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Show Summary
In this episode of the Real Estate Pros podcast, host Erika speaks with Michael Koch, founder of AAA Merchant Payment Processing. Michael shares his journey into the real estate technology space, discussing the evolution of payment processing, the importance of client relationships, and how his company differentiates itself through exceptional service. He offers valuable insights for aspiring entrepreneurs and emphasizes the significance of commitment and integrity in business. The conversation concludes with Michael’s vision for future growth and the strategies he plans to implement.
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Investor Fuel Show Transcript:
Michael P Koch (00:00)
Yeah, I mean, historically and still today, of course, because a lot of people just, you know, when you don’t have access to information, you’re not going to know certain things. You know, historically, people have taken rent via check, cash, a wire, ACH. But, you know, many years ago.the ability to take a credit card, log into a portal and have their customers pay their rent,
is historically whether it’s any business by the way not just real estate somebody the business owner is typically paying that monthly payment processing fee
And so many years ago, around five or six years ago, they came out with a solution called cash discount, which eliminated the processing fee for the business.
if you can avoid paying $20,000 a month, not a year, that’s a substantial savings for a business owner.
Erika (02:22)
everyone, welcome to the Real Estate Pros podcast. I’m your host Erika. And today I’m joined by someone that I’ve been looking forward to chat with, Michael Koch. He’s been making serious moves in the real estate technology space with his company, AAA Merchant Payment Processing. Michael, I’m so glad to have you on the show.Michael P Koch (02:43)
Thank you so much. I’m looking forward to chatting a lot.Erika (02:46)
Excellent. So then let’s jump on in Michael for our listeners who may not be familiar with the world. Give us the rundown. How did you enter the real estate world and what inspired you to form your company?Michael P Koch (03:02)
Well, you know, many years ago I used to work for a large bank, a very well known bank. ⁓starts with wells, ends with Fargo. And, you know, we had a lot of clients over the years that my wife and I worked at the bank and we had clients that were in the, I would say, high net worth space, personal and business professional. ⁓ And after doing lending and payroll and merchant and all the kind of things that were helping these businesses, we got to a space where the bank had a little more ⁓ higher quota and we had a different idea of how we could help people.
And so we started kind of putting our feelers out and a lot of customers they wanted to continue doing the banking with large banks but they wanted a different way to do payment processing and a lot of those happen to be real estate guys that also owned retail companies that also owned dish washing companies and restaurants and everything else. And so we were able to take a lot of those customers with us and start our business and being able to bring that kind of value, a monthly value, ⁓ not only just from a service but also
financially, ⁓ it was almost a no-brainer for a lot of them. And we’ve been able to grow this thing out over the last six years. ⁓
Erika (04:15)
Michael, was there a moment with forming this company that you knew this was going to be your lane, that this is what you were going to stick with, that it wasn’t just something on the side that you were starting?Michael P Koch (04:29)
Yes and no. ⁓ You know, when you start something, especially at scale, you know, we didn’t start with one account at a time. We started with many accounts at a time. When you start at scale, you have a lot of naysayers. know, a of people are like, it’ll never work because these people are loyal to whatever relationships they had. ⁓ But that’s the thing is when you bring value in the beginning, no matter where you go, people are going to follow you. And if you keep that up, ⁓You know, the world’s very fickle. It’s a very fickle place nowadays. And so people jump ship all the time. But I think when you stick with kind of traditional values and you keep your promises, kind of build, it kind of, how do I say it? You know, here, I’ll bring it back. When, you know, a coach told me a long time ago.
You’re not gonna you’ll know you won when you put in the work the weeks and months before in my case for payment processing or for business It was the years before and so when you do the work Even if everybody told you it’s not gonna work, you know, the relationships and the value that you put in over time ⁓ You’re gonna probably succeed so I hate to be ⁓
ego driven or have this arrogant idea of, I was going to have some work because you never really know. And but I feel like when you have good value and you bring good value to people, it’s kind of a no brainer for them.
Erika (06:45)
Yeah, that makes a lot of sense. you’ve been at this for six years, Michael. How has the landscape changed with payment processing since you started?Michael P Koch (06:54)
You know, to be honest, before… ⁓Before COVID, I feel like there was a lot of OG guys out there that were still doing payment processing in an old school way, the way the world kind of operated and did business. To be honest, post COVID, I think being out there is a lot easier. I don’t know if it’s because of those few years of weird communication or where there was limited, limited communication. I find that going against other companies, a lot of people aren’t willing to go out there and knock on doors and actually introduce themselves like a real person. So the landscape is
changed a lot, the technology has changed a lot, the promises not kept from other companies has changed a lot, ⁓ and we’ve just kind of stuck through what made us successful working in banking. again, as a lot of people have fallen off, a lot of new technology that actually has helped us has come along.
Erika (07:49)
That’s great. And what would you say separates AAA merchant from the rest of the companies? How do you stand apart with the competition?Michael P Koch (07:58)
You know, it’s gonna sound crazy, but it’s the people.At the end of the day, anybody can sell merchant services, any bank can sell merchant services, any company can come along and sell a credit card transaction. But it’s the service, it’s the setup, it’s the promise of not increased rates, it’s the ability to protect the real estate ⁓ portfolios, it’s the ability to protect the owners of those companies that a lot of other merchant companies seem to fall off. And that’s where we kind of always thrive, to be honest.
