Fear Of Failure To Financial Freedom | Dylan Koch | Part 2

This episode isn't about leaving a pharmacy.
It's about the decisions that determine whether leaving actually works.

In Part 2 of this conversation, Dylan Koch - former pharmacist, full-time fix-and-flip operator, and real estate investor based in Cincinnati - breaks down the mechanics of early wealth building, partnership structure, and the mindset shift that separates operators who sustain from those who stall.

Dylan didn't leave his W-2 on inspiration. He left on fear - fear of walking back into that pharmacy three months later. And he's direct about that being the fuel, whether or not it's the healthy kind.

This episode covers:

• The first house hack: Oakley, FHA financing, $9K to close, and what the actual numbers looked like
• Why Dylan got his real estate license - and why it has nothing to do with representing clients
• The partnership that worked, then didn't - and what the warning signs actually looked like from inside it
• Why matching vision matters more than complementary skill sets
• The LP multifamily collapse most investors won't admit: five of six deals in his mastermind gave keys back to the bank
• The "time, energy, capital" framework for anyone trying to exit a W-2
• What a real operating agreement needs to cover - including the scenario where a partner dies and you're forced to sell half your portfolio
• The mindset shift from "nothing to lose" to "protect what you've built" - and why that transition is harder than the original leap

Dylan runs a seven-figure transactional business while continuing to add rental units. His model: build massive active income, convert it to passive. He's executing it now - not in hindsight.

This is Part 2 of a three-part series.
 Start with Part 1 if you haven't yet. Part 3 picks up the operational side of his current business.

Chief Milestones is a series studying how real operators build durable businesses under real constraints - capital, regulation, systems, and life outside the business.

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

Fear, Risk, And Momentum

Dylan Koch 0:00

One of the main motivations to not fail was the fear of failure amongst probably my peers at the time. There's a lot of my colleagues talking about this freaking crazy. Like you have the cushy job, you know, that gives great benefits, makes low six figures a year, kind of go into the unknown. And I did not want it to be three to four, five months later, and they're like, oh, he's back in the pharmacy again. And I don't know if that's the right motivation, the healthy motivation, but it's it's what it was. At the beginning of nothing to lose, it's kind of balls to the wall, kind of, you know, do whatever it takes. And now once you have some a little bit of wealth or a little bit of money, it's like maybe back off a little bit because you don't want to lose whatever you've already built. Mindset and that business is around make massive income and turn that into passive income.

Why Get An Agent License

Reshma Vadlamudi 0:51

So how about the so when did you with all this? Like so what is going on? When did you decide that you want to be an agent also?

Dylan Koch 1:00

The agent was all I don't help retail people with being an agent. Yeah, it's strictly to list your own flips and have a little bit more data, so I have access to MLS.

Reshma Vadlamudi 1:09

Okay.

Dylan Koch 1:10

So there's really not a whole lot to to the list, or if we list an apartment or something like that, like I have the agent stuff. So I really don't help residential people with that. It's just more of a convenience thing.

Reshma Vadlamudi 1:21

So it's mostly for your own flips, and also investors or mostly I'd say no.

Dylan Koch 1:30

And I've had I've had investors reach out and I I get it. I and I'm I'm happy to help in any way that I can, but my time is already constrained as it is. So to go to you know across town for an investor showing he might be out of state, it's just not the best return of my time right now. And that and that's you know, the maybe self-crazy. Yeah, you know, I decided I'd like to say yes to everything, but I you know, my time is more important on my own business right now and my own family.

First House Hack Numbers

Reshma Vadlamudi 1:55

So, yes, you actually told us like what your first deal was. Um so can you tell like explain what that house hack was like and more on members? Do you remember anything?

