When Should You Walk Away From a Deal?

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

Dylan Koch: [0:38] You gotta get paid for solving people's problems. Yes. Like, neither of these people were expecting any money from this. Yeah. They just were gonna let the bank take it. Yep. Right? Mhmm. And so now they're each gonna walk away with more money than they'd ever thought.

Mike DeHaan: [0:51] What's going on, guys? Welcome to today's episode of the collecting keys real estate investing podcast. This is Wednesday. It's the off market operator show, and this is the show that you should make massive income, not just passive income with your real estate investing business. If this is your first time here, I am Mike DeHaan here with my cohost, Dan Austin and Dylan Cook. And on these Wednesday shows, we dive into what our businesses look like, all the things that we're seeing in the market, and just general real estate news or whatever else you like talking about for the week. So we both have deal situations that we want to discuss with each other. Dan and I are in a partnership here in Eastern Washington, and Dylan is over in Cincinnati. So start with yours, Dylan. I know you said you have one that you're trying to figure out, I guess, like the best course of action to go. I don't even know. You basically said you have an offer accepted, and you're trying to figure out if you wanna accept it or not.

Dylan Koch: [1:45] So basically, I got this eight unit that I post about in our scale community under contract for a good price in honestly a good area of Cincinnati, good school district.

Dan Austin: [1:53] What's the price?

Dylan Koch: [1:54] So for 200,000. Okay. Which is really cheap.

Dan Austin: [1:57] That's very cheap.

Dylan Koch: [1:58] Yeah. And then I was just, yeah an eight unit, which is like unheard of in this area. But it needs a shit ton of work, won't lie to you. And the guy's already, like the city's already on his ass, he got busted trying to do work without permits. So it's gonna be flagged for all those purposes which is fine, but this rehab is gonna take six to eight months. I was talking to a buddy of mine about it who I've sold deals to before, and he basically gave me an offer for $2.75. So I could assign it to him and make 75 k, or do I keep it for myself and do the whole BRRRR strategy, get some cash flow, some equity, and I've been struggling with those two options as of the past forty eight hours.

Dan Austin: [2:32] What's the ARV on this thing? So you said you buy a 200, what's the need like 200 worth of work?

Dylan Koch: [2:37] So like 200 maybe $2.50 k and ARV is probably $6.40, 75% of $6.40 is $4.80. So it would be like a true burr if not cash out a little bit. With like 200

Mike DeHaan: [2:46] Total equity, which is $6.40, you know, so you'd be like a 100 feet grand equity?

Dylan Koch: [2:51] Correct.

Mike DeHaan: [2:52] And then you'd cash flow?

Dylan Koch: [2:54] Probably close to about a thousand bucks through cash flow a month on eight unit.

Dan Austin: [2:58] You're 12 k? 12 k. Infinite ROI. Okay. So infinite ROI. Right? Yep. You're getting 12 k a year from that. And then you probably, my guess, I did the quick math, it'd be like $3,000 a year in true tax benefit. Like, that would reduce your tax bill by that much if you do the straight line depreciation, buy it by 27 and a half with your all in repair costs.

Dylan Koch: [3:21] Well, I'd probably just add some flavor. I'd probably do the 60% bonus So this

Dan Austin: [3:26] 60% bonus. Yeah. So then, yeah, that would probably get you quite a bit more. In the first few years, you'd get quite a bit more. So could you use that tax benefit this year?

Dylan Koch: [3:35] Yeah. Honestly.

Dan Austin: [3:36] Or I guess, would it land up next year? I guess you could do it this year.

Dylan Koch: [3:40] Well, for next year, but, yes, this... We've done more transactional volume this year. So... Yes. Okay.

Mike DeHaan: [3:45] Here's my next question. Is the property currently leased and performing right now, even though it's a shithole? It's a lot of work.

Dylan Koch: [3:51] So there... Here's the other half of this. I'm glad you said that, Mike. The guy, the seller, is kind of a moron. He has leases in place for four of the eight units at $7.50, which is under market rent through 2026.

Mike DeHaan: [4:06] What the fuck? That guy's a long Yeah. Like, through the whole year? Like, two and a half year leases?

Dylan Koch: [4:11] July of July 2026.

Dan Austin: [4:12] Two year. Two full year

Mike DeHaan: [4:13] leases. Okay. Yeah. I mean, so that's the thing too, is you're gonna cash flow a thousand dollars a month once it's at full market. So you're gonna have to

Dylan Koch: [4:22] Once it's at full market, which is two years or not. But it has 32 ish 100 a month right now to help with some of the carrying costs during that period.

Dan Austin: [4:29] So you could maybe cash or keys them though, like $2 talk?

Dylan Koch: [4:33] I could, but that's not a guarantee.

Mike DeHaan: [4:35] So here's how I would think about this. Because also too, there's the opportunity cost of doing a $200,000 rent out. I guess a lot. So Like, honestly, that amount will be hard to even get, like, a hard money lender to fund. Because a lot a lot of hard money lenders won't wanna do, like, that large of a rental for the purchase price. Like, if your renovation costs are equal to your purchase or your loan amount

Dan Austin: [4:57] Definitely raises eyebrows.

