In today's episode, Joe Cornwell sits down with expert real estate investor, Dylan Koch, to unveil the power of direct-to-seller outreach and its incredible potential for commercial real estate investments. As Dylan divulges his strategies and experiences, listeners get a front-row seat to learn how to replicate these successful techniques in their own ventures.
Key Takeaways:
- Creative Financing is Gold: Traditional listings often don't provide the flexibility that off-market deals can. By going direct-to-seller, investors can craft creative financing structures, such as seller financing, that benefit both parties.
- Action Over Perfection: Instead of getting bogged down by the specifics, taking immediate action and refining along the way can yield impressive results. An effective outreach, even if basic, can uncover lucrative opportunities.
- Direct Outreach is Transferrable: Dylan emphasizes that his methods are not exclusive to residential properties. The strategies can be effectively applied to larger commercial assets, even those in the 50-100 unit range, opening a realm of possibilities for savvy investors.
Dylan Koch | Real Estate Background
- Founder of Morning Brew Properties
- Portfolio:
- 29 units of single and small multifamily
- Based in: Cincinnati, OH
- Say hi to him at
- Best Ever Book: Broken Money by Lyn Alden
- Greatest Lesson: Identify your worst case scenario, and do the math to figure out what you need to do to avoid it. Then, get started - action over perfection.
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Transcript
Joe Cornwell:
Hey, best ever listeners, welcome to the best real estate investing advice ever show. I'm your new host, Joe Cornwell. Today's episode is brought to you by Presario Ventures, a private equity real estate firm based in the booming Austin, Texas market to learn how you can invest in the future of Texas with Presario Ventures. Visit info.presarioventures.com forward slash best ever or click in the show notes.
Today I am joined by Dylan Koch. Dylan is a Cincinnati based real estate investor who has started in the last couple of years an off market real estate company. They wholesale, they flip, they whole-tail, lease options and seller finance. He's done a lot of creative deals, which is why I asked him to be my very first solo interview guest. His current real estate portfolio is 29 units. That's mostly single and small multifamily. He was a pharmacist prior to being full-time real estate. I think I mentioned he's based here in Cincinnati, Ohio. And Dylan, if you wanna start us off by giving a little more of your background, what you're doing prior to real estate and how you transitioned into real estate.
Dylan Koch:
Appreciate you having me, Joe. So I think you'll kill a new guest on the podcast. Congratulations. My short backstory is I grew up in a very rural town in Ohio. It was very much a rich dad, poor dad, go to school, get good grades, which is what I did. Pursued pharmacy, which was a safe, stable career. As I was pursuing that, the thought process was really, hey, you're going to make decent money. You should know what to do with it.
So I started going down the personal finance rabbit hole, eventually found out real estate as being the best avenue for investing that I wanted to do outside of stocks bonds, that kind of stuff. So I graduated pharmacy school in 2017, and I bought my first health sack in June of 2018. And then fast forward until October of 2020, so it was two years to the date, I actually left my W-2 to pursue real estate investing full time.
Joe Cornwell:
Awesome. And yeah, I want to break down several things you said there. So let me go back to your time in high school and college. I know you said you didn't have much of a financial background at home. What was your first motivation to try to get into real estate?
Dylan Koch:
When I was reading the personal finance books, it was do the whole index funds, which is a great way to do it. There's nothing wrong with that approach, but I would basically type in those compound interest calculators. You put an X amount over this many years, even if you max out your 401k. And at the end of 65, it was like, okay, you'd have a couple of million bucks.
And I just didn't feel like it was really worth it for that amount of money and that amount of time and sacrifice that came along with that. And on top of that, it was a quality of life thing. So I was doing the pharmacy is what I thought I wanted to do. I don't have any regrets of going to pharmacy school. Once you graduated and some of that novelty wears off and you're getting slammed every single day and retail facing job was getting more difficult and more difficult. It was like, well, it was kind of colliding. I have this job that pays pretty well as a young 20 something year old here in Cincinnati, but I could also build up this rental portfolio that could potentially offset some of that income. And that was the whole goal at the beginning, was get $5,000, $6,000 a month in rental income to basically replace that W-2. And I just set out to do that. And then as you quit doing this for a while, you realize to do that, it takes a lot of time and you have to implement strategies like a little bit more advanced, like the Berkshire, et cetera, to do the velocity of money, because you've just got to buy 20, 25% down on it single family or small multi-family, you're gonna need a lot of capital in order to get to that financial freedom number.
Joe Cornwell:
All right, so in your journey, how many years were you working full-time in the pharmacy business?
Dylan Koch:
I started when I was in college. So that would have been 2011, 2012, to start as a tech. And then I basically worked all the way through 2019. I wasn't quite full-time in pharmacy school, but I probably worked 20, 25 hours a week. And then I graduated in 2017, obviously full-time, working a ton of overtime in those couple of years from 2017 to 2021.
