What Is This SVB Thing? Buying Rentals With Current Rates. The Exact Copy Of Our Current Mail Campaign

Mike DeHaan: [0:00] Is the most recent letter that we sent out. You guys can verbatim copy this. We are getting currently over a 1% response rates in huge, highly competitive markets, including Houston, including Baton Rouge, Louisiana. Right? Else have we sent this one? Recently, I have go through our list. Jacksonville, places that so many of you invest. We are getting an over one response rate with this letter. Take notes. What's going on, guys? Welcome to the collecting keys real estate investing podcast. Today, you have the Mike and Dan show where I, Mike DeHaan, and my cohost, Dan Austin. We talk about real estate investing, business, and everything in between. Our favorite movies. Our favorite movies.

Dan Austin: [0:50] Movie critics on the side here.

Mike DeHaan: [0:52] I mean, the they were just at the Oscars, so I guess that's a relevant thing

Dan Austin: [0:56] we could talk about. Is relevant.

Mike DeHaan: [0:57] Yeah. Let's not talk about that. Oh, wait. I mean, so really quick on the Oscars. They had a huge increase in interest this year versus last year. And last year, no one gave shit. I mean, so few people cared that that's why they had the whole publicity stunt where Will Smith went and like slapped Will Smith slapped Chris Rock. I a, can't believe was a whole year ago. That like is greatly disturbing to me because I don't know how this last year went. I think so. Was that something else? I have no idea.

Dan Austin: [1:22] I don't watch any of those. I'm pretty sure

Mike DeHaan: [1:24] I was at the Oscars.

Dan Austin: [1:25] Okay.

Mike DeHaan: [1:25] But this year, they had a lot more interest. And here's here's why. A, because the movies that were actually nominated were movies that people actually liked, so people wanted to see those. And also to the people that were nominated for stuff, they were like, kinda like wholesome people, and not a lot of these kinda shitty people that everyone was sick of.

Dan Austin: [1:43] Weird Hollywood people.

Mike DeHaan: [1:45] Yeah. So like the guy that won, you know, best supporting actor was from everything everywhere all at once.

Dan Austin: [1:50] He saw that movie. Never heard of it.

Mike DeHaan: [1:52] It's a good movie. It's really hard to explain. It's like this kind of sci fi sort of movie. Yeah. Stop. Don't explain it. The guy that won, he was like the the Asian kid from Indiana Jones, the temple of doom, like the taxi driver. You ever watch that?

Dan Austin: [2:06] I haven't seen that in a long time, so I would not put those together.

Mike DeHaan: [2:09] So he got super famous from like that and from The Goonies. He was the Asian kid in The Goonies.

Dan Austin: [2:14] Oh, he's the kid in The Goonies. Got it.

Mike DeHaan: [2:16] Okay. Yeah. And he's done nothing for the last thirty years except for this one movie, and he won, like, best supporting actor for it, which he was great in the movie. So but then it's like wholesome, you know, and he's, like, so grateful and, like, the whole thing. And here's the thing, Hollywood, that's what people want. People don't want your outrage like a bunch of spoiled rich people doing dumb stuff. They want the comeback story. But anyway, that's a movie session.

Dan Austin: [2:41] There you go.

Mike DeHaan: [2:42] But the real business at hand right now is, as everyone is talking about, by the time this comes out, we're gonna be a week late, so everything will be completely different.

Dan Austin: [2:50] It's gonna be real.

Mike DeHaan: [2:51] But the Silicon Valley Bank collapse. And first off, we're not gonna go into details about why it happened and all the details because why not? Want to why why we are we now the banking experts that I've been hating on for the last

Dan Austin: [3:04] four days absolutely know everything about I know their whole balance sheet. Now I've been memorizing it

Mike DeHaan: [3:09] every time something like this happens. These are like crisis, whatever. Everybody's an expert. Dude, all all the whiteboard, like literally the whiteboard bros Instagram joke I made a couple weeks ago.

Dan Austin: [3:19] That that is such.

Mike DeHaan: [3:21] I saw like four different dudes that I'm like, I haven't seen you post anything that's actually educational for the last two years. They have their video that they made of them standing in front of a whiteboard, trying to explain how the SVB thing happened. I'm like, since when did you become a

Dan Austin: [3:38] And they're like, and that's why I don't put $250,000 or more in a single bank account. Never have, never will. Gotta completely ignore the

Mike DeHaan: [3:45] fact they don't have $250,000, but that is why I don't do it.

Dan Austin: [3:50] Thanks, bro.