Mike DeHaan: [4:58] They'll get weird about that.

Dylan Koch: [4:59] I have a good relationship with my local people. I've already ran it by them. They would do it. Yeah. But I might have to cross collateralize some other properties. Sure. I'll swing. Okay.

Mike DeHaan: [5:07] If it was me, I would definitely be inclined to assign it and move on. If I was going to take it down, what I would probably do, like, realistically, is buy it, do just like... And Dan and I did this for the property, actually. It was a better condition. Buy it, do like the bare minimum to it so that you're not putting any more additional capital into it. Let it cash flow with that rent... That rental rate. You know, if a property turns, you handle the property as it comes, but you don't go in, like, with the intention of doing the whole thing. And then after, like, a year, either, you know, reassess how it's looking and then maybe look to sell it with, like, the leases with less time on them. And I bet you could sell it for, like, more of a premium. Like, I wouldn't be shocked if you could do that, carry it for a year and then sell that bitch for like $4.50. Right? And there's some more meat on the bone and now you're gonna make like 200 g's. Yeah. On this after like a year without having to go through the full thing and then somebody else can come and do their value add and they'll be all excited for it, whatever, and they're gonna have a different vision, and they can get like more of the, you know, big picture.

Dylan Koch: [6:20] And I thought about I thought about it too, Mike, and then... Or just throwing it on buying it, throwing on MLS for what I would think would be, you know, unrealistic price, like maybe 400 k. Yeah. And if someone takes it, that would be like the make me sell price, but if not, I saw my original backup plan.

Mike DeHaan: [6:34] Yeah. I mean, you never know, like, especially because like what interest rates for those kind of properties are gonna look like over the next little bit will obviously influence it. Yeah. I mean, people are looking for value add multi families right now.

Dylan Koch: [6:46] Yep. I know I get a lot of interest. It just depends on, you know, if someone's qualified to buy it.

Dan Austin: [6:51] You haven't even sent it out. You just had a friend that's like, I'll give you 75. Yep. So there's realistically probably a 100 k of a wholesale fee on there if you really wanted to. I would take the money and run, and I would just say, I just prepaid my marketing for 2025. Boom. Yeah. I committed. That's my reserves. That's how I'm operating my business.

Dylan Koch: [7:08] Well, yeah, I'm hiring this EA, so there's their salary Right, whatever. Then some, probably a lot.

Dan Austin: [7:13] Exactly, and it's just like a mental tweak that allows you now, hey, I've got this covered, maybe that's six months of operating costs, whatever it is, hey, it's covered, now my job is to go make a shit ton more money, Cause I'm not even thinking about that.

Dylan Koch: [7:24] Right. I just have these two, like for the audience here, these two competing goals is one, I want my revenue to be a certain amount this year's Yes. And I also want to buy more properties for more cash flow. And so like these two goals are kind of pulling at each other a little bit. Yeah. I have a good problem. I will say that. Have a good problem to have. But I just gotta figure out what's best to do.

Dan Austin: [7:43] The downside of your problem is you're not going to probably get that thousand bucks a month of cash flow for a couple years, it sounds like. You're right. So that 75 k could probably get you this thousand bucks of cash flow quicker, or 100 k, whatever you can wholesale this thing for. That's where my mind's at in this market is like, go ahead and get them take the money that you can when it's big like that, and you didn't expect it. And then just keep moving forward because there's always another deal around the corner.

Mike DeHaan: [8:06] Here's the other thing I'm gonna say to you, Dylan. I'm gonna share your personal life here a little bit. You're about to have a kid.

Dan Austin: [8:11] Mhmm. Baby.

Mike DeHaan: [8:12] Are you gonna wanna be doing a $200,000 renovation while you're learn... Becoming a first time father? I wouldn't. Yep.

Dylan Koch: [8:19] No. And I was already planning on if I were to take it down, do like a full GC model. I would not sell about any of this out if I had to. But you're right. That is definitely a layer added on to that.

Mike DeHaan: [8:29] Especially as you're a solo operator for the most part, you know, you just hired your EA. That's your first full timer. And then one more question for you. Don't have to show us you don't want to. What's your current cash position?

Dylan Koch: [8:38] So at the current position, it's a little light. However, we have five closings set between now and September 6. So I'll free up about $354,100 k.

Mike DeHaan: [8:48] Yeah. So like, that's the other thing too is you don't need $75,000 right now. Like, that'd be cool. And so if you like the long term option for the property, like, this is the time for you to go long term into that deal. Right? What I don't like is when there's somebody that has, like, 50 k, and they're like, well, I'm gonna pass on the $75,000 in money now that I can reinvest in, you know, 10 x.

Dylan Koch: [9:15] Right.

Mike DeHaan: [9:15] Right? Because I want long term assets. I I totally love the long term hustle. I I mean, I appreciate that mindset with real estate. Even though a few weeks ago, talked about, you know, I'm not really... I don't really believe in rental properties like I used to. You have surplus cash.

Dan Austin: [9:30] Yeah.

Dylan Koch: [9:30] Well, you're right. And, Mike, if I had 50 k right now, this would be an easy decision. Totally.