Joe Cornwell:
Okay. And at what point did you start to think, I want to get out of this career field, even obviously, like you said, that was your plan previously. And what was that first thought process toward making the move to get out?
Dylan Koch:
Yeah, I don't know if I can pinpoint the exact time where I had an epiphany or something like that, but I would say shortly after graduating, it was, do I really want to do this for the rest of my life? Kind of a moment. And it quickly turned into, how can I make the most money to try to get out of this position, at least have more options pretty shortly. So I guess call it end of 2017, early 2018. And to be honest, I had a couple of pharmacy friends I was doing some of this stuff with and they were more inclined to quit and to try this than I was. So it was almost like more of a positive peer pressure situation because I was probably more in the psychology of I spent six years, a ton of money to go to this. There's this white collar job that has a Sigma around it, quote unquote prestigious job.
And the initial thought of giving that up to be quote unquote, a real estate investor or wholesaler or a flipper was something that I needed to mentally overcome. But once I did it, you just kind of suck it up and do it. You learn quickly. People don't really care. They're like, okay, cool. He does that now.
Joe Cornwell:
Yeah. That's an interesting dynamic. Having obviously left my career to get into real estate full time. I think there was definitely less of a exterior stigma because being a cop, you're kind of a blue collar job, but I understand your point of view being in medicine and being a pharmacist, probably a little more eyebrow raising to wonder why you would leave such a cushy type of.
Dylan Koch:
The hardest conversation was with my parents, obviously. And they didn't really help financially, so they didn't really have that hanging over me. It was like, we paid for this, you should keep doing it. But it's kind of like, they could tell their friends that their son's a pharmacist, and then now they're like, I can't really do that anymore. They trust, I'd say it's 2020, but that was the hardest conversation I needed to have.
Joe Cornwell:
I can absolutely imagine that. Yeah, family can be difficult, especially when you're getting into new ventures that they may deem as risky. I know you mentioned briefly, you had some other friends that were in real estate and obviously I know you. So tell us a little bit about that initial partnership and walk me through how that went, some of the things that you learned from that because partnerships is definitely one of the topics I wanted us to discuss today.
Dylan Koch:
Yeah, absolutely. So it was me and one pharmacist friend that I had at the beginning. I think he's been on the plastic before, his name is Ton. He's done a lot of commercial stuff now and another buddy of mine named Scott. And we graduated together. And I consider myself fortunate in the fact that I had like-minded friends in the same career field that I was in. So we kind of went balls to the wall at the beginning. We were buying basically single-family homes. I think we got up to like 13, 14 rental units to just amongst us three in a very short amount of time, I think it was a year, year and a half, and that was just combining our capital. Everything was kind of split three ways. And eventually it came to a point where as life happens, we wanted to go separate ways.
We had different goals and aspirations. So I would say everything ended amicably. They're both so groomsman in my wedding, but we got to a point where at the end of that time we sold our whole portfolio. So I had some money from that, which is great because you're buying a decent timeframe. You have tax implications, but it was basically a clean slate from that. And if I'm going to think what your next question is, how did that go? I would say we were all pretty much too much alike. Our skill sets were very much the same. We were very much like, I like doing this part of the job, whether it be analyzing deals, finding the deals, negotiating with sellers. None of us really liked the property management or the rehab side of things. So we didn't have these complimentary skillsets that were probably needed for most partnerships to thrive.
Joe Cornwell:
Yeah, you're right. And that was my next question. And that makes a ton of sense. Obviously you and I both have experienced partnerships and finding those kind of symbiotic relationships where you're actually able to compliment each other is one of the key factors in being successful in partnerships in my experience.
So take me from when you left off with the partnership and you guys sold your portfolio and went your separate ways. Fast forward to what you're doing today. And then obviously I want to pick through all of the details of that.
Dylan Koch:
This is a good thought exercise because I haven't done some of this in a while, but I think our last one that we sold would have been at the beginning of 2021. So now I'm basically back at square zero.
I don't have any rental property, but I still feel like I have all this knowledge because during that time you're continuing to read, educate yourself, go to meetups, meet people like yourself and other people in our sphere. So it was kind of like at that pinnacle point, another life was happening. I was engaged at this point, like I met my wife. So between the beginning of 2021 and when I decided to quit, it was pharmacies getting worse and worse and worse. I'm marrying my wife. She is also a pharmacist, so she has good income. I can be on her health insurance.
We don't have kids yet. It's almost like a now or never decision. Are you actually going to pursue this or not? What was my worst case scenario at the time? It was, it didn't work. And I went back to being a pharmacist. So I didn't really have a lot to lose at that point. So that's when I decided to pull the trigger, put my two weeks in at work. And I don't think I had insurance for like three months, but it is what it is. I worked out and then we started the off market real estate business and I'll stop there now. Let you ask your next question before I get a little bit too, too out of myself.
