From $0 to Hundreds of Rentals - With Dylan Osmon

All right. Welcome back to The Owner Meeting Podcast. I'm Christian, your channel host. Today, joined by Dylan Osman. I am super excited for this episode. Caught up with Dylan for the first time in a while at BiggerPocketsCon, which is why I decided to wear the t-shirt. I don't usually wear other people's logo, but today seemed fitting. We got the t-shirt, we went to the event, just got back from Vegas. Since I last saw him, this guy's advanced his portfolio immensely. It is absolutely incredible what he's doing. So I am going to bring him on to talk about how to scale, how to structure your deals, and we're going to talk about what the goal is behind real estate. There's no point in buying anything, and quite honestly, you won't get very far in business if you don't have a specific target. For most people, I would say 99% of people, they go into real estate for cash flow. Dylan might have a different take on this, so we'll see what we find out here on today's episode. Dylan, let's start with the start. When did you start in real estate? What was your actual starting point? So let me know like what it looked like, how rich were you when you started and where are you at today?

Cool. So I bought my first place in March of 2020, which was a really interesting month to buy your first place. It was a triplex down in Laurel, Mississippi. At the time I had a job making $40K a year. I think I had about $15K saved up at the time maybe. And I bought this place really, really cheap. Like I said, straight off the MLS. It was one of the worst conditioned properties I've ever bought. It was a, I think I paid $33,000 for it for a triplex and it was, it's pretty cheap. And, but it was rough. It justified it. So, but at the time it was like $300 a unit on tenants paying. So very green behind the ears. Today I'm sitting at 215 units. I've got some properties under contract to sell, so that may change a little bit going forward. But yeah, I'm, I'm going to stay above that 200. Mark for the next probably 3 or 4 months. And then next year I'm thinking we're going to scale up a lot.

So I mean, that is pretty explosive growth. I mean, getting into the hundreds of units in, you know, what is it called, half a decade. That's absolutely amazing. What was a turning point for you from going to like, hey, I did, you know, like, hey, year 1, you bought a rental. Year 2, you know, wasn't explosive growth yet. Where did you go from buying a deal or 2 to were in the multi-hundred unit territory? What was the turning point there?

I think the biggest deal I got was a 22-unit. That was my first big commercial deal I had, I had bought.

Yeah.

And I bought that at the end of '22, I believe.

Okay.

Maybe end of '21. I don't remember exactly. I think it was end of '21, but that was my first large project to buy. And you probably remember your first big deal, but I had started with single families and small multi-families and did a lot of those. And after you get that first big deal, you realize how much easier it is to actually buy bigger deals versus doing smaller ones all the time. And I think, you know, if there was a catalyst for everything I own today, it would probably be that deal. It gave me the confidence to go do bigger deals.

And that, that is a big thing for a lot of people is they start out thinking that, hey, I need to do these smaller properties. I need to do single family. Did you find in your portfolio, did you find a lot of utility from starting in single family? Or if you went back in time, would you have started bigger? I get mixed reviews on this. It's different people. This is like a 50/50 split for most investors.

Yeah, I don't, I'm with you because you hear of some people like, you know, Ryan Pineda where it's like, oh, my first year I flipped 100 houses and it's like, well man, that's a big jump. And, and some same thing, like some people buy 100 units their first year in real estate. I think getting my reps in on the early stuff helped me. It made me a better investor for what I'm buying today for sure. Okay. I realize because of the single family, I need to buy bigger stuff because it enables me to buy, or not buy, but you know, pay the right people in my business that I need. And then, you know, the financing and structuring the deals, it's a lot easier to live off of a million dollar property than it is like a $60,000 house. You know what I mean? Yeah. So cash flow numbers are a lot different. The structure of the deal's a lot different. And then I think just the long-term benefits are a lot different.

Well, and that's a really interesting concept because it's really simple. But you said it perfectly, a $60,000 house or a million-dollar property. A million-dollar property's going to have more top-line income. You can't have that bottom-line income to live on if there's not a top-line. Yeah, 100%. Every expensive property makes more money. You can actually lose more money on a bad deal.

100%.

On a larger deal. But the numbers make sense. If your goal is to scale or you have a specific cash flow goal, typically larger steps are going to be how you get there. Funny enough, that lesson clicked for me on the board game Cashflow, where I was like, wait a second, you win by just always doing bigger deals.

Yeah.

And then you do translate it to real estate. I'm like, oh, well, I'll be darned. That game works pretty darn well.

Yeah. And it's really tough because at BPCon there's a lot of really smart speakers who don't own necessarily huge portfolios, but they're really, they're still getting the life they want. And you know, I didn't get to talk with them, but there's some advantages and disadvantages to having a larger portfolio versus a smaller one. And so I think early on I was really concerned about cash flow. And then one of my later-on mentors, the guy who owns a lot of real estate, he really opened my eyes about like the name of the game is owning as much real estate as you can for as long as you can, because the real benefit's not cash flow, it's actually that loan paydown and that appreciation. And if we can put that on a spreadsheet, you'll see all the time, if you look over 20 years, your biggest gain is not going to come from cash flow. It's going to be from those two things. And so that would be my argument to the smaller portfolio people is yes, it's really good that your $3 or $4 million portfolio is cash flowing like it really well. But I think my $50 million portfolio at the end of this journey, or $100 million, I don't know where I'll wind up, is long-term going to give me a lot of money. A lot of money.