Mike DeHaan: [9:34] Yeah. I mean, I don't know. Like, so knowing that, I would probably keep it. Or, like, go for the bigger play.

Dylan Koch: [9:41] I think I might just go for the bigger fee. I think I might buy it.

Mike DeHaan: [9:43] Yeah.

Dylan Koch: [9:44] You know, do the miners, throw it on the MLS, you know, and just... That's where the big buyers are.

Mike DeHaan: [9:48] Yeah. I mean, and also, two years, the other thing is these people are are leased up for a while. It's very possible you could sell a thing without ever having to put any money into it. Yeah. You know? And you just, like, sell it as, like, a cash only deal at 400 k. It's gonna be worth more than that, and it has additional upside. People will buy stuff that's leaner than that. We saw them do it through all of 2021. Right? Twenty twenty twenty twenty one, you had all these multifamily people who are buying these lean ass deals.

Dan Austin: [10:11] They were pretty stupid, though.

Mike DeHaan: [10:12] And here's the great thing. This is this is what I'm starting to see of what's happened. If we are the deal finders, all of those dummies have gone bankrupt. They're all gone. Now the new wave of dummies is coming in overpaying for shit again. I'm trying to see

Dan Austin: [10:26] some of people. These

Mike DeHaan: [10:27] Like, just to be honest, some are like the the people that pursue, like, the multifamily and commercial stuff. Like, I see these deals who are putting together in in different groups. I mean, I'm just like, come on, bro. Like Yeah. I understand the mindset, but, like, you're really hoping for some stuff to come into place here.

Dylan Koch: [10:44] Yeah. Yeah. Starting to see the underwriting at lower rates. Yeah. Or really... The thing that got me a couple years ago, not doing a tangent, but people were underwriting these exponential rent growths like 7% every year for Yeah. The next five After the years of appreciation we've already had, I was like, there's just no way. Like, there's a shitty part in Cincinnati. You're think a one bedroom's gonna get 1,300 in a month in five years? There's no freaking

Mike DeHaan: [11:06] Yeah. When also too the problem is is that the consumer affordability is now going against that very, very heavily. Yep. We are officially at the point where you can try to charge more rent, but people just aren't going to pay it. Like, people will be homeless. Like, it's not like they're gonna magically figure out a way to pay you more than you're currently asking.

Dan Austin: [11:29] Mhmm. I mean, the government might.

Mike DeHaan: [11:31] But you say that, but they won't. After a while, they... Like, we see this in Spokane. They just let people go on the freaking streets. Yeah. Know? The problem with the government is even if they are willing to do it, it has the bureaucracy that's behind it, which makes it so impossible to actually, like, get it done.

Dan Austin: [11:47] I mean, there is an argument that they're not all there mentally and on drugs. There's that too.

Mike DeHaan: [11:53] A lot of people like that. There's also a lot of people that aren't, though. Like, that's, like, the literal truth. Yeah. So I don't know. If I was in your shoes, like, with your current cash, I'd probably do this the latter decision where you would close on it, list it. Because I... There's one that Dan and I, we did that on. And what do we end up selling eight for? We put, like, a total of, like, 15 k into this $20.20 k. Yeah. We bought it for, like, I think, $4.75, and we sold it for... Was it, like, $6.50? Yeah. A year and a half later?

Dan Austin: [12:22] We made a decent because we split the profit on that with our partners and yeah, we did okay. Like, it was good. I mean, we did it a great time.

Dylan Koch: [12:29] Yeah. How much effort did it like did you put into it? Doesn't sound like a whole lot. Not a lot. Yeah. Not a lot.

Dan Austin: [12:34] We we did some evictions because we had some problems. The only thing that I would be tentative on that plan is I'm just in a mood where I don't wanna deal with shitty tenants right now. Not that people are shitty, just like the shitty tenants that you tend to find in these, like, rehab nest... Like, when they're that bad, they usually come with some problems. And like that would be the only thing I think about is like, do I really wanna

Dylan Koch: [12:54] Oh, yeah. The two units that I got in already or

Dan Austin: [12:57] Yeah. And you may want to. I just personally right now would not wanna do that. I'd rather focus on other things, and so that's the only thing where I'm like, man, if you can make a 100 k on a wholesale fee, that's pretty cool.

Dylan Koch: [13:07] It would be my highest ever. And for the audience, I've been doing this for almost three years, and I've never had a 6 figure assignment.

Dan Austin: [13:12] So it would be nice. How easy would that be Dylan? One day you have 100 k in your bank account.

Mike DeHaan: [13:18] That alone, you're you're a podcaster now, dude. You gotta have that story. The $100,000

Dan Austin: [13:23] wholesale. Exactly.

Mike DeHaan: [13:24] You can go and spout that off when other people start reaching out to you to come and be on their shows.

Dylan Koch: [13:27] They all spin off the collecting keys and do collecting houses and story.

Mike DeHaan: [13:32] Oh, there

Dylan Koch: [13:32] you go. Yeah.

Dan Austin: [13:33] Oh, yeah.

Mike DeHaan: [13:34] The key collectors. Yeah. Right.