Joe Cornwell:
One question from what you just said.
And I know we've talked about this before, but for the guests and the audience, what was your biggest fear you had to overcome and how did this first six months go when you, when you left your job?
Dylan Koch:
I guess biggest fear was it wasn't even a monetary thing because we had some money saved up and I went through some of that, we'll get into that, but it was almost just like a fear of failure. And it was truly like, I didn't want to go back to pharmacy once I'd quit. Cause that was to me admitting failure. It didn't work.
And so that was probably the biggest fear, also the biggest motivator at the same time. And then what that turned into was, okay, quit October of 2021. The first, I didn't do a deal until March. So it was at five months and I went through about $30,000 of personal savings and that was in business expenses before I did my first off-market wholesale transaction. And that was for 5,500 bucks. So very much still in the red from that, but at least it was a proof of concept that I needed to be like, okay, I can do this.
Let's double down on what's working, pull back on what's not. And since then, we've done over a hundred off-market deals and built a portfolio. So it's been a blessing. Don't get me wrong. These last few years have been good to me. But the answer is succinctly, fear of failure and a rough beginning, but it's been great ever since.
Joe Cornwell:
Yeah. So you're six months into your new business and you're, sounds like about negative $25,000. Is that right? Yeah, no, that's about right. So what motivated you to keep going at that point? I know you said you had a proof of concept there.
But there had to be that lingering thought in the back of your mind. Does this even make sense? How long am I going to try this? And at what point do I try something different or go back and try to find another pharmacy job?
Dylan Koch:
Going back to the pharmacy would have been a very last step resort for me. I might have had a different career path. I don't know. But to that, there's definitely those thoughts keeping your mind. I don't know if it's imposter syndrome or self doubt or whatever it is, but really what got me through was.
I have a good sphere of other real estate investors I hang out with. Like, Hey, it's just a matter of time. I had joined another group to kind of teach me the ropes and I paid a decent amount of money to be in that. And the last thought is I've talked to people in this space. It was almost like if they can do it, I should be able to do it kind of a thing. And that's not to be insulting to anyone else I know, but it's like, I've talked to this person and I feel like I know as much, if not more than they do. So it's not a knowledge problem. Maybe it's an execution problem and just be humble enough to learn from people who have been in your shoes before. And someone's like, don't reinvent the wheel, just figure out what works and then mimic what those people do.
Joe Cornwell:
That's such a good point, especially you're talking about that fear that creeps in your mind. And obviously you and I both left our careers at similar time points. I've been out in real estate full time for two years as well. And I remember that first six months, and keep in mind, if you go back, that was right after rates started creeping up. So in my first six months of being in real estate full time, for anyone who doesn't know me, I'm an agent, so I sell investment property as well. And rates jumped up out of nowhere unexpectedly. And I went from 10 to 15 properties in escrow to two or none. And that was immediate change six months. And all of a sudden I'm like, what have I done? Am I going to be able to make money? Obviously I have a rental portfolio that was able to pay most of my bills, but still when you're counting on X amount of income, and then all of a sudden it's a third of that or less, it's definitely kind of a pucker factor.
Dylan Koch:
Personally, we've kept our expenses rather low to account for some of these changes. So we live pretty frugal lives. So that not having a huge baseline that you have to hit every month obviously helps with this stuff is real estate is cyclical. This past May, I don't think we made a dime, but other months we make a lot more than that. So you have to have ample amount of reserves and that helps with the peace of mind.
Joe Cornwell:
Yeah. And so on that line of thought, I talk to investors all the time. Some are active, some are passive, some are new, some are experienced. And this reoccurring theme I see for a lot of people I speak with is that they do want to build a path out of their job or Out of their career and into either a business or full-time investing. So do you have any Tactical tips that you could give for anyone who may be pursuing that journey.
Dylan Koch:
Good question. I think from the psychological part because I think that's probably what holds most people back is do like the Tim Ferriss like Fear-setting exercise, which is what is my worst-case scenario and what actually would happen if that happens. So write it out and try to figure that out. Doing that for me was my worst case is I go back to being a pharmacist. That to me was like, that's what I'm doing now. So it was like my worst case is like doing exactly what I'm doing now. And then from a tactical standpoint, depends if you have a family and that kind of stuff, but there's ways to get around insurance, write down what your monthly expenses are, your fixed expenses, and everyone's different. We have six months of expenses just sitting in a savings account, which with us was like, okay.
If I don't sell a single place for six months, or I don't have any income for six months, I'll be able to figure something out. So there's just the money side of things and then the psychological part, which I think that fear setting exercise is what helped me the most.
Joe Cornwell:
Yeah, it makes sense. I say this phrase a lot, but it's a math problem. It sounds like that's your advice. From a tactical standpoint, the logical side is understand your budget, understand your income, understand your expenses, and figure out what that number truly is that you have to have to survive. Obviously the lower, the better.
