How To Lose 70 Grand And Keep Going | Dylan Koch | Part 5

This episode is about the deal he says he'd never do again.

In Part 5 - the final episode of this conversation - Dylan Koch, off-market real estate investor and operator in Cincinnati, breaks down what happens when the underwriting is wrong and the money's already spent.

This was not a bad-deal problem. It was a constraint problem: DSCR requirements, a low appraisal, and $70,000 he had to bring back to the closing table on a refinance that didn't work out as planned.

We cover: Why the 1% rule no longer works in high-property-tax counties The negotiation tactic he uses on every seller call, and the psychology behind it The refinance mistake that cost him six figures in unplanned capital Why he's hiring his third acquisitions manager and what he's changing this time How he and his wife run an annual life-vision conversation most operators skip

If you're a founder, operator, or investor managing debt, underwriting risk, or a growing team, this conversation will feel familiar.

This is a practical breakdown of what happens after the deal closes and the numbers don't cooperate.

Chief Milestones is a video podcast featuring honest conversations with founders, parents, and investors about building real businesses, staying healthy, and raising families.

New episodes release Tuesdays and Fridays.

Youtube: https://www.youtube.com/@ChiefMilestones

Instagram: https://www.instagram.com/chiefmilestones/

Spotify: https://open.spotify.com/show/7HLDAe7SP3GnJSTOgAQqLy?si=6e9ac82be46f413c

Apple Podcasts: https://podcasts.apple.com/us/podcast/chief-milestones/id1861185226

Transcript

When A Refi Comes Up Short

Dylan Koch 0:00

They're about $1,000 worth less than my thoughts gonna get. So that way our appraisal came back a lot lower than I thought it was going to. So I thought this was to be a deal where I'd have 10 to 15k into it. I'm about to bring like $70,000 to the books and pay for the refi. If you had asked me if this deal was presented to myself, would I buy it? Like if I had to put $70,000 down to buy it, my answer would be no, I wouldn't buy it. But I'm committed at this point. Long term, it'll be fine. You know, we'll get the rents up, like it'll it'll be it'll be perfectly fine probably a year or two from now, but it's not ideal I would do again. I have more money than time now, so now I've hired people to take on social responsibilities. My wife and my daughter are my top priorities, and businesses come investing after that, which is a hard separation, you know, for me at times.

Trust Through Radical Transparency

Reshma Vadlamudi 0:45

So, how do you ensure that you're consistently building trust?

Dylan Koch 0:50

Sharing, probably, you know, like social media is a good example. Um, and not only sharing the wins, but also sharing the losses. And I usually get more comments on the losses that I share than anything. Like, you know, hey, thanks for you know, thanks for finding this. Uh no, it's not always sunshine and rainbows. Um and I I mean, I'll even even on seller appointments that I'm going on to, and a lot of these people aren't sophisticated with real estate, right? They um I will walk, I'll sit there, we'll sit at the kitchen table and be like, here are my numbers, here's what I think it's worth all fixed up, my costs during this time, when I'm gonna put it in rehab, this is it's gonna granite countertop, it's kind of like so um honest communication, I guess, and just being real with the actual numbers. Yeah um and our returns are worth this. This is you know, I don't think they're I don't know if you can overshare enough. Um, and I eventually it's just the more and more you share, the more and more time that you have, like, oh Dylan's been doing this for five years now. Maybe he actually knows what he's doing. Um, versus if you're new, they'll actually what I don't like is someone who's just started real estate investing and then they start preaching online about how they're the great real estate investor and like um all this money and capital and deals and all this kind of stuff. So um usually the the quieter people are the most successful ones, but you have to balance that with people, especially in the beginning, if you're raising money, you need to tell people what you're doing. Um, and from maybe from a GP side introduce them to other LPs, you know, or you know, say, hey, I've I'll introduce you to Kevin, and Kevin invested our first deal and let them have their own candid conversation about the deal, right? So it's an unbiased conversation.

Reshma Vadlamudi 2:28

When things get busy, how do you ensure you're still investing time and can you relationships?

Structure And Family Time Boundaries

Dylan Koch 2:33

Yeah, I mean it's tough. I mean, especially now with a seven-month-old home. My wife still works full-time.

Reshma Vadlamudi 2:39

Um that so she is still a pharmacist?