Dylan Koch: [13:36] There you go.

Dan Austin: [13:37] The key. But

Dylan Koch: [13:39] let's see here. Let's see you guys just wanna wanna hear and see if I can Yeah. We'll share. Help at all.

Mike DeHaan: [13:43] Cool. So ours, we have this innovation deal that we were working on, and it was pretty simple, turnkey house. And the... Basically, the lady is going into pre foreclosure, and she essentially needs to pay her loan up due in the next, like, three weeks. It wasn't even a lot. It was, like, $12 or something. And then she's gonna able to get out the house, which she was super cooperative of. And then our plan was to novate it because her loan is, like, just high enough that we can't do, like, a cash purchase without it being sort of underwater to do, like, a wholesale. And then we're gonna list it for her, and she was gonna walk away with basically the money that we're gonna give her to move, and that was it. And then we were gonna basically carry them where she went through. Subject to was a little bit questionable since it is under the the pre foreclosure already. So it's already kind of on the map. We weren't necessarily comfortable going through doing, like, the title transfer and things like that as a subject to when it's already being watched by the bank. So, anyway, all agreed, set forth. We go through this agreement. The lady, like, right away is like, cool. Here's the Airbnb I'm gonna move to. You know, here's my options. I need a moving truck. Like, she itemizing all those...

Mike DeHaan: [14:53] All the expenses she needs is gonna be, like, $8, k, For two months in this Airbnb and, you know, the moving parts, everything else. She wants to get storage unit to hold up all our stuff. It's fine. Whatever. So we didn't pay her yet because you're waiting. And then opened up escrow, started working through this process. I'm glad that we waited because now all the dirty laundry is starting to come up. Always. And so there's always something. She has a, like, a HUD lien, which I'm sure... I'm not sure necessarily sure what that's from, for, like, $30,000 or something. Not entirely sure what it's from. It's on entire reports there, so that's extra cost. And what really got her is she took money from one of those super predatory companies that reaches out to the same people we do and says, like, hey. If you sign this document, we'll give you $2,000. Right? And, basically, the document is a right to be able to list their property or, like, collect money from their property in the future.

Dan Austin: [15:54] For, like, forty years usually.

Mike DeHaan: [15:56] For, like, forty years, it's like this really

Dan Austin: [15:58] long term

Mike DeHaan: [15:58] agreement that they're gonna get paid if you ever go to sell it. I mean, I think it's becoming illegal in lot of places. Yeah. But it's not here yet. And so she signed that document and got her $3 or whatever. Total amount that they're expecting to get paid is the money that they gave her plus interest plus their fee of, like, $18.

Dan Austin: [16:19] Why?

Mike DeHaan: [16:20] Where the fuck they got that amount? So basically, it is a full 6% off the ARV of 300 k. K. That's what they're expecting to get paid. That's their decision is they wanna pay that plus the HUD, plus your mortgage, plus all the fees. All of a sudden, this property that we were planning to novate for, like, $2.90 is the total debt on is, like, $2.77. All said and done. Between the mortgage, the penalties, the HUD lien, and this... It's called, like, home face or something company that's Homelights.

Dan Austin: [16:56] Robbing her Is it outlined? Homelight?

Mike DeHaan: [16:58] It's not it's not Homelight. Homelight's Homelight's marketing company.

Dan Austin: [17:01] Oh, it's like, where did that come from?

Mike DeHaan: [17:02] Homelight's like a it's like a marketing company that let people submit offers, then they sell the leads to

Dan Austin: [17:07] wholesale. PPO.

Mike DeHaan: [17:09] So, Dylan, guy, I've been racking my brain. The only thing I could think of with this is if we were to do a sub two and then a rip off some pore buyer. But I'm not willing to do that because we could probably get it as like, oh, 5,000 down. You can

Dan Austin: [17:23] buy this house. Just trying

Dylan Koch: [17:24] to see.

Mike DeHaan: [17:25] I'm not willing to do that. Do you have any thoughts on where a deal could come from here?

Dylan Koch: [17:31] I... The only thing I would try to do is because he needs to sell. Is go direct to the the HUD and these other scumbags and see if you can negotiate them down as far as you can because I'm getting something is better than nothing. Yep. And HUD's... HUD will probably do that, I've had success with like Medicaid liens getting those reduced quite a bit.

Dan Austin: [17:47] Good for you. Like state or federal?

Dylan Koch: [17:49] That was state, We but tried to do that

Dan Austin: [17:51] once in Idaho and they're like get out of here.

Dylan Koch: [17:53] Oh no, mean ours is pretty big. And then that could take, I don't know what that number is, but if you're back down to like that $2.50, $2.60 number, then try to go with your original agreement.

Dan Austin: [18:01] Good Rick.

Dylan Koch: [18:02] I've done things sellers where it's like, hey we'll try this and basically like still go through with the listing, maybe you get lucky and someone's like really needs a house and they're willing to pay $3,103.15 to come through, but that's just like a shot in the dark. Or you'd buy it, a second buyer would come in and do the owner finance like to the second guy with a higher down payment. They had like a wrap pretty much around it. That's still like, I don't know if there's lot of buyers out there if it needs to work like that. So I don't know.