Mike DeHaan: [3:51] Yeah. But but they all come out. Everyone's a banking expert. Everything, you know, the whole thing is just ridiculous. Right. I mean, there were some bright minds that called it a while back, like Jay Scott I mean, if you are going to listen to somebody that, like, probably actually knows what they're talking about, Jay Scott, you know, he's from wrote the Bigger Pockets House Slipping book. He's a super sharp guy, and the stuff that he went through, he's, like, really, really bright when it comes to the economy and everything else involved. But he's been posting a lot of stuff about, like, the actual details and, like, the financial things and also what happened, how it's related to the interest rates and everything in between.

Dan Austin: [4:26] So in case you've been hiding under a rock, Silicon Valley Bank true.

Mike DeHaan: [4:29] We should probably talk about what actually happened.

Dan Austin: [4:30] It's a bank. It's a top 10, I guess, banking institution in America that catered to startups, hedge funds, and venture capitalist firms, people essentially wanting to invest in startups. Like, that was their biggest depositors, their biggest clients. So and we're not talking like Facebook. We're talking small startups that and there's a I think it's very interesting conversation of why it happened in in a sense in the larger economic picture. But essentially, that bank failed and became insolvent last Friday, which is also sweet because all the executives paid themselves bonuses and have been selling stock for a while because they've actually known this is a problem. And I do think that so they've known this has been a problem at the bank. The executives there have known about it, and they've made some of this public months ago. It's not the first time, like it's the first time for laymen like us to hear about it hits the news, and all of a sudden, everybody's freaking out. Like, oh my god. We're failing. It's 2008 again. But anyhow, like, it's it's interesting to see what went on and how that that plays with us in real estate because it kind of goes back to interest rates, which is all what we're talking about. It's part of it.

Mike DeHaan: [5:39] Yeah. Yeah, it does. And so, what is the Explain Like I'm Five version of why it failed? I know you're probably more versed on that than I am. Right.

Dan Austin: [5:49] The very, very high level version of this is that essentially, they got a bunch of money, and they needed to do something with it. And so they bought assets called treasury bonds and mortgage backed securities on a long term time horizon. And when interest rates shot up, those assets became worth a lot less. And then people stopped putting money in the bank because they were spending all the money in the bank, and now they didn't have money to give to people. Okay. Gotcha. And so the biggest when I say that interest rates play a big factor in this, is because interest rates, when you go and buy a bond, the bonds trade basically on the market as a value. So if you buy a ten year bond, you really only realize that value of that bond when you sell it. So if you buy a bond like they did, earning 1.5% interest, but then interest rates shoot up to where they're at now, what I don't know what the daily rate is now, shoot up really high, why would you buy a 1.5% bond when another company, another bank is gonna issue bonds at that new interest rate? You won it. Right? Which means that bond, to sell competitively on the market, has to basically sell for less so that the person is effectively getting the same interest rate as today's rate.

Mike DeHaan: [7:01] Yeah. It's being sold at a discount from that. Right.

Dan Austin: [7:03] At a discount. And so they sold $21,000,000,000 worth of bonds recently to make up for liquidity gaps because, again, all these startups are burning cash, but nobody knows investing in startups right now. Venture capital is dried up because it's too risky. So they're spending all this money, and they sold those bonds at a 1,800,000,000 loss at the exact same time the bank announced that they need to raise money to make sure that they had enough money for their depositors. And the market freaked out and ran did a what's called a run on the bank where everybody was told, get your money out of that bank. It's failing. And everybody did, and then the people that didn't have lost.

Mike DeHaan: [7:39] Yeah. And so I I think, you know, it's kind of a perfect storm. Right? So they had all these bonds they couldn't sell. They couldn't get the money, you know, to pay back these people that needed the money, like these different startups that needed the money to run their failing startups while all of Silicon Valley is just collapsing right now, and there's these huge layoffs and things going on. I mean, even Facebook, they posted today that they're laying off another 10,000 people. So here like, I

Dan Austin: [8:02] would reuse a different term than failing as in that they're resetting. Resetting. Yep. So let's in context of these big tech companies are laying off, and it's not just big tech, it's little tech as well. They're laying most of the big tech are laying off, and they still have the same amount of people as they did before COVID happened. And in some case, although they're laying off, they're net positive still hiring employees. But they're laying off all the people they don't need anymore, right, that they hired during this buildup. With Silicon Valley Bank, their balance sheet tripled since 2020, which is because the Fed was printing money, and venture capital in 2020, '21, '22 was just like, everybody gets money. Everybody gets a little bit of venture capital. Right? And they that's why they had this huge problem is Silicon Valley Bank had all this money come in, and they're like, we have to put it somewhere because we're losing money by just sitting in a bank account.

Mike DeHaan: [8:54] Yeah. I wonder how many of those how much that comes back to, like, the PPP loans that people were getting where you could just It's a ton

Dan Austin: [9:00] of it. It the whole thing.

Mike DeHaan: [9:02] And they're just like, it's free money. I might as well just swing for the fences with this and, like, throw it into a bunch of startups, and, they'll a thousand x over the next five years.