You had mentioned when people are designing the life they want, and we talked about the speaker, there are a lot of speakers there. Some of them don't even have massive portfolios, but they've been able to sustain the life they want. You have a couple hundred unit portfolio, you're scaling. What is the life that you want to build with this? Why 215 rentals and why are you still buying? It's a lot of property.

You know, the targets changed a little bit. I don't know if you felt the same way. That first year I got fired from my job and I can honestly say from 0 to 100 units was fed on nothing but like, I'm never going to work for somebody else again. And like, I don't want to ever I don't ever want to feel that vulnerable to losing my job. So that 0 to 100 unit span was like nothing but almost anger about getting fired maybe. Yeah. Never again.

Job security again.

Yeah. Yeah. 100%. And at 100 units, I had to, like, I almost went through like a slow season for 4 or 5 months because I had to find that new reason why. And I think for me nowadays is a couple different things, but like, I want to be able to give away as much as possible. Right. I really, I want to make a lot of money. I feel like God gives us gifts to make money. Right? Some people are endowed with that and I need to use mine for what he's given me and I want to be able to bless the church and bless people around me. And then number 2 is more lifestyle. You know, my bottom or my number that I want has probably grown as I've made a little bit more money. I'm not going to go extravagant, but my target right now, cash flow-wise, would be $30,000 a month. A lot of my mentors have said over that $300,000, $350,000 a year mark, it's really hard to spend a lot more than that. Obviously, I'm sure you could, but like, they're like, that covers most of our needs. We have a really nice house, a brand new car, we travel as much as we want. It's hard to need much more money than that. So when I first started, $30,000 a year was my goal because that was like, I can live off of that. And that was before I had kids. And, uh, yeah, that's low in Mississippi.

Yes.

Yeah. Well, probably my baseline now is probably 60, 50, 60.

Yeah.

You know, to just absolutely cover expenses. Great place to be. And then, um, but like where I want to be to, to live where I, how I want to, you know, that's probably $300,000 to $350,000. So that's my goal. And it doesn't, it's not going to take that long to get there.

No, no, especially not with where you've scaled.

Yeah.

If you bought nothing else and you continue to just manage it over time, you'll just, that size portfolio will just naturally migrate to that cash flow anyway. Like you've already done the groundwork to be there. You just speed it up by more acquisition and scaling.

And I think that's why it's hard to start in this game is because once you get good, like once you make it to 200, 300, 400 units, going to 1,200 units, 2,000 units is not as much work as it was to get those first 200 or 300. Yes. You start to get the hang of it. And here's the beautiful part. Once your cash flow is covered in this business, like once your existing portfolio gets you a pretty good chunk of money and you don't need cash flow to buy deals, AKA you can buy a deal that loses a little bit of money. Man, I feel like your game changes exponentially because when everybody starts off, they have to buy deals that are, you know, making money. They can't lose money every month when people are starting out. Most people. Yeah. But once you have that real good nest egg building every month, man, like going from there is, I feel like it's going to be a world of difference. I'm not to that point yet, I would say, but I'm excited for that when I get to that point.

Well, and what becomes amazing is your risk goes down as your portfolio expands. I just had yesterday, I had the first ever fire in my portfolio. Fortunately, it was isolated to a garage. The firewalls did exactly what they're supposed to do, but it's still going to be like an $8,000 repair because you have the smoke damage, you have all the city inspection you have to do that is a couple thousand dollars. There's a process when you have a serious fire going into that being like, oh, okay, well cool, we'll just write a check for that. I don't need to ping insurance. We don't have to do that. If you had a single family house, you're making like, couple hundred bucks a month cash flow, the type of stuff that you often see advertised, the bigger pockets for like, hey, there's one deal, it's bringing in $150 a month. $8,000 out of your $150 a month cash flow sucks. You're like, well, I guess we're not making money this year. Maybe next year we'll pay this off and we'll get back. In a larger portfolio, you get to the point where it's like, yeah, okay, let's go ahead and write the check. This is a rounding error in this particular deal. And we have 30 other deals that are supplementing this income. The scale really does provide stability. One thing can happen at one property and it doesn't tank you, which is, I think a big, it's one of the biggest risks that I see in being a smaller investor is as a small business, you're vulnerable to random acts of God happening.

And they do happen.

Yeah. And yes, they do happen.

They do happen.

Over 200 units, I'm going to guess that you have seen at some point a combination of any of evictions, drugs, water damage, or fire damage. I'm going to guess some of those things, if not all of them, have happened at some point.

Yeah. It's amazing how many things break the day after closing. It's like they were destined to.

Yeah. Oh, and fun statistic, 100% of domestic violence happens at home, hence domestic. Yeah. If you rent homes, you have enough people, there will be terrible situations that come up. It doesn't happen all that often to us. We screen well for tenants, but you manage hundreds of people. People can suck too. So you have buildings, you got people, you got all sorts of stuff that happens. It's a hard job.

