drama.

Mike DeHaan: [36:09] He definitely is. He is so cute in with, like, really weird stuff. Like, there's so many things that he'll, like, ask me about. I'm like, why do you know about this?

Dylan Koch: [36:16] Like, he

Mike DeHaan: [36:17] I don't know. He's like, oh, it's because of my kids. I'm like, you can only blame your 2.5 and seven year old for so long. Like, honestly, but it's alright. That's what his algorithm. He gives them what he reacts to. So that's why, he at least isn't spouting a lot of fake news yet, but he's not quite that old. Give him time. So awesome, guys. Well, thanks for listening, everybody. You have a great rest of your week, and we'll talk to you next time.

Dylan Koch: [36:40] See you.

Mike DeHaan: [36:41] Thanks for listening, everyone. If you want more from us, you can shoot us a follow on Instagram. I am at Mike underscore Invest. Dan is at investor man. Dan and Dylan is at Dylan underscore does underscore deals. Choose to follow and send us a DM to let us know what you think of the show.