Will Wholesaling Become Illegal Soon?

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. It's a great rental strategy. Like, it can be very secure. And once it's established, I would say it's one of the more, like hands off types of portfolios you can build. What is going on, guys? Welcome to today's episode of the collecting keys real estate investing podcast. This is the show teaching make massive income, not just passive income with your real estate investing business. This is your first time here. I am Mike DeHaan here with Dan Austin and Dylan Cook. And we're still working on our intro. This is the third one with Dylan.

Mike DeHaan: [1:17] And you know, we did just just mean Dan for like 300 episodes. And so now I guess this is the three more white dudes talking about real estate show. So we'll lean on that until stops being entertaining to only me and nobody else. But right on, guys. Well, I appreciate you guys holding down the fort last week while I was out. You guys had the d and d show. I was out in Las Vegas at the Alex Ramosy scaling workshop for acquisition.com. I'm not gonna dive too much into details on all that stuff because I recorded two Friday focuses where I kind of went into detail on the two days that we covered there. One came out last week, the other one's coming out. I guess they both when this one comes out, we'll come out the past two Fridays. So check out those deep dive into the two days that took place there. And it was great overall, it's completely kind of fundamentally changed my views on our business and we're planning to do. I know Dan's felt the impact of that as I came back and scrambled up a bunch of shit, fired a handful of people. We revamped our organizational structure, and sort of like our hierarchy a little bit. But overall, I don't know, Dan. First week, I think, has been super, super impactful on what your thoughts are.

Dan Austin: [2:22] Yeah. It's been going well. I would say it's always good to get a fresh set of eyes on things and move things around. And, you know, as you get into the monotony of a business, like, things just kinda like grow legs and start walking around and not doing everything you think they would do. And then you also recognize that you need that awakening to be like, you know what? We don't really need those people. And Yeah. Mike and I are are famous for that.

Mike DeHaan: [2:43] Yeah. This is the third event that one of us has gone to where you've come back and fired somebody within forty eight hours.

Dylan Koch: [2:49] I know.

Dan Austin: [2:49] Our team should be super afraid for about be around us for give us like two weeks, like just go high, go on vacation for two weeks when we come back and maybe you'll survive.

Mike DeHaan: [2:56] Yeah. Actually, we've had a lot from looking back to, I mean, our third partner that we fired years ago to when we got rid of our client manager to now we got rid of

Dan Austin: [3:06] Yeah.

Mike DeHaan: [3:06] Two of our other partners in one of the companies that we owned.

Dan Austin: [3:09] Couple other partners. We're really, just so you guys know, like, everybody asks Mike and I for advice on like how to be partners. Like, we're really good partners together, but don't try to partner with us because we're No. They never last.

Dylan Koch: [3:21] They never I don't think this is budding well for me. Yeah. Get out of here, Dylan.

Mike DeHaan: [3:28] Yeah. So anyways, so what we got going on in real estate this week, Dylan. I know you sent over a couple notes in our Slack channel. I mean, I guess the number one thing that's topples, I would say the industry as a whole, and you've done a big deep dive into is South Carolina and the ban

Dan Austin: [3:44] on wholesaling. Yeah.

Dylan Koch: [3:46] No, I think that's probably kinda catching the industry by storm. Then a lot of headlines to all of our the bigger pockets forums and other. I think it got brought up in my local real estate event that we had here yesterday too, and how it's gonna affect everything. So I listened to a couple podcasts today, I did some of my own research, and basically the way that what this boils down to is the way that South Carolina's law is currently written is it pretty much does ban wholesaling if you take the letter to the word, the definition. And they go into that and they say that wholesaling is comprised of four things. It's basically a contract for real property, marketing or advertising that property, the process of assigning that property, and then making a profit. Right?

Mike DeHaan: [4:32] So like literally every step of the entire wholesaling transaction.

Dylan Koch: [4:36] Yeah, right. Their biggest grievances they pointed out was one, transparency to the seller, was two, but then the marketing part. Basically they say if you are marketing any kind of a real property then that is considered acting as a real estate agent and you should have a real estate license. And the back and forth is, well I'm not marketing the property, I am marketing the contract to said property, right? Sure. But the, legalese the way it's written, it basically says like, if real property is tied to the contract, then it's still legal. Right? So there's really not a loophole that you can go around it. So there's more to this, what's your initial I thoughts you think you even operate in that market right now.

Mike DeHaan: [5:16] We do. So I guess just to clarify, when you say marketing, you're talking about marketing to find a buyer, not marketing to That is correct. Sell

Dylan Koch: [5:21] Yeah. So you have the property under contract to assign, and these are your investor lifts. But the caveat here, not to dive too deep into it, is what if I just said it to to Mike or to Dan? Like, what you already knew the the buyer previously? That's not technically marketing the property because I already knew who I was going to give it to. That is not illegal. The illegal part is the marketing part.

