What to Do When The Effort Isn't Worth the Payout

Dylan Koch: [0:00] There are other aspects of this business, especially if you continue to buy and hold and not just do strictly transactional business that might go a little under the radar.

Mike DeHaan: [0:10] What's going on, guys? Welcome to the Click and Keys Real Estate Investing Podcast. I am Mike DeHaan here with my cohost, Dan Austin and Dylan Cook. Hey. What's going on, guys? Rounding out July. Dylan, you were just complaining about how all of your deals have been tiny, just like something else that you have to deal with this tiny every day.

Dan Austin: [0:27] No. He's the real estate genie. We already know his nickname, dude.

Dylan Koch: [0:30] Shut the fuck up. You didn't have to finish that sentence. I knew where you're going.

Mike DeHaan: [0:36] No. It is a valid conversation though with transactional real estate in general. Right? And I say that as kind of a broad term because I was talking to another scale member this morning, And there's always this kind of pattern that occurs where the smaller the deal is, the more work it seems to be.

Dylan Koch: [0:53] Oh, a 100%.

Mike DeHaan: [0:54] And this exists on the wholesale side. It exists on the lending side with our SLA Capital lending business. Right? We have a loan right now that's like a $90,000 loan that we're going through the fucking hoops trying to close it. Right? It happens with your flips. If it's like a tight flip for some reason, it's always so much harder to get out of it. I've heard the same thing from real estate agents that are doing listings. Right? If it's like a lower quality house, it's always a harder listing. What is that? I don't know. But they are important though. And you're about to say that a lot of your deals right now have been smaller.

Dylan Koch: [1:27] Yeah. I mean, the past like three have been like 2,505 and 6 ks. And especially after you're paying the acquisition guy, I'm literally not making anything.

Mike DeHaan: [1:35] But it's... I remember years ago back when wholesaling was like starting to get popular, right? Which Dan and I were, I would say fully like in the mold of, like, when it was on the up and up. Like, we were definitely after the early adopters, but before it became, like, Guru City like it has been since 2223. We turned it into Guru City. We we kinda did. We participated in that. But the... There was this whole movement for a while of if you make less than $15,000 or whatever your number is that you don't even bother doing the deal. And that's kind of a shitty mentality because you need those small ones to keep the lights on. Right? And even if you make fundamentally nothing because you have an AM You didn't lose. Didn't lose, right? And it's covering your cost per deal and it is keeping your team engaged, which is worth something.

Dylan Koch: [2:23] Yep.

Mike DeHaan: [2:24] Yep. You know, if you're not a solo operator.

Dylan Koch: [2:26] And sometimes there's other intangibles, like you find a buyer that you didn't have before, right, that you can sell a future deal to that might be a bigger spread.

Dan Austin: [2:33] Keeps you active in the community too. People see you.

Mike DeHaan: [2:36] Or if it is a tough deal and you have to help the seller, can you turn that into like a five star review on Google, right, and make it part of like your larger sort of thing. And you can add that extra deal to your your Instagram bio when you go and you say, I've done 67 deals now.

Dan Austin: [2:51] I like to call this the effort to upside matrix. I'm gonna coin that. You're just making shit up. I am making shit up.

Mike DeHaan: [2:58] The effort to upside matrix. So the etum.

Dan Austin: [3:02] The etum. And so when you're looking at the etum, sometimes the effort is max when you're up here. But also when the effort is max, the payoff is low. The goal is to be effort low max payoff. And so

Mike DeHaan: [3:18] Okay. So what you want is an This

Dan Austin: [3:21] is the unicorn up here. This is the unicorn.

Dylan Koch: [3:24] You were looking for like a lay down lead that's like a 50 spread. That's what you want. Yes.

Dan Austin: [3:28] So, but there's actually, there's a moral to this story. It's interesting because there is looking at the silver lining and the upside in some of these deals. Like you said, you get a five star review. It keeps you active in the real estate community. You're selling deals. Even if you

Mike DeHaan: [3:41] make $5, it covers marketing costs, right? In our type of business where it's not like a hard sales thing, right? Like it's very opportunistic And it's very akin to fishing, right? Like you're kind of throwing lines out there and you have to wait for the fish to come to you. No matter how hard you try, you can't force someone to sell you their house, right? But if you want to catch like the trophy fish, you also got to be willing to catch some small fish. Right? And that's sort of what keeps you engaged. So you don't just like zone out for fucking nine hours circling around on a boat in Maui and wondering why the hell you spent $2,000 on this fucking trip. And it's definitely not based off of a real experience.

Dylan Koch: [4:18] The moral aspect of this too is like, there's been... I think there's one or two occasions where basically, like, we still did the wholesale transaction. I literally made nothing. Buyer got the property. The seller still got out of their situation. There just wasn't enough spread, you know? And that was before I had an AM. Like, now that'd be a little bit tougher because I wouldn't want to pay them, like basically to sell the house. But if you can still like get people out of their shitty situation, it still helps.

Mike DeHaan: [4:41] Yeah. Yeah. I mean, we had one like a month ago that we wholesaled for $0

Dylan Koch: [4:45] Yeah, exactly.

Mike DeHaan: [4:46] Right? Like we just assigned directly to the buyer just because we want to get the deal done for a seller because they freaked out. And tell you what, those are the most ungrateful fucking sellers. We should have let them burn.

Dan Austin: [4:55] Fuck those. No shit. That does happen.

Dylan Koch: [4:57] I usually just ask the buyer like, Hey, if you make more than what you think you're going to in the back end, it's like a handshake agreement, like throw something my

Mike DeHaan: [5:04] Yeah.

Dylan Koch: [5:05] And sometimes it works, sometimes it doesn't.

Mike DeHaan: [5:07] Yeah, it doesn't. And we've done those too. Like we have actually some community members that we have done deals like that where it was like kind of questionable on like the buy even for like a 5 or $10,000 wholesale fee. And so what we'll do is we'll sell it to them for scratch, and then they'll flip the house and then they'll pay us afterwards. You want to make sure that you have a good relationship with that person before

Dan Austin: [5:27] you do it. So definitely people that will take advantage of that because there's losers out there.