I remember buying a house in, I'm in Arkansas and I remember buying a house in Gasville that the HVAC was maybe 10 years old, right? And so I bought the house not expecting for any problems. Well, within the first 6 months I probably had 3 service calls. That probably cost me about $1,500 if I remember right. And then after that I had to replace the unit 'cause I was getting tired. It was an old type of Freon and I was like, screw this, I'm tired of doing it. Then I had to put a new unit in that was $9,000 or $10,000. And then I still had to do a little more work to, 'cause the guy who installed it didn't install it correctly. So there's another $1,500 after that. All that to say, that's, you know, $13,000, $14,000 I hadn't planned for when I bought the place. And I almost cringe a little bit when somebody starting off is like, broke, they're paycheck to paycheck and they want to go buy a rental. I'm like, you know, yes, it cash flows on paper, but an act of God may happen this first year. And so maybe it is better to have that little nest egg before you start going and buying stuff. I didn't do that myself. I scaled pretty risky. I didn't have much cash when I was scaling, but I can see where you could get into a pickle very quick.

Yeah. And that's how most people start. If you're starting with less cash, so you started with $15K, which is about exactly what I started with. You're starting with nothing, you have like 3 main types of money. You got cash flow, you got liquidity, and you got equity. Like that's, that's where your wealth's going to be stored in real estate. And so if you're starting with none of those, you're going to have vulnerabilities to some of them as you go. You can borrow any of them from any other player in the market, which I'm sure we're going to touch on here when we talk about equity. But as you go through your portfolio, one of the riskiest times is when you're building. I think you add stability through diversity, not by going into like 8 different businesses like a lot of people think, but yeah, 100%. Don't bank on that one house, that one deal, that one 25-plex being your future. It's coming. Scale up in a measured way. And really, I found responsibly stack cash flowing rentals as quickly as possible. That's going to help stabilize you because now the income's fixed. You're going to have one refi and all of a sudden you have some liquidity, you hold the liquidity and you start to roll and you get some legs on it.

Yep, 100%. I'm probably one good bulk buy away from having enough top line on the rent roll to maybe justify one more really key position, and then I'll feel really safe, a lot safer. It's hard, like when you have one employee and they quit, you lose 100% of your workforce. When you have 5 employees and one person leaves, you lose 20% of your workforce. Uh, like I said, my mentors really opened me up to that on like You know, what does truly risky look like? 30 units with nobody working for you, or, you know, 1,000 units with 15, 20 employees. Yeah, 15, 20 employees sounds pretty stressful, but if you lose one, kind of a crappy day.

Yeah.

It's not that bad.

I found two sweet spots. You have the, I'm a solopreneur with a small, so the keynote for BiggerPockets was Deon.

Yeah.

16 rentals.

Great example.

Heavy cash flow, does not need to scale. All of his needs are met. He has, I, I, I think he sits right around $16,000, $17,000 a month in cash flow.

Yeah. Fantastic.

That freedom doesn't need employees for that. He works like 2 hours a month. That's one of the sweet spots. If your goals happen to be larger than that, which you had mentioned that I happen to also agree. I think the Bible would back you up there. Matthew 25 talks a lot about stewarding resources. Yeah. For those you don't know, called Parable of Talents. Great book. You should read all of Matthew actually, if you haven't read it yet. There's some other good stuff in there. Pretty cool guy named Jesus. But as you go through stewarding resources, if your goals are larger than, hey, I want to provide for myself, go on vacations. You know, Deon had a very specific, I want to get $10,000 a month and now he surpassed that sweet spot. Now he is just like, okay, when do we have too much money? We buy another rental.

Yep.

If your goal's bigger than that, you kind of hit that. It's kind of the worst period of business where you're like, hey, I need more people, but I have a whole bunch of key people. You're probably still wearing 6 or 7 hats. And then whenever that person quits, you have to take the hat back. You have to train the next person. Being really small and elite like Dion or scaling that business to that next level where you're like, hey, I'm liquid. We got multiple, like you said, like 15 employees is the next place you really get freedom. You get stuck in that middle section. It's where a lot of people quit because it gets discouraging. Every mentor I've talked to is like, hey, if you can pull out of that middle section of, hey, I'm a really small business and get to like mid-sized business, it gets way easier again.

Yeah, 100%.

So it sounds like you're in the middle of the really, really hard part of real estate.

Or I guess on the back end of the, I should say. I'm on the back end of that.

It sounds like you're, uh, you, you can see land there. The vision's, the vision's there and you're like, hey, I'm one or two events, but you're on the back end of the really hard part.

Yeah, it depends on your model. Like I'm buying pretty value-add heavy deals and I manage my own properties, right? So if you didn't do those two things, if you bought just turnkey and you didn't manage, no, you don't need employees, but I'm going to guarantee you, you're not going to buy as deep of a discount as I am. Like if you're, if that's your model and you're not going to operate as efficiently as I am either, you know, if you're using third-party management. So Deon's story is awesome. I think it took him 10 or 11 years to get there. I think I'm going to get to the same spot quicker because I was more aggressive with it and I didn't have a job in the middle of it. So maybe there's some time freedom benefit there. But he does have an awesome story. Like he, to me, he had the most relatable story to your average person out there in the world. I don't recommend everybody do it the way I did, but I would agree. The average Joe who works a job and you want to buy real estate and retire in 10 years, that's by far the best way. Absolutely.