Dylan Koch 2:42

She's still a pharmacist, yeah. She's working from home uh with one day a week in office, which helps, but you know, it doesn't mean she's not working eight to ten hours a day. Um so uh structure is my answer. Um I I typically live by my calendar. Um but not only structure as in a sense of this is the routine on a day-to-day basis, but uh carving out the time for those your marriage, for your kids. And it's not like I have to cold plunge at 4:17 a.m. and I'm working out by nine, like you know, it's not any stuff like that. It's just the intention behind that, and actually a good uh productivity book uh for uh 13-week year is a good uh recommendation I would I would say to and it basically they break up their the whole purpose is I can get four years in one because of the way that this is this is structured. So it's a light read. I would maybe recommend that to the audience.

Reshma Vadlamudi 3:38

Yeah.

Real Estate Myths That Keep You Stuck

Reshma Vadlamudi 3:40

Okay. What's a real estate myth that's keeping people broke?

Dylan Koch 3:44

What's what's keeping people broke?

Reshma Vadlamudi 3:46

Uh real estate myth that's keeping people broke.

Dylan Koch 3:49

The 1% rule, especially now, uh, especially in like uh Hamilton County. Um, your property taxes are just too high to make the 1% rule work. You really need to be like 1.25. Um have uh investing with no to low money down, I think, is also a myth. Um it can be done, you can house like you can't like do all these things, but there are ones or twosies. There's not there, like you're not gonna build true wealth that way.

Reshma Vadlamudi 4:14

Yeah.

Dylan Koch 4:14

Um and it's as easy as people online say it is. Um, yeah, I mean it's just it takes hard work.

Reshma Vadlamudi 4:23

Okay. Can someone still get rich from real estate in 2025?

Dylan Koch 4:29

Of course. Like I, you know, I it depends on how much work and effort and time you're willing to put into it. Like most things, like that's not different than any other business. Um, but I would not, if I'm new and I'm trying to build up the real estate, and I I don't think the best avenue going forward is and you have $10,000 in your name. I don't think the best avenue is to buy a duplex as an investment property. I think if it's $200,000, you're coming in with a best like say a convention loan at 20 or 25%. That's all of your working capital. It's gonna take you a long time to build up that down payment again. So I am such a proponent of building massive income before passive income. And so I don't know if that's your skill set, is that's gonna hire that could be an entrepreneur or that could be a promotion that's your job. Like just focus on making more money first.

Reshma Vadlamudi 5:15

Yeah. Is it still possible to buy realistic with zero money down?

Dylan Koch 5:19

No, just answer that question. I mean, of course, there's exceptions to the rule, but the my default

Build Massive Income Before Passive

Dylan Koch 5:24

answer is no.

Reshma Vadlamudi 5:24

Yeah, what's your go-to negotiation hack that always works?

Dylan Koch 5:28

Always is a misnomer. Like I always is is not a thing. Um, but a couple that I share. Um I always like to present two offers. Um one of the, and you can structure those however you want, whether you're changing the price, you're changing the timeline, you're changing the contingencies. In my mind, psychologically, now they're competing between options one and two and not yes or no. Um, so I like to do that. And uh, Chris Foss in the first with the difference book, he always says when you're getting a price, make it oddly specific. So, like if you know, instead of $75,000 plus album, I'll give you $74,895. And that's just because it looks like it's a very detailed this is what the Excel sheet spit out, like, you know, and stuff like that, you know, just like onesie Susies. Um, those are the two things I guess I'd say.

Reshma Vadlamudi 6:14

Yeah, I think I do the second one too. So yeah, yeah. Okay, what's the least the laziest way to make money in real estate?

Dylan Koch 6:23

Being an LP, probably. Yeah.

Reshma Vadlamudi 6:25

Yeah. If you had to start over from zero, what's the first real estate move you would make?

Dylan Koch 6:33

Devour content so that way you know you you know what you're talking about.

Reshma Vadlamudi 6:37

Um for the convent, if they only have

Negotiation Moves That Shift Decisions

Reshma Vadlamudi 6:44

one, because there's so much content or so much information overload. What's one website you would recommend?

Dylan Koch 6:51

It's hard for me to recommend bigger pockets anymore because I don't listen to them, so I don't know the content that they're putting out. I know that's the most popular one.

Reshma Vadlamudi 6:57

That's where I started.

Dylan Koch 6:58

Yeah.

Reshma Vadlamudi 7:00

But that's also true. I haven't heard back, like I haven't gone back and like I can't, yeah, it's not maybe not relevant. I don't know.

Dylan Koch 7:07

Yeah, so um if you just I honestly go to uh I I'm sure there's timeless wisdom in uh Brandon Turner's first couple books, which is the rental property one and the um I think this is a book on real like a literally a book called Real Estate Investing. Yeah. Um maybe start there.