Mike DeHaan: [5:30] Yeah. And then if you're really smart, you own a hard money lending business and you have them do the loan through you. So you get paid anyway. Exactly.

Dylan Koch: [5:36] Well, now I have a system too. Just... Sometimes I'll be like, hey, I'll list this on the back end as a flat fee listing for like $500.

Dan Austin: [5:42] Yeah.

Dylan Koch: [5:42] Right? And then, you know, that way they can make more and they're not paying 3% to a realtor. It doesn't take a lot of my time.

Dan Austin: [5:47] Totally. That's fair. That's actually a good technique there, Dylan. As long as you... Assuming you don't mind doing the effort to get it listed.

Mike DeHaan: [5:54] Yeah. I

Dylan Koch: [5:54] mean, it takes me, like, two minutes.

Dan Austin: [5:56] And Mike, you eloquently explained what I was going to say. And then to put a cap on it, the other end of that spectrum is, you know, I was reviewing some underwriting in our CRM today, and the AM was asking about the seller finance deal for a duplex. The seller wants 500,000. The Zestimate's $4.30. It's a duplex, so nobody's... Just nobody's buying those right now. He also has a $1,800 a month mortgage, and she's trying to do like a seller financing deal on it. And I just looked at it and it's just like, well, it's more of a sub two deal, which I know is gonna be headache and a pain in the ass. The guy wants 500,000, so the underwriting doesn't mean that we just give them what they want. Right? It's just like, let's just do a quick sniff test and be like, no, dude. Like, sorry, don't waste your time on the lead. Give them an offer. I don't ever advocate throwing a lead or a lead out, but give them an offer that actually works instead of trying to meet them in the middle on a really, really terrible lead where you waste your time. And that's where I see people spending too much effort with almost no payoff or never payoff. And you're thinking that just because they're willing to sell to you doesn't mean that it's a deal.

Mike DeHaan: [7:04] Totally. Yeah. We see that a lot with like new people or people that kind of like lack confidence in the sales process or they don't like being told no, is they try to, like, craft these deals that don't really make fundamental sense because they think it's what

Dan Austin: [7:19] the seller wants to hear. It's like, who's the buyer of this?

Mike DeHaan: [7:21] Honestly, it's like the entire crux of, like, the sub two PACE Morbid movement. It's a bunch of, like, peasants that are, like, so afraid to, like, make a mistake or take any sort of quote, unquote risk. They're trying to make these super complex deals that they feel like is a win win for everybody, but no one can actually understand. Right? And then they get offended when they don't... When you don't understand their freaking calculus problem they're proposing to you, which actually sucks for everybody.

Dylan Koch: [7:44] Which is probably not structured in the correct legal format anyway.

Mike DeHaan: [7:48] Probably. Yeah. Definitely not. 100.

Dylan Koch: [7:51] Exactly. So like no one really wins there. I mean...

Mike DeHaan: [7:54] Yeah. We haven't gotten any more recent information on how a lot of that stuff... Like last I heard, there was a movement towards a large lawsuit against Sub2 that was being pushed by a bunch of sellers that had essentially been misled by Sub2 community members. It was like one of those things that you get in the mail and it was like, if you participated in a transaction with these companies between this date and this date, you might be subject to compensation, right? And it was like a big thing. And that was like a year ago. I haven't heard anything more about it since then.

Dylan Koch: [8:28] If they're smart, they probably settled. Probably. A lot of the sellers probably didn't have the means for a lot of legal counsel.

Mike DeHaan: [8:36] That's true. Right. Speaking of dipshits, let's talk about fed rates. And so this is my current opinion. Like we, this is just like the flavor of the month on the news when it comes to real estate and business right now is, you know, are rates going to drop? And first off, I just want to say that my opinion has now become that if you spend all of your time focusing on interest rates to make a decision, really that just means you just suck at business. Because big picture, it doesn't matter. It shouldn't matter like that much. Sure, you can make more money. It can be easier. But like if you are paused or you're not doing stuff like you normally would, because there's this uncertainty around the interest rates, it just means you're a bad business owner.

Dylan Koch: [9:14] Yeah. And they'd use it as a cop out excuse of like, oh, I think rates are going to go up, I'm not doing anything And to sound really like, no, man, that's a 180 of what you should be saying.

Dan Austin: [9:23] Yes. Absolutely. I think the challenge is more than anything at this point, because now every, you know, Dick and Harry or whatever on the street thinks interest rates matter. Like people that don't even own houses, they're like, man, interest rates, they bring those down.

Mike DeHaan: [9:34] I'm like, do you even own any stocks? Right? Like it's

Dan Austin: [9:37] a very buzzy buzzword, but it's sentiment. Right?

Dylan Koch: [9:40] The second level of that is, oh, they're gonna bring interest rates down thinking that the ten year is gonna go down with that when that's not necessarily the case.

Mike DeHaan: [9:47] Right.

Dan Austin: [9:47] Like, what does that even mean? Right? Yeah. Okay. We're gonna bring interest rates down. And so the the one thing is, is consumer sentiment. And so if you're letting yourself, I guess, be part of that consumer sentiment as a business owner, as opposed to just like running your business with the correct fundamentals that actually make your business move. Because for the mass majority of people in real estate, although interest rates are heavily influencing like the market, the real estate market, it's not the only thing and it's not the most important thing all the time.

Mike DeHaan: [10:14] No. And the funny thing to me is when you have these small businesses, and so a small business, I'm pretty sure is of any business doing less than $20,000,000 a year. That's considered like a micro business. And then I think 50 to 20,000,000 is considered a small business. Right? And so every single person's listening to this show, you don't even have a small business. You have a micro business that no one gives a shit about.

Dan Austin: [10:33] It's not the only thing micro you got.

Mike DeHaan: [10:35] I can do that. Oh, there you go. Good one. There we go. Like, overall market sentiment doesn't matter because you have like 20 customers. Right? Especially

Dylan Koch: [10:46] Yeah. You're not big enough for that to be a big impact.