Dan Austin: [5:45] So, yeah, and like you could just JV, like which we do a lot of times on our exit. Right? You say, it's not just me. It's this other person I'm gonna JV this deal with.

Mike DeHaan: [5:54] Exactly. And what what it's was it their difference between marketing to sell the property and marketing to say like find an investor who's going to do that deal with you, and then part of your JV agreement is that they're gonna pay you x amount of money in exchange for title?

Dylan Koch: [6:06] So JV ing one of their like things at the end to try to get around it.

Dan Austin: [6:10] Mhmm.

Dylan Koch: [6:11] But that or like land contracts, installment contracts, where you have equitable interest from a down payment, not just the rights to the property. And then do you have it on a two week timeline or whatever that may be, and then you just close it out two weeks after that.

Mike DeHaan: [6:24] Yeah. Was gonna say like, what about a lease option? Right? Exactly. Same thing. Yeah. Yeah. I mean, it's obviously investor lift still works there. We have two deals on there right now. It's not it's not like when they decided to ban Pornhub in Texas, and they like blocked the IP. Right? You can still yeah. You can still, you know, use all the standard process that are there. And I guess our workaround right now so we currently have three properties under contract. They're in Ascra that are all being assigned. And our workaround is that our attorney is a wholesaler. And so he's like, I don't care about these stupid rules. It's in his best interest to just keep doing deals. And one of our deals, he even found a buyer for us. So I'm not gonna say who that is. You know? His his his name is under wraps. Yeah. So if he DM me asking who it is, tough shit. You better go find him yourself. I mean, he says no qualms.

Dylan Koch: [7:14] The weird thing I think they're trying to get at is, like, what precedent is this gonna set? Like is this gonna be a sweeping over the entire 50 states? And the attorney that they interviewed on said podcast was like, yeah, think this is gonna be like the playbook for the rest of the states, and so how is this gonna affect the industry? Are people gonna leave? But he was very pro cop listening to it and said hey these are times where if you're a good business owner you will adapt and just find out a way to win. But you guys are gonna love this next part of how this even came to be, was I guess in 2021, some wholesaler who didn't know what he was doing, I was trying to wholesale a deal that was on the MLS, screwed an agent out of their commission and because they had a listing agreement, they went around that, closed the deal anyway, and the listing agent is the one that reported this to like the board of realtors, whoever they're supposed to, that's what kicked off kind

Dan Austin: [8:04] of this whole escalating of events. That smells a lot like the most ethical wholesaler of all time. Jim know? His cohort pays more.

Mike DeHaan: [8:14] Yeah. Right. Well, it's funny though, you make that reference, Dan. That is how all these things always start though, right? Is it's like

Dan Austin: [8:21] Well, that's what Keegley's doing, right? They're trying to wholesale contracts on the MLS.

Mike DeHaan: [8:25] That's literally Keegley's whole model with their franchise. But also too, like, all these things always start with, like, that one situation that just, for some reason, decided to tip everything over, and they'd make an example of it. And the immediate thing I think of is how long till this happens with, say, like, subject to properties. Like we've talked about forever, where there's going to be a fund manager or a note servicing company or somebody that goes, you know what, you could get a shit ton more yield on this money if you stopped, you know, started calling these loans due. And then next thing you know, there's a sweeping legislation that completely just like

Dan Austin: [9:01] Totally changed on that. So I feel like a good chunk of this regulation could be resolved with a bit of regulation that talks about transparency and clarity to the seller. Mhmm. Like that's fair, right? Know, like as you get better and more experienced at this business, you talking to the seller about what your process is and what you're actually gonna do with the property becomes a hell of a lot more common and a lot easier because you gain that experience and understanding and confidence, right? Well, I and remember this, I don't know how you were Dylan, when Mike and I first started, you're kinda like walking the eggshells, what do you say to the seller? And it's not always quite apparent that you should just tell the seller you're gonna sell their property and make $20 on a quick wholesale fee. Like that doesn't come off right, that doesn't feel good. But I do think that some level of transparency would a, help the sellers out and b, get rid of some of these dorks that are just doing crazy shady bullshit.

Mike DeHaan: [9:51] Yeah.

Dylan Koch: [9:51] Yeah. Or at least have the capability to close on. Like a lot of these people don't have a dime, 2 dimes to run together. They're saying they're

Dan Austin: [9:56] gonna have

Dylan Koch: [9:57] full cash, and, like, they have some weird clause in their contract that says if their cat says it's not okay, like, they could back out or something. Yeah.

Dan Austin: [10:04] Right. Yeah.

