Why You Don't Need More Leads, Analyzing the 4% Rule, When It's Better To Pay Taxes

Mike DeHaan: [0:00] People will argue that you can't control the real estate market, which is true. But there are parts of the real estate that you can control compared to stocks. Right? So you can control your purchase price. Right? With stocks, you can't buy at a discount. With real estate, you can. And that is literally the most powerful wealth generation tool for the average person is the ability to buy discounted real estate. Yep. We've talked about this a lot of times before. If you have a $400,000 property that you buy for $300,000, you just get a $100,000 in your net worth the second that you close on it. Right? You can't go and buy a $100 stock for $75. What's going on, guys? Welcome to this episode of the collecting keys real estate investing podcast. You are here on the Wednesday Mike and Dan show. With me, Mike DeHaan, and my cohost, Dan Austin with his BDE energy. And I feel like he's low BDE energy today though.

Dan Austin: [0:58] I am.

Mike DeHaan: [0:58] Oh, I mean, I say that. He was getting worked up before because we got got corrected by somebody on Instagram over something that we apparently said last week that we can never remember. But your BDE shirts look sick though on the new official Collecting Keys store.

Dan Austin: [1:12] Oh, I haven't actually checked them out on the website. We need to get me to model it. We can't have those fake models up there.

Mike DeHaan: [1:19] I agree. We definitely need photos of you wearing a shirt with your face on them. I was gonna send you one, but we don't have kids sizes yet. So I needed to Yeah. I was waiting till we get those before I I got you one. Thank you.

Dan Austin: [1:31] Thank you for that. I was hoping to get like a like a size extra small in tween girls, please. Didn't see that in Do the drop

Mike DeHaan: [1:42] they do tween sizes?

Dan Austin: [1:44] I don't exactly know what tween means. I've heard that, but I think it's like preteen maybe for young women.

Mike DeHaan: [1:50] I think it used to be that, but then we started putting all this like hormones and shit in our food. So people just kinda like Yeah. Go from child to adult when they're nine years old now.

Dan Austin: [1:57] No. I thought it was the opposite of that where like there's actually this thing out there where people look younger today. Like, if you go look at your parents, you're like, goddamn. My dad had a beard in high school. Right? And now kids coming out of high school look like they're in fourth grade.

Mike DeHaan: [2:09] Or they're freaking stocked, dude. I'm seeing these NFL players coming

Dan Austin: [2:13] out of There's definitely because they have access to great hormone therapy that we did not have.

Mike DeHaan: [2:18] Yeah. Right. But, anyway, starting off with a tangent.

Dan Austin: [2:20] Yes.

Mike DeHaan: [2:21] If this is your first time here, guys, this is a real estate investing show. And Dan and I, on these Wednesday shows, we talk about our business, talk about real estate in general, we talk about investing, and whatever else is on our mind, obviously, as you can tell right there. So but really quick, I guess we need to address something that, apparently, one of us said on a show last week

Dan Austin: [2:43] I would not make an uneducated comment on this show, so don't look at me.

Mike DeHaan: [2:46] Yeah. We would never say anything without being 100% educated and researched. That is not how we roll.

Dan Austin: [2:53] We don't have a Jamie over here telling us and doing Google searches for us.

Mike DeHaan: [2:56] Yeah. Right. Yeah. We don't have an actual producer, like, verifying everything. Here's one thing I will say. I appreciate everybody who reaches out and says, like, hey. You said this. It's actually this way. Or, like, vice versa. You say things, Joshua. I think he's just that's great. Just so you guys know, the second that we stop recording this show, both Dan and I immediately forget every single thing that we said on the But

Dan Austin: [3:22] we do appreciate the candor in people that actually listen and say, you know what? I'm gonna reach out to them and say this. Yeah. Because they were wrong or I enjoyed what they said. Yeah. That's great. A lot of times, it's people that really like what we're saying. We're like, man, I'm glad you like what what we said. I just gotta remember that.

Mike DeHaan: [3:38] Yeah. Yeah. Exactly. So always appreciate it. If I have no idea what you're talking about, that's why. This phenomena exists across everyone that does podcasts. I know if you've ever done a podcast, if you have your own podcast, if you have friends that do podcasts, they will all be able to relate to what I'm saying. But the second that you stop the record button, couldn't tell you what we

Dan Austin: [3:58] talked into the interwebs.

Mike DeHaan: [4:00] Yep. Forever. And then sometimes I'll even, like, listen to our shows. I'm like, that was funny. Or I'm like, oh, that was not funny at all. Why do I think that was so funny? Funny anymore.

Dan Austin: [4:09] Yeah. Yeah. We always brief each other too before a podcast. If someone doesn't sound funny or off color, we make sure not to say it most of the time.

Mike DeHaan: [4:17] I cut you. Today and age, Wade, you gotta be careful. But anyway, the thing that one of us allegedly said was talking about the investment principle of the 4% rule where basically I'm

Dan Austin: [4:29] gonna guess you had something bad to say about it.

Mike DeHaan: [4:30] Probably. I'm just kind of like a general hater on people that do these thirty year projections to try and establish a false sense of financial security. Here's where it could have come from.

Dan Austin: [4:42] Yeah. Here's where it could have come from, because I think you and I do not shit on, but don't agree with the path that most people take on fire. What is that? Financial independence. Financial independence, retire early. Not that we both haven't thought that's a great idea before, but I think a lot of folks with that are trying to get the bare minimum to cover their expenses and use cash flow from rental properties that doesn't necessarily exist in the way that they say it does, and also use the 4% rule from their $250,000 $40.01 ks balance when they're 38 years old, use those funds to live off of. So I could see us saying something like that.