As you mentioned, you're keeping your expenses very low. But if you want to make that transition, you have to understand the actual math behind making that a reality.
Dylan Koch:
And I think it's very hard to get a rental portfolio, true cash flow, two to $300 a month to get to that point. I think if you use your active income, get six, 12 months of reserves. And then if you quit your W-2, now that you have 40 hours a week freed up, what else can you do to make it have to be on the rental side or even real estate? But I feel like if you put yourself in that situation, you're forced to make money, you're going to figure it out, but you just can't live behind the safety net of, oh, I don't have the reserves. You just have to jump sometimes.
Joe Cornwell:
Perfect. I know you mentioned a few minutes ago, mentors, mentorships, and some of the mastermind groups you're in. You don't necessarily have to name anything specific, but tell me a little bit about your journey in that. And if you would recommend that to other investors who may not be doing that.
Dylan Koch:
I guess my thought process with this is you can learn anything from YouTube University or books or podcasts. A lot of people who listen to this are probably self-motivated. They like to self-educate theirself on a lot of topics, right? So you can figure all that out by yourself. It might take six months to a year to figure out how to properly do that. Or you can pay to be in groups that are already doing it. Now, obviously vet these people pretty extensively, but I joined a group that I just viewed it as shortening the learning curve. And instead of taking six months to a year to do it, they can basically give you the template and then copy and paste, you know, what they're doing, and then put your own little spin on it. So that's what I decided to do and I don't have any regrets doing that. I think that was the right thing to do.
Joe Cornwell:
So it sounds like you're saying that in the right context, paid coaching, mentorship, masterminds, if even if they're paid can be a resource. If you have a specific reason and something kind of tangible, you're trying to obtain from that relationship, even if it's paid, but it has to be somebody vetted legitimate, that's not some internet guru that's trying to take your money for very little value.
Dylan Koch:
Nothing is exactly right. And proximity is power. A lot of these people know other people. So outside of just not the knowledge and the know-how, but it's also the people that you get to surround yourself with is another factor into that.
Joe Cornwell:
Yeah. It brings up a good point that in the last eight years that I've been active investing, I've done a lot of local networking, obviously we're both based in Cincinnati, so I know almost all the investors here in Cincinnati, and I've been very proactive in that, but I have not been very proactive in doing any of the bigger national conferences. And I think one of my mistakes in not doing that is that I feel like from a tactical standpoint, a lot of the things you may learn there are great if you're a new investor. But what I personally have missed out on is the networking opportunities. Kind of back to your point. You are networking with investors that are high level. They take it very seriously.
Some of these conferences are obviously expensive. And if they're willing to travel and spend their time and money, you're going to get around people that are good networking opportunities for whatever type of real estate you're in. And that's something that I definitely have to improve on going forward. Even if you don't necessarily need some of the tangible day to day educational pieces of it.
Dylan Koch:
I think that's exactly right, Joe. My only point on top of that is if you do go to these events, don't just be the person that hands out business cards to a million people and then does actually do something with it, like continue to follow up. Try to add value to someone in some way and take action upon actually going to these things.
Joe Cornwell:
Yeah, I don't know who said it, but did you just maybe think of it as like, try to meet five or 10 people and actually build a relationship with them instead of meeting 200 people that you hand your card to. Go deep instead of wide. All right, so let's get into your actual business. Tell us a little bit more about what you're doing tactically and how you're monetizing it and just the scope of your day-to-day.
Dylan Koch:
To back up a little bit, I first started doing this too. Wasn't even from a to monetize perspective, to make money. It was like, not a lot of the deals I'm seeing on MLS are making a whole lot of financial sense to me. So it almost sounds like getting price out of my own market. So that and everything I was saying is like, direct to sellers probably the way to go. These are the best deals are found. And from my perspective, finding the deals are at the top of the funnel. So it doesn't matter if you're the best contractor or the best analyzer of deals, or if you don't have the deals, it doesn't matter. So I basically started to go down this path to find my own buy and holds, burst strategies. And as it turns out, if you send out some of these direct mail pieces, not everything is in my buy box. There's certain areas of Cincinnati that I don't wanna own in or stuff like that. But it doesn't mean that other people don't wanna buy these places. So it just turns into, now when the deal comes in, the first lens is, do I wanna add this to my portfolio? Okay, that checkbox is no, then who do I know that would like to add this to their portfolio? And just kind of be the middleman of buyer and seller and then collect your fee that way. So top level is it's marketing, it's a follow up and sales system, and then it's ex-executive. It's I guess three pillars of my current business.
Joe Cornwell:
Okay, let me break that down a little bit. So you are doing direct to seller marketing. So break that down, what types of direct to market are you doing?
Dylan Koch:
Yeah, so the three main ones that we use right now are direct mail, which is probably our main source, SMS, which has gotten a little bit more tight recently, but it's still a good lead source for us cold calling and then on top of that would just be referrals.