Mike DeHaan: [10:05] Yeah. I mean, you know, it's getting out of hand when, like, the one of

Dylan Koch: [10:08] the

Mike DeHaan: [10:08] biggest, I would say, up and coming or existing pieces of this business, right, little niches, we'll find ourselves the stupid gator lending thing where people are like lending each other $1,000 for earnest money,

Dan Austin: [10:20] because

Mike DeHaan: [10:20] they don't freaking have $1,000 But they're still signing an equitable contract that says they have $200,000 to buy a home. It's like, come on. That's ridiculous. That shouldn't happen.

Dan Austin: [10:31] Yeah. I will say much of this when you actually boil it down to where issues are in this industry, and this isn't just a poke at the same guy we poke at with like Pace and Jamil and all those dudes that are also have been tied into bigger pockets and all this stuff. They're the ones that have been teaching and and coaching people that the no money down real estate which gets people in here that have to like wholesale their car just to make money to pay for his course like, you know what I mean? Like they're doing weird shit right? And they get out there and they do crazy weird shady shit that is not in the best interest of the seller or anybody in general and then it does create problems for people and then regulation.

Dylan Koch: [11:07] If you're new, right, you're hearing this, you're like, oh shit, don't know what to do. Like even one of the workarounds they talked about here is try the reverse wholesaling thing. Go to a guy that you know that buys in your market and say what are you gonna buy, and then just find him the property, then you're not doing anything illegal because you're not marketing real property, you already know who the buyer's gonna be. Right? And then you can get a couple of signing fees under your belt and get some money, right?

Mike DeHaan: [11:29] Totally. Here's the thing, if you don't have any money to buy real estate, there's really three places you should look. K? You have zero money. You should look at Indeed, LinkedIn, WiseHire. Go get a freaking job and save some money, and then you can start and then make these investments. Investments are things that you do when you have cash. Right? You can start a business. A lot of different ways that you can create, you know, cash flow and bring in income that are not, you know, kinda negligent or not taking advantage of people. I don't know. Whenever they make these different sort of legislation changes to wholesaling, I don't really get too phased. Honestly, like, to me, it's kinda similar to when people get super upset about, like, anti landlord laws in certain states. And I say this as somebody who has almost my entire portfolio in a very liberal state. It's really not that bad. You just need to follow the rules. And like, honestly, if you do follow the rules, they make it pretty mutually beneficial, like overall. But it's for some reason, they always feel like they can only be successful if they can just like cowboy shit, but that's not how anything works.

Dan Austin: [12:38] Yeah. I think you're absolutely right. Like the challenge becomes not like whether you can or can't wholesale, it's whether, let's say, how do you do it within the policies and the regulations of the state that you're operating in. You know, like we have it here in our notes, like Illinois has a 20 k fine if you wholesale or whatever the rule is about wholesale. I guarantee you there's investors and they're still operating and working. You just have to figure out what that means and how do you And do I will say that me personally, as you operate, as it gets trickier and trickier and if you have to step through some more hoops, the more you need to lean on like being professional and and getting your like letting the seller know what's going on. Yeah. Exactly.

Dylan Koch: [13:17] Two like is with the South Carolina thing, I think you did such shot, Dan, so sorry if I'm repeating myself, but what is the fine? If it or who's policing it? Like, if the title company is you're doing it and it's a $500 fine, then no one's gonna stop.

Mike DeHaan: [13:29] Yeah. Exactly. You know? And we talked about that a little bit on our scale of coaching call earlier today is, you know, so our attorney is also a wholesaler. Also, to the fines from what I see on this are not very big. I think the first time is, like, $500. What is in the attorney enclosure's best interest? Honestly, is it to snitch on you, or is it just to keep doing transactions and make several thousand dollars of your transaction that you bring back? Like, they have no incentive to actually do anything about it.

Dan Austin: [13:57] I mean, unless like the state bar gets involved, right? Just like Yeah. The two things that would scare me would be the state bar if I was an attorney, or the real estate commission if I was a real estate agent and cared about having my license, right? Because those are the two people that can totally bone you out of your career if that is your main source of income.

Dylan Koch: [14:14] Mhmm.

Dan Austin: [14:15] But I think it kinda goes back to like, we operate this way all the time. Like we've gone to plenty of title companies and attorneys in town, right Mike? And they're just like, no, we don't do assignments. All the time. Like, okay, we're gonna go find someone that does. And sometimes that person we do assignments with for two years is great and then they suck and we find somebody else. Some attorneys won't do Novations, some attorneys won't do Sub two or RAPs, you just have to work and find the ones that are willing to take on that risk because they feel like their interpretation of a law, which is what law is usually, right, is an interpretation until there's some sort of precedent set, which even then it's up to interpretation, but you gotta find somebody that is going to work within that that policy for that will help you still be able to, you know, in quotations wholesale or whatever that means.