Mike DeHaan: [5:20] Yeah. But so very basically though, the 4% rule is, it's this principle that whatever money you can invest, right, if you wanna be financially independent, if you can get to a point where 4% of your invested money, you can draw that and live off of that amount, then you'll be good for the rest

Dan Austin: [5:38] of your life. So You'll never have to touch the basis of your investment.

Mike DeHaan: [5:41] Correct. And so what a lot of people say is like, oh, if you can get to a million dollars invested, and you can live off of $40,000 a year, which is 4%, then you're good. And like the things should grow, and then the distributions that you take should be balanced out, right, by the what you're by the growth of the portfolio. And people apparently, it's supposed to account for inflation. That was our main point that we made was that it didn't. Someone very kindly sent me a list of the the things where it shows that it does account for inflation. I still don't fully believe that because I don't think it provides an accurate view of inflation. And I also don't think that any of us actually know what inflation actually is. So how can it truly account for when inflation has now just become a form of political candor to build issues on either side of the I've

Dan Austin: [6:29] done that path. Yeah. I agree. So, the 4% rule, hypothetically, the Federal Reserve, their target for inflation's 2%, but people always say, historically, it's been two to 3% a year. So then if you assume a 7% growth rate, which is a decently conservative, but average growth rate, you remember this is average over a retirement of thirty to forty years, or however long you retire, maybe you retire at 35, whatever. But on average, 7% growth a year. If you pull 4% out and you assume 3% inflation every year, that 7% growth means that $1,000,000 will always keep up with inflation, and whatever $1,000,000 is today, in future value dollars after inflation, it'll still be a million dollars, and you'll live off of the exact same 4%. The problem with the 4% rule, and why I don't think it's valuable, is as we're seeing today, inflation's 9%, or was historically, now they're saying it's dropping down. Allegedly. Allegedly. And you realize one of the ways they come up with inflation is they send people into grocery stores to buy a basket of goods, and those baskets of goods, they have never updated of what that is. Yeah. And so they're probably still checking to see what lard costs. Don't know.

Mike DeHaan: [7:39] The funny thing is Things

Dan Austin: [7:40] that they used to cook within the fifties.

Mike DeHaan: [7:41] You're probably true. It's like, is canola oil?

Dan Austin: [7:44] Right, exactly. And so they're going out there, and they come together, and they say, well that basket of goods in the grocery store costs blah blah blah. Well, what we found out recently, one of the biggest drivers to our inflation, the stickiness of inflation, is housing right now. That is the biggest chunk of it right now. And so that is way more expensive. The cost of housing is way more expensive than your freaking basket of goods at the store, so that could obviously skew that as well for you. But also, the government is reporting kind of in a like a not perfect way, and then, of course, you said there's some political sway of like, well, is inflation high? Is inflation low? We found that they're not super good at controlling it. So if you assume two to 3% inflation every year, that's obviously we're living through it where it's not the case. And also, the 4% rule does not help you very well if the market goes down and is depressed for a longer period of time. What do you do in those two years where you lost 20%, 30 of your $40.01 k balance that you're pulling 4% off of? Now your 4% might be like 2,008 happens, your 4% might have been $40, and then the next year, was $20. Yeah. And you and then as you're eating with that principal, because your expenses don't change, like, especially as you get older, your expenses grow with medical costs.

Dan Austin: [9:00] Like, if you can't budge off of $40,000, now you're doing an 8% rule just to keep and maintain that same quality of life. So once you retire or leave the workforce, do you wanna change your quality of life because the market's shifted? That's why I don't like it.

Mike DeHaan: [9:13] Yeah. It leaves it leaves a lot to question. You know? You leave a lot in the hands, and it's funny. This dude's ears must have been burning. He literally just sent me a message on Instagram.

Dan Austin: [9:21] That's the same guy. Nice. Hopefully. He appreciates us addressing this.

Mike DeHaan: [9:25] Yeah. So so, Kevin, if you lose this one again, shoot me another follow-up message. I would love your take on on Dan's rebuttal there.

Dan Austin: [9:32] Well, and also, the 4% rule is I mean, I guess it's a fundamental. So maybe you have $5,000,000, and you really only need to live off of a million. And so when you're taking out $4,040,000, but you could actually hypothetically take off, you know, $200, like, yeah, it doesn't matter what you're doing at that point. You're living so far below your means.

Mike DeHaan: [9:48] Yeah. But, like, people don't do it that way. People use it on, like, the lower end

Dan Austin: [9:52] of it where if, frankly Financial advisors use it to help you plan your finances for when you retire.

Mike DeHaan: [9:58] Well, think that a lot of it comes around to this traditional views of your only form of income's gonna be your job. Right? Or you invest in stocks and things like that, and so it grows that way. Right? But it doesn't take into account, you know, using things like leverage or, like, having additional forms of income, whether that's like a side business or, like, you flip a house or you, you know, have capital gains from other things that you do. And so it gets it's more like the the quote unquote everyday person, right, that they do, like this average person. But I also think that that notion of what an average person is and what they're capable of is 100% different now than it was even like ten years ago.

Dan Austin: [10:37] Yeah. You're right. Absolutely.

Mike DeHaan: [10:38] Like, you can see that just in the incredible growth of interest that there's been in real estate investing period. Right? Something that was like loosely on the map ten years ago. If you're like, oh, yeah. I read Rich Bad Dad in the nineties. You're just some

Dan Austin: [10:50] old guy that's like, yeah, man. I love buying my property.

Mike DeHaan: [10:54] Yeah. But now you got tons of young people that are getting into house hacking. They're getting into flipping houses. We have people that are extremely high income earners that are investing in stocks. They're like, I also wanna own real estate because I understand the power of leverage, and I understand the power of, you know, the debt pay down, the tax benefits, and all that sort of stuff. The knowledge that used to be reserved for, like, the elite is now such common knowledge that things like the 4% rule

Dan Austin: [11:17] The elite and the experts.