Joe Cornwell:
Okay, so through your network, social media, whatever you find a potentially motivated seller just from somebody who knows you're looking for.
Dylan Koch:
Yeah, like just from going to like a local meetup, so if I meet a new wholesaler, introduce yourself to have a conversation, I was like, hey, if you get a lead, not sure what to do with it, bring it this way and either we'll JV it, I'm also a buyer and then so just like local networking as well.
Joe Cornwell:
Okay, so it's actually wholesalers, not necessarily just like property owners that just know you're in the market.
Dylan Koch:
Correct.
Joe Cornwell:
Gotcha. So you're having contact with these potential sellers through direct mail, the cold text, cold calling. And did you say you're doing any web-based marketing?
Dylan Koch:
We actually don't right now, but that is another method to do the pay-per-click or SEO, which I know a lot of people have had success with, but we have not pursued that route yet.
Joe Cornwell:
You're not doing that currently. Okay. So what's your next step? What does that look like after you have contact with a potential seller?
Dylan Koch:
Yeah. And then you're pulling certain lists. The biggest one in this space is high equity absentee.
I'd probably say 50% of at least our deals come from quote unquote tired landlords. And there are other levels of motivation. There's the bankruptcies, there's junk loans, pre foreclosure, leans, and then all this stuff that you can pull and list stack on top of that, et cetera, et cetera, but it's outbound marketing that we're doing for a lot of our stuff. Right. We send out the mailers, they get it in the mail, they look at it and they might throw it away or they might give us a call. And then when they give us a call is when we come in, we have that initial qualification phone call really, where we're qualifying the lead to see if they actually are a motivated seller at a reasonable price. And then that's when the follow-up and negotiation comes in. And then once you get the contract signed is when you figure out what your good, the dispo is going to be.
Joe Cornwell:
Okay. So I want to make a tactical point here for the listeners. You said that your number one successful motivated seller are high equity owners. And did you say usually?
Dylan Koch:
Absentee. Usually order. Are they regular or are they just absentee? Yeah. So high equity absentee. You can pull that. We use PropStream, which I'm sure a lot of people are familiar with who listen to this real estate podcast, but you can type in the filters that you want. I think ours is below 70%, what they deem LTV or another way to filter it is who have at least owned for 10 years and then just pull that list. And not only is that your vast majority of people, but we would actually separate high equity absentee and high equity absentee out of state. So we would make those two different filters and the out of state ones are even a little bit more motivated, obviously because they're not local.
Joe Cornwell:
So let's break that down just a little bit. So why do you think these are the people that are motivated? These conversations you're having with obviously hundreds of these people, what are these conversations, the pattern you're seeing?
Dylan Koch:
Most of the people in that situation, to be honest, don't wanna deal with the property anymore. Even though they bought these 10, 15, 20 years ago, they necessarily haven't kept up with the property maintenance. They've always been below market rent then they might not have the money to fix it up. And they would rather just a quick easy solution. A lot of times they also want to make sure you're going to take care of the tenant that's in their property as well. I'm going to back up just a second. A lot of people think it is all about the money. If you just come in and you're taking hundreds of phone calls and you're shooting that offers, you're not going to get very far in the business. A lot of the times it's figuring out what the problem is. And the real estate is just the tool to fix the problem.
Whether that be, well, I'm going out of town, so we want to sell, but we don't have another place to go. Okay, well, we can buy at least it back to you for a couple of weeks, help you find another place to go, something like that. So that's just an example, but it's more of a solutions-based business than just a monetary business.
Joe Cornwell:
Okay. That makes sense. And I can say to your point, from my own personal experience, that most of the off-market properties I purchased were elderly landlords that were looking to retire or retirement age the deal that obviously we just talked about, same situation. So the point I want to relate it back, obviously the focus of this podcast is mainly commercial focused real estate. So mid to large multifamily or non-residential real estate. And I know your focus is single and small multifamily, but I think that this skillset translates extremely well, depending on your market and depending on who you're marketing to. And there's mom and pop owners all over the country that own mid to large multifamily. And there's mom and pop owners that own non-residential commercial real estate. And if you can master the skill that Dylan's talking about today, I think you can have a lot of success in this particular market. We can talk a little bit more about that here in a few minutes, but I just want to make that point that I think this skill translate, whether you're doing small residential, large residential, or even non-residential.
Dylan Koch:
I agree. And you talk to people, John, you'd be in this having the conversation. He'd be like, you own 40? It's almost a surprise, but yeah, people walk around every day, they might have this portfolio that could be a life-changing opportunity for some people.
Joe Cornwell:
Okay. It makes perfect sense. So let's go to your disposition. So you're getting these leads, you're having these conversations, you're putting them under contract. Then what are you doing and why?