Dylan Koch 2:09

Yeah, um Oakley, um, but for 272,000, I didn't know what the hell I was doing. I one of the guys at my gym was an agent, so he he was like who helped me through it. Um, I read in one of the books that I could get three and a half down with an FHA, not knowing that FHA might not look good on paper, right? And so I I made a we looked at a couple places kind of around town, and I was so set on my rent being higher than the PITI that we said no to a lot of places. But my agent kind of sold me to his credit on the Oakland area um back in 2018, and we bought this place, and it wasn't it wasn't perfect, you know, the numbers wise, but my living expenses would be dramatically lower. So 272, 3.5% down. I think I brought 9K to the closing table or something like that. Um had PI had uh the PMI because it's you know the low-down payment. Um, it was a two-bedroom, one bath on the first floor, two bedroom, one top on the top floor. Um off-street parking. And I rented to my one of my college roommates' brothers and his girlfriend for $1,500 a month, which honestly was probably kind of pushing it at the time, but they wanted a nice place to live, they knew us. Um, I was gonna let them have a dog. Um, so you know, it's just kind of figuring it out as you went along. So I think all in all, when you do P ITI, and um utilities were not split at this on my first one. I did, you know, it's something I learned later on. Utilities, I think I was my monthly payment was around 2,000 to 2100 bucks. They were paying 1500 and then eventually my girlfriend lived in, and yes, I charge like $200 or something to rent, and she's now my now life, so it worked out. But like so, my personal living sets were extremely low, and that allowed me to save more money. And I

Intentional Life And Work Seasons

Dylan Koch 3:59

guess the the point around all this is I'm trying to tie this back into what I see successful people do, is live life with intention. And what I mean by that is is plan it out, you know, plan out the um what do you want your life to look like five to eight years from now, not just capital-wise, not just financial wise, but you know, who you're spending your time with, what does your day look like, this net worth, you know, all the aspects um of living a full life, in my opinion. And um I'm sure you guys can deal with this. There's like this hedonic trend all people talk about. You get to a certain wealth point, and um it's like what's next, right? The life of an entrepreneur is like, you know, what can I do next? And I have, I guess, two different takes on this. Is one, yes, be happy that you probably completed what you did a couple years ago, right? I actually journal sometimes, and one of the things I wrote down um I was reflecting was I hope I have you know X amount of net worth a couple years from now. I'm well past that now. And I'm almost complaining about some of the problems I have now, and it's good to have that perspective to go back to, right? Like don't complain about the things that you're once dreaming that you had. Um, but two, the other aspect, the other half of this is once you accomplish something to that, a new level of what you know and think is possible now exists. And now that is like the new bar to reach. And so, yes, like live life with content, figure out what enough is, but also I don't feel guilty about wanting more because now there's a new level that I know I can reach. And it's almost like the more that you can propel yourself, the more then you can propel other people. So that's my tangent on that, I guess.

Reshma Vadlamudi 5:35

Yes, yes, and um I can't agree more with that thing. Like, but then the only thing I would like, I wouldn't say constraint, the only thing is I I would just stop and take a look back if my kids are in it, or if I have to just slow down a little bit. Um, that's the only time. And I and like both of us, like me and my husband, both of us, we don't want to limit ourselves. If you want something, yeah, we it I think I want to tell my daughter and my son the same thing. Like, if they want something, there is nothing wrong with it.

Dylan Koch 6:09

So the dichotomy between um being there for your kids, having the time, freedom to be there for your kids, going to sporting events, the ballets, you know, whatever it may be, but also showing them, hey, mom and dad and us have this life because we worked our asses off to get here. Right. And so that that's a balance I don't think anyone will ever truly figure out. The line I I take from Brandon Turner all the time for this is um it's not work-life balance, it's work-life balancing. And it's always uh an act between what season of life that you're in that you're gonna figure that out.

Reshma Vadlamudi 6:39

Yes, yes. For some days it's just work, work, work, and then some days it's just family.