Mike DeHaan: [11:18] Yeah. Things like the 4% rule, think, are outdated. Because here's the other thing too is, as more and more people become more financially strong, they become wealthier, the cost of general things in life to maintain a middle and upper class lifestyle will go up accordingly. When more people have more money, things become more expensive regardless of what the actual Is that called inflation? No. Regardless of what the actual federal inflation is, that's called supply and demand, which is a completely different economic factor that is never accounted for. Right? Well, I

Dan Austin: [11:51] think inflation is measured based on supply and demand. Right? Yeah. So, like, if the demand go theoretically, if the demand goes up and supply go or supply goes down, demand goes up, right, then that creates some sort of inflation.

Mike DeHaan: [12:02] Yeah. But the difference is inflation's gonna be sort of theoretically, should be tracked equally across everything across the board. If the value of the dollar

Dan Austin: [12:10] Demand might drive inflation in other places, but I think it's what maybe you're trying to say.

Mike DeHaan: [12:13] Yeah. And it affects it differently. Right? And so if you have a certain quality of life, like a middle upper class lifestyle, and all of a sudden, more and more people are able to afford that, those things will become more expensive. It's why stuff like kids sports are so absurdly expensive now. Right? It's because there's a huge demand to have your kid play like a good team so they can get into better colleges, all sort of stuff. They can charge what they charge because people pay it. That is not one to one directly related to inflation.

Dan Austin: [12:41] That is not affected by inflation of the dollar. You wanna know what is it upper middle class inflation? So have you seen these these trucks driving around here, like called the poop scoop or something like that, where they'll Yeah. Pick up your dog

Mike DeHaan: [12:53] It's a franchise. You can start one for like $20.

Dan Austin: [12:56] No thanks. I I called one, or Facebook messaged them. They had like advertising, and I was like, blah blah blah. My wife took care of it, and she was like, yesterday, they won a $120 for the first initial show up. Was like, man, now I'm good. I'll pick up my own dog poop. But I was just like that. I used them last year, but then for this year, I just couldn't do it. And yeah, it was a $120. That's an expensive time to go pick up your dog poops, in my opinion.

Mike DeHaan: [13:22] Wait. So that's each time or just for the first one?

Dan Austin: [13:24] That was the first initial whatever. And then I can't remember what it was after. Maybe it was like $60.80 bucks. Bucks. Don't know

Mike DeHaan: [13:30] where they come out? Do they, like, weigh it?

Dan Austin: [13:32] And measure how much poop you have. But, like, anyhow. But I guess, like, you know, that's a task. I don't mow my lawn anymore. Like, that's a task that I would have totally paid for somebody, but I guess I'll just have to wait for my daughter to get old enough to pick up for her and tell then I'll buy my time. But that's a good example of services that did not exist thirty years ago. Yeah. No way were people doing that or paying other people to walk their dogs or other things out there. I don't know what services people pay for now that exist that people didn't do forty years ago on principle.

Mike DeHaan: [14:00] And so I guess that's another thing you're saying too is, you know, now quality of life, depending on where you're at, there's just more stuff that comes up depending on what sort of services and things that you want. Although I think that somebody who's trying to live off of $40,000 a year off the 4% rule with their million dollar portfolio, they're not gonna be paying for luxury such as that.

Dan Austin: [14:18] The dog pooping, dogs pooping, pooping.

Mike DeHaan: [14:19] That would be

Dan Austin: [14:20] yeah. Well, I definitely think you have to prioritize your luxuries at that point, but you should, you know, indulge a little bit, but off of $40 a year, it's tough. But that's, I think, a good discussion about why real estate investing does give people such more of an opportunity to retire early or to retire with control, and I think the big transition, especially after twenty twenty, people want more control. They realize like, oh, I can work my entire life until I'm 65 or whatever most people have the number in their head, and then I don't really have control at that point. I'm relying on whoever's investing my money, however you're investing your money. Like a lot of people, it's just in their four zero one ks, they don't really have true control over that. A, the government tells you what to do with that money because from a tax perspective, and B, you're relying usually on other fund managers to manage the success of your retirement. But with real estate, you can manage that success, and you can continue to choose to grow, and you can continue to work too after you quote retire, by growing your portfolio, and doing whatever you want to, all the way down from maybe you wanna be the maintenance guy, to maybe you wanna learn how to, I don't know, develop properties. And that's part of your retirement work.

Mike DeHaan: [15:28] Yeah. And and people will argue that you can't control the real estate market, which is true. But there are parts of real estate that you can control compared to stocks. Right? So you can control your purchase price. Right? With stocks, you can't buy at a discount. With real estate, you can. And that is literally the most powerful wealth generation tool for the average person is the ability to buy discounted real estate. We've talked about this a lot of times before. You have a $400,000 property that you buy for $300,000, you just get a $100,000 in your net worth the second that you close on it. Right? You can't you can't go and buy a $100 stock for $75. That just doesn't And

Dan Austin: [16:03] you can't add sweat equity to the stock. Exactly.