Mike DeHaan: [14:59] Yeah. Totally. And when every door closes, more will open. I would love if it just like weeded out all of the I would say like the weekends. Every time there's something that just sort of weeds people out as established operators, I'm pretty confident we can figure it out. Yeah. No.

Dylan Koch: [15:13] That's the only last thing they said was like, get rid of all the bad actors, the ones that have come in because it's gotten so popular lately and do treat people like crap, and then it'll probably be better for everybody.

Mike DeHaan: [15:23] Mhmm.

Dan Austin: [15:23] I think that's a fair way to look at it, but I think there's still a lot of dirtbags out there. Is that something else we're gonna talk about?

Mike DeHaan: [15:28] Good segue, Dan.

Dylan Koch: [15:29] Yeah. Good segue, Dan.

Mike DeHaan: [15:31] Yeah. What is the deal with this guy that you send over to me on Instagram? Because I had never seen him before, but he's huge. He hasn't seen strong.

Dylan Koch: [15:36] Yeah. Didn't know who he was either, and then it popped up on just like my algorithm. I mean, name's Thomas Cruz, and he has this Instagram handle of just t cruise n c on here, titled section eight real estate investor, learn how to buy houses with 2,500 down, and then he's of course selling some kind of webinar on here too. But he posted a story that caught my attention, says, I make an extra $45,000 per month renting luxury amenities to his clients. And I'm gonna play this for the audience, but keep in mind, like this whole time I'm thinking, like this is sad. Like these like I said, just kidding at the end. He never does. So just take a listen.

Speaker 4: [16:13] From my section eight tenants, as they pay those rents on luxury amenities, such as $25 per month for ceiling fans, $40 per month for food disposals, a $100 a month for a dishwasher, $50 per month for a washer or dryer, storm doors, screen doors. Doesn't matter what it is. As long as that luxury amenity is not required by the section eight program and does not have to pass by section eight inspection, you can add it to the lease and tenants can pay that if they agree to it before they start. Now let's say they rent one of my ceiling fans for $25 per month and they stop making payments on it. They have a few options. One, my associate named Roger can go into the property during an inspection and remove that fan from the ceiling.

Dylan Koch: [16:53] He goes on a little bit.

Dan Austin: [16:54] But literally Give me my ceiling fan I

Dylan Koch: [16:58] was in disbelief for a while. Literally couldn't believe that one, he charges extra for things like ceiling fans from probably the economically challenged.

Dan Austin: [17:06] Yes. Then That's section eight.

Dylan Koch: [17:08] Two, we actually like take out a ceiling fan and someone's not paying $25 a month.

Mike DeHaan: [17:12] That's crazy. I mean, it's it's like the landlord version of people that like lease furniture. Know? It's like 70% interest. See

Dan Austin: [17:19] those It's companies your rent to own furniture.

Mike DeHaan: [17:21] You rent to own furniture.

Dan Austin: [17:23] I have

Mike DeHaan: [17:23] a lot of problems with it ethically. Like, is it a is there business rules around that? I have no idea.

Dylan Koch: [17:29] So actually, it's funny you mentioned that, Mike. And here in my market, you can't even have sub agreements with tenants. Like your CMHA rent, your section eight rent is what you get.

Dan Austin: [17:39] There's no like, they pay extra outside of whatever. I guess I have a couple comments to make. One is is it possible, I don't believe so because I don't think we have it here, is it possible that under the section eight guidelines, a senate would be afforded more income or like more section eight funding for these amenities?

Dylan Koch: [17:58] I don't think that would

Dan Austin: [17:59] be the big. Like our our section eight, our housing authority locally, because they're usually, they're like a local authority, will basically do a comp and they'll say, you are allowed to get this much rent for that property based on whatever comping that they do for rental and that's it. Like you can't like, well this one has air conditioning, you know what I mean? Like you can't do that. I understand this guy's business purpose and it makes sense and I think on a more ethical level, one of the things that I heard that one of the big apartment owners here in town doing was he rents for $25 a month a air conditioning unit. Because most apartments have like the small like air conditioning units, right? And when he built all these apartments, he puts in a space for the unit but then you don't get it unless you pay $25 a month for that and then they put it in. To me, that's reasonable. We live in a climate where air conditioning isn't, you don't have to have it but maybe two months out of the year if if that, you know what I mean? Like you could survive, I've survived. That to me is a great way to increase your NOI But when you talk about trying to charge section eight people all this extra money for all this bullshit and then you take it out, things that would be considered, I think the ethical issue here that I have, they're pretty much the things that would be considered somewhat standard. Exactly. Totally. You know what I mean? Standard applications.