Dylan Koch 6:44

Yeah, totally, yeah. I mean, like the people, the highlight reel of Instagram doesn't always indicate that. And now we're putting ourselves in this unrealistic bar and barrier that many people like they don't have kids, you know, they they or their whole life is around their content creation, and so the incentives aren't there. You know, most entrepreneurs I talk to, yeah. I mean, myself included, I'll post the highlight reel on Instagram, and I try to be um also share some of the losses because sometimes you're in it, it sucks. You take financial losses, you don't do the loses, it's very stressful at times.

Reshma Vadlamudi 7:17

And so, like, I don't know, I think we need more of that and less of the yes, and we we need to talk about it, but then it's also not easy for us to put it out there, especially when you're going through it. Yeah, but when you're going through the highs, it's so easy to share. I think that's what what's happening with most of us. Like, yeah, when you're in it, when you're at the thick of it, it's like you don't you're not open to talk about it. Totally.

Dylan Koch 7:42

I think your peer group also matters a lot with that, you know, not only the real estate investment groups, but I've joined a couple uh masterminds for business owners for um you know certain net worth individuals, and you know, your circle of friends that you hang around with might not be in the like you can't share those those shared pains with a lot of people that might be close to, and just being around people that also have that helps a lot too, and then having the vices, whether it be exercise or you know, hobbies, what do you know, pick your hobby? Like having something you can get your mind off of too also helps a lot in that regard.

Reshma Vadlamudi 8:13

Yeah,

Multifamily Hype And Hidden Losses

Reshma Vadlamudi 8:14

yeah. So uh, were there any key mindset shifts or financial milestones you had that gave you the confidence to go all and on real estate? Asking this for someone who has like a W2 and want to do something else doesn't have to be real estate.

Dylan Koch 8:34

Yeah. So I'm gonna answer that question in a second. I want to tie back to what we were just talking about one more time. Yeah. Especially because I think this is the line of business that you are in. Um the the GP side of things. The past couple years, especially multifamily real estate, we had zero interest rate policies, people were underwriting for perfection, and then some. And you saw all of these um influence content creators and how they bought 3,000 units or 2,000 units. And in fact, one of the groups I'm I'm in, it's called Go Bundance. If you used to listen to bigger pockets, you've probably heard of it. Um, but I had a guy in my little group who was an LP in six different deals, all multifamily from all across the country. 50,000 a pop. Five of the six gave the keys back to the bank. So I say that people don't share their losses, they only share their wins, and especially this past couple years where it got so hot and they had these bridge debt, and now the time to refinance is like that's not the reality for a lot of the times, right? And so find an operator that you trust that has a track record that they can do that, and they made it through the past couple years unscathed, or if they didn't, they were up front and communication was was good. Then, like that, I guess, is my uh two cents for that. Now, sorry, going back to that question. Um, it's for most of the things.

Reshma Vadlamudi 9:49

I want to I wanted to add on to that because I I interviewed someone in Texas, we just got back from Texas, and he was an LP in a couple of deals, and the total money he invested was one to two million so far on different deals, and uh he's like, I'm still giving them money to this day to make that deal work out.

Dylan Koch 10:11

Yeah, capital calls, all that kind of stuff.

Reshma Vadlamudi 10:13

Yes, he's still taking those, yeah.

Dylan Koch 10:15

So yeah, I know, and like and and you know, I saw some of the pitch decks like because I got pitches to be an LP in some of these, and even local in Cincinnati, I would see like their five percent rent rent growth for the next five to ten years in places like Avondale. You're telling me a one bedroom in Avondale is gonna rent for sixteen hundred dollars a month? No, it's just not gonna happen, or they're trying to exit at a three percent cap rate. Like, I'm sorry, that's not like wasn't realistic from the start. Yeah, um, and so I think I mean unfortunately the LPs who got caught in that who might not know better. You know, those are the people I feel the most sorry for, not the GPs who took the who took other people's money for that. Yeah, um