Mike DeHaan: [16:05] You can't increase the value of the You can do that with real estate. That's another thing that you can be fully in control of. So you can increase the value of it by increasing square footage, turning into, a rent by the room situation, redoing the kitchen to make it so rent's higher. On that same note, you can increase the rent, which increases the profitability of the deal. Mhmm. You can adjust things with the market. Right? You can adjust your interest rates by getting different kinds of loans, like, you know, refinancing, things like that. There are so many ways that you can take that asset and control the actual return and the value that you get from it versus just throwing everything into a bunch of securities. You know? And it's less passive than, say, just having stocks, but also too, that's the trade off. The upside is significantly higher if you're strategic about it. Right? And you can do that as many times as you want. You know, if you do that across 50 properties, so you have that $400,000 property, you buy $300,000, you do that 10 times, congratulations, you're a millionaire. If there's kids' time. You know? That's one of the kind of the falses about notions, I guess, you hear about like accredited investors, million dollar debtors, or things like that. Oh my god. If you are like even the most basic real estate investor

Dan Austin: [17:16] The Smoky Mountain bros, is that what

Mike DeHaan: [17:17] Smoky I'm gonna ring Mountain bros. Exactly. Yeah. If you owned small handful of properties in some of the markets through 2021 and 2022, you are absolutely a millionaire, and you didn't even you just made a good investment decision, got a little bit lucky. And unfortunately, it doesn't mean that much anymore, because there's a

Dan Austin: [17:34] bunch of people that the same thing. Timing was great. But yes,

Mike DeHaan: [17:37] but on that note, if you were wanting to be that person, it is a great time to start trying to buy properties because tell you what, this current phase that we're in, you know, as of March 2023, I would say it is starting to break my like, our historical notions on, like, I guess, I would say, like, seller interest in selling off market. Says the market's gotten kinda weird. The interest rates are sticking around. People that have Mhmm.

Dan Austin: [18:05] More and

Mike DeHaan: [18:06] more of these distressed properties are finally coming around to the fact that they cannot just list them on the MLS and sell them anymore. And our sales guys and, like, our clients for the Instant Investor partnership program that we have are having a field day of opportunity right now. Right. We typically tell people when they start working with us in our on our partnership program to expect seventy five to one hundred days before they start to have like real traction. We have several, I guess, several people that we started with in March. And I think so far, we have, what, at least two signed around in the first month, if not three. Mhmm. And we have seven other contracts out across two markets, two brand new markets. That's 10 contracts out across two markets. That has never happened that quick.

Dan Austin: [18:47] That's pretty cool. It's insane. I mean, it's just like, it just speaks to the fact that, like you said, there's the market's shifting. The the on market is shifting, which is affecting the off market in a positive way. It is. So the off market real estate is growing while the on market real estate is shrinking.

Mike DeHaan: [19:01] Yeah. And I think that that's an interesting thing too about real estate investment, especially off market investment is, I wanna say we're like bulls to like the retail market, but we kind of are. Like, a retail investor, retail buyer, right, they want the market to go up all the time because the properties that they are in, they want to go up. I would say, here's what here's what I say, guess. For your holdings, you're a bull on your real estate. You always want to go For your acquisitions, we're realistically bears. We want stuff to get shitty so that we can buy more discounted properties and that there are more people that are gonna be willing to sell at a discount. Yes. And if you have a long term mindset, right, you can be okay with your holdings going down a little bit because you know over the next ten, twenty years, whatever your outlook is in the property is gonna go back up, but you have to look for those opportunities, those bear markets to be able to acquire more discounted assets.

Dan Austin: [19:53] Yeah, and if you're like that person that's waiting, oh, I don't know, the market's I think there's the bottom's still coming, or you're just waiting because, well, everybody's waiting right now as far as like, if you look at the headlines, people are unsure of the market. I find it more interesting that so many people that are really super successful, that started in real estate, and maybe even pivoted away from real estate, but have done other great successful things, they always tell the story of like, oh, in the .com boom, or in o seven is when I started flipping houses. The absolute worst time to flip houses. But if you have the wherewithal and you can kinda succeed through those rocky times, then you're going to skyrocket because you figured out how to operate a business and invest in real estate at the most difficult time, and so once the times get good, it's it's just easy. It's like, still canning for a baby? Is that a thing?

Mike DeHaan: [20:39] Yeah. Canning for a baby, fish in a barrel, you know, there's there's all sorts of things.

Dan Austin: [20:43] Yeah. It's just a lot easier as you're on your on the up climb if you're in the rocky roads, which I would say we're kinda coming out. I don't think there's too much more we can see, unless there's some unexpected things that I don't know about, but that happens in any market. But I think, you know, if you're operating this bumpy road right now, I think you're reaping the rewards, and you're going to continue to reach the rewards, because you learn how to operate and build the systems for this type of market.

Mike DeHaan: [21:04] Yeah. Exactly. And I think that's the key there is building the systems right now. And, like, I would not say that this is the time where you should go and pour a bunch of your money, like, into rental properties per se, just because, like, the interest rate situation is completely screwed up right now. Like, with all this SVB stuff that happened over the past couple of weeks, you know, the federal rates went down, the private rates went up, lenders are all over the place. They're all trying to lock you in with these They don't know what they penalties that are just disgusting. Don't buy shitty debt just because you wanna buy rental properties, honestly. Yep. But it's a great time to be looking at, like, the transactional nature of real estate. Right? Looking at building a pipeline, looking at getting into flipping or wholesaling, or like, you know, I say, don't use shitty debt to get around property. If you guess if at a screaming discount, absolutely do that. That's fine at that point.

Dan Austin: [21:55] I mean, if you can get a six and a half percent thirty year fixed debt, go with it. And if if the cash flows really well Yeah. Why not?

Mike DeHaan: [22:01] Yeah. Exactly. Like like one of our our guys in our instant investor program, Dylan, what did he say? He just pulled out, did a full cash out refi on a four plex at 7.5

Dan Austin: [22:10] or 10 k.

Mike DeHaan: [22:11] Yeah. Yeah. Plus five or 10 k. And he got 7.75% interest. But because it was such a good deal, his DSCR is still, 1.4. So that's his that's his debt service coverage ratio. So that means that it is his payments coming in from the property is still 1.4 times the debt on the thing. So he's cash flowing machine. So it doesn't really matter what the rates are now.