Dan Austin: [19:12] Like a ceiling fan. Come on. I mean, granted, I don't put any of that.

Mike DeHaan: [19:15] Did he say screens?

Dan Austin: [19:17] Door window screens. Like, that to me is like, come on, man. Like, that's crazy.

Dylan Koch: [19:20] Yeah. Storm door was one. Yeah.

Mike DeHaan: [19:22] That's insane.

Dan Austin: [19:23] Yeah. Storm

Mike DeHaan: [19:24] door. Yeah. Like like, this all sorts of stuff. And I know too, when I went to rabbit hole, I see your notes your notes here, he talked about how he just gets like these shitty ones that he buys from like used stores for like $10, and then sells them at $25 a month indefinitely to these people.

Dylan Koch: [19:38] I mean, no one's refuting the math. I'm just refuting this them being a person.

Dan Austin: [19:43] The ethics of it. Yeah. Yeah. And why are you putting that on the Internet? Yeah. Know?

Mike DeHaan: [19:47] The thing that was honestly really disgusting about that to me was like how there was people that were in the comments that were like, yeah. Right. You know, that's fucking So, yeah. You're That is the worst kind of people in society.

Dylan Koch: [19:57] Well, you already said out, like, landlord have you put landlord anywhere on social media? You are the devil. Right?

Dan Austin: [20:02] Oh, yeah.

Dylan Koch: [20:02] And you have people out here, like, seeing this kind of shit. Well, no wonder they think like that. Right? Like,

Dan Austin: [20:07] Yeah. For sure.

Mike DeHaan: [20:08] Here's where the real hypocrisy would come out. So let's say that one of those tenants goes and buys a $15 ceiling fan and installs it. You think he'd allow that? I bet he wouldn't.

Dylan Koch: [20:17] No, actually I watch a lot of these because he said that. I think it's the most recent one. He says he will go in and remove their ceiling fan. It's in his lease.

Mike DeHaan: [20:25] See, that's fucked. See, that is a bad person. That is a horrible human being.

Dylan Koch: [20:29] Exactly. And another one on there, he basically admitted to insurance fraud. He said that one of his tenants poured liquid cement down his toilet during one of the rentals, and so he paid a plumber, I don't know, thousand bucks to fix everything. But then his plumber is a friend of his, and they filed like $20,000 for the insurance company to fix everything.

Dan Austin: [20:54] You should not put that stuff on the internet. Mean you shouldn't do it but you shouldn't have put it on the internet for everybody to see and why do you I have literally never had a tenant do that because I'm not an asshole. Like I I am not trying to take advantage of my tenants so that they don't pour liquid cement down. I mean, I

Mike DeHaan: [21:12] don't know what the worst

Dan Austin: [21:12] thing has happened that we've had Mike, I haven't had really anything that's been like that. And we have section eight tenants, we have, you know, higher income, lower income, medium income, we have it all.

Mike DeHaan: [21:22] I'm trying to think of if we've actually ever had tenants do anything malicious. Like, honestly, I think the only one that we've really had was the deal where we rented it back to the owners after we bought it. And they were like, basically decided they were going to screw us over even though we were perfectly professional about the situation.

Dan Austin: [21:41] Yeah, we did everything we said we would do. They just were they had ill intentions from the beginning.

Mike DeHaan: [21:46] They did for sure. Like that was the only one, but like, tenants in that pretty shit. We have several section eight

Dylan Koch: [21:51] units. There we do. And I think they fit within a portfolio, right? Like, let's Yeah,

Mike DeHaan: [21:56] they're great.

Dylan Koch: [21:56] Honestly, if you go into recession, our biggest risk is our tenants lose their jobs and they can't pay rent, Right? Well, in section eight, mean, it's pretty much guaranteed income.

Dan Austin: [22:05] Totally.

Mike DeHaan: [22:05] Well, this kinda goes back to what we were talking about with the wholesaling stuff and where people tend to get really weird is when there are extra rolls and all of a sudden they can't just like cowboy shit. Section eight tenants are actually awesome. And what people don't realize is that there's like a bunch of initial hoops that you have to hop through which are super freaking annoying. They take a long time.

Dan Austin: [22:26] They're actually a challenging, super challenging. Yeah, you got to do your due diligence on the process.

Mike DeHaan: [22:30] Totally. And then they always have like weird deadlines, at least up here in Washington, they do. Where like, you miss the deadline, they're like, well, I guess you gotta wait until next year to, you know, get market rent, then you gotta carry it for a year.

Dan Austin: [22:40] And Spokane, you're not allowed to call them. They only do email and you can't go into the office. Yeah. Try getting section eight for a deaf lady who can't call them and can't go into the office. It's crazy. Like ours is kinda odd, like the way ours is set up.