Dylan Koch:
It's changed in the past couple of years. So what started at the beginning is you get under contract, you mass market, these email blasts, or there's investor lift, or all this kind of stuff out there. And that worked for a while, especially when real estate was really hot. And that is going to be your wholesale or whole tail. And we can explain the difference for the listeners if we need to. Or fix and flip lease option, or own buy and hold for the burst strategy. So there's many different ways that you can go. Now I'd say it's more a lead comes in, do we want to keep it? And obviously if the answer is yes, it's easy. Like we'll just keep it, refinance through the improvements. But the answer is no, because I've been doing this so long and I'm familiar with this market, I can text or email a handful of people.
I have this property, it's going to be at this price. Here's the interior condition. Are you interested? And they say yes or no, we do a walkthrough. If they say yes, they'll execute at their price. I'll take my fee. And the seller also walks away with the money that they were promised.
Joe Cornwell:
Okay, so in your current business today, let's go through some numbers. How many pieces of marketing are you doing a month of various forms? How many people are you talking to? How many properties are you looking at? And how many are you putting under contract per month?
Dylan Koch:
The SMS and cold calling. I don't have the exact numbers for I know for cold calling. They make about two to 300 phone calls a day. And we get about two or three leads from that a day. So it's about 1% that comes in from that. And then you're hoping to convert about one every 10 leads that comes in. So I don't know what that math equates to.
Joe Cornwell:
So your cold callers, this is like an employee or a VA you have doing this?
Dylan Koch:
Yeah, VA. VA, okay.
Joe Cornwell:
So you're doing, let's say 300 a day, five days a week, I assume.
Dylan Koch:
Correct. Okay. So let's call it 6,000 a month potentially that they're talking to. Yep. Okay. And that's just with the cold calling. That's strictly cold calling. Okay. And then what do you think with the text and or mailers on top of that?
Dylan Koch:
Texting we send out, we have the capability to 20,000 texts a month. And I should have looked at this beforehand. Actually, if you bear with me for a second, I can probably get you a number, but I'll just talk on direct mail real quick. We send about three to $5,000 in direct mail a month. And that kind of depends if you're doing postcards or letters. Letters are usually around a dollar a postcard. So that's easy math. Postcards are about 55, 60 cents. And those have resulted in about 80 leads on average per the past couple of months. And we're converting every two to three to those deals as well. So to back it up, I'd say our cost per deal right now, I think in the industry average, if you talk to some of these groups, they want you to be around $3,500 to $5,000 as a cost per deal basis, almost regardless of marketing stream.
And if you're higher than that, you got to figure out are the leads actually coming in? Is it a data problem or if the leads are coming in, but your follow-up and sales system sucks and so you aren't converting the lead that are coming in. So right now our cost per deal for cold calling is 3,200. Our cost per deal for SMS is only 1,700 and our cost per deal for direct mail is 3,170 bucks. And if you throw in some of the referrals that we've gone in there, that brings our cost per deal down a little bit just because referrals obviously don't have any marketing.
Joe Cornwell:
Okay. But it sounds like you're doing, let's call it 10,000 plus contacts a month. Does that sound right?
Dylan Koch:
Yeah, it sounds about right.
Joe Cornwell:
Okay. That's awesome, man. End of the funnel, how many deals are you typically putting on your contract and or closing per month on average?
Dylan Koch:
Right now we average two to three deals a month. So we're a little bit picked up right now because we have six in escrow. Okay. And we'll end up doing just about 40 deals this month. So it's gonna be a little bit more than that. We have a nice little tailwind to that. But our fallout rate is really good. So that's one thing you got to consider in this business is you are dealing with people's lives, especially if they're owner occupants.
So if you want to go into a contract, you have to make sure that you have the means to execute on the contract. But we only fall out of like one every 10 deals. And most of the time, that is just because of title issues. There's a probate deal that we couldn't agree upon or something like that, something that we really couldn't resolve.
Joe Cornwell:
Something comes up, derails it. Yeah. Okay. So with these deals you're closing, I know you mentioned some of these you're looking to buy and hold and I know you buy some singles and some small multifamilies that you keep. Tell me about a deal that you've done this year. I want to give this context with, we all know we're in a challenging market. Rates today are 7%, 8%. So how are you finding these deals that make sense as buying holds and what is your strategy with that?
Dylan Koch:
Good question. So the whole purpose for this, and if you want to relate this to commercial real estate, is I get to have conversations with sellers and solve their problems. And a lot of times based on solving their other issue is I'm getting a good deal on the real estate. So the most recent example is I bought a four unit here in Cincinnati.
This four unit brings in the day I bought it, $3,450 in month in grossly rents. All the utilities are separate, it has off-street parking, corn laundry, all the things that check the boxes, it's pretty well maintained and upkeep. And I bought it for $205,000. So this back end of that math, it was a really good deal for us on paper. I bought that with hard money. So I'll refinance into debt, DSCR, probably low eights at this point, but it's still cash flows even with those rents. We're going to take rents to 3,600 here starting at the top of the month.