Mike DeHaan: [18:27] Because the thing is, the house is legit good. Like, there's no work on the house. It's literally just like title and liens and weird stuff.

Dan Austin: [18:34] The challenge I was gonna add the flavor to that is is that we need to come out of pocket to make this happen. So then you're coming out of How much? To come up with... Was it $12 or something like that to come up with those fees plus then then front her Airbnb cost or something like that? Was that what we negotiated? And so you got a decent amount.

Mike DeHaan: [18:51] Yeah. So, like, total amount was gonna be more

Dan Austin: [18:53] Yeah. A decent amount to come out of pocket, and then you're like, well, shoot, do I risk it on a person who's already kind of in a weird situation because they've done some things and they weren't fully open with us about that. Like that HUD lien, I'm sure she knew about.

Dylan Koch: [19:06] Could you go through with one of those strategies and then just do like a post occupancy of two weeks so she can stay in the house, so you can guarantee that the place sold and then buy her hook her up with an Airbnb?

Mike DeHaan: [19:17] Maybe. I don't know. Again, like there's a money source to come from somewhere, like regardless. Yeah. You know, it it's not even necessarily the risk of it not selling. It's just like, where's the money come from on the deal?

Dylan Koch: [19:28] Confident of the $2.90 ARV?

Mike DeHaan: [19:30] Yeah, very confident $29,300, like, of like, I think 300 is like actual market value, we probably put it up at $2.90. So it's a little bit quicker. The only thing I could think of as well, realistically, was what you said of, like, being able to go and negotiate with the debtors. Right? And sort of see what that looks like. But I can't imagine... I mean, HUD maybe would do something. It's another company like they're they're in the position of, like, we made our $2,000 bet, now we're just gonna wait because they know that it's gonna get sold eventually. Because I also too, I don't know if, like, with this person, if it goes to auction, if their stuff is waived or if they get paid out.

Dylan Koch: [20:06] So my experience, I've done a lot of foreclosure stuff is, basically, the only thing that matters in a foreclosure is the mortgage, like the first position lien. Everything else gets pretty much Yeah.

Dan Austin: [20:15] If there's anything excess, like HUD would get paid first

Mike DeHaan: [20:18] HOA liens.

Dan Austin: [20:18] No HOA liens. Yeah.

Dylan Koch: [20:19] Yeah. And HOA liens. Yeah.

Mike DeHaan: [20:21] HOA liens stick around. They're the real criminals and all this shit. I've heard some crazy stuff with HOA loans.

Dan Austin: [20:26] I'm sure.

Mike DeHaan: [20:27] Yeah. So I don't I don't think of anything we can do with it, which is unfortunate because, like, the lady Tope. She's completely shot herself in the foot, and it's like a good lead, and we are happy to help her out with it. But people always say that every deal is salvageable in some way. I really don't think it's... Like, the only way I can think of that would actually get it done, like I said, if we did it subject to everything, and then we found some buyer that wanted to, like, deal with that themselves. Right? Like, come in with, like, a $5,000 entry fee, something super low, and they wanna go and drive those conversations and be a problem solver, they could probably recover some good equity. But that will be a very special kind of buyer, and don't think we'd find that person because most people that are, pursuing sub twos at retail value are stupid. Like just being honest. Yeah. So they're not gonna be able to figure it Yeah.

Dan Austin: [21:13] Nobody wants to work with those people.

Dylan Koch: [21:14] Unfortunately this is gonna be a desperation one. Like you could throw it up on an investor lift and just say... And just be honest with the seller, like, we're trying to do this, this is what we're doing. Yeah. But yeah, I don't have anything else for you unfortunately. Yep. Where's your money?

Mike DeHaan: [21:27] Anyways, alright. Well, yep. No problem that one. But also too, the big lesson too is this is why you don't give people money ahead of time Mhmm. Until you kinda know what their full situation looks like.

Dan Austin: [21:39] Yes.

Mike DeHaan: [21:39] Because we could have easier... Easily given her $10, got an Airbnb, she'd like, cool. See you. Thanks for

Dylan Koch: [21:44] Totally. Making these

Dan Austin: [21:45] And she probably want... Would have loved that because she knew that she was gonna be deep doo doo when the property was gonna sell. She's like, wait, my Zestimate is lower than my payoff. She's like, uh-oh.

Dylan Koch: [21:54] Yeah. I've seen a lot of that lately too.

Mike DeHaan: [21:57] Yeah. Weird stuff. Like, we have to... That that was with the red flag, is this lady that has been behind in her bills being pre foreclosed on was so on it when we started working with her. And I was like, this lady hasn't done anything in her life. Like like, she's falling behind with, like, a perfectly decent house. She, like, has a job and stuff, she just hasn't paying her bills. Yeah. She's had a long time of trying to figure this out before she called.

Dan Austin: [22:18] Oh, yeah.