Dan Austin: [22:33] Yeah. And then in the future, if rates go down, he's going to be even more of a cash flow machine if he wants to refi again.

Mike DeHaan: [22:38] Exactly. Yeah. He'll be able to refinance down to like, you know, five. That's gonna be freaking 1.6, 1.7.

Dan Austin: [22:43] I don't what what was the saying realtors were saying there for like the the end of last year? What did they say? Like, date what was it? Date the rate, marry the home. The home. Or something like that.

Mike DeHaan: [22:53] Hate it.

Dan Austin: [22:53] Yeah. Don't date the rate on this. Like, don't expect it to come down next year.

Mike DeHaan: [22:57] No.

Dan Austin: [22:57] If you can make it work as a rental property and cash flow like a king at 7.75, there's a a good chance that you'll have an opportunity to refinance in the next couple years and really cash flow well.

Mike DeHaan: [23:08] Yeah. Well, I also don't like that methodology though for investors because investor grade loans are different front than retail loans. Like, they're more expensive to get. Even if you're getting Fannie Freddie loans, they're gonna wreck you on cost compared to a traditional homeowner loan. Know, they're gonna go through all of your books. It's gonna show up on your credit, all those sort of things. But and then, like, if you're gonna get a DSCR loan like a lot of us do, the costs associated with that are massive. And then what's really getting people is all these lenders are getting so greedy with their early payoff penalties. And, like, they want you to lock in a 9% DSCR, you know, rental property loan with a five like, a five point step down prepayment penalty over the next five years, which means you're gonna have 9% right now. And if you wanna refinance or pay it off, it's gonna be 5% to pay it off the first year, then 4% the second year, then 3%, then 2%, then 1%. And so that means that, you know, you lock in this 9% rate. You're now stuck with it unless things adjust to a point where you're okay paying them a disgusting amount of money to adjust the rate again in the future.

Dan Austin: [24:11] Yes. Yeah. And I think there's some of it they know that they're able to take advantage of that have, you know, flippers, or investors that have bought properties in the last four to six months because they have no other exit right now. Yeah. And there are no other good exit if it's a tight deal for them anyways, and so they know some of these DSCR lenders probably know that they could get whatever they want right now because those people gotta get out of those hard money loans. Right? As those hard money loans dry up and maybe the banking picture kind of settles out a little bit, those rates will have to drop down, I think

Mike DeHaan: [24:41] Yeah.

Dan Austin: [24:41] To something more reasonable because you can't make you can't as a lender, you can't make money doing these kinda deals for very long.

Mike DeHaan: [24:47] Yeah. You can't. I mean, and I think that's their way of kind of hedging the fact that the volume is lower, is they're trying to make up for it with the cost they make per loan, which makes sense, this business. It's so bad to the point, though, I I did an Instagram story on this just the other day. You know, in this ten thirty one that I was doing, I so I sold some properties looking at $10.31 into a short term rental down in Austin. And I ended up deciding that I'm not even gonna do that because after meeting with my CPA and figuring out what my true tax burden was going to be, basically, the cost to get into these these properties with not even considering the prepayment penalties, but just considering the cost these lenders are charging right now, it was gonna be like only a $10,000 difference in the loan cost versus my taxes. So not only was I was basically gonna save $10 net if you compare the taxes to the loan cost, and I was gonna be stuck into a property where I was like 8.5 percent. Right? With a five year prepayment penalty. I'm like, why would I do that? I'd rather just have unencumbered access to my capital and pay pay the tax made.

Dan Austin: [25:49] Yeah. Over a $10,000 difference. Like, if you're in that weird about paying the government taxes, then that's a whole another conversation. But a $10,000 difference, I'd take that money all day long. Totally. I'd pay the taxes.

Mike DeHaan: [25:59] Yeah. I mean, I'm gonna be having back $200. I can go and I can do like a hard money transactional loan on that, right, and get back half of that. You know, it'll take Absolutely. Take me twenty four hours, you know, it's crazy. Right. So, I know, it's just a really, really interesting time. But yeah, either way, like, going back to the systems and things, starting to build that out and getting a pipeline forward is gonna be really, really instrumental. And if you have that momentum going as a stuff starts to turn, and you're looking at acquiring properties, like, you wanna build that now versus in the future. Right? And that's what we're going through with a lot of our instant investor guys, and we're scaling up our stuff here as well, trying to get into those positions. Know, and the motivation's there with sellers. With these markets that we've kicked it off, we have a new sales guy who's been getting after it.

Dan Austin: [26:45] Lots of contract sales.

Mike DeHaan: [26:46] He is. He's the first, like, I would say, like, hard sales guy that we've had, where sometimes I think, you know, we've had an issue right now, so we have all these contracts that are pending. We're not getting them signed. Sometimes I think he pushes them so hard that they're like, okay, yeah, we'll take your offer, leave me alone, and then they go sell. Which is fine. I would rather have that versus the opposite where you have guys that are just like, oh, well, I'm embarrassed to make the lowball offer, they just sort of

Dan Austin: [27:09] scoot But around

Mike DeHaan: [27:11] if you're focusing on building those systems right now, it is the place to be focusing on in this current market cycle, because there's already abundant opportunities, there's gonna

Dan Austin: [27:21] be even more coming up here over the next short term. So what you're saying is to build the systems out so that when more and more opportunities come, you're ready to take them down without getting lost, because without the systems, what we found, and they don't have to be crazy tons of systems, you just have to have some good systems, what we found is it's so much easier for you to lose opportunity and not capitalize on, and it goes back to what other people, or we coach people on is like, don't think you need to go find more leads, you need to be able to take take down the leads you have before you go out and and actually start buying more leads, because that's people's tendency. They're like, well, I'm I'm not getting as many deals as I want. Let me scale my marketing. Well, no. If you don't have the systems, you're having good leads fall through your cracks, which means you're not maximizing the leads you have now, so don't go spend more money on new leads.