Mike DeHaan: [10:48] No. Right. It doesn't matter at all. Well, let's say... Let's put it

Dan Austin: [10:52] this way. Let's play a game. Like, what would it change? We're all in the same business. Every listener to this is in the same business. And let's just say interest rates tomorrow went back to what they were. We had like ZERP again. Like what would that change for a wholesaler looking to be in real estate?

Mike DeHaan: [11:07] There'd probably be a whole bunch more of them that would come in and do bad business.

Dan Austin: [11:10] Right. So there'd be a bunch of competition. There'd be a bunch of crazy shit going on, and it wouldn't actually be an idealistic situation like No. Somebody would assume.

Mike DeHaan: [11:18] Yeah. And I mean, and even then it would take a six to eight month period for all the buyers to start to come in again on the wholesale side. Right? It still isn't going to solve the fact that most of the American homeowner can't actually buy a home right now just because of affordability and debt to income issues because the asset prices are still so high. Even if interest rates came down, that's not going to solve that problem. But you can still sell properties to people that shouldn't be buying properties. We're selling one right now. And literally, the difference of them being able to buy the home or not buy the home is like a $360 a year or a $300 a year HOA payment.

Dylan Koch: [11:54] Oh my god. A year.

Mike DeHaan: [11:55] Not a month, a year. It's like $3 a month. And that's like the difference for them being able to fucking afford it.

Dan Austin: [12:01] Well, It's ridiculous. That's that's pretty tight.

Mike DeHaan: [12:02] But that still exists. This is in 2025.

Dylan Koch: [12:05] No, I want to correct your statement, Mike. The difference between the underwriting approving it, they still can afford it.

Dan Austin: [12:10] Right. Correct. Yeah. They still can't afford it. Yeah. Right. The lender is just willing to make some money on them for a couple of years.

Mike DeHaan: [12:15] But like big picture, it wouldn't change anything if you are running a decent business. It only would if you are somebody that gets by on luck or that's a complete opportunist. And the same thing continues on the multifamily or like larger asset size. Well, anything in real estate, it's going to be kind of like that. As if you were making decisions based off a completely idealistic situation, you have no longevity in your business at all.

Dylan Koch: [12:40] I do think the FOMC meeting was a big nothing burger for the most part. The most interesting thing was two of the voting members, two governors dissented, disbanding that they disagree with Powell, they said they wanted a 25 basis point drop. There hasn't been two dissenting members since 1993, thirty two years ago. But those two members are both positioned to be the next Fed chair, especially Chris Waller. He's like the... Probably the the go to guy that they've been throwing around.

Dan Austin: [13:11] Do you think that there's no world that we're besting becomes the Fed chair? No.

Dylan Koch: [13:15] Not right now. Yeah. I don't

Dan Austin: [13:16] think so. Not in the media. I mean, if Powell steps down or something, Trump gets to appoint him.

Dylan Koch: [13:21] No. I think actually he has more he has more what he wants to do in... As a treasury secretary than as as Fed chair.

Dan Austin: [13:27] Oh, okay. Okay.

Dylan Koch: [13:27] But my point being is Chris Waller, he's very much telling Trump, like, posture, like, hey. I'll do what you want. Yeah. I'll lower rates. Like, just put me in the chair.

Dan Austin: [13:36] Which is so dangerous, dude.

Mike DeHaan: [13:37] Boot, liquors, bro, everywhere. And so what's

Dan Austin: [13:41] the advantage for these two? What would the advantage of Chris Waller? Is it a status thing? Cause it's not a pay it's not a pay thing. Right?

Dylan Koch: [13:46] I just think they're career politicians.

Mike DeHaan: [13:48] He just wants an invite to the island, bro. He's getting... He just wants the island invite.

Dan Austin: [13:53] Or the island shut down, dude. Come on. Now we're going to P Diddy's house. P Diddy just got released, bro. He's good.

Mike DeHaan: [13:59] Did he actually... I saw that as, like, a Actually, I don't big headline. I don't know if that actually happened.

Dylan Koch: [14:03] How are we going from Chris Waller to to P Diddy in about the span of three seconds?

Mike DeHaan: [14:08] Well, they're all related, dude. Because they're all the same people.

Dan Austin: [14:13] This is conspiracy corner over here.

Mike DeHaan: [14:15] It's not conspiracy corner if it's always true.

Dan Austin: [14:18] It's all... It is always true. They're all related. I don't know. I've just... Yeah. Sorry to take us down that pipe.

Dylan Koch: [14:24] Biggest thing is like, okay. If Powell's going after his term and and Trump gets to a point, Chris Waller, he's pretty much gonna try to go dovish the whole time. Like, rate cut, rate cut, rate cut, rate cut. Right. I think that's the biggest thing I would look at from.

Dan Austin: [14:37] Does he get a different vote, or is it... Do they all still have to vote in majority?

Dylan Koch: [14:41] They all have to vote majority and not one other... Okay. So the Fed chair doesn't get more of a a poll than the other voting members, but it's very likely that

Dan Austin: [14:49] It's influential. There's behind the doors, handshakes sort of stuff going on, I'm sure of

Dylan Koch: [14:53] it. The fact that there has been two descending people in thirty five years is pretty... Or thirty whatever years is pretty telling.

Dan Austin: [14:58] That is pretty telling.

Mike DeHaan: [15:00] Yeah. And, you know, a lot of these people, right, it's literally all just about getting reelected in status. Everyone always thinks there's like a financial motivation behind them, but there's not. He's worth billions of dollars. He doesn't care. You know what someone who's worth $20,000,000,000 needs? More money. Not. Like, it doesn't fucking matter.

Dylan Koch: [15:15] Yeah. I think I think it's just like a power career thing. Right? They all like circle jerk around each other. Like with Bernanke, Yellen, all the past people who have been my Fed chair. And they think they're God's Summers, they all think they're God's gift to earth.