Dan Austin: [9:09] And the Fed, in their defense, they were really worried because you remember in COVID, we had that super sharp dip there. Well, they did quantitative easing, which is essentially putting money tons of money in the system by buying shitty mortgage backed securities, which they've been doing for years now. Right? By buying those so people can go get loans because the banks can can basically loan that money out at dirt cheap, and then the government will buy those bonds, right, as they wrap them all up. Nobody else will buy them, but the government will. So that's your quantitative easing. And then on top of it, the PPP loans, they are printing money and literally, like, actually just shoving it into the market to people, which also created this glut of money. And it was just a it was a great time the last two or three years as you, and I know with our rates, we're dropping Yeah. And the values of our properties are going up. Yeah. Yeah. I just wanna make one last correlation. That this is the correlation I wanted to make with all that crap we just said was, think about this. All you awesome dudes and gals that locked in two, two and a half interest rates on your home. It's really challenging for you right now to think of a day that you would sell it for the same price you paid for

Mike DeHaan: [10:11] it Uh-huh.

Dan Austin: [10:12] If you bought it in the last few years.

Mike DeHaan: [10:14] That's kinda hide the market.

Dan Austin: [10:15] Exact reason is because as interest rates go up, guess what's gotta go down? Just like in a bond, your property values have to go down. And so your house that you maybe paid $500,000 for in 2021, and you locked it at two and a quarter rate, you're like, I am winning thirty years at two and a quarter. Do you really wanna live there for thirty years? If you do, you're set. You're great. Who gives a shit what value your house is? But if you're like everybody else, you wanna move in five to seven years, you really can't sell your house until market prices grow up to that value at the new interest rates, and they're not gonna do that this year.

Mike DeHaan: [10:49] Yeah. Yeah. Well done. I think you explained that better than all the whiteboard bros I saw yesterday. So Well, I

Dan Austin: [10:55] do think this is this will be a fascinating case study. This is the exact type of case study they share in business school. Yeah. And the reason why is because I guarantee you there's gonna be some mismanagement discussions coming out from Silicon Valley Bank and their executives, and it's a great case study of how they went long when they really needed to be short. Yeah. Right. Buying very long term mortgage backed securities that are ten years ten year maturities when they really shouldn't have done that because that's what kicked themselves in the ass. And so this, I think, be a this will be an Enron or a World Kong without as much scandal and and more management mismanagement.

Mike DeHaan: [11:36] Yeah. And so the way that this, you know, this is important for real estate investors as well. I think it's it exposes the risks of just the general banking system, which everyone should be aware of, especially as you grow real estate business or you grow a business in general, you end up having a lot of cash on hand if you're doing decent, or you have no cash on hand because it's all tied up in properties. Right? They're they're especially the wholesale business. Yeah. There's not a whole lot of in between. But I mean, it's not uncommon for us to have 500 to $800,000 in cash as we're waiting for our next project. And what happened in this instance, I mean, even significantly more than that, there was one of the the companies that had $3,000,000,000 in cash in Silicon Valley Bank. It's a lot. When you sign up for a checking account, everyone's done this. Right? You sign the agreements. In that, it says in every single institution, I don't know if anyone's over this, that is FDIC insured up to $250,000. That means that if the bank collapses, the federal government will insure $250,000 of your money. That that company that had $3,000,000,000, technically, they're only getting $250,000 back. Back.

Dan Austin: [12:43] Right.

Mike DeHaan: [12:43] Right? From the federal government.

Dan Austin: [12:45] In this case, the government has said, hey. We're gonna make sure you're whole. And a lot of people are like, screw that. Screw those bank those those investors.

Mike DeHaan: [12:51] And this is something that's getting interesting, and this is the wholesaler in me sort of starting to fix it out. So the government is giving guarantees to these people like, hey, we'll give you this money at some point in the future. There are people right now that are saying, screw that. I want my money now. I will sell yeah. I want my money now. I will give up my $500,000 guarantee from the government at a discount. I will sell this to Mike and Dan for $400,000, even though I know it's worth $500,000.

Dan Austin: [13:17] Yeah. So I can have my money now.

Mike DeHaan: [13:19] I guarantee you that there are some hustlers out there, and if there aren't, I'm disappointed in everybody. I guarantee you there's a hustler out there that is gonna say, oh, yeah. You have you have a $500,000 guarantee with Silicon Valley Bank. I'll buy it from you for $400,000. Then they go and they find the other person

Dan Austin: [13:32] There's gonna be some hedges out there doing it.

Mike DeHaan: [13:34] That'll buy it for 420,000, and you make a little $20,000 margin.