It is certainly the simplest way. And he's done a great job in branding himself as the lazy investor. He's like, one of his questions is how much work is this?

Yeah.

I'm going to just go out on a limb and say guys like you and me, how much work is this going to be is usually not the primary concern. It's where are we headed and we're going to get to do it. So let's go do it.

Yep. Pretty much.

Do you have a favorite deal? Was there a project that you had where like this one was just so fun or it's like the returns were just so ridiculous? Did one stand out over the last 5 years? While you think about it, I'll share a very quick one. I did a, it's the one of the least flashy ones ever. 3 beat up buildings downtown Ephrata, Washington. Small, small, small little 5,000 person town. But we bought one building, next building, next building. We ended up with the basically one and a half blocks of downtown Ephrata. We did the retail, we did the multifamily. It's one of the only Washington State buildings where my wife's like, we're not allowed to sell it. I just love the project. It was super fun. I learned a lot and it went well. Probably one of the most boring deals I did as far as like work. It was just renovate, learn how to lease retail. And now you go to downtown Ephrata, I'm like, we own a ton of this. This is crazy.

Yeah. It's our street. Yeah. That's our street.

You have any, any deals that stand out where you're like, hey, this one was just awesome?

Mine's kind of similar to, I've got two, maybe I can have time to do both, but one of 'em is the resort that we live at now. It's called Cranfield Resort. Yeah. It's right out from the lake where we live. And, uh, it was the first larger complex that I had bought solo without any partners. And so I really like that about it. But it's just, it was a fun property when I bought it. It was all short-term rentals, 100% of the place. Since then it's like 85% long-term rentals and I still have a few short terms in there, but I'm ready to get rid of 'em. I'll tell you, be honest. Don't like hospitality. Yeah. But since then there was a resort across the road that used to be under the same ownership. And then there's a resort right next to it and then a resort next, right next to that one. Well, yesterday I closed on that fourth one, so I now own all four resorts right there. And so that's a total of like 45 units. So that's pretty cool. I like that. I kind of got to own the whole block there, but I put a pickleball court in. The one across the street's got a wonderful lake view. It's just kind of a cool project. Yeah.

So, well, not on the pickleball court, by the way. That is a fantastic resort amenity. Yeah.

Yeah. It costs more than what I thought it was going to. I gotta get some pictures online for short-term rentals so I can start monetizing it. But the other deal I bought was just so creative. And fun, and it was cheap. Like it was not a very big deal, but it's just simple. I had reached out to somebody on Facebook Marketplace and they had a rental posted and I was like, hey, you wanna sell this? Right? A totally free way to find a deal. That's what I like about it. And he said, no, but I've got another property I would sell. And so this was a single family house. I'm hoping I remember the numbers here, but he sold it to me for $24,000. It had an existing tenant at $500 a month. These are really cheap numbers. This was in Mississippi. He seller financed, uh, I put $4,000 down and he seller financed the rest at 0% interest of 60 payments. So I was paying like $300 a month, something like that.

Yeah.

Uh, just a very textbook deal. I raised the rent instantly to $600. So it was cash flowing. I had one maintenance call on that place in the 2.5 years I owned it. And that cost me like $800. And it was just the smallest little janky house ever, but it was just a funny deal and I sold it later for $40,000, $38,000 or like $42,000 after owning it for 2 years. And I already paid down, you know, $20,000, probably $5,000, $6,000 worth of principal. So I made $25,000 on this deal that I spent no money to find, owned, and just had zero headache with it. And I, it was just such a funny little deal. So.

You had mentioned early on, you'd mentioned the big benefits are appreciation and debt paydown for building wealth. I recently had Coach Carson on because he said something interesting. Actually, I had BP on. He's one of the only other people I know who do this. We're talking about how he likes to pay down debt without having a strict amortization schedule, how they prefer to do it. What is your strategy for debt paydown? Do you just stick these all on an AM schedule and just not relever them? Do you have a, do you have a specific method that you target for how you manage debt paydown over time?

You know, I don't have a specific strategy right now. My strategy is to get more debt. Like the more debt I have, the more debt I'm paying down, as long as it's good debt. So if there's any strategy, that would be it. Will I ever pay off all my stuff? I don't know. There's a lot of arguments out there on this, obviously. One of the biggest ones my mentor has, which I tend to agree with, is you know, when you own a lot of assets and you own them outright, maybe you're somewhat liable or vulnerable for lawsuits. And so a good way to protect yourself on that is to have debt on properties. It's a lot, not harder, but people are maybe less likely to sue you when they see debt across your entire portfolio, because obviously that bank has to get paid off in a cataclysmic event. So that would be one argument for not paying off debt., you know, two different ways. I could pay off the debt, live off the cash flow, or, you know, re-lever the debt out every year and live off that. So at this point in time, I don't know, dude. I, I'm not trying to pay off any debt because I'm still scaling.

Yep.