Mike DeHaan: [15:29] It's a similar sort of relationship with our small business versus larger businesses where small businesses try to like think that these larger businesses are making like similar decisions. It's very similar to like people with politicians where they think like the politicians are on like the same plane as them, but they're not. Like they're just doing completely different shit for reasons that you can't possibly understand because the average person's just trying to live their life and pay their bills. Right? And like, so why they do wonky stuff, they'll think it's in their best interest or it's so they make more money or it's so own the libs or whatever. Like, it doesn't matter. It's literally just to do whatever is going to get them more votes. They can stroke their ego, you know, even more and, you know, slowly manipulate themselves into a higher power tier for some other reason.

Dan Austin: [16:12] Wow. That really kind of pains politicians in a bad light, Michael.

Mike DeHaan: [16:15] It's... What's crazy, it's always been that way. Like, I don't think there's ever been... You go back to medieval times. Right? There weren't politicians back then. They were royalty, and they were also fucking scumbags.

Dylan Koch: [16:24] Okay. So let's get her away from that.

Dan Austin: [16:26] Oh, fine. Apparently, this is not an entertainment podcast anymore. Freaking Dylan over here trying to sling facts.

Dylan Koch: [16:32] There's a there's a gray area between entertainment and fucking... Just being weird.

Mike DeHaan: [16:37] Okay. Micropene. Goddamn.

Dan Austin: [16:42] Get us on track, Dylan.

Dylan Koch: [16:43] I know what to say after that. I mean, the other the other thing that's even related to that that we have in the things is, like, the... What the tenure did in relation to this. And it it really didn't do much. Like, it it went up a little bit. With the biggest thing, I'll say this. After the meeting, the consensus among the market and of the board members was it's probably gonna be higher for longer, which has been kind of the sentiment the past, like, eighteen months. And so if you're a real estate investor, kind like we just said, that is expecting or theorizing that rates are gonna go down here shortly because of everything that's in the media, you're probably wrong. And you're probably SOL if that's your business plan.

Dan Austin: [17:20] Yeah. Definitely. If your business plans, it goes back to the beginning of the conversation, is based on lower interest rates, you're kinda SOL for probably a long time. I think it was maybe a couple months ago, Dylan, you were talking about, like, a decade of inflation is kinda like some of the sentiment you had. Like, the next decade, don't expect... Not necessarily high inflation, but don't expect that rates are, like, going to change drastically to go down to zero or two or three or whatever, you know? So...

Dylan Koch: [17:42] We would almost seem like a great depression esque crisis for them to do that, in my opinion.

Dan Austin: [17:47] Just kill people. Just kill people off.

Dylan Koch: [17:49] Just get the depression over with. Is that what you're saying? I just wish they

Mike DeHaan: [17:51] would do it already. I mean, goddamn. Why does the collapse of The United States have take so long? Just get it over with. I'm freaking bored waiting for it. I want a front row seat. Yeah. Right? 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 through 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 in there if you want. I'd love to see if you'd be a good fit. I was actually having a

Dan Austin: [18:36] conversation with some folks, some non real estate folks that were complaining about, like, baby boomers being able to buy houses, but we can't because we're young millennials and all this sort of stuff. And I was like, yeah, dude. Moral story, don't be poor. You wanna be in America and you wanna live the American dream, don't be poor. I mean, that's what it comes down to because, like, it's not... I say that facetiously, but it's like it's not getting any it's not gonna get any better for anybody overnight. Like, it's not gonna change. Like, the fundamentals of the American economy are just gonna shift and change just because sentiment feels good because of some almost arbitrary metric for the average American, which is, you know, every time interest rates.

Mike DeHaan: [19:13] The thing is it's always been that way. Right? It just doesn't feel as good when you realize that you are the person in that seat.

Dan Austin: [19:18] Yeah.

Mike DeHaan: [19:19] If you go back a hundred years in The United States, it was exactly the same. If you were at the lower class, your life sucked. Yeah. My wife, when she grew up, she used to watch Little House on the Prairie.

Dan Austin: [19:28] Great show.

Mike DeHaan: [19:29] And we were talking kind of along this line. We were driving down to dinner last weekend. And she was talking about how in one of the episodes in Little House in the Prairie, because they're like kind of a rural family. Right? They have their farm or whatever. But the rich family, they get a water closet. And that's pretty fancy. Because they get like the first bathroom that they've ever seen. Right? But that's what rich people had. And so that same sort of situation has existed forever where if you're at like the bottom financial tier, yeah, your life just kind of sucks, honestly. And if you go back even further in time, it just gets worse and worse and worse and worse until the poor people are out there with a seventy percent infant mortality rate. They're living in the mud. They have zero education. They have no teeth. They're all dying when they're like 35 because they're so unhealthy. And then the royals are up there getting fat, doing whatever with all their slaves and shit. So if anything has actually gotten better, it just doesn't feel as good because we have social media that makes you have FOMO constantly.

Dan Austin: [20:21] I mean, of life has gotten better.

Dylan Koch: [20:23] Social media is a big culprit. Yeah. And just the, I don't know, recognition. Like people can fake it a lot easier with social media nowadays than they could before.

Mike DeHaan: [20:30] Totally.

Dylan Koch: [20:31] Right. And I think that's one of the biggest culprits.

Mike DeHaan: [20:33] They can also make it a lot easier with social media, Because like all of us on here, we have been pretty decently successful in a relatively short period of time, right? In an industry that wasn't actually possible, honestly, before the Internet where you can just like pull data and do everything that we do. But also it isn't like that inherently difficult. It just takes more time and risk than most people are willing to do. You know? And it's funny. I'm not really like a big pull your bootstraps up kind of guy because I do think there's lot of circumstantial stuff that is hard to wrap your head around. But like we've had people that have come through, like, scale or, like, in our different circles that come from, like, not a lot. And they figure out and they get their first win, and then they reinvest that into, like, two more wins. And the next thing they're doing four more wins. Right? And next thing they know you have a business, and they went from being somebody that was kinda doing nothing to now making multi 6 figures a year. And that's a pretty sweet lifestyle.