Dan Austin: [13:38] I bet you there's already people doing it. I love your mindset there. And here's why. And this is why I also think the government should step in and actually, in this limited case, make sure that guarantee the depositors money is because a lot of that money is like payroll money. So it's people like you and me, the average Joe in America, I shouldn't say average Joe, mean, they're probably $250,000 a year jobs in Silicon Valley working twenty hours a week, but still, there's people that are working for startups that their payroll is supposed to hit, and it didn't hit because their company's money had disappeared. And so if you're a person that's for the people, that's why I believe that they should do that. But people are gonna need to make payroll, so they're like, well, I'll take a 20% hit on my money to keep my business alive. Because the option is die or stay alive for a lot of these startups. And you need money. The one thing startups always need is money. That's why they always talk about their burn rate, because they're not producing income, generally speaking.

Mike DeHaan: [14:34] Yeah. I mean, you know, that makes sense, though. And I mean, because it has such a huge trickle down effect in such a negative way.

Dan Austin: [14:40] Right.

Mike DeHaan: [14:41] If all a sudden you have all these people that can't, you know, especially with so many people that live paycheck to paycheck, they also they can't pay their mortgages, can't buy food, can't do these other things. That's what leads to real problems. And, you know, so many people are coming out now about all the inflation and stuff that's gonna be produced when the government bails out all these people. The trickle down damage is significantly larger, in my opinion, than that inflation, which is already especially if you look at, like, our national deficit was it was, like, $40,000,000,000. I mean, that's a lot of money.

Dan Austin: [15:11] Wait. Our national deficit?

Mike DeHaan: [15:12] No. No. No. No. That was the the amount that SVB defaulted. Was like, it was like $40,000,000,000. With our deficit being was like 18,000,000,000,000 or whatever the hell now. Yeah. It's it's like nothing.

Dan Austin: [15:22] It's a drop in

Mike DeHaan: [15:22] the bucket. Billion dollars. It's just, know, it's just one more You know, thing over there. Start, like,

Dan Austin: [15:28] all of a sudden, all these banks start failing. We might wanna talk about that. And we should probably just put all the CEOs in prison.

Mike DeHaan: [15:34] Jamie Dimon already showed that it doesn't matter when he failed the first time in 2008 and got super rich and

Dan Austin: [15:39] now still runs Chase. So He is he is a man on top of the world.

Mike DeHaan: [15:43] Yeah. Anyway, so yeah. It's interesting. So, like, how that's affected real estate as well. Fannie Freddie rates dropped, which is really interesting. You know, people going and buying bonds with their cash, that's caused the rates to come down a little bit. DSCR loans for the my 10/31 deal finally closed and funded yesterday. The DSCR rates have gone up as of all of this happening from what I've seen. So the people that can sell to the federal government, the Fannie Freddie loans, they are a little bit more on the positive now. The private money is like, uh-oh. This is gonna get weird. And they are now getting more conservative. So they're having higher rates on their on their loans. So question another point of who the

Dan Austin: [16:28] hell knows? Like, we'll see what happens. Like, who cares what the interest rates are? Because the real hustlers out there are figuring out a way to make it. Right now, it's easy, honestly, from a buy and hold standpoint just to tap out for twelve months. It feels so much easier to do that.

Mike DeHaan: [16:42] Honestly, though, so, like, even with my ten thirty one, with all these DSCR loans that I'm looking at, so it's a debt service coverage ratio loan. Basically, it's a rental grade loan that you get from there's tons of companies. You could go DSCR lenders. You can find them. But they will let you buy a property based off of the debt service coverage ratio of the so basically What does that mean? Yeah. So what is the rent compared to the monthly payment on the property, including taxes and insurance?

Dan Austin: [17:08] And what's the good coverage ratio? Like, typical what what are they right now? Should let's just say what they're expecting.

Mike DeHaan: [17:13] It varies a lot. So there are some DSCR so traditionally, for, like, low competitive rates with, like, a a local credit union, they'll do DSCR loans, like commercial style loans. They'll want you to be at one and a quarter, 1.35. There are private DSCR lenders. If you're in hot markets such as Austin, Texas, where I'm looking to buy, they will sell you a house with a point seven five DSCR. Wow. Which is crazy. If you have real estate experience.

Dan Austin: [17:39] How do they calculate that though? Right? Because a lot of folks that would be investing in that, they're probably assuming they're short term rentals.