Erika (08:32)
Yeah, and you also mentioned to me that you are helping renters save a lot of money. Can you explain how you’re able to do that?Michael P Koch (08:41)
Yeah, I mean, historically and still today, of course, because a lot of people just, you know, when you don’t have access to information, you’re not going to know certain things. You know, historically, people have taken rent via check, cash, a wire, ACH. But, you know, many years ago. And again, a lot of people still have no idea this is an option, but the ability to take a credit card, log into a portal and have their customers pay their rent, whether it be commercial or personal or Airbnb.whatever what have you and be able to make that payment online and where the savings comes in is historically whether it’s any business by the way not just real estate somebody the business owner is typically paying that monthly payment processing fee and that that rate could be very different because they’re all different card types amx visa mastercard they’re all nobody owns the cards so those rates can fluctuate they can go up and down and if you’re operating at scale and you have multiple units and you have three
4, 500, 10 rent or whatever it may be. Somebody’s paying that rate and somebody’s paying that fee and that fee typically will range anywhere from a few hundred to a few thousand to 15,000 to 20,000. It just really depends. And so many years ago, around five or six years ago, they came out with a solution called cash discount, which eliminated the processing fee for the business. put the processing fee onto the customer. And so if you can, as a real estate person,
As you’re seeing the insurance keeps going up, especially in California, the premiums keep going up and going up and going up. And how do you offset that? Well, the one way to do that is to have the customer pay the processing fee. And that rate can go anywhere from 3 % all the way up to 4%. It really just depends where the negotiation happens. But if you can avoid paying $20,000 a month, not a year, that’s a substantial savings for a business owner.
That’s substantial savings for a renter.
That’s
a substantial savings for anyone that’s accepting a payment and you know low end I mean I want to say low and I mean average rent out here one bedroom apartment in the San Fernando Valley $1,500 to $2,000 a month now maximize that times a hundred renters Somebody is paying that that three and half three point eight two point five percent Whatever it is, but if you could eliminate that it is a substantial savings. So now all of sudden the
premium doesn’t look so bad anymore on the insurance.
Erika (11:49)
Absolutely. And as I’m sure you know, Michael, for those property managers, the margins can be pretty tight. How do you ensure your software integrates with the property management tools that are out there?Michael P Koch (12:04)
Well, I mean, we have a ⁓ large swath of technology and IT and just like safeguards to do that. I mean, typically we’ll see what they’re working with on the back end of their portals. So the ones that have portals we can typically integrate with, you know, we use a couple of outlets. One of them is authorized.net. A lot of renters typically will have that and then they have their own real estate portals that they do. But most of the time, because we do operate at scale, we can integrate. We just have to get on the phone with whoever they have, whatever software they’re using on the back end.you
Erika (12:36)
regulatory hurdles in different states too.Michael P Koch (12:40)
No, payment processing, mean anyone can accept the payment with a credit card debit, that doesn’t really matter. But again, sometimes people are using, some of the large scale operators are using something that’s proprietary that was built specifically maybe for their thing. ⁓ So we just have to get the okay from whosoever on the back end of that really. But most of the time, because you know, at least out here we’re pretty well known, we’re very well versed what we do, ⁓ sometimes they’ll unlock the floodgates for us to come in and help.Erika (13:09)
Yeah,yeah. And you your market, you have a lot of customers in California. What was it, you know, like expanding your client base or, you know, was there any networking or marketing that you found to be really useful?
Michael P Koch (13:23)
To be honest, doing podcasts, do a lot of TikToks and I talk about kind of a mixture of personal and business. And I feel like, you know, when you’re, when you, when you start something and they’re so familiar with something else, it doesn’t really allow.just kind of a natural progression and move along to a smaller company. But then when they get to know us, they’re like, you’re actually human. You’re not in Bangladesh, you’re not in India, you’re not in Mexico. So when I call and I have a problem or I have an issue, and so when they realize we’re actually here in LA, we can reach you in San Diego, we can reach you in San Francisco, we can reach you pretty much anywhere. ⁓ They like it a lot. And again, anyone can do a transaction, but it’s that service, it’s that touch, what we’re doing here is the missing piece a lot of the time.
you
Erika (14:10)
Yeah, absolutely. there something that you do with your client onboarding that sets you apart from the rest?Michael P Koch (14:17)
Yeah, we show up. Most of the time, you know, lot of the time equipment or things are done just with an IT guy in the back end. And that’s fine. mean, whatever, you try to make things a little more efficient. But the reality is, is people like to sit down, they want to shake your hand, they want to get to know who you are. And they want to know that you’re going to be there a month from now, a year from now, six years from now. And at the end of the day, that’s still really, really important to most people.Erika (14:44)
Yeah, absolutely. For our listeners who are looking to start their own business and are new to the game, what kind of advice would you give them in those early stages?Michael P Koch (14:56)
commit, deeply commit. You know, I heard a great quote recently thatIf you restart every time and you never fully commit to one thing and really just like hammer down on the knowledge and the talking points and just how to immerse yourself completely in whatever it is you’re doing, you’ll be broke for the rest of your life. So commit and commit really, really hard and you may fail, but at least if you fail, you’re going to get a bunch of knowledge from that failure. So you won’t have to keep starting and reinventing every time. ⁓ I learned the hard way and
I like to be creative and try things all the time, but the areas that I have succeeded in substantially are when I have committed wholeheartedly and don’t go to the very deepest parts of whatever it is that I’m doing.