Dan Austin: [21:25] The the pull yourself up by your bootstraps conversation works and and is, I think, valid when you surround yourself with the right people because then you can. If you don't have the option or you're not near, you don't have that, like, whatever's right in front of you in your direct life circumstances, until you get a

Mike DeHaan: [21:41] peek out of that, you

Dan Austin: [21:42] have no idea. Right? Like if you're living in Africa, you don't really have... With no connection there, you don't really understand what it's like to live in America. Right? And same same goes for like your micro community. But when you get into a community with people doing shit you want to do, that's going to better yourself. Like that's how you can actually do. That's where it's like really direct one to one, the more you put in, the more you get out.

Mike DeHaan: [22:02] Yeah. And see, and that's the plus side of social media, right? Is you can choose to either be like a consumer or a participant. And if you're a participant, there's actually a lot of opportunity that's out there.

Dylan Koch: [22:11] This around like the whole business aspect, we're kind of diving into this a little bit is... And I I think, Mike, I told you, like, I didn't wanna make bad financial decisions because I publicly said on the podcast and in general circles that I wanted top line revenue to be a million dollars. And I felt like I was chasing that. And I'd maybe one of these flips that we have going now, I would probably end up losing money on. You know? And that happens in business. But there are other aspects of this business, especially if you continue to buy and hold and not just do strictly transactional business that might go a little under the radar. And so just for my own business, you know, we create out of, like, three different holds, have about 250 k in equity that cost me, like, $25 because they're pretty good burry properties. 1,800 a month or 22 ish thousand a year in cash flow. 500,000 in depreciation and take off taxes. And like, I need to stack those. I guess it's a mental reminder to stack those also as wins and not just like the deals that get done on a daily basis.

Mike DeHaan: [23:06] For sure. Reviewing like your full financial picture like that, I think is really major. And a lot of people, I don't know if it's like the dopamine addiction everyone has, but they feel like if they aren't winning every single day to their expectations that you're not doing very well, which isn't true.

Dylan Koch: [23:22] Yeah. Even though if you compare it to the past three years of business, it looks great. So it's just what you're comparing it to.

Dan Austin: [23:27] It's hard though. Mike and I have this conversation. I always say this, patience is difficult, especially when you're building something worth building. Like it takes time and the patience, you're like, why isn't it going faster? My goal is a million dollars. Why am I not there already? Like trying to make decisions every day to get there as fast as you can. And you forget to be patient.

Mike DeHaan: [23:46] That's why you just gotta zoom out. Right? I know, Dylan, you're a Bitcoin guy. That's what I always say in crypto to keep Just zoom out. Yeah. Getting people to buy more. They just zoom out. Look at the graph. Keeps going like that.

Dylan Koch: [23:55] I mean, they're not wrong. Yeah. You can

Mike DeHaan: [23:56] do the same thing with your your business. Right? Your real estate portfolio. And if you zoom out and it's kinda going flat or down, yeah, you probably

Dan Austin: [24:02] should

Mike DeHaan: [24:02] fix

Dan Austin: [24:02] something

Mike DeHaan: [24:03] because that's wrong.

Dylan Koch: [24:03] Yeah. I guess the important thing though is track it. You know, have your KPIs, track your net worth, track your cash flows, and actually your CapEx expenses, not just your pro form a paperwork.

Mike DeHaan: [24:13] Yeah. So try not to make emotional decisions too, which I think is the tricky thing. Because everyone has hard situations that occur in business, whether it's like you got to fire somebody, someone on your team isn't performing, you lost a deal, you just wasted a bunch of money on marketing because you fucked up one of your lines on your Excel spreadsheet and just wasted that entire marketing batch, right?

Dylan Koch: [24:35] That has happened more than you would think.

Mike DeHaan: [24:38] That happens to people all the time. To all the time. Right?

Dylan Koch: [24:40] Yeah.

Mike DeHaan: [24:40] That's something you have to deal with and you always have to have a contingency plan for. But I do like this concept where business is mostly a marathon, right? And it's a game of not best man wins, but last man standing. Because one thing I have found, especially in what I would call like fad businesses, which wholesaling is definitely one of those, real estate in general, where it comes in cycles. It's like you go back to pre 2008, everyone was getting into real estate, right? Then it kind of died for like a little while. And then you get to 2020, 2021, everyone was getting into real estate. They don't like died for a while. If you're able to like keep performing in those middle periods between the exciting times, that's where you'll make the most money. Because then when the uptick does go again, you're already a pro, right? And you're not the person that's trying to figure it out while things are on a rocket ship.

Dylan Koch: [25:26] Or you just might have to tweak one or two things that might be new, right, versus reinventing the entire business.

Mike DeHaan: [25:32] Yeah, exactly. Yeah, it's bigger picture. I mean, it's just important to look at that. But either way, still think that if you are trying to make business decisions based off of what the feds are doing, you're dumb. Just focus on what you can actually control because realistically, you're probably too small for it to affect you that much.

Dan Austin: [25:47] Yeah. And while everybody's running out, just keep doing what you're doing. Because I'll contend that it's like, I don't care what they're doing because I've learned how to operate in this, like, tougher interest rate environment, and it's actually fine. It works out great. I'm happy with it. And I don't want any competition.

Dylan Koch: [26:03] If you do take a step back and look at number of deals, deal revenue, I mean, they're not far off from the past couple of years. And then how much the business has changed in those past three years too?

Dan Austin: [26:12] Oh, a ton.

Dylan Koch: [26:13] SMS and texting or ringless voicemails, those are pretty much all gone. Done. Cold calling sucks. I don't know if you guys have any success with cold calling lately, but it sucks.

Mike DeHaan: [26:21] We have a couple of deals we're closing off cold calling right now.

Dylan Koch: [26:24] Nah. Well, it's good for you. I don't. I got to spend a lot of money on that.

Mike DeHaan: [26:27] Yeah.