W2 Hustle And Skill Building

Dylan Koch 10:53

yeah. So going back to someone who's starting who has a W-2, I mean, what is I'm gonna steal this from promotion. There's like three things that a business owner or someone has to do to do business: time, energy, or capital, right? And I guess if you don't have the W-2 taking a lot of your time, like then you know, or what it is, you have to have two of the three to try to move forward. And you know, if they're just trying to be uh to to do what I did, I guess on their own side, is you're gonna have to, I mean, there's nothing around the work that you have to do around hustle. You're gonna have to probably work some nights, you're gonna probably have to work some weekends, um, you're gonna have to maybe take phone calls during the day. Like, you know, I don't know other than find try to bring value to other people. I know it's a cliche, cliche answer, but find someone who's doing what you want to do and see if I most people I've I've talked to are willing if they show that you're hungry, they should if you show that you're that you're not just a leech, like they will pour some time and reference into you. So find that person that you want to be get try to get mentored by them and honestly is do whatever they say. Like, don't try to be cute with that. So I don't know if that answers your question or not.

Reshma Vadlamudi 12:02

Yeah, yeah. So it's it's just be willing to do what it really takes, it's not just wanting something. Yeah. Make sure you commit your energy or time if you in case you don't have any money.

Dylan Koch 12:14

Yeah. So I I think a lot of people underestimate how much effort this actually takes. Uh and I I don't think people would realize that until they're in it, right? And they either give up in the first couple of months or just like shit, this was hard. Sorry, I can't cuss on this podcast. Um you're fine. But they they're like, damn, like this, this was a lot harder than I thought, or they just bury down the hatches and they keep going. And those are the people that usually tend to win. You don't have to be the smartest, you don't have to be like you just have to really not give up and get you in a place where you get ruined.

Reshma Vadlamudi 12:44

Yeah, yeah. So

Partnerships, Alignment, And Breakups

Reshma Vadlamudi 12:47

let's talk about the partnerships. Sure. And what what about like what happened in those deals? And first of all, why did you get together? Is it the resources or resources?

Dylan Koch 12:58

And honestly, we were just so aligned at the beginning where we thought our life was going. Um that it almost seemed like a no-brainer, right? And and I think a lot of people get into partnerships as they think it's going to be easier. I don't think that was really the case for us. I just I thought we legitimately thought we could propel, like it's a one plus one equals four almost thing, like where you could exponentially increase with the power of two instead of just the power of one. Um and so, and you know, he we had together $250,000 a year to work with as far as capital resources, and we did have the um the operating agreements, we did have kind of the rules and set up. But it's funny, we were using an agent, and he even said, like, I uh because we got like a counter on one of the offers that we put in, and he got a hold of my partner first because I was busy in the pharmacy, and he gave his answer, and he's like, We got to confirm with Dylan, and um I gave my answer, and those two answers to the rebuttal were pretty much the exact same from independent parties, and the agents that like I've never had a partnership very much give the same answer like that. All I have to say is like good, we were lying on what the path was, but we also like our strengths and weaknesses were the exact same, like we did not have counteracting things. So that's uh I guess that's obviously one thing that you hear all the time is have complimentary skill sets, uh, which we did not have. The the biggest issue wasn't the operations, it wasn't um the friendship, it wasn't anything like that. It was honestly where we got to the point after we tried that residential assisted living that our visions changed. And I guess my hot my hot take with partnerships is it's actually a lot easier to have partnerships, in my opinion, the later you are in life, because the direction of your life is less likely to change in a dramatic fashion. Neither of us were married at the time, neither of us had kids at the time. You know, we were just kind of figuring things out fresh out of college. So the the probability that a major life happens was still a lot greater that would change the direction of the partnership. Whereas, you know, if you're 30 plus years old, 35 plus old, or older, you know, it it's less likely for something like that to happen.

Reshma Vadlamudi 15:03

Okay. So is he still into real estate doing the deals?