Dylan Koch: [22:56] I think they're all in the stone age though. Ours here, you can't email them anything. It has to be a fax, or you have to physically drop them off. And their packets are huge.

Mike DeHaan: [23:05] They're kinda like that on purpose because a, if it was super easy, everyone would do it, and it would take a huge chunk out of the budget. The government tries not to spend money. It doesn't have to on things like that. They it's rather somebody they don't need to on, you know, other bullshit. But also too, if you think about it, how when you guys get tenants, everyone has this tenant where you're like, god, they keep texting me all the time. They're a pain in my Now imagine that, but you only have the bad tenants that text you all the time. That's their entire client base.

Dan Austin: [23:34] Yeah. Yeah.

Mike DeHaan: [23:35] And so they have to make it intentionally very challenging. Otherwise, they would never get anything done anyway. 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 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 and 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. One thing

Dylan Koch: [24:33] that they implemented here that I liked was like, so once, as a tenant, from their perspective, once you get, they call it a voucher, you don't wanna lose it. If you lose it, you're banned from So they will actually usually keep your place pretty nice to avoid an eviction because if

Dan Austin: [24:47] you get evicted, you lose that voucher. So they're not getting any kind of subsidized housing forever if they lose that. So they actually tend to be decent tenants. Yeah. And long lasting tenants because that's one thing, well, can quantify it, but if somebody stays there for five, six, seven years, that's going to be so much cheaper. Even if you're below market rent, which the great thing about section eight is you get market rent. Like, there's it's not like you're making less money than you would because it is based on what the market is renting for. The difference is is a portion of it's getting paid by the housing authority, whether it's a 100% of it or it's income based, so it does vary. And so like, we have section a tenants that I don't know how long they've been in there, I'm like, man, I don't want them ever to move out. Yeah. And every year, I email the housing authority, our property manager does now, and says, hey, rent's now 1,300. They're like, okay, approved. And they stay there. They it doesn't affect them as for the tenants, the income or the rent going up doesn't affect them one bit.

Mike DeHaan: [25:40] Yeah. And also to people, you know, rip on the blue government stuff. But if they have a pretty established, like, section eight, you know, sort of system or like a rental, like a renter sort of system that provide assistance for different things. A lot of times, if you have a renter that falls on hard times, like I've had this happen before up here, and all of a sudden is unable to pay rent for whatever reason or whatever period of time, and then they are willing to work with you as the landlord to go to this go through this process to become a section a tenant, the city very often, as long as you weren't a dirtbag, you weren't violating the lease rules, your property's in good condition, you weren't, like, you know, threatening them doing weird stuff, they will actually pay your back rent.

Dan Austin: [26:21] Yeah.

Mike DeHaan: [26:22] I had this a little while ago. I got a $14,000 check from the city. Right? It took me almost a year to go through this process with this lady of which I had to let her live through that, like, in that there a period of time.

Dan Austin: [26:34] Oh, you had to let you had to let her live? That was nice

Dylan Koch: [26:36] to you.

Mike DeHaan: [26:36] Yeah. Yeah, I did. Unfortunately, there was those times, especially she was she was kind of a bitch for being honest.

Dan Austin: [26:42] Was this the one that said she had cancer that maybe actually did?

Mike DeHaan: [26:45] Oh, totally. Yeah. She had she had such a weird shit. I played the game. She went through the process. I got all of my rent recovered. And then she went that anyway, so it's

Dylan Koch: [26:54] perfect. So

Mike DeHaan: [26:56] but point being is like, you know, it's a great rental strategy, like, honestly, it can be very secure. And once it's established, like, I would say it's one of the more, hands off types of portfolios you can build, until you have a turnover. As soon as you have a turnover, you can guarantee the place is gonna be trashed 95% of the time.

Dylan Koch: [27:15] Well, my biggest gripe with that is, okay, you have the inspection to come back out. This actually happened to me, where one inspector came out, he's like, hey, you just gotta fix like these things. It's like a smoke detector or some other shit. Like, it was something super small. Yeah. I was like, alright, fine. Took three weeks for another inspector to come back out. Comes back, he's like, and we fixed the things that they did. Was like, oh, well now it's a different person. Like, oh, now you gotta do x y and z. I'm like, why didn't they tell me that the first time? Right? And so it's just ongoing thing.

Dan Austin: [27:39] Yeah. That is a bit unfair. I mean, it's kinda crappy.

Mike DeHaan: [27:42] Especially because I feel like inspectors always need to find something to justify their existence. If they don't find anything, they're like, I'm not a good inspector.

Dylan Koch: [27:49] That's for residential too. And that's not just yeah. It's for it's for everything.

Dan Austin: [27:53] That's everything.