At some point, if I say, hey, I'm going to stop scaling, maybe I'll, I'll look at that side of my business, but get the cheapest debt possible. Right now I want the longest amortization possible because I'm more, I care more that I own the deal. So the better my cash flow is, the more likely I can buy that deal.

I love it.

Yeah.

The two models that I've really appreciated, I've had a bunch of people on the podcast who've had different ideas on this. I have found that the wealthiest, happiest, least stressed people I know at some point paid off their entire portfolio. So one of the guys I learned from is named Gary Mann. He lives in Central Washington. He's, you wouldn't know him unless you met him. Cash flows $100,000, $120,000 a month. He has a couple hundred rentals completely paid off and he just kind of just lets it ride. Still has his most expensive vehicles, like a $17,000 car that he fixed up. He's just a simple guy who makes a boatload of money. Very stress-free way of living. But the model that he had, and I really like this, is get as much interest only as you can. So he stacks as little debt paydown in his portfolio as possible, save it all in the side account, and then when it's great enough to pay off one mortgage in full, kill the mortgage. Now you have a debt-free property. What he ended up doing, and I'll probably copy this, one, if you have a ton of income, It's one of the best things you can do to legally protect yourself is pay to win every lawsuit. So it's a very helpful strategy. But another thing he did is he just put together a holding company. That holding company lent to all of his. So he has debt on the books, but if you really traced it through, it goes to a company that he has in Wyoming that is also still— if a lawyer was to look at it, they would go, these properties are encumbered, not that much to go after if you did a deeper dive. You'd find, okay, he doesn't really have debt. He's just paying himself from 100 properties to one location in the form of debt.

Yeah. Mentor's talked about, I think, I don't, I'm not an attorney obviously, but when I get to that point in life, that'll be one of the things I look into is how can I show debt even though there's not really any debt on the property?

Well, this is the rate that you're scaling. You'll be there pretty soon.

Yeah. I don't have to worry about showing debt at this point. It's already there. Yeah.

Yeah.

Yeah.

Right now we don't have to worry about showing debt. Yeah. Rocking tens of millions of dollars of debt, it's pretty easy to show debt because you in fact have a lot of debt. Which brings me to one of the last couple questions I had. When you, we mentioned this before we turned the cameras on, how much equity do you have in your portfolio? Do you bring in partners? There's a bunch of different strategies that were discussed at BPCon and most of the people at BPCon don't have any partners, which I found interesting. So how much of the 215 units is really yours?

Yeah. No, and I like being candid about it because— Me too. I really hate, I really hate door count as a metric because it's really horrendous. It's a vanity. It's a vanity metric, to be honest.

It has nothing to do with how successful you are.

Yeah. My unit count by equity percentage is probably like 130, 140, and I use partnerships really heavily when I first started, which is probably, I can't say it's a regret because I don't want to throw any of those partners, like I had, I liked all my partners, but like looking back, I shouldn't have partnered as much. I should have taken down some deals solo. Should have, could have, would have, right? They got me in the door. I did the deal. But to answer your, I'm sorry, what was your question on that? That was door count.

Just what, what does equity look like for you? Equity. So, so it sounds like if you're like 130 weighted out of, so you're, you're a little bit over 50% equity of your 200, you know? Yes. Or as far as the ownership.

Different partnerships. Yeah. Different, no partnership on my less than 50% ownership on.

Very wise.

The only partnership that I want to continue to really scale with, I own 66% of. I own two-thirds. And then the rest of everything I'm gonna continue to scale just solo. I need less, I need partnerships less than I did 4 years ago, obviously. In fact, I just got my first return where I actually owe the government money. So I was a little bit sick before I got on this call. I'm about to write some checks and put 'em in the mail. It's October 15th.

Not enough, not enough cost segs.

We did a cost seg, but I actually wanted to show some profit this year. So I've never really had to pay taxes up to this point, but, uh, it was, I needed a good year of tax returns with the bankers, especially since I'm about to start buying a lot of stuff solo and building. So anyway, yeah, total portfolio probably worth market value-wise, I'm probably at $7 or $8 million. And on that I've probably got 3, looks like 3.8 of debt on it. So I'm between 3 to 3.5 on, you know, net worth in the portfolio.

That's a fantastic place to be. Absolutely fantastic. And you built that in a relatively short period of time doing that in 5 years.

Yeah. When I looked the other day, I was actually a lot less leveraged than I thought. I used to think I was like 65, 68, and then I looked the other day, I'm like, I'm more like 50, 55. So I need to lever some stuff up and get some cash. Yeah.

Oh, that's again, great place to be. And I think we're entering a good market cycle here. I'd probably hold off till the first of the year since we have a couple more planned little teeny rate drops, but like January, February should be a better time than it has been the last 3, 4 years to hop in.

Absolutely.

Re-lever the portfolio, get a decent interest rate on a whole lot of money. Well, that's going to feel really good because now you're going to be holding liquidity, cash flow, still in a very strong equity position. If you're, if you even just push from 55 to 65% leverage, you're, you have basically an unlosable portfolio.