And then that's one of our most recent deals that we did. And the reason why she sold to us is because she was trying to fit a timeline to close by the end of the year for a 1031. I'm like, if you give us our price, we'll make that happen. So it was kind of a win-win for both parties. In another situation, this is my, probably my favorite deal to date is we bought 12 units from one seller on a seller finance term. So we bought it for 1.4 million, which on a cost per unit basis, you think that's a lot for, especially for Cincinnati. But.
We put $100,000 down, they carried the rest of the note at 3% and then on a 30 year term, but with a 10 year blow. So, it was still a cashflow positive day one because of the rate that we negotiated. And the upside for this is pretty great just because of how under market their rents were. So, we are almost break even day one, but it already cashflow is great just from being underneath our ownership. So, all I have to say is I get to have these conversations because I am director-seller. Something that came through a broker or something like that, that deal is never going to happen.
Joe Cornwell:
And that makes sense. And so it sounds like in a deal like that, the debt is really the asset. Right. Because you're paying full market or even maybe above market price, like people were the last three years during COVID. But if you have interest at zero to 3%, 4%, you're able to pay that premium. So the seller gets what they want and you're getting a really, really lucrative debt structure that makes the deal cashflow even at the premium price.
Dylan Koch:
Yeah. 100%. And in 10 years, this is the debt pay down. I'll be able to refi pretty easily and probably still be able to take money out.
Joe Cornwell:
Yeah. And again, to take your model and relate it back to commercial real estate, which is why I wanted to have you as my first guest, the way you're structuring these creative deals is absolutely translatable to the commercial real estate deal. So you could buy a 50, a hundred unit in the same way with the creative structure, seller financing and the way you're structuring some of these off-market deals that you're doing on the residential side.
Dylan Koch:
Right. And I'm not as versed in commercial real estate, but as many of the listeners will be, but from what I understand, if you want to buy something that's over a million dollars debt, you could have the seller bring down another 10% or 15% of that. And so you're only bringing 10 to 15% down. You get Fannie and Freddie for a lot of it. And then they'll obviously bring a portion too. So that is something Joe that we can get into. I am starting to trying to use some of these same methods and techniques into larger assets. So 20, 39 units in the Cincinnati market, some mixed use. And hopefully I can come back in a couple months from now and we can talk about how that goes. But to your same point, I think it is a transferable skill set and time will tell if that's not good.
Joe Cornwell:
Yeah, let's get into that. What are your goals and where do you see your business going the next one to two years?
Dylan Koch:
I wanna hire another acquisitions person because right now it's been mostly me on this side of the business. So I wanna get to a point where the business is spitting off hopefully seven figures a year in revenue. I'm having to work 20, 30 hours a week inside that business, but then it's taking the revenue generated and the profit generated for the business and just pouring back into real estate and other investments. So I want to hopefully own those 20 plus, 30 plus units without having the need to syndicate, but I can if I need to. So having the capital to be a larger owner of that asset, maybe partnering with one or two people on those. So that's the ultimate goal. And you have options when you can create that kind of active income.
Because I also could just take some of that active income, pay off a couple of the rentals and then be truly financially free. And then it's just a game of you're doing this for fun at that point, not a means of survival.
Joe Cornwell:
Yeah. And obviously I've been financially free. I understand that mindset and it is a great position where you can work in my business when and how and with who I choose. I can take investments that are maybe more risky that I wouldn't have done five years ago, because once you have that freedom, it allows you to open up your models in your past that you're able to go down. All right, let's transition into the best sever lightning round. You ready?
Dylan Koch:
Yep, I'm ready.
Joe Cornwell:
Awesome, what is the best sever book you've read recently?
Dylan Koch:
Just finished a book called Broken Money by Lynn Alden. She is a macro analyst. It's a thick book, it's about 480 pages, but I encourage anyone that has an interest in macroeconomics, history of money, to take a deep dive into that book.
Joe Cornwell:
Awesome, hope to check that one out. Best ever way you like to give back?
Dylan Koch:
I actually donate blood about every eight weeks. Sometimes platelets every seven. And I don't know, this is something I've done for a while now and you save three lives every time you do it. So this is something I try to continue to do.
Joe Cornwell:
That is interesting. I did not know that. I have actually not done that. All right, so let's look at a deal you've done. And if you could sum it up to one, what is the biggest mistake you made or deal that maybe went sideways and the lessons you took away from that?
Dylan Koch:
I would say I contribute to a deal. It was almost like a opportunity costs. It was 20 units in North College Hill where I was just kind of getting started into this and I was negotiating with the seller and got to a price and I just didn't have the guts to pull the trigger. So I ended up monetizing that deal. I was able to find a buyer for it. But looking back on that now, I was stupid not to buy that myself because I probably could have figured it out. So I don't know if that helps. I can get more granular if you want, as far as location, unit mix, income, that kind of stuff. But I would just say not having the courage to take on something that big when I was just starting into this business.