Reshma Vadlamudi 7:24

Yeah.

Dylan Koch 7:24

Or reach out to someone that you know that's doing it. Yeah.

Reshma Vadlamudi 7:29

What's the biggest mistake new investors made that cost them money?

Dylan Koch 7:34

I'll give a different answer. Um, probably they probably underwrite themselves out of deals because they're nervous to do the first deal. So their error that they're making is they're not doing the first deal and then therefore giving up hundreds of thousands of dollars of equity in the future. And I've made that mistake several times. Um so I would say it's almost an error of omission than anything else. So be realistic with your underwriting. And if you have a couple, if you have some money left in the deal, it's not gonna be the end of the world.

Reshma Vadlamudi 8:02

Yeah,

Lazy Money And Learning What Works

Reshma Vadlamudi 8:03

yeah. Okay, so biggest mistake investors make when following social media realistic advice.

Dylan Koch 8:09

Yeah, believing it's all true. Um yeah, I mean, Instagram and all social media is a highlight, y'all. And so they're not usually gonna share the loses. Don't set your expectations against that. Um, and a lot of them, like we talked about, don't have families, they don't have kids, they're not balancing the day-to-day work of everything. And so set real like the expectations. And uh my biggest thing is just talk to people who are actually doing it, that are on social media, and figure out what's realistic and what's not. Because even if you had a home run deal, but you thought it was going to be, you know, I shouldn't say, let's say you had a double of a deal, but you thought it was gonna be a home run, you still hit a double. That's still good, right? So, but you're sad because it wasn't what you thought it was going to be. Whereas if you're like, this was a good deal at the beginning, like it's all in your head of what that looks like.

Reshma Vadlamudi 9:00

What's a recent shift that you made that's been a game changer in real estate?

Dylan Koch 9:07

I don't have I call it squirrel syndrome where I'm not like looking over here for the next thing. Like, I don't have a shiny object syndrome, right? Like um, I've just been focused on the off-market business, really trying to just dial in. I hired someone, I hired an acquisitions person, so that now there's someone driving revenue other than just me and the business. I hired an assistant, and a part of this is back to the family thing. You know, I have a team around me that I I've gonna work 10 hours a day prior to being married with a kid. Um, and I did, and now it's I have to I have more money than time now, so now I've hired people to take on some of those responsibilities.

Reshma Vadlamudi 9:45

So what does your team look like now?

Dylan Koch 9:47

I have myself, um, I have my assistant, um, part-time assistant, she works 20 to 25 hours a week. I have Tony, who's my acquisitions manager, I have uh Kimmy, who is a lead manager out of the Philippines, uh virtual assistant, and that and that's and then a part-time bookkeeper too. Um, and so that's it.

Reshma Vadlamudi 10:06

So are there any tips and tricks for hiring?

New Investor Mistakes And Social Media

Dylan Koch 10:11

I mean, this is my third time trying an acquisition manager, so like it again, like it's gonna take trial and error. Um have a good job description. You don't want people to show up and like this isn't what I signed up for. Um do multiple interviews, you know, don't just hire your friend's cousin because you think that they're you know them and they'll be a good fit. Um I would reach out to your network first before posting on like the indeeds or the job hires or that kind of stuff because that's how I find most of my people. My assistant was my uh pharmacy technician at one of my stores beforehand. Um, and then you know Tony I've known for a while. So yeah, I mean, um clear the the same answer again, clear expectations, uh, and just be open and honest with what the job looks like. And like with Tony, I was like, you are going to be on the phones a lot, and like if that's okay with you, that's great. But like I just a lot of people, if they cold call someone and they get told get cold to go F themselves multiple times a day, that's tough to hear, but day in and day out. So, like setting that expectation up front is uh is important.

Reshma Vadlamudi 11:14

Okay, so let's talk about the parenthood. How has fatherhood shifted your mindset?

Dylan Koch 11:19

You know, um, I did the whole the brand attorney thing where I I bought a property, I I'm gonna pay it off hopefully in 18 years, and I'll be she can do whatever she wants with it at that point in time. Um I've never been a big legacy guy. I I don't know like if that's right or wrong. Um, I'm just trying to do the best I can do while I'm here. Um, and like Formosi says, we're all gonna die eventually. Um I mean, obviously the priorities change, right? Like my my my wife and my daughter are my top priorities, and businesses come investing after that, which is a hard separation, you know, for for me at times. Um so I would say I was forced to hire. My my day obviously looks different, it's more structured. Um, as long as we go back to kind of what we talked about earlier of setting time aside for the for those things. And you know, my wife and I will have conversations of okay, this is

Focus, Hiring, And A Lean Team

Dylan Koch 12:18

what our life looks like now, but also what do we want to look at next year, three years, five years, and we kind of build a life plan around that. Um so priority-wise, I mean, it definitely changed. I was all just money and and work before, and now it's you know, not that's okay. Like that's trade-off I'm I'm obviously okay with.