Dylan Koch: [22:19] Yeah. Just like the payoffs being higher than what we need to buy the place for. I've seen like more than normal recently and I don't know kinda what I guess that... Is it trickle down to some of the stuff we talked on the show before with affordability and all this stuff, but

Mike DeHaan: [22:35] I hope you guys are enjoying this episode. We are seriously trying to grow this podcast so that the voice of what it really takes to grow a real estate business becomes kind of the norm versus the guru get rich quick b s that everyone is fed on a daily basis. With so many podcasts out there, it is hard for us to get discovered on our own. So a quick ask, please share this episode on your social media accounts. Be that a real story, whatever. And if you tag me at mike underscore invest, then I will give you a follow and I will also send you a DM so that we can have a little chat about your business and anyways I could potentially help you grow. So again, please share it on your socials. Tag me at Mike underscore invests, that's with an s at the end, and I'll follow you, and we can have a little DM, a convo about your business, and maybe I can help you grow a little bit, or you could just say what's up to you. That'd be awesome. But appreciate everyone, and thanks so much for helping us grow. You know, what the really bad one is that we've been seeing that has been leading to that is the frickin solar panels.

Dylan Koch: [23:33] Yeah. Oh, we don't have that out here.

Mike DeHaan: [23:35] And they put these liens on people's houses. You don't have solar panels in Ohio. God, you there.

Dylan Koch: [23:39] I mean, we have solar panels. Just think it's prevalent. I've never run into that.

Dan Austin: [23:42] Elliot's not coming out and pounding your door and selling you solar panels? Wow. No.

Dylan Koch: [23:47] There's some in my neighborhood with solar panels. But

Mike DeHaan: [23:49] Yeah. It'll start happening, and what'll happen is you'll get these, like, shitty houses with, like, the nicest people inside that are very, like, well intentioned, and they have solar panels on them. And then you go to buy their house, and they have a $80,000 solar panel lien Yep. On their house over the next forty years. I'm like, well, there goes all of your equity. I'm glad that you're saving $7 a month on your power bill.

Dan Austin: [24:13] Yeah. Yeah. There's nothing they can do too. It's just a shitty deal. They're they're really terrible. Like Yeah. What they're putting on people's houses is not good. It's not good at all.

Mike DeHaan: [24:21] Yeah. And something too I haven't understood about that, Dan. Maybe you'll you'll have an insight on this. How do you replace the roof if you have solar panels up there?

Dan Austin: [24:30] You have to take them off.

Mike DeHaan: [24:31] Take... But the roof is not gonna come take off the solar panels.

Dan Austin: [24:34] Oh, and by the way, they drill holes all over your freaking roof to hang these things. Do you think that those installers are really good at that? Hell no, dude. No. So I was messed up. Solar guy came to my house and I was talking to him and telling him all this stuff. And he's telling me how great solar panels are. And I'm like, okay, yeah, right on dudes. And then I was like, well, I need a new roof. What do you get? Do you get like, I'm screwed. I can't get solar panels. Like, guess what? We have a roofing company. We'll reroof your house. Imagine that I guarantee that roof is like double what it should cost, because they're just gonna wrap it in this payment, right? They've got all this, the basically these loans, and they're just leasing them to you. And so it's it's a bad business model. It's good for them. Cause they sell a lot of these. And it's usually like Mike said, it's usually like what we see all over here in Washington. It's like older people, and like kind of low income people that are like, I won't ever have to pay electricity and it's basically free. I want that. And then they realize,

Dylan Koch: [25:24] How much do they cost? Like, I'm very ignorant to this. Is it $15? Is it $20? Is it $50?

Dan Austin: [25:29] It used to be like for a good system, it would be like 30, and it would take about the life of the system to pay it off when you had all of the subsidies.

Dylan Koch: [25:37] Dumb. It's already done.

Dan Austin: [25:38] Yeah. And so now, I think with some of these companies that are pretty scrupulous, I think you got $30,000 systems like $50.60, 70,000 to power your three bed, two bath home.

Mike DeHaan: [25:48] Mhmm. But they don't... They always sell it on terms. Right? And what they do is they basically lay it out so it's based... You know, it's an alternative cost to paying your power bill. And so it's kinda like, well, it's a cost you're already paying anyway.

Dan Austin: [26:01] We live in, like, one of the cheapest places to get electricity in the country. It's like we're super cheap here. So

Mike DeHaan: [26:07] And not only that, but we're so freaking far north that, like, it doesn't make any sense the vast majority of the year here.

Dan Austin: [26:14] Yeah. It's pretty mild here.

Mike DeHaan: [26:15] Like, the the angle sucks, but we have a bunch of, you know, people that wanna, like, save the world, do different things. You know? Good for them. I can support wanting to have a less world, I guess, but it doesn't make any sense.

Dylan Koch: [26:28] It's funny though, because I've read, and I have no idea if this is true for the for the haters out there, but once these things are like past their useful life, they go in some like landfill and just they don't even like deteriorate. Yeah. They're bad for the environment when it ends up being like whatever. It's pretty

Dan Austin: [26:42] it's a pretty weird situation for sure.

Mike DeHaan: [26:44] Yeah. But you feel good right now when you look up there and you're like, look at that.

Dan Austin: [26:48] Yeah. Exactly.