Dylan Koch 15:07

Yeah, I mean, yeah, he's a very successful um commercial real estate investor, you know. Um, he partnered with one of the local guys around here that's very prominent. Um, and you know, if I'm if we're being 100% honest and transparent in this podcast, like we're we're ended amicably. It wasn't like it was, you know, we now hate each other, anything like that. He was still a grooms in my in my wedding. But I would be lying if I said our friendship had not suffered from that separation, right? Like we're definitely not as close as we used to be. Part of that is the business side, part of that I think is just the way our lives kind of evolved, which also happens in regular friendships, too. So, like, you know, it's a it's a catch-22.

Reshma Vadlamudi 15:44

How did you start noticing? Okay, this is something maybe we have to act on, or when do you think things started popping up?

Dylan Koch 15:53

Or you know, it was so long ago that I don't know if I can remember the exact instance, but um, I think you just kind of know, like, you know, the things maybe fall between the cracks that wouldn't have previously, or the communication that would have been there previously is not, you know. I would say it's almost from an omission of work or communication than it is anything else. Yeah, um, and most people are not willing to have tough or awkward conversations, um, and so they avoid it until it's almost too late, and I think that that's part of it. Um words of advice obviously is just trying to nip in the butt as soon as it happens because it's only probably gonna get worse.

Reshma Vadlamudi 16:32

Yeah.

Dylan Koch 16:32

Um, and I, you know, there's a lot of partnerships that I can't name many partnerships that have gone longer than five to ten years. Yeah, and you know, I I don't know why that is per se, but obviously the numbers are inside, you know, that most people probably are better off if they're in the entrepreneur space, if they are that visionary type person, to just hire that next person, not maybe partner with someone with color resistance or just maybe just hire that next person, whether that be a CEO, COO, or whatever that is, once you get to a certain size, because then you still have control, you can take the direction of the company, which whichever way you want to go, investment side, that kind of stuff.

Reshma Vadlamudi 17:09

So were there any emotional or financial fallouts that happened uh with that with the partnership specifically?

Dylan Koch 17:18

No, I mean we we we bought in good times, we bought through 2018 through 2019, and we always bought value add, you know, and because we're a director seller, usually lower the market value properties. So, like honestly, you know, financially it turned out okay. Um, we had a hefty tax bill, we just sold everything in one year, um, and we had to pay like not only the capital gains, depreciation recapture, like all that kind of stuff. Um, but so financially, no. Um, but the emotional side, I will say this. Um, obviously, the the friendship side of thing happened. Um when I left the pharmacy uh to do this full time, I gave my two weeks' notice going in. Um one of the main motivations to not fail was the fear of failure amongst probably my peers at the time. There's a lot of my colleagues talking about it was freaking crazy. Like, yeah, the cushy job, you know, it gives great benefits, makes low six figures a year to kind of go into the unknown. Um, and I did not want it to be three to four, five months later, and they're like, oh, he's back in the pharmacy again. And I don't know if that's the right motivation, the healthy motivation, but it's it's what it was. Um, you know, and and I wanted to prove to myself that that I could do it. And so I guess from the emotional side at the beginning, it was almost uh a fear of failure is what is what was the biggest driver. And and now, you know, it's not the fear of failure, it's like kind of proven that that it works. Um you switch to a point, and I'm not saying I'm there yet, but like at the beginning you have nothing to lose, it's kind of balls to the wall, kind of you know, do whatever it takes. And now once you have some a little bit of wealth or a little bit of money, it's like maybe back off a little bit because you don't want to lose whatever you've already built. Um, and so now it's just being a prudent investor. Uh, I don't, you know, I keep planning on buy rentals, but I'm good with buying you know 10 to 20 units a year. Having my my transactional side of my business, I I've said publicly I want to do seven figures top line this year, which we are in track to do as of this date. Um, and it it's more of the now my my mindset and my business is around make massive income and turn that into passive income. So you know, make several hundred thousand dollars a year if you can by building a skill set or if you're a W2 earner, you have a you're a high W2 earner, and use that to one, you have tax benefits, but two, to create passive income, whether that be on the on the LP side or buying your own apartment buildings, like you know people who start out. I'm backtracking a little bit, but people who start out like if they have ten thousand dollars to invest, and you know, I'm gonna steal another one from Hermosy that says don't invest in the SP, invest in the SME, which is the develop skill sets for that ten thousand dollars, build a course, buy the YouTube things, whatever it takes, or or be willing to spend lots of times and develop a skill set that that 10,000 can turn into 100,000. You get a better checks on a 10 to 100x return on yourself than you do on any other outside investment. And then once you develop that skill set, pour that back into real estate.