Dylan Koch: [26:27] PPL has been okay. Direct mail is still winning. Even referrals though, like actually, could talk about this. There's a scale member. I won't say his name, like, if he doesn't want it. But he just posted it in our Wins channel the other day, where they say he's like, hey, my deal count or geo volume is nearly half of it was last year, But they just crossed one deal that would probably net him close to $100 that came from a referral just because he's been in business for a long time, where his gross revenue numbers are going to be better than last year. And we're

Mike DeHaan: [26:55] in July. And referral stuff especially, I think is such a validator of being patient, right? We had this call with our partners the other day. They're like, how do we do more of that? I'm like, it's just, you know, equity, right? It is relationship equity that you have to build with these people where you're around long enough that they actually believe you can perform. You know, it's not something that you go, I'm going to go make relationships to referrals today. No. They're not going to send you shit. But if you do that and you're around for six months, twelve months, and they're also around for that long, they're like, oh, hey, you're still playing the game? Hey, me too. Let's do something together. And that just compounds over time. You know, that's why like some of those people that have big name advantage, you know, the Brandon Turners, even though he's losing everyone's money, I guarantee you the next deal that he raises money for, he will do it instantly because he has an incredible amount of relationship equity with a ton of people.

Dylan Koch: [27:45] Might not be the current LPs, but yeah, you're right.

Dan Austin: [27:47] I hope. Good for him.

Mike DeHaan: [27:49] Right. Hey. But, you know, he doesn't he doesn't need that many though. Right? Like, goes back... Even at his scale, he is still a micro business. Yeah.

Dylan Koch: [27:57] That's pretty wild.

Mike DeHaan: [27:57] You know? Like, he he needs so few customers to be able to do what he's trying to do, you know? And pretty much everyone that's in all of our circles is in that same vein, honestly. You know? And for some reason people try to take this big business information and apply it to themselves in small business. It just doesn't make sense. You know, especially in real estate where it's like one to one transaction. It doesn't matter what the market sentiment is. You only need one person to buy your damn house. You need one seller, one buyer, and that's it. That's two people. You can't find two people in every market condition to do a deal, that means your deal fucking

Dylan Koch: [28:30] I got a buddy here, our favorite saying here is, it only takes one. Because sometimes it only takes one person to buy it. Good. And like just one of these houses that we're selling now, it has a pool at it. And the one buyer... We haven't really had a lot of stuff on it, a lot of engagement, but the one buyer is going through like some kind of medical treatment where she needs a pool. Right? And like automatically she is a buyer for this house because she needs a pool and not everyone else needs a pool. Right? Like there's stuff like that.

Mike DeHaan: [28:58] There you go. Absolutely. It's funny. I've listened to some of the Hermosy podcasts where they're doing like the live Q and A at his events. And he's like, yeah, it's just like really saturated. And he goes, oh, wow. That's crazy. You've talked to every single person that owns a pool in Scottsdale, Arizona. Right? Yeah. They're like, well, no. He's like, then it doesn't sound like it's saturated. Yeah. Like, you're just not talking to the right people.

Dylan Koch: [29:16] I listen to some of this Q and A sometimes, and I'm like, these people are dumb. But I don't know if you get that same thing.

Mike DeHaan: [29:21] Oh, dude. Totally, man. And like, it's my... Dan and I really was talking about this morning. I can tell why he's gotten so jaded. And this is also me currently as well, is going down this phase is, as you've been in business for longer, and you realize honestly how fundamentally simple business is. Right? You need lead flow, you need an offer, and you need a way to like collect that money and create that value. Right? There's so many different ways you can go with that, but it's relatively simple to put those things together. I want you know what you're doing. It's so frustrating talking to people that don't understand that because they try to complicate everything. You know? And they always, like, think that there's another bit. He does that. It's fucking Alex from Moses show. I just talk like shit all the time. He just think he has so many good thought provoking things. But he's like talking, he's like, how many people here would be happy with $50,000,000? And everyone raised their hand and goes, cool. So you can stop trying to invent the newest vacuum cleaner, stop trying to invent a startup, you can stop trying to like develop something that's never been seen before.

Dan Austin: [30:18] It's like your AI chatbot, but you're a wholesaler that you just, for some reason, need to develop.

Dylan Koch: [30:22] That's a lovely one. Yeah.

Mike DeHaan: [30:24] Exactly. Right? It's like you can focus on just super basic boring stuff. You can have a trade business, a service business. Anything that you can do like right now that you can start from zero, you can probably scale to that same size. Right? And for some reason, it's like specifically newer people or newer entrepreneurs, they always are trying to build these crazy complex things that don't make any sense.

Dylan Koch: [30:46] Something new. They want to be something new.

Mike DeHaan: [30:48] Yeah. Something novel. And what's been the proof for me, so Dan and I, we've had several businesses now, the wholesaling we've been doing the longest. We have scale, which we've stopped like really pushing quite as much. But for a while that was going pretty well, right? And now we have our lending business. And like our lending business over the next twelve months will probably do close to a million dollars in profit just off of points. Wow. Right? Because we have the lead generation through this podcast, through our communities, through our referrals, through a sales guy that's out there prospecting, right? We have the ability to create the loans through our own money, through investors that invest with us, through hedge fund connections, and we have the ability to process it in the middle. And that's it. And it's going to be a four person business that will likely do close to a million dollars in profit over the next twelve months.

Dylan Koch: [31:34] I have a follow-up question to that. When did you decide like, I mean, I guess pivot, right? Because everyone's like, do you pivot or do you just stay and keep doing the same thing and double or triple down on what you are doing, which would for you guys would have been wholesaling versus, I don't think it's going to take that much additional effort to put this off the ground and it might be a better business model.

Mike DeHaan: [31:53] So I would say that we decided to pivot. It was like last fall. Because most of last year we spent, we're trying to franchise our back at home buyers business through a partnership program, right? And that was our focus.

Dan Austin: [32:08] I will say, I will step back with that too. We probably didn't pivot soon enough because we had the conversation a year prior and we had talked about what what do we wanna do? How do we wanna grow the business? And the lending business came up because we had been doing lending, but then we ultimately started to do the franchise model. We're like, well, let's give this a go.