Mike DeHaan: [17:46] So that's part of it. So they're assuming that. And then they are also willing to bet on these markets that they're extremely bullish on. So I have several lenders, particularly down in Austin, that are willing to give you a point seven five DSCR. So that means that if the more mortgage payment's gonna be $2,000 and you can only enter 1,500, they will give you the loan, which is crazy to me. The caveat with all of that right now is the rates are insane. Nine and a half to 10% if you're getting something that's, point seven five DSCR, and they are locking you into a five year prepayment penalty with basically a 1% step down every single year. So what that means is if you pay them off, you go to refinance in two years, you're gonna have to pay 4% of the loan amount to get out of it. So if you have a, $200,000 loan, you go to pay it off in year two, gonna have pay $8,000 just to get out of the loan. So what happens is they're locking you into these insane terms that, like, don't that are not beneficial for a lie unless you have an extremely long term time horizon. Whereas, like, me as a business investor, that doesn't make sense. And so as I've started to look at these opportunities, I'm still weighing stuff. I don't wanna pay taxes on my on my ten thirty one sale. But if I don't find something that I really like, I'm just gonna take my money and pay the taxes. Yeah.

Mike DeHaan: [19:07] I'll have, a $40,000 tax bill, but also have $200. And because we have a lot of opportunity, I can take that, and I can go and make that money back. It's not the end of the world.

Dan Austin: [19:15] Right. It's it's a lot better than doing a bad deal just to not pay tax. And a lot of people do that because they're so adverse to taxes, which I'm with you. I don't wanna pay taxes. It sucks to do that, but it's better than doing a bad real estate deal.

Mike DeHaan: [19:27] There's nothing wrong with paying taxes. Paying taxes means you made money. Right.

Dan Austin: [19:31] Just wanna pay a lot of them.

Mike DeHaan: [19:32] Yeah. Just wanna pay my fair share. Yeah. Yeah. So, you know, it is a really interesting time when it comes to buy and hold stuff. Like, especially if you're buying stuff at kind of retail ish price, which I am looking to do right now with this $10.31 just because of the the nature of our business and the attention that it takes and because it is a personal investment, you know, so it's outside of the systems of our business.

Dan Austin: [19:54] It's because you don't have Dan to show up and be like, hey. Why are you not here working, contractor?

Mike DeHaan: [19:57] Like, seriously, though. Honestly, my opportunity cost to have to go and manage something like that versus focusing on our business

Dan Austin: [20:04] Right. It's challenging.

Mike DeHaan: [20:06] Is not correct. Our upside is significantly more than the $40,000 if I don't do that.

Dan Austin: [20:12] Yeah. It's also why we're both not doing major rehabs because it just doesn't make sense for our goals and our business right now.

Mike DeHaan: [20:18] Yeah. So the point being, yeah, with with all those things, like, the rates and stuff are getting weird with the the SCB stuff, and then My

Dan Austin: [20:25] hope is that it's short run. Right? Like, this is kind of like maybe we're peaking. I I don't know. And and I we were talking earlier. I was mentioning maybe they're pricing in a couple more fed rates, and that's why DSCR loans, you know, because they're going back to that conversation. Do you wanna lock in a rate at 6% when rates actually are gonna keep going up? Probably not. Yeah. Because you wanna have the peak rate so they're pricing in expected rate increases. And then as we get that next quarter quarter point BIP or hopefully that's all it is, then maybe they start tapering off after that because it's already priced in. Just the Fed raising rates next month doesn't necessarily mean the DCR rates are gonna go up because, like I said, they're priced in already, potentially. I have no idea.

Mike DeHaan: [21:07] Yeah. Yeah. Exactly. So I'm not

Dan Austin: [21:10] an expert. I'm not an expert. It just sounds like a terrible loan to get right now.

Mike DeHaan: [21:13] It does. Either way, I think that right now, it's just not like the time to be buying rentals unless you're buying them at a massive discount. You're finding them off market. You're able to recover a lot of your capital, and it's a great asset that you like. That's fine. People that are trying to justify buying rentals by doing things like fooling yourself into thinking that a midterm rental is gonna be a lot better. Yep. Or, you know, trying to convince yourself that having this Airbnb in this neighborhood, in this town that isn't a destination, right, is gonna be like is gonna make your rental worthwhile.

Dan Austin: [21:45] Because everybody says that's a good deal.

Mike DeHaan: [21:47] Yeah. Probably not the time to be going down that path, but I think it is a great time to be doing transactional real estate where you can make some money. Because tell you what, like, our wholesaling stuff right now has turned up immensely over the last couple of weeks. And we launched in some new markets that have been killer. And on top of that too, like, it's funny. We had we had our new sales guy come in. We had to part with one of our sales guys a couple weeks ago. Had a new guy come in, and I'm like, wow. Is this actually what it's supposed to be like? Oh, he's actually good. When you go from someone who's very unmotivated, you know, they've been with us for a while and kind of on the way out to someone that is hungry and ready to go. It is a night and day difference on your business. Right? Self sufficient, like closing deals. He's been with us now for what, two weeks, and he's already has, I think, one officially signed around and three in the hopper that I think we should get probably by this week. Yeah. He's doing well. And those are just, the official ones. Or as of today, I've seen the other stuff going around. Like, it's possible we could have several more here over the next week or so.