Mike DeHaan: [26:48] I'm powering the earth with the sun. You know, powering my house with the sun. But, anyways, like, those ones are are big, though. You'll see them too. And there's just, like, other... I don't know. Some some of the weird weird lanes and stuff we've been seeing recently. We had one that was a... It's like the rural loans. What are those called?

Dan Austin: [27:05] USDA. USDA loans.

Mike DeHaan: [27:07] Yeah. USDA. Yeah. So we had one property. This was out in... I think it was in Maine. The lady had, like, $18,000 left on her mortgage. That was it. Right? And so she was gonna be walking away with, like, a big chunk of cash on this deal. It's like a $152,100 g's. Just straight cashing. She was stoked. Offer was still great. It was a killer deal. We we get to her full payoff amount. She has this USDA lien and, like, penalties and stuff for something that she had done, like, forty years ago

Dan Austin: [27:39] Wait. Wait.

Mike DeHaan: [27:39] That hadn't been paid off. And so it had all of the accumulated interest, which had been compounding, plus the penalty interest that she'd be getting charged, her total USDA payoff was like... And this is all just fines and shit. It was like $290. It was like more than than our offer on the house. And I was like, I don't even know how that can happen. You know? And I was like, if anything, that's that's amazing. This is like a great negative example of the power of compound interest because she got Right?

Dylan Koch: [28:13] She got fucked by it.

Mike DeHaan: [28:14] Yeah. Right? Versus like everyone that's pulling their stuff in the stock market. You know?

Dan Austin: [28:18] But the opposite way.

Mike DeHaan: [28:19] Yeah. But we've even seen something like that just like left and right.

Dylan Koch: [28:21] Those are like reverse mortgages, you know, like It is. Reverse mortgages are notoriously terrible. Yeah. Very bad.

Mike DeHaan: [28:27] Yeah. Mhmm. Bad news. So...

Dylan Koch: [28:28] Well, cool. I mean, we got one more other topic. Do think we'd dive on it real quick? Or I can talk about another deal that's kind of interesting that we can, this has been like a deal deep dive.

Mike DeHaan: [28:36] Yeah, let's just keep it on deals for this one.

Dylan Koch: [28:38] Okay, so I gotta make sure that set the stage right. Property's in pre foreclosure, and it is in a husband and wife's name. And the husband and wife bought this house in 2008, they got divorced in 2018, in their divorce decree it says that the property goes back to the husband, but they never actually went through and like filed it with the county or the mortgagor. Husband dies in January this year.

Dan Austin: [29:06] Okay.

Dylan Koch: [29:06] And the husband has one true heir, his daughter, that is not the daughter with the ex wife. Solid. So we have this probate issue of who is the rightful owner in the state of Ohio, and do we actually need the ex wife, does this go to the daughter? They hate each other because of like all this stuff going on. Luckily I was able to trace them both down and we have contracts signed for both of them, we just got the payoff, everything looks good. But I did learn that in this process, at least in the state of Ohio, that since the divorce decree says this should go back to the husband, they can basically file that as an exhibit or an addendum with the county, and they can just deed it back without the ex wife's signature to the husband and then start the probate process with the husband and we can go through that. This will end up being a deal that should make us like 30 to 40 But I've had to learn a shit ton through all of this.

Dan Austin: [30:02] So did you initially work with on the sale? Like who was, which family member?

Dylan Koch: [30:06] The ex wife. Because that's who I found first just from the last name.

Dan Austin: [30:09] Got it. So she wanted to sell the house to you.

Dylan Koch: [30:12] She did, but then it turns out, she actually doesn't even have a right to Now the I'm still paying her a little bit to to be cooperative, like to get like the payoffs and some of the like access to the houses kind of stuff. But it turns out like, I at the beginning I needed to talk to her but I ended up needing to talk to the daughter, which was her stepdaughter.

Dan Austin: [30:28] Dang, has she lives at the house? Does somebody wanna live there?

Dylan Koch: [30:31] No, she moved out. The bank has winterized the house already, they changed the locks. I'm just like, I don't think they should have done yet. Right. And she's moving to Texas at the end of

Dan Austin: [30:39] this month. Boy, they always move to Texas.

Dylan Koch: [30:41] And I guess the important thing here, the ex wife, if she would have done through this like, at the beginning and gone through the whole probate process, she would have probably had rights to this house. But she got very bad advice from some other attorney that said that she couldn't do this. And now she's not gonna get near as much as what she would before. I mean, kind of.

Mike DeHaan: [30:59] Yeah. That's a truculence. It kinda reminds me, Dan, of Naomi. That we had this seller very similar to this.

Dan Austin: [31:05] I don't even wanna think about that one.

Mike DeHaan: [31:07] This gives me nightmares the way that panned out. But this lady, she was deaf and mute.

Dylan Koch: [31:13] Oh, boy.