Mike DeHaan: [32:26] Yep. And so we spent an entire year and several $100,000 trying that before deciding we didn't wanna do it and canning it completely.

Dan Austin: [32:34] Yeah.

Mike DeHaan: [32:35] Right?

Dan Austin: [32:35] Like completely.

Mike DeHaan: [32:36] And and in the same time, we were doing lending with Dan and I's own capital that we'd made through our businesses just to get more horizontal income. And so then when we got rid of that, we were like, okay, so we are going to

Dan Austin: [32:48] do the

Mike DeHaan: [32:48] local wholesaling and flipping business, we already know what that looks like. We know that there's a ceiling to that. That is not what we want. Let's push into the lending business a little bit more seriously because we know people that make like FU money with that. And what Dan and I both wanted was enterprise value. We wanted something that was actually going to create a sustainable, repeatable business that you could grow to a much higher ceiling than a wholesaling and flipping business. And with wholesaling and flipping, Colt Red Johnson, he posts a lot about this, that like the best size of a wholesaling business is like 1.5, 2,500,000 a year. You have five team members. You're doing five to eight deals a month kind of thing. I fully subscribe to that. I think that is such a true sentiment. Because as you get larger, your profit margins get thinner. You're still taking on more risk, right? And it gets kind of dicey. And so we knew that's where we're going to get to. And so the lending business became the focus. And so at this point, it was like maybe nine months ago. And it took us the first, I would say, six months to figure out, like, the foundation Mhmm. What were the seats where that we needed to fill and kinda find those people. And then over the last three months, it's been the start of the rock ship trajectory.

Mike DeHaan: [34:00] And just yesterday, actually, I put together our our financial forecast. And, dude, it's fucking zoomed out Bitcoin right now because it's just like nothing, nothing, nothing just going up and it's gonna continue to do so for the next little bit.

Dylan Koch: [34:11] It's kinda like a software where, like, there... You don't need a lot of incremental inputs for greater outputs. Which is that's not the case in wholesaling. You basically need to step on the gas for either people or marketing.

Dan Austin: [34:22] Yep. And as you do that, your profit margin goes like this. And so there's like a crossover in like the wholesaling flipping business where it's like, you're in the sweet spot of scale before it's step functions in in that business. Like, gotta hire a bunch of people. Your profit margins have to shrink, then you have to get good at that level. And if you're not good at managing a big giant team or you don't want to, there's no point in doing that in the wholesaling flipping business because it does it does take a lot of effort where, to your point, dealing with the lending, we can do a whole lot with small team management, which is actually really fun. Probably safer.

Mike DeHaan: [34:51] Totally. Because we just pass off the risk to the hedge funds on stuff that's kind of dicey, and they'll buy the loans. And we just carry the good stuff in house. And then, well, I forget the acronym we came up with earlier for the effort to output or impew and nip you. He doesn't even remember. Something like that. But that for unlike the lending business, it still applies, but it's very different. It's much less asymmetrical. Yeah. Right? Because you can have your base hit loans that essentially cost you nothing that you make 4,000 to $7,000 on. And you can basically just churn through those. Then every now and then you'll have your big one where you make like $20 on. And the amount of work to do that versus like the other ones is way less than on the wholesaler flipping side, where you're going to make $15 on a wholesaler, dollars 80,000 on a flip. Right? That work ratio versus like the seven to twenty thousand dollars on a loan is so off.

Dylan Koch: [35:43] Yeah, that makes sense.

Mike DeHaan: [35:44] And you can do a ton more of them with a much smaller team.

Dan Austin: [35:47] Totally. Yeah. And the interesting thing that I find interesting is like going back to when we hired our first business coach and he really broke it down, he's like, there's four, but for this conversation, we'll say it's three departments for every single business. Marketing, sales, operations. You have to bring in leads, like Mike said earlier. You have to convert them into opportunities, and then your operations are are doing the work to provide the service that they're paying you for. And so we're able just to apply that. We knew that from wholesaling. We knew that from the other businesses we built. The one caveat I think that helped us kind of have like a nice baseline to start out with was brand equity that we had already built up in the

Dylan Koch: [36:21] industry. Sure.

Dan Austin: [36:21] That's like our competitive advantage, and we'll continue to use that as our competitive advantage because we do have

Dylan Koch: [36:25] And the networking. Right? The GoBundance crowd, like probably people who are local to you up there. I would assume that too.

Dan Austin: [36:31] Right. People people know us, and we have a relatively good brand, and people trust trust our brand. And so they're willing to go with us or they hear our name. They're like, oh, okay. Yeah. It's like, it's not a random name that they're gonna go apply for a loan with.

Dylan Koch: [36:43] Well, in wholesaling, you know, we talk on that specific size that you mentioned, like 50 to 60%, probably net profit margins on industry average.

Mike DeHaan: [36:52] Oh, for wholesaling? Yeah. Yeah. I think if you're small, right? Like once you start to grow, it goes away super fast.

Dylan Koch: [36:58] Well, that's my point. I'm assuming that the lending, you need probably some software and staff, like salary.

Mike DeHaan: [37:04] Yeah. Like, two team members, like, honestly, in a VA. And our profit margin is, like, 90%, dude. It's crazy.

Dan Austin: [37:10] Yeah. That's pretty high.

Dylan Koch: [37:11] Yeah. That makes sense. If you're gonna pitch these two businesses to, like, Shark Tank, the lending wins.

Mike DeHaan: [37:15] Totally. You know, people sell lending businesses on high multiples because the book of business and the recurring revenue is so valuable. Like finance, like private lending business typically trade at seven to 10 x EBITDA. Yeah. Right? Which is like a lot. It's pretty good. So for something that is fundamentally like air, right? It's just like it's numbers on a spreadsheet. It's not like you have a campus. It's not like you have some like IP, you're selling a commodity, which is money. Money you can only sell for so much.

Dylan Koch: [37:40] So if Mike and Dan are filling out their one sheet and they have a million dollar a year top line lending business, let's say 80% EBITDA, that's $800 a year. At a 7x model, that's a 5,600,000 business?