Mike DeHaan: [22:50] But a huge amount of that is a massive increase in response rates to our marketing. And people always ask what we do for marketing. Like, there's always some sort of secret sauce, like magic button. Button. That's the number one question I get all the time is like, what is what is your marketing? Why is your direct mail so successful? This is where we're consistent, man. And we have our brand behind it. The people can go, and they can verify. It's very easy to see. And when we go and we send out stuff, it has a clear call to action, has a clear intention about what we're trying to do. You know, we're not sending like a, are you in trouble? Are you going into foreclosure? You should call this. We it very specifically says, in fact, here here's what I'll do. I'll see if I'll see if I can, like I'll read you the most recent letter that we send out. Please read it. It's like the most basic thing. While you pull

Dan Austin: [23:37] that up too, I would just also comment that if you're trying to get leads from somebody, like a company that has to, like, name their company magic, and I don't know anybody called magic, but, like, magicalleads.com or anything like that. Like, not magic. There's no magic.

Mike DeHaan: [23:53] Dude, that's They should name they should your lead gen company should

Dan Austin: [23:56] be like, we show up every day consistently and do the same thing over and over again and find you leads.com. Yeah.

Mike DeHaan: [24:02] Yeah. Right. That's how you do Totally. I know. Yeah. Anything that's like super magic leads or like motivated sellers. So motivated seller leads, and that's bullshit. Right? Right. All that. Yeah. So this was this was the most recent letter that we sent out. You guys can verbatim copy this. We are getting currently over a 1% response rates in huge, highly competitive markets, including Houston, including Baton Rouge, Louisiana. Right? Where else did we send this one recently? I have to go through our list. Jacksonville, places that so many of you invest. We are getting an over one response rate with this letter. So take notes. Hello, first name. We are a real estate investment company looking to buy properties in Blank City. Right? You insert your place in the in the the blank. We are interested in making you an offer for property address. We buy in any condition. You can and can offer you flexible closing days to fit your schedule. We also don't require you to pay any realtor fees. Could you please call or text us at phone number at your earliest convenience? Thanks. Mike DeHaan. Here's our phone number again. Here's our website. That's all.

Dan Austin: [25:10] That's That's too simple. Doesn't work. Too simple.

Mike DeHaan: [25:12] And everyone always thinks we're full of shit. But if we're not, it's so

Dan Austin: [25:19] how else to explain it to people. It's just like, yeah, it works. I don't I don't know what what to tell you. It's pretty simple. It is. Execute We better than a lot of people.

Mike DeHaan: [25:27] Yeah. I mean, you know, we have a sort of series, I guess, of letters that we send that builds off from the one previous, and it sort of builds a little bit of a story around our brand. And it pushes people to our professionally designed website, not a shitty care website that has the same copy as everybody else. And we have a sales and follow-up process. And that's it. That's the whole business. So many people try to have these, like, crazy, like, bait and switch and, like, all these sort of things. Like, no. Or they're

Dan Austin: [25:53] just looking for the the easiest or cheapest way to market, which isn't always going to be fruitful, or they don't want to market every month. They think like, oh, let me just market one month, and I'll just make a bunch of money, and I'll stop until I'm ready to do it again. It's like, that's not how it works. Yeah. Show up and just consistently market and consistently follow-up with your leads.

Mike DeHaan: [26:12] Yeah. Yeah. Exactly. Right? And it's funny. As as you go through this too, a lot of people, they say direct mail's really expensive, whatever. Our average cost per lead is between 3,000 to 3,400. Not cost per lead. Sorry. Cost per deal. Our average cost per lead is close to a $100. Our average cost per deal in 6,400. And when you're new, you're like, damn. That's a lot of money. But our average deal size is also like $17. So, you know, it pays itself up.

Dan Austin: [26:38] So basically, the quick back of the napkin math is you need 34 leads into your system, into our system to get a deal. Yeah. Exactly. I mean, if if it's average cost is $100, the average cost or cost per lead is a $100. Average cost per deal is 34. Do the math. 3,400. Do the math. You get 34 leads. And so if you're a person that wants to buy a property, we just give the equation, go and get 34 leads.

Mike DeHaan: [27:03] Yeah. And so that's strict male leads. So the number of leads required goes up with some of other stuff we do, whether it's SMS or I remember when we used to cold call

Dan Austin: [27:12] SMS is probably really high.

Mike DeHaan: [27:14] So SMS is is yeah. It's probably like 90 something. I remember when we used to cold call, it was about the same. It was like 70 to 80 leads. And like all those leads, like they would we talked to them back and we'd said, oh, you wanna sell your house? I'd be like, I don't know. You called me. It's like, well, that's not really the conversation that I wanna have.

Dan Austin: [27:30] It's a cold open for sure.