Mike DeHaan: [28:04] Yeah. And I think that that's such a valid point. I'm glad you brought that up, because that is something that has come up more and more frequently with folks that just hit me up on Instagram and those sort of things is they're always wanting to know what our lead gen looks like. Right? And, like, how we're getting more leads and all sort of stuff. And you're completely right. I think that people focus on the lead generation because it's a less scary task than the sales. It is. You know, you don't have to get rejected. You don't have to, like, call people a bunch of times trying get them back on the phone. But the sales and follow-up is what gets everything done at the end of it. I mean, even right now, we had a we had a a new gal in our our coaching call this morning, and she was saying she's a acquisition manager with one of the people that just joined up with us. And she's like, yeah. So we're currently calling like 500 people a day, and I'm just talking to so many people and no one wants to sell. I'm like, that's why I hate cold calling. Because you're spending a ton of time, but it is not productive. It's like, why? Like, what is the point of that at the end of it?

Dan Austin: [29:01] Yeah. There's no point calling people that don't wanna sell to you, disrupting their day, and having terrible conversations, or having conversations, which is, yeah, I'll sell to you for, you know, $3,400,000 more than my property's worth or more than you're willing to pay. Yeah. It's not a productive conversation at all.

Mike DeHaan: [29:15] It isn't. And and the thing is with cold calling too, especially these days, like, we use direct mail. That's our main main form of marketing. Right? People always say, I don't like direct mail. It's so expensive. Exactly. It has a slightly higher barrier to entry than going and finding a VA for $500 a month on Upwork from Pakistan who's gonna sit and call people. Everyone can do that. Everyone's doing it. The lead quality shit, you're interrupting people's day. Right? It is not a productive way of running a sales team. And just like the nature of it too, because it's so invasive, people are not going to be reciprocating towards you with like a positive attitude versus like with direct

Dan Austin: [29:54] Right.

Mike DeHaan: [29:54] Direct mail, they are they get the letter, they have time to go research your company, they have time to research you. They can choose to call you on their own time and have a conversation when they are ready to do so. And yes Absolutely. It's less leads, but it is a more friendly conversation.

Dan Austin: [30:09] Yeah. It's like, I mean, we're in this day of age where, like, if somebody knocks on your door Gotcha. And you don't expect them, you're kinda like set off. Same thing with people call you without texting you first. Like, there's all these things, like, just nuances that you don't realize to where you're, like, using old school methods like door knocking and cold calling, like, upset like, they're like people are surprised. It's not that you're not gonna get deals doing out of those methods, but the vast majority of people are like, who the hell is calling me? What the hell is this? And they answer.

Mike DeHaan: [30:35] They're like, hello? You know

Dan Austin: [30:36] what mean? Like, or they just don't even answer their dorgs. They're like, I don't know who that person is on my ring.

Mike DeHaan: [30:40] Yeah. Right. You know? Is that a UPS guy? I can't tell.

Dan Austin: [30:44] Yeah. Who is that? Where's the package at, bud?

Mike DeHaan: [30:47] But I mean, yeah, you're not wrong. It's it's just different.

Dan Austin: [30:50] It's changing. The times of technology are changing, and I mean, we harp on this. Direct mail is just a softer conversation, but it's also more motivated leads. And so then the time you're spending on the phone is so much more productive. And then as you build up this backlog of leads, because you're not gonna close every single lead that comes in, let's say you get a 100 leads coming in in a month, which is a lot, but, like, if you're if you're working those leads in the next month, you're consistently marking, you get another 100, and another 100. Next thing you know, you have a lot of leads that you're on the phone with that you're nurturing, and you're not just prospecting and cold calling, which nobody loves that. Right? You're actually nurturing a lead system, and you're running a system, a sales system that works.

Mike DeHaan: [31:29] Yeah. And that is where a lot of people get to, and they think that the business doesn't work, or they think they need to add on this new marketing. They have all these leads in the system, and they're like, I'm not closing things. So, you know, I need to find, like like, this form of marketing does not work. Our experience that we have, which is also where so many other people that, you know, we've coached, that we know personally, that are in this similar style of business, They get into that zone. They're one man operator, two man show. Right? They get all these leads. They're not closing deals. They need to look in the mirror and say, like, why is this not happening? It's probably because you suck at the sales part.

Dan Austin: [32:04] Here's a good example too, Mike and I, we have a mutual friend, a good friend, that we're running marketing for in market for Oh god, he's And we know he's a great sales guy. In the first month, the first batch of marketing, same marketing we send for ourselves, same marketing we send for all of our other clients, same marketing we coach people to send. First month, he's I mean, how many contracts does he already have out there?

Mike DeHaan: [32:23] He's now at six. He spent $6,000 on marketing, and he's at six deals in a very competitive market.

Dan Austin: [32:29] Right. And he's I don't even know what they're averaging. I'm guessing if, because I know the market's 15 to $20,000 a pop on the fees, if not more, somewhere around there. So you could do the math on the ROI. And he's a great sales guy. So he got the exact same marketing, the exact same data we coach everybody on, but he's having a vastly different experience than people that might be complaining that they're not getting enough deals through whatever method they're using to get leads.

Mike DeHaan: [32:52] Yeah. Exactly. And everyone say easier market, things like that. It's not, man. No. Like, It's is an extremely hot market. Right? Yes. He is super skilled. Right? And and like, even to retract further on that, also our experience, when we first the first traction that we had, and we went to a a mastermind, what I did, and they looked at, you know, our our coach, they looked at the CRM, he's like, there's all these deals like, think you just suck at sales. That was hard for me to swallow, right? I had to accept it. But we came back, and I told Dan about that, and we decided that we're gonna hire our first salesperson. Had no idea what that looked like, how to interview people, how to do anything.