Mike DeHaan: [27:53] Mean, it's every kind of inspection, every industry. You go find like a pest inspector. They're gonna find somewhere

Dylan Koch: [27:59] Yeah.

Mike DeHaan: [27:59] That you're gonna have some sort of pest in your house because that's their job.

Dylan Koch: [28:03] If we're good with that, I got one other thing that just reminded me of. I had I posted in our our Slack channel for the scale community the the hard lesson thing about this house I've owned for a long time.

Dan Austin: [28:12] Mhmm.

Dylan Koch: [28:12] We had an inspection, and the guy was like, the inspector found all kinds of things wrong with this house. And keep in mind, we did this place up nice. And the biggest thing that was scaring away the potential buyers was he said there was still foundation problems. I was like, there's not. We fixed it. But they're first time home buyers, of course, wanna double check. And I had to spend $500 essentially for a structural engineer to come out there to say, like, to prove that there's nothing wrong even though I knew nothing was wrong. To your point of they always find something.

Dan Austin: [28:38] That sucks. Right? Like They do always find something.

Mike DeHaan: [28:42] Well, that's where there's like the old, like, house flipper knowledge of like you always leave a little something, you know? Like, you only put the railing on one side of the stairs, you know, you don't attach the dishwasher to the underside of the the counter.

Dylan Koch: [28:53] Yeah. Yeah. GFCI outlet is an easy one.

Mike DeHaan: [28:56] Yeah. The

Dylan Koch: [28:56] red plumbing underneath the sinks. Yeah. Mhmm.

Dan Austin: [28:59] Yep. Yeah. Exactly. Yeah. We had a freaking inspector one time, everything he would say, he'd always say there's a gas leak. And it got to the point to where it was like, come on dude, because like people are like, we need the furnace replaced. I'm like, there's no gas leak, like come on. You would have like the the gas furnace guy come out be like, brother, there's no gas leak here, but whatever tool he had always and I'm like, bro, dude, like, I'm referring you to my buyers not so you will screw me over, dude. Like, chill out. Like, you don't have to find something.

Mike DeHaan: [29:26] Oh, dude. They always get crooked. I the first house actually I ever lost on, this was years ago. It was an older house up on the South Hill here that had this huge basement. They came back and basically, was this huge issue with radon. Basically, radon's the big one. The house. And it was like, oh, you need to get a a whole radon mitigation system

Dan Austin: [29:45] Yep.

Mike DeHaan: [29:46] Figured out. And it like, I was curious, looked up, you know, got a quote, $28,000.

Dylan Koch: [29:51] Shut the no.

Mike DeHaan: [29:52] Well, I'm not doing that. Yeah. And I found out this dude's dad owns a radon mitigation company. Of Like, come on. That's like that's crooked as hell.

Dylan Koch: [30:02] Dude, you should not pay more than $2 for like a full rate radon mitigation system.

Mike DeHaan: [30:08] It is insanely expensive. And then also too, I looked it up, and like it's not even a real thing. Like there's no like proven evidence that it's like dangerous. And the people would be like, if you're exposed to it for over thirty years, like you can have health problems. Same with being outside where there's just air pollution. Yeah. Right. Jesus.

Dan Austin: [30:26] Yeah. Radon.

Mike DeHaan: [30:28] How'd you end up doing this house, though? So I know I think you mentioned it briefly a couple weeks ago. So the notes say you owned it for three hundred and fifty five days, which is really fun. Do you have a hard money loan that was creeping on that

Dylan Koch: [30:38] Private money. Yeah. But luckily, he's like

Dan Austin: [30:41] super chill. Why didn't you just let it go nine days? You should've gone nine days more and gotten long term capital gains, dog.

Dylan Koch: [30:48] Dude, I wanted it gone

Dan Austin: [30:50] so bad.

Dylan Koch: [30:50] And plus, I think they still tax it as a flip. Right? It was never a rental. So I don't think that changes anything.

Dan Austin: [30:56] Yeah. You still owned it. You probably could've got it wouldn't have saved you much. You're right.

Dylan Koch: [31:01] I mean at this point I made like 15,000, which I was happy with after it was all said and done.

Dan Austin: [31:05] That's That's

Dylan Koch: [31:06] so biggest thing and how I put in here is like, because it tied up most of my liquidity, I got a lot of that back. So that affected my marketing going forward, It affected my aggressiveness going towards after extra deals. And just like being able to sleep at night, bro, like I didn't know when this thing was gonna sell. So that's a chapter behind me. Hard lesson learned, good thing to share with the community, and hopefully everyone can can learn a couple lessons so.

Mike DeHaan: [31:31] Yeah. Well congrats man, I'm glad you got out of it. That's that's always so shitty.