Yeah, I'm gonna have a lot of liquidity by the end of the year regardless, because I'm selling off a lot of those old partnership deals. And so I've got some good liquidity events happening this year, uh, anyway. So I am very excited for '26. I think it's going to be, I'm going to go into the year with the most cash I've ever had, uh, with the clearest buy box I've ever had. So I just feel like it's going to be a Really good year of growth.

Oh, I love that. And I'm very happy for you. I, uh, perfect transition to our final question. So I, I had a, uh, a million four of cash. I finally got my liquidity, got liquid to a million four and had to spend it all getting rid of partners. So that's a good, unfortunately only owed the IRS, uh, $17K after making, uh, about $2 million.

Oh, that sucks.

Over a year or so.

It was a great step. Mine was opposite. I got the liquidity because I left the partners.

Yeah, I got, I paid the bill for the partnership structure and it wasn't a planned paid bill. That was partnerships. People made bad decisions unrelated to our partnerships and they needed to be emergency evacuated. Otherwise they would not pay the balloons. So I had to take, buy them out and cover the balloons. So that was a bummer portfolio. And at $1.4 million in cash, which is hard when you start with $10K, that was my stupid tax, $1.4 million. Of too many partners and not rich enough partners. It's nice to have partners who do not need the money. I had some partners who needed the money, lost the money outside the business, and I saved a few of them. For you, when you start, you're the dumbest you'll ever be by default because you'll have more experience the longer you do things. In the first 5 years, if there's one mistake that you made where we could save listener to this podcast a bunch of pain, either friendships, monetary, time, any of them? What's the highest tax you've paid?

Is this for a first-time investor or any, any level?

Any level.

Any level. Okay. Well, because I could go down the same route and say partnerships. And like I've, like I said before, I don't 100% regret them, but I gave a lot of, a lot of value away there and there were some inefficiencies that came from that. But I'll tell you what I'll give you. Is bad employees, dude. I probably, my first year of getting employees and having employees, I paid a lot of money out from bad employees. And that was a cost of learning how to be an employer. But honestly, I probably had $50,000 to $100,000 in bad payroll because I just didn't know how to manage. And that's, that's a guess, right? When you hire somebody, you want 100% value out of them, but they may only give you 30%, 40% of what you're paying them of value. So Now I'm a lot better about fire quick, hire slow. But, um, that would be my lesson. When you first start hiring employees, hire really, really slow and fire very fast. And you have to be a lot— your expectations have to be a lot higher than what you think they are. And also, I would say don't hire an employee unless you have clear data showing whether what they're doing is a good job or not. Don't rely on your gut, okay? Have clear data that shows what, what the expectations are of your employees, and then if they're hitting those or not. It needs to be black and white. So I had a lot of bad payroll, especially on the construction side.

I, I definitely, definitely agree with the fire fast. That is the number one. I'm okay with, with working on stuff. And I always ask the question when you have an employee problem, hey, is, are they failing because I haven't given them the tools to succeed or are they failing because it's the wrong person in the wrong position? And if you find it's the wrong person, you need to get them out. If there's a question of whether or not you set them up to fail, I'm all for giving second chances. Uh, 0%, never third chances. I could reflect and they can, they could be like, hey, you know, was it them? Was it me? Let's, let's have a conversation and rework it. If it does not turn around immediately and aggressively, it's like the faster you get them out of the org, the better it is for your company, your other employees, you, them, because they're never going to succeed here. Uh, it's the best thing you can do. We have. Different experience on the front end of this. This is actually interesting. I have found that the person that I get in the interview, regardless of how much time spent, the people I'm the most excited about, who we spent the most time on, is not always the employee you get. And I sometimes have to fire them just as fast. So I've adopted a fire fast, fire fast, get the right person in, trial by fire has worked really well.

Yeah.

But I also run a few companies that are like sales and marketing where they're inherently high burn rate anyway.

Yeah.

So we have that HR engine just just kind of rolling all the time. I don't want to be a revolving door and we try very hard to keep our best people, but I've been burned on that strategy before. How have you made it work for you where you're able to fire slow and get the benefits of taking that time?

Because some people can't do it.

Yeah.

Well, so to be honest, that's what I want to do. I'm probably more on your page. Like when I'm interviewing somebody and I like them, I get a good vibe. I'm like, hey, you ready? Let's go. Like you're hired. Yep. That's where I need to slow down some and like, no, like our company policy is 2 interviews and I wanna set it up like where my employ— my current employees do the first interview. If they like it, they make it to me. Mm-hmm. That's really what I wanna do. And I mean, like I said, like it's good in theory. I haven't executed as well as you think. Like I'm still bad about hiring too fast and firing too slow. It's something all of us have to overcome. Mm-hmm. And I do like that, like. It's, it's hard to tell how good somebody's gonna be in an interview. The best way to know if somebody's a good worker is work with them for a week. Like how fast do they catch on to stuff? That's a pretty big indication on if they're gonna work out or not.

I agree.