Reshma Vadlamudi 20:31

Sounds so good. So are you currently in any partnerships? And are you are you going to get into any partnerships?

Dylan Koch 20:40

NCT wise, no, I'm not. Um, I will do partnerships as far as like JD deals on some stuff. Um, a lot of times, like we mentioned earlier with the flips that are a little bit bigger. I may do a 50-50 JD with the contractor who he's taking care of, all of the rehab. I found the deal, I'll take care of the financing, and I'll list it on the back end. You just do the rehab. So I will do partnerships in that regard, but I have not done any partnerships um on a business-wise level uh since those ones ended. I'm not saying I'm not opposed to it. In fact, we I made an offer on a decently large building, um, and I was going to 50-50 partner with a friend of mine on that. So, like um, I wouldn't say as like a as a business-wise my transactional side, no, I'll probably won't do that. But as far as like a building or an apartment or something like that, I'm not opposed to it.

Reshma Vadlamudi 21:28

Okay. So what would your um like if you were to write down a prelude? So what would that look like?

Operating Agreements And Worst Cases

Dylan Koch 21:36

Yeah, honestly, it's um have your operating agreements, and the biggest thing is if the partnership goes sour, how do those assets get divided? If it's a true partnership, in my opinion, it should be 50-50. Um also spell out beforehand whose responsibilities are what, who's gonna be the property management, who's gonna do the leasing, who's gonna take care of the relationship with the bank, who's gonna do the asset management, right? Like, you know, update the financials.

Reshma Vadlamudi 22:01

Um, so I don't know if that's necessarily a prenup, but yes, but those are the things that usually come up, like those are the things that usually stress out. A me on the city. Correct.

Dylan Koch 22:14

Yeah, uh, I mean like a prenup. If you get one, it is better to have those all on the front end than it is halfway through or or near the end of the winter. And in fact, you know, not only from the business side, but there's a a friend of mine um who is in the Hamilton market, anyone around here, owned, I think, 150 to 200 units uh built over since the early 2000s with the partner. His partner died uh kind of abruptly. They didn't really have a lot of their documents in place, and now, or like the proper insurance in place. And so he has to essentially sell half of his portfolio to pay out the wife of the person who died, um, so that way she could get their fair share, which is like you know, mathematically makes sense. But now he's a four if he would have had the proper operating agreement, documents, or even better yet, insurance in place for something like that, that wouldn't have happened. So, you know, that's just a good example, maybe in an extreme sense. You're talking millions of dollars that this guy has to pay out now.

Networking And Trusting Operators

Reshma Vadlamudi 23:17

But then, yes, these are the things someone wouldn't think of, and uh definitely that's I think that's where the networking, like you would you want to hear what's happening, yeah, and then make decisions based on that.

Dylan Koch 23:29

And if you're local here, I mean there you're always usually one network connection away from the right people, right? If you don't know them directly, you're probably one person away, whether it'd be a good CPA, a good estate planning guy, a good insurance person for all your properties, right? And that's the whole purpose of the social capital of that networking is yeah, the deal looks great on paper, but if something uh you know astronomical happens, then you need to have these other places and places that people don't think about. And that I think that's where the a good operator is where they're worth their money.