Mike DeHaan: [27:32] Yeah. Versus the reason I love direct mail, and this is what we're talking about with some folks in the instant investor program today. Every single person that enters into your system with a call with a direct mail lead, every single one. If you think about the seller story, k, they received a piece of mail, and they got it in their mailbox. They received a

Dan Austin: [27:52] lot that day, probably. A lot of mail.

Mike DeHaan: [27:54] Yeah. They probably received a lot. Yeah. They got it. They got an envelope. They said, what's this? You know, they opened it. They picked it up, and they looked at it, and they said, there's a phone number here. I am going to take time out of my day. I'm going to go find my cell phone. I will pick it up. I will dial the number, and I'm going to be willing to sit on the phone with somebody. They've already raised their hand and said they wanna have a conversation. Okay? Regardless of how that conversation goes, they have an interest in selling their property, and there is an ability to monetize that. Whether it is you buying at a wholesale price, you buying it with creative financing, you're doing innovation with them, you're referring it to a realtor. Right? They went through that whole process willing to have a conversation. In today's world, no one has a conversation if they don't have to.

Dan Austin: [28:41] So true. Yeah. So true. You're absolutely right. It's like you can take that. Say you're just doing direct mail like you just said because that's a very good motivated leave that's raised their hand. Take that $100 and figure out how to monetize it. They have multiple ways to monetize it. And this is where you and I started. Was like, but we have a cash offer, and we will close fast. Like, I don't care. I don't care. Like, and then we can't figure out why we're not closing. It's because that solution is not aligned and it's to solving that person's problem. But that person might have a retail ready house that you should be referring to a realtor or taking down if you're a licensed agent, taking down yourself and because you can monetize that $100 lead pretty quickly doing that. Or, you know, maybe it is a rundown crack at house like you and I love to buy.

Mike DeHaan: [29:21] Right.

Dan Austin: [29:22] Good cash offer.

Mike DeHaan: [29:23] Yeah. And if they're not ready to move forward right now, establish that relationship. Right? Continue to follow-up with them over the weeks, months, and years, and stuff comes around. And you do that for long enough, that's where a pipeline comes from, and that's where opportunity comes from. That's such a great

Dan Austin: [29:39] point because, like, look at it. Man, here's a good analogy. It's like, every time a lead comes into your CRM, think about it as a $100 bill. Like that, there's a $100 bill. If every time somebody called you got a $100 bill, would you just ball it up and throw it away if that $100 if you couldn't spend a $100 bill right now? There you go. Probably not. Yeah. You would invest it into your system. So move that $100 bill to the stack of $100 bills where you're like, I gotta call these people to get that $100 bill. I gotta call them back. I gotta text them back. Have to follow-up with them. It might be one year. It might be two years. It might be one month. It doesn't matter because that $100 bill is going to turn into 17,000. The sooner it turns into 17,000, obviously, the better ROI. But $17,000 off of a $100 is a lot better in two years than just throwing it away and balling it up now. Still a great ROI.

Mike DeHaan: [30:24] Yeah. Exactly. And it's hard when you're starting out to sort of have that long term mindset, but that's where real money's made. You know? And if you're in this to work on things quick, you know, you're trying to make, like, a quick buck, honestly, it's not the right business. It's a legitimate business these days, especially wholesale real estate. There's still these guys that go around Instagram that sell it as a get rich quick scheme, you know, because that's what they were doing in 2015. One of them's name is Lameel De Gom whatever. I'm trying to find something that rhymes with his real name. His name no. His name rhymes with Jamil. Jamil. Yeah. But he is a bigger pockets guy now, and he has it all the sale the house himself for eighteen years. Yeah. So now he goes and talks about how it's a get rich quick scheme, because for him, it was back in the day because he was the only guy. Yeah. Now you have people with real money, real systems, real platforms that are going and doing this. And it is no longer a get rich quick scheme. It is a business to like everyone else. And not only that, but there are people who are taking the systems, and they're adding them into their flipping businesses, their rental businesses, they're competing for the same deals now as the wholesalers, because the barrier to entry for it has dropped so much. And if you don't approach it with the same mindset, you will not be successful. The only people who get rich quick on this are people who are doing super illegal stuff, and they're, like, lying to people, and they're doing some weird things. And they're not getting

Dan Austin: [31:48] rich quick either way.

Mike DeHaan: [31:49] Yeah. Yeah. Right. They're not yeah. They're gonna lose it all pretty quick.

Dan Austin: [31:52] They're still doing dumb shit.