100%. I'm a little impatient, probably. Like I pick up stuff pretty quick and I already know it, so I know I'm a little impatient with that. But like, if I do it and you watch me do it the first time, and then I watch you do it the second time, and we maybe a third time we do that. If by the 4th or 5th time of us going over this task or thing, if you're not picking it up, I don't know if you're gonna cut it. Like, I'm sorry. Like, I, I just, I can't go over this with you 100 times. Here's a Loom video. If you didn't pull every detail from that Loom video out before coming to me with a question, bad sign. Like, I may not want you on my team. You gotta be able to figure stuff out, make decisions. Just, I don't know, when I give you education and you don't follow it all and you come to me with a question, oh my gosh, that makes me mad.

So that, that is one of the quickest ways to get axed. I, I, I had a person who was put in a key role where I, I, I realized I need to get rid of them, but we had to get the right person in to backstop them. It wasn't a role where we could just like not have someone in the slot. And so we got through and it was, yep, it was literally every day it was a question on something we'd gone over before. Or you assign a task to them and then they call and they, they call someone else on the team. They're like, hey, can you do this? And they just like delegate everything to everyone else. Absolutely awful. Have you had Have you had any bad firings yet? Have you had a firing?

Oh, hell yeah. I think my firings have gone worse more on average than not bad. And it's sad, like, you know whose fault it is? It's mine. Because I think as employers, we think we're the only ones that see if something's not working out, but that's not the case. Like, if it's a bad relationship, both sides feel it.

Yeah.

And so I have let employees stay too long. I didn't fire them quick enough. And it got so bad. I was getting pissed at them. They were getting pissed at me because I was getting pissed at them. And so by the end of it, it was just a blowup where I would have saved us both a lot of headache if I had just let them go 3 months earlier. But no, I just wanted to keep giving them more chances and more chances and thinking it would work out. And like, no, it would have been better if I just fired them 3 months ago. They would have been only, you know, a month or 2 with me at the point in the company. Yep. You know, the writing was on the wall, but instead I just let it boil over and it just turned into a bad ending. Yeah. And, uh, so that's, that's been a big learning lesson on employees. Yeah.

I hope everyone hears this and is able to apply that. If, if you haven't done a lot of hiring or firing yet, that, that getting rid of the wrong people first is the kindest thing you can do for them. And it takes a second to sit in and a lot of people are gonna make the same mistakes. I've made 'em, you've made 'em. You hold the person in the position too long. Now they're leaving frustrated. Now they're upset. That's where you're gonna get the bad review for your company. My worst one, uh, turns out they're kid was an ex-convict and they, they tried to come after us.

Fortunately, yep.

I posted up our, uh, our contractor who's 6'4" and about 285 pounds, knowing that her son happened to, uh, happened to be a potential problem.

But like, I mean, it's, um, you can have, people can turn ugly at the end. I just, there's no other way to say it. Like, I just had an employee that, uh, had been cordial with me the whole time, had a great employment. He wanted to go out on his own., and, uh, you know, his PTO policy, he didn't get PTO after his— long story short, he put in time off for time after he had left the company, and then he wanted money for the PTO, and I was like, no, you had left the company, and it was after. Yeah. And then next thing you know, it's like, oh, I'm threatening lawyer. I mean, it just turned into the ugliest conversation ever, and it really sucks, like, that good relationships can turn sour that quick. And I'm bad as an employer. I want to be friends with my employees. I spend time with them all the time. And I've learned that lesson enough, as painful as it is, you just can't be best friends with them. You just have to keep them— unfortunately, I care about them. I know about their life. I know about their goals, but we are not going to be best friends. We're going to be friends. I'm going to like working with you and hopefully you like working with me, but like, we just can't be friends or best friends. It just turns too ugly at the end.

Of all the times people threaten with lawyers, how often do you actually see anyone ever actually go through with it?

Tenants are more litigious the right word where they want to sue?

I don't know if that's right.

Yeah. Tenants are more sue— there's more tenant lawyers out there now than ever. Yeah. And it seems like once a month with an employee or a tenant, I'm having to be like, at some point you're like, send it. If you think you got grounds for whatever you think legal-wise, go for it. Like, yep, you're wrong.

But I have gone through 2 legal battles out of 30, 31 partnerships. And 400-something units.

You got 31.

I've had 2 where we actually had to go to court for anything. It wasn't even court. It was like the, it was mediation. So we didn't even go into like full— we probably get someone once every other week. Well, I need this, otherwise my lawyer's been informed. Oh yeah. Well, we just, I just forwarded my lawyer's contact. I'm like, excellent. I don't handle that. Here's my legal team. Yeah, just so you know, we're like 40 and up, but go for it.

Our communication is done when you bring up the L word. Like when you say lawyers, okay, sounds good.

Awesome. I have a house lawyer.

You're going to love them. I had a, I've got a complex, one of the resorts, we cut down a tree and the tree probably sits this high up off the ground. You can see it. Anybody can see it driving around. And this tenant had already lived there for 6 months. So I know they've already missed a tree at this point.

Yeah.

Well, one day they just rammed this thing. I mean, high-centered this stump on their little car. I don't know how much damage it did, but that was grounds for him to sue me and get out of his lease and this and that. And, you know, I owed him this and he wanted me to sign this document, which is bullshit. Uh, so yeah, I mean, we have those conversations all the time, but—

Conversely, don't hit trees.

Another option. How long have you lived here? 6 months. Have you hit that stump ever before? No. Okay, so why did we hit it this time? You were texting or something?