Dan Austin: [31:36] That's a long time to own a flip and and still make money like you just don't, you feel fortunate. But yeah, that is a good thing. Like, Mike and I have definitely had that. Usually, we don't get our money back in the whole piece that we thought we would. But either way, even if you're losing money, you're just like, thank god I'm gonna get and it's usually on the big ones. It's never like where you're like, oh, I got $30 tied up to do it. Don't care. It's usually when you have a 150, $200,000 tied up, and you're like, I like that money. Exactly.

Dylan Koch: [31:59] Yeah. And if I wasn't doing deals during this time, or this was the first deal I ever did, I would've been in trouble.

Mike DeHaan: [32:06] Oh, totally.

Dylan Koch: [32:06] Not gonna lie. Like, you can go, like, what's Brandon Turner say? You can go broke buying good deals. Not saying this was a good deal because I still made money, but if this was my first deal ever, don't know if I'd be here today.

Mike DeHaan: [32:17] Yeah, and this is a big thing that I'm always preaching, like don't buy stuff, like, early in your real estate career. Like oh, don't buy anything that's, like, complicated or big or expensive or in the a class. Just do c class stuff, wholesale, build that cash sort of basis. Right? Do you like super simple flips? Definitely don't buy any rentals because it completely just handicaps, like, the opportunity that you have over the short term and then ultimately the long term. I mean, that got Dan and I the first thing that we did when we started working out was we bought this shitty duplex that is now is a great property, but man, we could have acquired so much more in like the nine months it took us to do that freaking thing. Right? Or like, you'd bought this one, Dylan, like your very first deal, you probably wouldn't be in the business anymore.

Dylan Koch: [33:03] No, I 100% agree.

Mike DeHaan: [33:04] Honestly.

Dan Austin: [33:04] Yeah, it slows you down too much, I mean, and yeah, like Mike and I, this goal was to buy rental properties when we got into this, and I think that's what a lot of people's thing is, is I wanna buy rental properties, that's why they get in it, because they see the passive income, all that sort of stuff, but that will slow you down too much, you gotta create that income, and you have to learn how to make consistent income out of your business before you do that, and and that's just us looking back and saying, man, if we didn't do that duplex for nine months, we would have learned how to make money, we would have probably made multiple multiple six, you know, six figures beyond what we did that year, and we could've We still had a ton of opportunity to buy good deals. That's the cool thing about this business is, you will always find good deals. Like, that's just how we do it. The marketing, that's how it all works, the systems work, and so you'll be better off in the future to buy those good deals. What's worse is I could've wholesaled this and

Dylan Koch: [33:49] made 30 k eleven months ago. Right?

Mike DeHaan: [33:52] It's probably

Dan Austin: [33:52] 15 k. If you

Dylan Koch: [33:54] count up the, because I went to this property frequently, it's only ten minutes from my house. So like the amount of time I spent versus that profit is pennies. Like it is not a Yeah.

Dan Austin: [34:04] It's totally honorable. Totally. Far

Mike DeHaan: [34:06] less than minimum wage. Yeah. Should have instead gone and looked at LinkedIn and Indeed and could have gotten a higher higher return value.

Dylan Koch: [34:14] No. Luckily, was working the other times. I got a couple other deals in front of The only caveat to this is I learned a shit ton with this one, because it was a complete remodel. We raised the ceiling, we reframmed the house, electric, plumbing, a pool. So my education went up a lot, but so I would not advise that for anyone who's starting up.

Dan Austin: [34:32] Yeah. It's a good way to look at it. You got an education.

Mike DeHaan: [34:35] Yeah. Absolutely. You know, and and people chasing cash flow when they start too is one thing I'm gonna finish on with this. Please bring me somebody that has an impressive cash flow number that has been buying exclusively in the last, like, two to three years. They don't exist. They were all buying shit, like, ten years ago. And when stuff was super, super cheap, and now they either refinance twenty twenty twenty one. And so they, you know, have no cash in their cash flow is super, super strong. But people that are getting into the game since like, '22 to right now, cash flow is not not the ticket at all. Just focus on making big money. That's literally why the tagline for our show is make massive income, not just passive grossing business because it's a lot easier to do. And honestly, $10,000 a month in passive income is cool. You know, it's also cool having like $2,000,000. Just like, just do that. It's significantly easier at this point. Trust Yeah.

Dylan Koch: [35:30] Anyways. I think that's exactly right.

Mike DeHaan: [35:33] So, alright, guys. I'm gonna finish up there. Thanks for listening, everybody. Can You follow us on social media. I'm a mike underscore invest. Dan is at investor man Dan Dylan. What's your handle? Eleven d cook. Eleven d cook. There we go. Choose follow and we appreciate listening. Talk to guys next week.

Dan Austin: [35:51] See you.