Reshma Vadlamudi 12:39

Yeah. And you said about wait, you mentioned about the life vision. How often do you guys do that?

Dylan Koch 12:47

Right. I mean, we'll have money talks like like once a month. Like we'll just go, like, this is what the accounts are at, stuff like that. But like as far as the vision, it's usually once a year. Um, and that we don't go somewhere secluded in like a cabin and like I wish we could all do that. Yeah, I wish we could all do that, right? But um it's usually at our dining room table. Um, and a lot of it actually the most recent ones because we had to change some estate planning stuff. Um, now that we we do have a daughter, and so like that was what caused the impetus for the next one, but um, usually once a year.

Reshma Vadlamudi 13:20

So you guys sit down and talk what you want to accomplish for the coming year.

Dylan Koch 13:26

And we I mean, obviously it's it's a living document, it will change as time goes on. But yeah, yeah, no, it's almost like this is what we've done the past couple years. If we extrapolate that out, and what I think, based on our other investments, you know, where we'll be in a couple years, do we want a different house? Do we want to maybe you quit work? You know, like that, these are all and not that my wife wants to quit, but we have the option to quit. Um, so yeah, I mean it's very it's it's written down to the point where I because I feel like writing it down is important for like your brain chemistry, but it also changes all the time.

Reshma Vadlamudi 14:01

Yeah, I think that's okay. Yes, I think things keep evolving. Like for us, when we got started, our why was very different. Now the why is very different. Like keep it keeps evolving, yeah. Um, and same thing with vision, it keeps evolving, uh it can be stagnant. Um so how do you guys deal with the structure? Like you said, like structure has been the most important thing for you guys. So, how does your usual day look like?

Hiring Expectations And Phone Work Reality

Reshma Vadlamudi 14:31

And how do you guys set those boundaries? Okay, this is it, I don't take this for a call after so and so, or it's very tough.

Dylan Koch 14:37

And my I will say my wife is very supportive where I will take calls at eight o'clock, nine o'clock at night sometimes. Um, and that's hard for me to shut off, but um and my wife's schedule is not nine to five, it changes daily. Um, and so the the most routine we have is we drop usually our daughter off at daycare at like nine, and I will pick her up by four or five. Like, I'm usually the and I'm working obviously nine to wherever I pick her up. Um really, I mean it's a day-by-day basis. The the day the day before, the night before like this is what tomorrow looks like, who's doing the drop off, who's doing the pickup, and like we have our own little routine, like I'll take care of the bottles, or like you know, that kind of stuff. Like um that's all there.

Reshma Vadlamudi 15:24

Um and then uh you guys like I know, like I know in the sense, like, is it the pharmacist, is it 12 hours? How long?

Dylan Koch 15:34

They're mostly they're mostly eights. Um, usually eights five days a week, which is in her current rule that you know that has changed in the past. Um it's eight and a half, but whatever, you know, it is what it is. Um but I have more flexibility in my schedule than anything else. And I I'm not the you have to wake up at four in the morning to be a successful guy because honestly, with the with newborns at home, you need sleep. But I will sometimes work from five in the morning, or I'll go, I'll work when Maddie or our daughter goes to sleep at night um for a couple hours. And I will say it is much easier with a a wife who gets it, a spouse who gets it. And you know,

Fatherhood, Priorities, And Life Planning

Dylan Koch 16:14

it sounds like you and your husband work together in the business. My wife really doesn't, like, but she knows what's going on because we talk about it, but um, it's not like she's in the day-to-day operations either.

Reshma Vadlamudi 16:23

Yes, yes. And with the new one, I totally get it. Like you have to, like, whenever he sleeps, is when I can really work, and then I want him to sleep all the time. Yeah. Okay, so how do you balance if that's okay? What is work-life balance to you?

Dylan Koch 16:42

Yeah, like I said earlier, it's not work-life balance, it's work-life balancing. It depends on the depends on the season of life that you're in. Um, and that's all things. It's health. That's your your entrepreneurial journey, it's it's wealth. Um here's what I say. I think I try to be very um, I try to be healthy because I think if you're not healthy, you don't have the energy to do everything else. Um, so we we eat decently healthy. We, you know, um, you know, go to the gym regularly. Um then there's not much to other than I work every waking hour that's not set aside for um either friends or family or you know, being a parent.