Mike DeHaan: [37:53] Yeah. And so depending on, you know, who I'm trying to flex on.

Dylan Koch: [37:56] Yeah.

Mike DeHaan: [37:59] It'll be EBITDA. Yeah. Yeah.

Dan Austin: [38:00] Yeah. It'll be 80,000,000 one day.

Mike DeHaan: [38:01] When I'm doing my seven to eight, it's a twentieth.

Dylan Koch: [38:03] Yeah. That's right.

Mike DeHaan: [38:04] Yeah. Yeah. Absolutely. That's right.

Dan Austin: [38:06] You know what's funny? I guess I've never even thought about that. You could do that, couldn't you? Like, put... Yeah. Yeah. Definitely. We're be flexing.

Dylan Koch: [38:13] Oh, I'm sure there's people who do it, like, that majorly inflate their net worth.

Mike DeHaan: [38:18] Yeah. Well, even the one that they did last week, I think we talked about this briefly, but, yeah, he had an $80,000,000 portfolio. $15,000,000 net worth. $15,000,000 net worth. But... And so one of my pod mates dove into that. And with the cap rates that he went off of, that's absolutely true. The problem is, because one of the guys on my pod... It's actually John Brooks, he's the show. He's very much a data guy. And he's like, I'm calling bullshit on this. So he went and did all this research and found the cap rates in that market. He's like, this dude's full of shit, dude. The cap rates are like two points higher than he said before. So this guy's actually worth nothing. He's underwater. Oh, wow.

Dan Austin: [38:48] Yeah. He's underwater. He can't sell that shit. If you can't sell your assets, then you aren't worth what what you think they are. Totally.

Mike DeHaan: [38:54] Especially when it comes to commercial stuff.

Dylan Koch: [38:55] One last question. We can round it out because this didn't affect me, but I've been in a friend of mine that's on the lending side, you can see if we give an answer. When he's doing... Bought a 7 unit building, and he went to go refinance it. And I understand that they automatically put in a vacancy rate, even though if it's not vacant, they put in like a 5% vacancy rate. Where he's getting boned is they're reevaluating his property at like a new tax basis, which is like three x what it's currently at. So kills all the cash on the deal, which I would understand if it was a straight out purchase, but doesn't make sense to me on a refi. Yeah. So is that just the lender being a dick?

Dan Austin: [39:30] It's got to be.

Mike DeHaan: [39:31] The name, like the game for lenders right now is how can we find everything possible to not do the deal? Wow. A lot of scrutiny. It has never, never been worse than right now. It's unbelievable, honestly. Like we see this both with AleniVest and for me as a borrower. I've been trying to get these HELOCs for like two months on a couple properties that I have very significant equity and a couple of rentals. And I went through all the hurdles for it. I've given them everything. I've like paid my accountant to update, my tax returns that had like some things that were unclear, all this bullshit. And then on Friday I got like a soft rejection. They're like, Well, your debt to income just isn't good enough because what we do is we can only take 75% of the rent

Dylan Koch: [40:15] I've heard this.

Mike DeHaan: [40:15] On your rental portfolio. I'm like, well, yeah. So then if they don't cash flow 25%, like then yeah, it's going to lose money. And they're like, yeah, so you have all these properties. And even though on your P and L, it's basically a zero for your whole portfolio, we have to count it as a loss. I'm like, that doesn't make any sense, dude. And I sent them this scathing email with like everyone included on it. And I was like, you're telling me that my P and L cannot afford this $600 a month payment if my HELOC is fully drawn. And I was like, here was my income two years ago. Here it was last year, here's my p and l's for this year, which is showing maybe twice as much as those last two tax returns. Like, what are you talking about? And then they're now, they're reassessing it.

Dylan Koch: [40:56] Oh, yeah. Right?

Dan Austin: [40:57] I

Mike DeHaan: [40:57] love that. So you can challenge it. Right? And people don't always understand that, but you have to have a convincing case. You can't just go, I think you're wrong and it's hurting my feelings. If you actually say like, here's here's why you're being dumb. Yeah. They will listen, but they will also find reasons not to do.

Dylan Koch: [41:11] I bished about though the one that were trying to lend out like a 40% LTV like two weeks ago. And I sent them a nasty email back and they're like, oh, wait, we have another credit meeting. And then they offered to do like 60% LTV. I still said no, but they did come back at 20% higher.

Mike DeHaan: [41:23] Yeah. I don't know, man. We have another one right now. And then I'll get off this about where we're having to go back to one of our borrowers because the underwriter found that the property has a lot that's attached to it that's extra. And the borrower's insurance does not cover the lot. And they need the insurance provider to have liability insurance for the lot. I'm like, who has that? Nobody. Nobody. Like, so if somebody goes and fucking rolls their ankle playing soccer on your your lot that they're trespassing on, Like, what are you talking about?

Dylan Koch: [41:58] I want to bang my head against the wall for this guy, it's not even my thing.

Dan Austin: [42:01] God So crazy, dude. So crazy.

Mike DeHaan: [42:03] But that's the game right now. It's stuff you're so risk averse. They're just like finding any reason not to do it. Yep. Anyways. All right guys, we'll wrap up here.

Dylan Koch: [42:10] Well, let's hope it gets better.

Mike DeHaan: [42:11] Yeah. It's going to get a lot worse before it gets better, that's for sure. Because also we actually have a meeting, one of our guys does with one of the main hedge fund guys that we work with, about all the increased scrutiny the staff's gonna be facing starting in August. So Like tomorrow? Yeah. Like starting like next week, dude. Yep. So if anyone's trying to get DSCR stuff over the next, like, three months, it's gonna suck ass. So you might as well just start it now because it's not gonna get better for a long time. Get going. So slacapital.com/apply. Alright. You guys have a great rest of your week and weekend, and we'll talk you guys next week.

Dylan Koch: [42:45] See

Dan Austin: [42:45] you. See you.

Mike DeHaan: [42:47] 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.