Dan Austin: [33:28] Didn't have the money to pay them.

Mike DeHaan: [33:29] Yeah, yeah, didn't have the money to pay them. We had $4,000 in the business bank account. We brought in this first acquisition manager, and she closed seven deals in the first two weeks for leads that were already in our system that we were not That we

Dan Austin: [33:41] talked to. That we had already talked to.

Mike DeHaan: [33:43] Yeah. Like lots of them too. And, like, some of them, they would even talk shit about us because they didn't like this, but they liked her so much better. And so they were okay working with us, proxy through her. Right? Right. Right.

Dan Austin: [33:52] Right.

Mike DeHaan: [33:52] And I guarantee you that if that sounds like you, you have a couple 100 leads in your CRM and you're not moving things forward, that you very well might be that same person. I get like, you need to look at that

Dan Austin: [34:04] Yeah.

Mike DeHaan: [34:04] And figure that out. So, like,

Dan Austin: [34:06] you could do that. So, yeah, if you have, like, leads in your system, you're having a tough time closing deals, like, say you have, like, $2,000 that you if you could just bring somebody in on a commission schedule, maybe you tell them you're gonna give them a base pay of $2,000 and then a commission for x amount of months, and then the base pay can go away. But for one month, just think about that. Invest $2,000 in that person. And I'm not gonna guarantee you any results, but if they're a decent salesperson, and you have actual good leads in your system that you brought in, you're probably gonna close a deal.

Mike DeHaan: [34:36] Yeah. Oh, yeah, exactly. You have actual leads that have frozen their hand. They're not cold calling leads of people that want

Dan Austin: [34:41] Right. They're not just junk, shitty leads.

Mike DeHaan: [34:43] $500,000 for $200, right?

Dan Austin: [34:45] Yeah. But say you did send out a batch of mail to a good list of people, like a good list, something that we would coach and teach on, then I can guarantee you, if you're not closing deals, if you brought in a person that has some reasonable level of sales skills or sales background, and literally just think about it as investing $2,000 into more mail, but instead of more mail, you're investing $2,000 into a person, Man, you have vastly higher opportunity of making money doing that than buying more mail.

Mike DeHaan: [35:10] Absolutely. And and the thing is too, it does need to be a professional real estate person. That's you. Right? You already know how to analyze the deals. It needs to be a people person. So, like, our first acquisition manager that we had, her experience was selling kettle corn at a farmer's market, and she worked as a bartender, right, previously. Right? And we kinda just well, like, our literally, our decision came down to like, like, we actually had another guy we interviewed that was so much more qualified for the role. But he walked in, was really sweaty. And we're like, can you imagine this guy like sitting with the sellers that we currently have right now? Like, this would not go well.

Dan Austin: [35:43] Yeah. I'm so glad we didn't hire.

Mike DeHaan: [35:45] Yeah. Versions we had, you know, this guy came in, and we're like, k. She's very personable. She knows how to talk to people. Everything about her aura, I guess, like her general energy is really good. Like, let's just give her a shot. She had an interest in real estate. We're like, we'll teach her the real estate part. And sure enough, she came in and slayed. And I literally remember her calling me, and she was like, yeah. So I know we said you'd be about, like, 150. They said they'd be good at a 130. Is that okay? And I was like, absolutely. Do it. You know?

Dan Austin: [36:15] Make it happen.

Mike DeHaan: [36:16] Yeah. So point being, if you're in the business right now where you were trying to figure out why you're not succeeding, it's very well possible that it's not your your marketing, but your sales. And It's your sales. Don't need to reinvent the wheel either with the sales side of it. Don't need to find someone that's an absolute killer. If you find someone that is willing to put in the time and is personable and willing to and interested in building relationship with your sellers and with your leads, that's where deals come from, especially in the off market world. It's rarely about the real estate. So Agreed. Cool. Anyways, yeah. Anyone wanna finish off with Dan? Any Dan's pop culture of the week around that?

Dan Austin: [36:53] Like, Danisms? You know, I don't have any Danisms for this week, actually. I I don't think so. I thought that are appropriate for the podcast anyways. I don't think.

Mike DeHaan: [37:00] All I know is that ready for, like I mean, the SVP stuff is, like, the big thing still going on. I'm just kinda Yeah.

Dan Austin: [37:08] People are really upset about that. I don't know what to think honestly about that. Like, I don't think it's a systemic issue, but then they're like, oh, these regional banks. I'm like, I don't know. Like, our regional banks are like pretty solid. Like, I don't know. Maybe there's some that are not good, but because it's skewing towards politics. Right? Like, oh, this bank has got a bunch of liberals that pay themselves bonuses before they Yeah. Know, You it's like, okay. That's not a logical, like, reasoning.

Mike DeHaan: [37:31] Yeah. And that I think that's why I've instantly lost interest in it too is it becomes super political. I'm

Dan Austin: [37:36] just Right. And then here's the thing that's worse about it is the information. I'm having conversations with people. Like, information they're getting, like, that's vastly different than information that's actually publicly available. Where did you get that from? I know. Like, that's not accurate, so it makes me think about other things that I'm not informed about Yep. Of, like, how crappy the information that might be getting fed to me is. And so it's just like, man, it's kinda scary.

Mike DeHaan: [37:55] I mean, I always just live on the sort of position that the stuff that's being relayed out there is always only the partial truth, and it's the truth that they want you to know. It's not the actual full situation. And as much as you think you can figure out the actual true situation, you cannot. They do not want you to know that.