Mike DeHaan: [31:14] Yeah. Yeah. So it was like a weird transaction to begin with because, basically, how she would talk on the phone is you... It would, like, go... Like, she would, like, get on Zoom with somebody, and she would, like, sign. And then, like, they would tell us what she was saying. And so it's like, like, conversation was always kinda weird. And then when we went to walk the house, it's horrific. And there's, like, meth heads that, like, live in there that she was, like, basically supplying the drugs for. She was, the meth head dealer. And then... So it's very similar situation, though, where there was an ex husband that had died and the probate hadn't been done correctly and had a next of kin that was the daughter. And the daughter and the, you know, remaining wife hated each other and refused to have any conversations or anything. And we kinda had to go through similar stuff, except the ex wife lived in the house, which made it extra weird. So what ended up happening is we got them to agree to the sale price. They went through all this stuff. I went and had to track down the daughter on Facebook because no one knew where she was. And Naomi had said that she was dead, which was not true. She basically just didn't wanna have to talk to her or anything. And I was able to find her on Facebook.

Mike DeHaan: [32:22] And, like, I literally messaged her on Facebook, and I was like, hey. You know, I know this is really weird. This is not a scam. We're trying to buy this house from, you know, Naomi, and this is what all needs to happen. Like, you're probably gonna get some money, so that's pretty cool. If you wanted to work with us, can you call the title company? And she was super cooperative and got it figured out.

Dylan Koch: [32:38] Don't you feel like a private investigator sometimes when you're trying to find

Mike DeHaan: [32:42] You can. Yeah. I I do feel like a private investigator all the time. We're getting into that stuff. But... So we we end up wholesaling this deal. You know, we got them to go through with it. And the guy that we wholesaled it to, the younger guy here in town, and we're like, listen. We got everyone out of the property for you. You need to go and... It's closing on Friday. You gotta go and board it up.

Dan Austin: [33:00] That shit up.

Mike DeHaan: [33:01] At closing. Don't dick around and do anything because you're gonna get back in there. And so he went, and he locked up the whole house, made it all secure. I think he might have, like, boarded up, like, a couple things, whatever. This lady somehow, like a freaking lizard, like, slithered in through, like, the basement and, like, got back in the house and opened it up to all of her meth head friends to come in again.

Dylan Koch: [33:25] Oh, And

Mike DeHaan: [33:25] had a huge fire and fucking burnt down, like, the garage and, like, half the house and shit.

Dylan Koch: [33:33] Did he have insurance on it?

Dan Austin: [33:34] Yeah, no, it was the RV parks next to the house that because they started bringing shit to the house at that point. And then burned the RV down, which I do think kind of burnt some of the siding. Like, I think it was like vinyl siding.

Mike DeHaan: [33:46] Well, I'm pretty sure burned the whole garage, didn't it?

Dan Austin: [33:49] I don't know. I don't remember that part, but I do remember it was an RV because, of course, they're probably cooking meth in it because I don't think they had electricity in the house at that point. And it was a weird... Took him, like, six months, and I think he lost a shit ton of money on it. But it was just like, bro, I I remember you on the phone. I was like, bro, board up every single window, sit there and wait for her to leave, and then just board up the door. Like, don't let her come back and just put boards on and they'll just leave. And he just was too nice. Damn.

Dylan Koch: [34:13] Yep.

Dan Austin: [34:15] Too nice. That's what happens when you're dealing with.

Dylan Koch: [34:17] So for anyone listening, change locks immediately.

Dan Austin: [34:20] You can't even change locks here. It's okay. Just you gotta put boards on. And she was deaf, he can never communicate with her. So it was really hard. Yeah. That's tough. Yeah.

Mike DeHaan: [34:28] Yeah. So it was... I mean, we had we had a similar title situation like you described though.

Dylan Koch: [34:32] But this is like, you gotta get paid for solving people's problems. Yes. Like, neither of these people were expecting any money from this this Yeah. They just were gonna let the bank take it. Yep. Right? And so now they're each gonna walk away with more money than they'd ever thought.

Mike DeHaan: [34:46] Yeah.

Dan Austin: [34:46] Good for you.

Mike DeHaan: [34:47] You know, and I can't even imagine what Naomi did with like the $100,000 or whatever that she

Dan Austin: [34:51] She didn't even get that much, dude. It ended up getting really... It was like leaned up and like all sorts of issues. And so she didn't give very much

Mike DeHaan: [34:58] water liens and stuff.

Dan Austin: [35:00] Just yet random shit.

Mike DeHaan: [35:01] And she had to split it with the daughter-in-law that she hated.

Dan Austin: [35:04] Yeah, she did.

Mike DeHaan: [35:05] Yeah. Anyways, these are the game we play. But no, that's good stuff. So cool. Anything else, guys?

Dylan Koch: [35:11] Nope. That's all I

Dan Austin: [35:12] asked for. Well,

Mike DeHaan: [35:13] if you guys have your own crazy stories, we'd love to hear them. And in case you haven't heard on the Monday shows, we always ask what their crazy stories. And you should just, you know, send us yours on Instagram or something. Would love to like, read other people's stories or, you know, maybe have a guest come on and tell us one. That'd fun. Yeah, let me heads up. I'm a Mike underscore invest. Dan is at investor man. Dan Dylan is at Dylan underscore does underscore deals. And appreciate you guys listening. Talk to you guys next week.

Dan Austin: [35:39] See you