Joe Cornwell:
Yeah, okay, well let me ask you this. Had you bought it instead of, sounds like you wholesale it, is that correct?
Dylan Koch:
Yeah, I am a licensed agent, so I actually just find the bar and sell it, and I just broke it.
Joe Cornwell:
Okay, so you end up listing it and selling it, okay. So what would you have made in contrast, let's say in the next five years had you purchase it instead of just selling it.
Dylan Koch:
Well, I haven't done that math, but when I agent it, I was 3% and it was like 1.2 million. So I made like 36,000 just from the agent side. If I still owned it, I'd have at least 200,000 in equity. At least, yeah, I probably don't want to run that.
Joe Cornwell:
Oh man, sorry, I don't want to one up you, but I'm going to tell you the story just because. So I had a deal I put under contract, 23 unit in Amelia three or four years ago. It was one of the first midsize multis I tried to buy. Long story short, the broker's selling it didn't really know what they were doing. They had a lot of really poor information on the offering memorandum. And I was able to find out that this deal was significantly more valuable than the way they had it marketed. They actually had it with owner pay heat. It was tenant pay heat on a deal that size. That was like hundreds of thousands of dollars in value difference. So I put it under contract, I think at 800,000. And then I had a client literally call me the day that I put it under contract saying they wanted to put an offer on it. And obviously I'm an agent as well and I don't compete with my clients. So similar situation. And these are really good clients of mine, sold them a lot of property. I was like, look guys, I literally just put this on their contract. This is my contract price. It was much lower than this price. I said, if you guys really want it, I said, I'll represent you and I'll get a little extra kind of kicker on it. So same situation. I made a good chunk of change, like maybe even 40 or 50,000. So I ran the numbers on that deal today. It would be worth about 1.5 million with very minimal investment relatively turnkey. So yeah, I like to tell myself I lost 700K in equity to make a $50,000 commission, which at the time was great money. I should go back and do that math because I know that obviously you never bought it. So, yeah, good. Track that because that might help you. If you ever had that feeling in the pit of your stomach again where you're fearful, that might give you just the kick you need to get over that. Sorry to one up you there, but I know. You could gladly take that win.
All right. What is your best ever advice for anyone listening to this show? Obviously, we talked about a lot of different topics today, but again, relating it to that commercial real estate, what's your best advice based on your experiences?
Dylan Koch:
I would just say, just try it. What's your worst case you lose? You're out a couple of thousand bucks in marketing spend in order to get a potential deal of your lifetime. And you might take a couple of hours to find the correct data, especially with commercial real estate, they're a little bit more shielded, but I would say, don't worry about what the copy is. Don't worry about having a website set up just figure out a generic piece of lettering or mailing and send it out and see what happens and then figure it out as the calls come in.
Joe Cornwell:
Yeah, I think taking action, especially in the off-market game is the best way to go. And I've been able to pick up deals like that. I was, that's your whole model and it's worked really well for you. So I hope more people, especially in this challenging market that we're in, are able to take that because like you said, stuff that's listed with brokers, stuff that's on the MLS, stuff that's on LoopNet, it's really hard to pencil those deals, especially with traditional financing, 8% interest. Finding some of these creative deals off market is certainly the way to go and the thing I'm telling a lot of my investor and clients to do. So last question, what is the best way people can get in touch with you if they wanna learn more about what you're doing or your businesses, how can they reach out to you?
Dylan Koch:
Really just find me on any of the big social media platforms, Instagram, Twitter, Facebook.
If you just type in my name, Dylan, D-Y-L-A-N, last name's Koch, K-O-C-H. I should be one of the few people that pop up and I've done other podcasts and stuff before. So you should be able to find me.
Joe Cornwell:
Awesome. We will make sure to link to your socials. And if you want to give us your email, we can put that in there as well. People want to reach out to you. Any other final closing thoughts? Anything else you want to share with us before we get out of here?
Dylan Koch:
No, I think that was it. Thank you guys again for having me. It's been a lot of fun. I mean, hopefully we can come back someday with an update.
Joe Cornwell:
Yeah, we'd love to have you back. Love to talk more about your future goals and your commercial real estate stuff you're working on moving into. Thank you so much for being my first guest. It means a lot to me. Obviously hope to speak to you more and have a lot of other awesome guests lined up here soon. So best ever listeners, thank you all. If you got value from today's episode, make sure you're following us on social media channels. Make sure you're subscribing and following the podcast on all platforms. Leave us a five-star review on whatever platform you're following us with and share our episodes with people that may find value from the things that we're talking about. I hope everyone has a best ever day. Thank you again for joining us.