Erika (16:28)
Yeah, absolutely. Do you have any, you you were talking about if you fail at something that you learned something have as you’ve been building their business, have there been any lessons like that in different areas that you’ve learned along the way that you can share with our listeners?Michael P Koch (16:45)
⁓ yeah, don’t…part of my friends, but don’t bullshit people. That’s a big one in merchant services. If you ever look at most merchant companies, to be very honest, whether it’s real estate or it’s any of this, if you ever notice most people that own merchant companies seem to vanish. Like they just disappear. You’ll see their website. You’ll see maybe an ad of a piece of equipment, but it’s very rare that you’ll see the owner of the merchant company doing a podcast. I don’t know why that is. I just know historically, ⁓ you know, back in way back in the day before I ever gotten this thing,
Merchant the rates were super high and they would rip people off really really badly merchant people Merchants to get a really bad rap for kind of being kind of sleazy credit cards and everyone would always say it’s a sexy it’s a sexy product because it’s credit cards and it’s high rollers and and You know, I’ve been trying to get rid of that old adage as long as I’ve been doing this and a lot of people that own merchant companies They just they don’t show up and I don’t know why that is I just think that a lot of them unfortunately I said in the beginning
they have a bad rep because they lie, they promise the world and then they lock people into contracts and if you can avoid doing those kind of things ⁓ you just you stand out substantially more because people aren’t used to it.
Erika (18:00)
Yeah. And you guys are definitely standing out. Your business is booming. So what’s next on the horizon, Michael?Michael P Koch (18:08)
You know, honestly, to kind of take us to scale and try to be a thought leader across the nation, I don’t think we’d really do, would do merchant globally. But just because of the reach, but at the end of the day, we just want to be, we want to be there to help people, man. And I feel like when you help people and…And you know here I’ll give a great quote. There was a guy that I knew, used to own a company called InSparity. think he still owns it, his name’s Paul. InSparity is one of the biggest, I think the biggest PEO ⁓ on the planet till today. He’s down in Texas. ⁓ But Paul went to one of his conventions many, many years ago and he was like, know, have, I have a…
All these guys business cards say consultants on their business card. But the reality is out of the 4,000 people sitting here today, there’s four consultants in this room. The other 3,000 plus of you that are sitting here are salespeople. And until you have affected a business, you have consulted a business and multiple financial assets, you’re not consulting them. You’re selling them on something.
You are not a true consultant to a business and to effectively help them across multiple landscapes. ⁓ And so that’s what I want our company to be. I want people to look at us as that. We’re not selling, a lot of merchant companies sell a lot of things, ⁓ but this is not a selling thing that we do.
Erika (19:33)
Absolutely. And when it comes to that growth, Michael, are there specific strategies that you’re eyeing to hit that growth?Michael P Koch (19:41)
You know, honestly, you know, we try to be really transparent and we try to most of our business honestly comes from word of mouth Doing these podcasts believe it or not, you know, I do some of my own videos and luckily thank the Lord I’m able to get you know, think from 20,000 views 50,000 views 5,000 views really just depends on the content the thing that I’m speaking on But that’s kind of the way I’ve been doing it and I’m big for technology and I truly believe that social media is the one way to not have to spendknow, $30,000 a month on marketing and putting an ad on the side of a billboard.
Erika (20:18)
Yeah, totally. Well, Michael, before we wrap, if someone wants to reach out, connect, or they need help with their payment processing, what’s the best way for them to reach you?Michael P Koch (20:29)
Let’s go to our website.AAAmerchantservices.net and then also, you know, once you get to the website, you’re more than welcome. I don’t want to put myself on blast, but you can call me. ⁓ You can email us and always feel free to text. I’m always roaming around, typically around Los Angeles somewhere. So just feel free to reach out. It’s, know we’re on social media. We’re on LinkedIn. You can follow me on LinkedIn. ⁓ I’ve got all sorts of connections on there and I’m always willing to share. And if it’s not just merchants that you need help with, you need a gardener, you need a guy to do your weed whacking. We know everybody in every aspect.
And we try to just, you know, we try to be consultants, man. We really try to help.
Erika (21:06)
That’s awesome. we appreciate you coming on the show today, sharing your innovating cost saving tech and your story. It’s awesome.Michael P Koch (21:15)
Thank you so much.Erika (21:16)
And for our listeners, if you got value from this episode, make sure that you’re subscribed to the real estate pros podcast. We’ve got more conversations coming up with operators like Michael, who are out there building fantastic businesses. We’ll see you on the next