Dan Austin: [38:16] If they don't want you to know it, they won't let you know.

Mike DeHaan: [38:18] You're not gonna yeah. Everything that they spoon feed you, that if if you if you ever read news and it causes you to have, like, a little bit of an emotional response to it, like, in, like, especially in a negative way, don't do it. It's a trap. That's what they want.

Dan Austin: [38:31] Don't do it. So true, though. I like it.

Mike DeHaan: [38:34] Anyway, that's my view on politics in general. But alright, guys. Anything else to wrap up, Dan?

Dan Austin: [38:39] Nope. I'm good, man. Cool.

Mike DeHaan: [38:41] You guys should all go and buy a collecting keys or a b d e big dan energy shirt at store.collectingkeyspodcast.com.

Dan Austin: [38:49] We have our little merch short of slot. Are we gonna be able to get this tattoo done or what?

Mike DeHaan: [38:53] Yeah. Probably, you can bring that up. Yeah. So I You can't bring that

Dan Austin: [38:56] up yet.

Mike DeHaan: [38:57] Is that

Dan Austin: [38:57] not publicly available?

Mike DeHaan: [38:58] No. It is. I I haven't I haven't messaged the guy back yet.

Dan Austin: [39:01] Candidate. We have a potential candidate.

Mike DeHaan: [39:03] Yeah. So I I made a remark again. I forget that I say these things.

Dan Austin: [39:08] Flippidly threw out some stupid thing.

Mike DeHaan: [39:10] I said something that if somebody gets a collecting keys podcast tattoo, that I will personally pay them a thousand dollars.

Dan Austin: [39:17] I'm glad you said personally you'd pay them. So this this is all on you, man. This is nothing to

Mike DeHaan: [39:21] say. I do. I will totally eat that just for my own satisfaction. But I had someone reach out to me on Instagram and said like, hey. I heard about your show, blah blah blah. I heard you mention that you'll give a thousand dollars to someone who gets a collecting Keys tattoo. Are you still offering that? And Mhmm. Here's what I'm saying. I'll respond to you on Instagram as well, Charles. Yes. If you get a if you get a full tattoo of the collecting keys podcast logo

Dan Austin: [39:46] What is that? Just the k symbol, or does that have

Mike DeHaan: [39:48] to say? No. Sorry. The the entire Collecting Keys podcast, like, you go to collectingkeyspodcast.com. I want the entire thing that's in the top left hand. If you get that done, has to be a professional tattoo, not a stick on tattoo. K? And you send me a photo of it, I will send you a thousand bucks. And that will be the best promotion that's gonna be

Dan Austin: [40:08] photo of the needle in the arm? Is that what you need to see?

Mike DeHaan: [40:11] So if you do that

Dan Austin: [40:12] And then the finished product.

Mike DeHaan: [40:13] I need proof that it's a real tattoo and not like a stick on tattoo. I'll send you $1,000. I'm not paying for your tattoo, though. You gotta go find the flash tattoo guy. You gotta pay for that yourself. So you saw your dad will be like, you know, 900.

Dan Austin: [40:25] I don't even know what tattoo costs,

Mike DeHaan: [40:26] something like that. Expensive by $50.100 bucks. But yes. So I'm a shoot a shit mess in Instagram, but that's a one time only. So no one else can get can get a tattoo unless you're, like, really high profile. Like, if you're, like, an OnlyFans, you wanna get a collecting keys tattoo and do it there then.

Dan Austin: [40:41] Totally. Yeah. We can support that. Fully support that. That's actually yeah. That's an interesting advertising model. I wonder if people are exploiting that. I don't know. Maybe.

Mike DeHaan: [40:49] I feel like it's a pretty fringe. I don't I don't necessarily know if if the consumers of that content It

Dan Austin: [40:55] can't be that fringe because, like, the tax returns on some of these people are vastly different than mine. That's true. That is very true. They're making 4 or $500,000 a month. Yeah. There's lot. There's not fringe anymore. There's a lot of people watching.

Mike DeHaan: [41:07] We should start a fund where we just target those people to buy heavy tax appreciation plays so we can like help them reduce their taxes. Man, they're speaking my language. Like the ATM funds or some of these sort of things where it's like Yep. You know, you go and find doctors, you're gonna buy a bunch of ATMs because those depreciate so quick. What if we did that, but we targeted OnlyFans people?

Dan Austin: [41:28] Do it. I mean I think it's a great tactic.

Mike DeHaan: [41:30] If you're raising money, that's untapped funds right there.

Dan Austin: [41:34] Right. Yeah. Yeah. Well, it's like being associated with, like, you're like an NFL player, NBA player, a professional athlete where they get these large sums of money very quickly. They have people that approach them and say, hey, I know you just made $8,000,000 on your signing bonus. You should invest that.

Mike DeHaan: [41:49] Yeah. I mean, it's not you're not wrong, but they're infinitely more accessible than an f NFL player because they are putting themselves out there. Anyways, guys, definitely go check out the merch store. It is store.collectthekeyspodcast.com. Pick up some shirts there. They're all the Bella canisters. They're super soft. They're nice stuff. So you should check those out. And we keep them reasonably priced by $25. They cost us like $22. We literally make no money on those shirts. It is purely just because we think it's sick that people actually wanna wear things with our logo on it. Besides that, guys, if you could please share this show with anyone who might find it interesting, that's easy way for us to grow. Also, follow us on Instagram. I'm at Mike underscore invest. Dan is at investor man Dan, and shoot us a DM on there. We love to chat with people. We're always happy to hear about what other people have going on and provide some investment advice as best we can. Besides that, I think that's all we got. So thanks for listening, everybody, and we'll talk to y'all next

Dan Austin: [42:45] See y'all.