Reshma Vadlamudi 17:25

Yes.

Dylan Koch 17:25

Yes. I that's not the sexy answer, but it's the truth.

Reshma Vadlamudi 17:28

Yeah. Then biggest mistake you made in real estate so far.

Dylan Koch 17:33

Honestly, the the that six years, the six year display and golf are because our rents are are so low, um, they're about a thousand dollars a month less than what I thought I was gonna get. And so that way our appraisal came back a lot lower than I thought it was going to because it doesn't meet the DSCR requirements. And so I thought this was to be a deal where I'd have 10 to 15k into it, but I'm gonna have to bring like $70,000 to the closing table on the refi. And you know, I if you'd asked me if this deal is presented to myself, would I buy it? Like if I had to put $70,000 down to buy it, my answer would be no, I wouldn't buy it. But I'm committed at this point, I have to pay off my hard money lenders, and so um, this is like the first time that I've miscalculated, you know, what the end value is gonna be, but I could get in rents, and long term, it'll be fine. You know, we'll get the rents up, like it'll it'll be it'll be perfectly fine, probably a year or two from now, but it's not ideal I would do again.

Reshma Vadlamudi 18:24

Yes, most underrated skill, uh, a real estate investor needs to succeed.

Dylan Koch 18:32

Being a human that can talk to other people. Um the going, I think the networking is part of the you can anybody can figure out the math to do being a real estate investor. The math isn't hard. Um, it's it's knowing the right people, even having a little bit of a sales background if you do what I do, um, and being able to talk to all different because you're gonna talk to investors like sellers who from all different life spectrums, and so you have to be able to have all different kinds of brand new conversations.

Reshma Vadlamudi 19:00

A habit or daily ritual that keeps you grounded and focused?

Dylan Koch 19:04

Probably journaling. And I I'm not best at doing it daily, but but again, like I think getting your thoughts down on paper um is important to clear your head and to go back to look at, you know, periodically.

Reshma Vadlamudi 19:18

Do you have a mentor?

Dylan Koch 19:21

I'd say right now, maybe not, but I have in the past. Um, and those are the masterminds that I've joined. Um, people who have definitely taught me a lot of things that I know now. So um I think if there's ever a next step evolution, whether you buy the big apartment buildings or whatever, because that's not what I'm hunting for right now, then I then I definitely will again, but I would say not right now. Okay.

Reshma Vadlamudi 19:42

Book podcast that's had a major

Work Life Balancing By Season

Reshma Vadlamudi 19:45

impact on your journey.

Dylan Koch 19:46

Well, I'll I'll selfishly plug the podcast I co-host. It's called the Collecting Keys Podcast. Um, I think we do a good job talking about things like this. Um and it's mostly uh a podcast for off-market operators. Um, so I'll plug that and uh it's cliche, but the book that kind of changed my life trajectory was Richard Ford. So unfortunately I have to go with that.

Reshma Vadlamudi 20:10

Yeah, even though he's a CI old man now. But yeah, yeah. What's next for you, personally and professionally?

Dylan Koch 20:19

Professionally, um, I want to continue to grow this business. I'm actually happy with the team size, it's just getting the revenue and the systems in place. Um, it's kind of chaotic right now, as most businesses are. So it's my job to get better systems around that so it runs more like a well-oiled machine. Um, and then personally, um, I have some fitness goals. There's um there's a Spartan race that's coming to Cincinnati that I want to compete in. Um so I'd like to do that. I think it's in July.

Reshma Vadlamudi 20:49

Okay.

Dylan Koch 20:49

Um so I'd like to do that. Um personally, you know, we have these net worth goals

Skills, Habits, And What Comes Next

Dylan Koch 21:00

um that we're close to hitting.

Reshma Vadlamudi 21:03

So yeah, congrats on that.

Dylan Koch 21:05

Yeah.

Reshma Vadlamudi 21:06

If you could give one piece of advice to a new parent who's trying to build vote, too realistic, what would it be?

Dylan Koch 21:12

Probably give yourself some patience. It's probably a little bit harder than social media makes it seem. Um talk to other parents who are real C investors and just be able to have a, even if it's a five minute phone call, um, be able to have those conversations, even if it's the event like this shit is hard. Yeah, that's okay, you know. So connect with those people doing it.