Mike DeHaan: [31:53] Yeah. Some people get extremely lucky. You know? Sure. There's always the story of like the the kid who like, I don't know, was out for a jog and like bred into a farmer, and the farmer's like, you wanna buy my land for a million dollars? And he goes and find someone for $2,000,000 to buy it. Whatever. That's bullshit. Like, that isn't how it works 99.99% of the time. And a big part of that system that you have to develop is the sales and follow-up process, which everyone always overlooks and focus on the marketing, which does not matter. Like, I literally gave you the letter that we sent out this month that we have produced I'm a see. So with that letter so far for the month of March, we have 200 leads in the system in fourteen days from that letter. Right? And we have sent I should actually look at the total number we've sent. But it's now like an insane number of letters. Probably about, I don't know, 15 to 16,000 so far. But like a lot of those haven't even hit yet. They're gonna be hitting over the next

Dan Austin: [32:56] two weeks. Across those two markets? Mhmm.

Mike DeHaan: [32:59] Across several markets. Yeah. Okay. But anyway, so point being, guys, it's not rocket science. And it is a great time right now when you aren't able to buy rentals to make that your primary focus in your real estate investment business is developing those lead generations and doing transaction real estate. Because tell you what, the homeowners, they are still wanting to buy, especially if you're in that lower price point range. And so just get deals and sell stuff to them, you know, do a quick flip, sell flip, sell sell fixer uppers on the market, find flippers that wanna buy starter homes. That's where it's at

Dan Austin: [33:32] right now. 100%. Yep. Starter homes right there slightly below the middle middle price point, the median price point of your market. Hotcakes right now.

Mike DeHaan: [33:40] Yep. Exactly. Yeah. Avoid, like, the step up homes, like the people that are selling starter homes and moving into the higher tier price point because that's where it's getting a little tricky right now. But For sure. So cool, guys. Anything else you wanna add, Dan?

Dan Austin: [33:52] No. I think we gotta get off our soapbox now before all of our listeners walk away and say, goddamn.

Mike DeHaan: [33:58] Hey. I mean, you know, kinda feel in the soapbox sometimes. But, you know, it's something that I've gotten, I guess, extremely passionate about recently as I've been talking to more and more people and seeing a lot

Dan Austin: [34:08] of

Mike DeHaan: [34:08] the, I don't know, the questions, I guess, about the off market space. And also too, I've I've talked to several people recently that have said like, oh, Direct mail is just, like, terrible. I'm like, but I know that it's not. I know that you're wrong.

Dan Austin: [34:20] Yeah. It works in every single market. Yeah. We've been consistently, and I argue that besides one of the massive franchises, which I would not include them in this, somewhere like HomeVestors or something like that that have been around a long time, We've probably been in more markets than any other wholesaler in this country at this point and done consistently successful profitable business in all these markets, some of which we've never stepped foot in. Mhmm. So you bring you bring local expertise to that argument. Game over. We know it works. 100%. All the time. It works every time, all the time, something like that.

Mike DeHaan: [34:53] Yeah. And not only us, but now, I mean, we are covering some serious geography with our Instant Investor members these days. And there are people that are getting stuff done all across the country.

Dan Austin: [35:03] In hot markets, big markets, little markets, rural markets, I mean, it works. Does. So awesome.

Mike DeHaan: [35:09] Cool, guys. Alright. Well, thank you everyone for listening. Quick bookkeeping thing. The store for collecting keys, if you wanna get some collecting keys merch is now live. You can go to store.collectingkeyspodcast.com. You can get some shirts. You can get yourself a collecting keys podcast shirt. You can get yourself a BDE shirt. And we have a couple other ones that we will be working on here as as things come together. I wanna figure out a way to do, like, a whiteboard bros shirt, but I gotta I gotta try to think of what it's designed like.

Dan Austin: [35:36] It can't be a white T shirt because if you have a whiteboard on a white T shirt, won't be able to see it.

Mike DeHaan: [35:41] That's like outline. If you have you have to have a white if you have a whiteboard on a white wall, is it invisible? No?

Dan Austin: [35:48] Good point. Touche. Yeah. Yeah. Somebody's gotta at least go buy it so our our guy, Daniel, that's building all this for us is, like, gets pumped so that he feels excitement that somebody's buying stuff from us.

Mike DeHaan: [35:58] Yeah. Yeah. So, you know, everything on there, like, we're not making any money off those. It's purely just for people that that wanna buy shirts. So go check them out. They're cool stuff. We get like the Bella Canvas keys. They're soft. They're nice. Everyone that's gotten a collecting T shirt so far that we've sent out to people, they always got Ben how soft it is. You should go get one of those at store.collectingkeyspodcast.com. Outside of that, if you wanna start getting some off market deals, go to collectingkeyspodcast.com/free. Get your free five step guide to start generating off market leads, and, that can get you started. Besides that, share this with your friends. Hit us up on Instagram. I'm at Mike underscore Invest as at InvestorManDan. Besides that, we appreciate you all, and we'll talk to you all next week.

Dan Austin: [36:36] See you.