I don't know what you were doing. People, people are silly. I've had, I had a tenant try to invoice me for renovations on a building because she got up on the roof and damaged it with a shovel.

I had a tenant complain at me that she was able to get out of our lease or I owed her money because we started construction on the RV pads next to her place. And we started at 7:50 AM on summer days where it, you know, topped out at 105, 110 degrees. And that was early in the morning.

It's like, okay, I think $750 is more than reasonable for, yeah, for a hot area where you can't do work during the middle of the day. Yeah, I'm going to say that's probably fair. So people are crazy. People are crazy. Well, there's a lot of ups and downs, but I would say super, super worth it. At the end of the day, that's what the money's for. It is. We make a good deal of money because it is a hard job and there is a lot of things that can come up and be it a fire or firing. A tenant threatening to sue you because they hit a stump that they've known about for 6 months, whatever it is. That is why we're in the business that we're in. Not only is it a rewarding business, we get to provide housing, but it is lucrative for these reasons.

The money is there so that you can use it to continue to grow the business.

100%.

I love what I do every day. I'm sure you feel the same. I love what I do every day. Oh my gosh. Yeah. We saw new, it's never, it never gets old and boring. You saw the, especially the more you scale, the bigger the problems you solve. And I think that's the fun of it. Like in the moment it feels really stressful and it feels like it sucks, but you know, a year from now I'm going to look back at problems I'm having today and laugh. And you know, that's always going to hold true. It's funny hearing a new investor and the problems that they're going through buying their first deal. And you're like, man, I remember when that used to be an issue. Like they wouldn't want to lock up a good deal because where will I get the money? And it's like, oh man, I remember when I used to think about that.

That's the, And the fun thing, and this is what I've learned, is where are you going to get the money? You're going to get the money from the next deal. Like the next deal will always tell you what type of money it needs. Is it high cash flow? Is it high upside? The right investor for that deal, the right loan product for that deal. You're not going to figure it out before you have the deal. If you're trying to pre-find all the capital, it's never going to happen because you have no product to sell. It's like trying to— a car salesman trying to come in and sell you a car before they have a vehicle on the lot. Oh, what do you want to pay for payments? I, we'll probably find something like that. Oh, cool. What color do you have?

I don't know.

I don't have the car yet. Like, how are you going to pitch a deal without having a deal? I find the craziest thing where people feel stuck on money. The money will find the deal. Your job as a real estate investor is the real estate. Put together the deal.

Yeah. And it's not even just money. I've seen people not do deals because, oh, I don't have a contractor yet, or, oh, I don't, what if I can't find a tenant? It's like contract, you have to understand, you don't have anything that need a contract. Yeah, I know. I know. I've been through it round and round, but it's, that problem does not stop, right? If I go buy 100 units this year, I've never done that in one year. Like I'm not going to know how to do that until I just go do it. Like really good entrepreneurs are really good problem solvers. That's part of this game.

So, so go, uh, go negotiate a problem to solve. What a great note to end on.

I like that.

That's a great piece of advice from Dylan Osmond. Go find a problem to solve. Go make a problem to solve.

No kidding. Go get a problem. Yeah.

Go get a problem. You don't have enough problems.

You don't have enough money.

You probably don't have enough money. Uh, go ahead and get more, go get new problems, get bigger problems, solve them. And, uh, that's where you make the big bucks, solving big problems. Dylan, awesome having you on the podcast. It was awesome seeing you last week, dude.

You as well.

That was a good talk.

Yeah. Oh, you made me miss one of my breakout sessions, but it's okay.

It was— I apologize. I have a habit of doing that.

No, we started talking and I looked up, I was like, oh crap, it's been an hour and a half.

So, so unfortunately I talk for a living, so I will, I will in fact do that. Dylan, awesome having you on. Thank you for sharing all of your insights. For everyone listening, this is the Owner Meeting Podcast. Download literally everywhere. We're finally top 100 on iTunes for business podcasts. We beat Alex Hormozi for exactly 2 days last week. So, and then he's right back on top. But thank you guys so much for helping us grow this channel. We do these owner meetings specifically because you learn by learning from the people who've already built the business that you want to learn. If you don't have time to do this, you're trying to escape the 9 to 5. I do my best to find the most interesting people I can so you can learn from them. Dylan, awesome takeaways. I'm going to be thinking about this hiring slowly thing again. I'm going to rethink some of this. You've given me a bit to think about in how we run our companies, which I massively appreciate. How does someone reach you if they want to follow up? If they have a deal for you, they want to invest with you, they have questions about this episode. How do they reach Dylan?

Yeah, man, uh, Instagram is Dylan-Osmond. Facebook is— I don't know how you say your Facebook tag— Dylan.Osmond, whatever it is. Same thing, D-Y-L-A-N-O-S-M-O-N. Uh, I'm more active on Facebook. I am starting my own podcast, uh, the Do Real Estate Podcast.

That's fun.

And, uh, yeah, guys, I'm in northern central Arkansas, Mountain Home. So if you're around me and you want to do deals or you got something in the pipeline, let me know.

Alrighty, thank you so much. We'll see you guys all on the next episode.