Are We Repeating 2008? Red Flags in Today’s Lending Market

Mike DeHaan: [0:00] This episode is sponsored by Sir Lenzalot LLC, also known as SLA Capital, which if you didn't know, is Dan and I's private lending company. So, yes, we are sponsoring our own show, but what you gonna do about it? It is our private lending company that offers hard money and DSCR loans to real estate investors of all types. So you can be a new investor, an experienced investor. You can be buying flips. You can be buying rentals, whatever. We can do everything. And not only that, but the rates that we offer are just as competitive, if not cheaper, than pretty much every other company out there. So whatever big company you've been working with, bring us their term sheets, I guarantee that we can probably beat it. We have the same connections they do. We just don't have all the overhead and middlemen. So if you wanna come and check us out, go to slacapital.com/keys, and I will know that you came from the show. And by seeing that you came from here, when you get the closing, you will save $500 on your first loan with us. So slacapital.com/keys, we would love to fund your next deal. So is this, like, the moment that we're gonna remember when the next, like, big short movie comes out in, like, two years?

Dylan Koch: [1:00] Which is in Vegas. That scene is in Vegas.

Mike DeHaan: [1:02] Yeah. Which is in that scene is in Vegas, dude. And she's, like, walking through, like, how they have they're having all these, shitty loans that they're not gonna do on the corner. And I was like, what is happening? And

Dylan Koch: [1:13] then Sunday night, I thought that I was gonna win the bet, and then we didn't. So

Mike DeHaan: [1:16] Yeah. I was thinking May was gonna go to Thanksgiving, but then it did exactly what I was kind of expecting where as soon as the elections were over Oh, wait. You're saying it

Dan Austin: [1:24] was just political fodder that some people maybe got into binds because

Dylan Koch: [1:27] of No.

Dan Austin: [1:28] Their politics?

Mike DeHaan: [1:29] No. We don't have political fodder in this country, Dan. Everything here is very, very legit.

Dan Austin: [1:34] Good thing is is it kept poor people poor. And politicians gaining power and wealth. I don't know.

Mike DeHaan: [1:41] What's going on, guys? Welcome to the collecting keys podcast. I'm Mike DeHaan here with my cohost, Dan Austin and Dylan Cook. And it's funny talking about politicians getting rich now. I saw this meme, and it was like, the world's best hedge funds, 30% on a great year. Nancy Pelosi, six 67%, seventeen years in a row.

Dan Austin: [2:02] Seriously though, like, she's taking the brunt of this. You know? I almost feel bad except for I don't. But there are a lot of those politicians in there that are doing the exact same thing.

Mike DeHaan: [2:10] You should definitely not feel bad about anything with these people. Because also too, it's the ultimate position of, like, they're putting themselves in the limelight to do nothing except receive criticism for every single thing that they do. Like, that is a voluntary position. If they wanted to be just a normal average corrupt rich person, don't go into politics. There's lots of other corrupt people that do the same shit. They're just not in a position where they can be scrutinized for every single thing.

Dan Austin: [2:33] Yeah. But that's why you go into politics.

Mike DeHaan: [2:35] Totally.

Dan Austin: [2:35] Because you can't you can't do it any other way.

Dylan Koch: [2:37] You got to be the politics friend. Politician's Exactly. You know? Then you're you're released one degree removed.

Dan Austin: [2:43] But that means you have to provide something. You gotta provide something. And politicians provide nothing and then they get something.

Mike DeHaan: [2:48] You have to create value.

Dylan Koch: [2:49] They provide information and then they, you know, they just fix it back in jail.

Mike DeHaan: [2:53] Yeah. Anyways, how's it goes? But either way, shutdown's over guys. So I hope you guys enjoyed your your shutdown over ending parties. The universe did. It had the northern lights. It was like across the entire United States apparently.

Dylan Koch: [3:05] Yeah. We even had it here in Cincinnati.

Mike DeHaan: [3:07] Dude, they had it freaking Texas.

Dylan Koch: [3:09] Don't take it away from me. I'm just saying. It was nice.

Dan Austin: [3:11] Is that aliens?

Mike DeHaan: [3:12] Yeah. I would assume so. Like, I don't know what causes it. Weather, global warming, aliens, something. But it's pretty cool if you guys have never seen it.

Dylan Koch: [3:21] The heavens opened up because snap benefits were

Dan Austin: [3:24] back. Yeah. It also has to do with magnetism.

Mike DeHaan: [3:26] I don't know if you can, like, actually see it with your naked eye if you go further south. In Spokane, it's very hard to see with your naked eye. It just seemed like it

Dan Austin: [3:35] was more bright out. I was in the hot tub last night with coal, and it was just like like brighter out.

Mike DeHaan: [3:39] Yeah. The only time we've ever actually seen this unit is in Iceland, I guess, because you're so far north the the way it is. But anyways, Dan and I were at a big private lending conference in Vegas the past week, and very applicable to to real estate as well. It's because we are we're meeting with all of the guys who fund all of your deals, whether you know it or not. Regardless of what lending company you use, and if it's not SLA Capital, I don't what to tell you, the people who actually give the money for your deals was at this thing. Like there was like the CEOs of every company, like the leaders of like the hedge funds that the big companies sell all their debt to, We're all at this thing in Vegas this past week. And it

Dan Austin: [4:17] You know what's more fun than a

Mike DeHaan: [4:18] real estate conference? Finance conference. 100%.

Dan Austin: [4:20] Yeah. And the thing about it is I like what is nobody's pretending to be there to listen to the speakers.

Mike DeHaan: [4:25] 100 dude, like shamelessly. Like, they're they're like doing the talks. There's like 15 people in there. They're just like at the bar, at the casino, like networking, doing different stuff. Ben, there's a big conference like what 900 attendees, I think, because they said they they had planned to be there.

Dan Austin: [4:38] Yeah. Was like 900 people.

Mike DeHaan: [4:39] And it's totally not around like the conference piece. And one of the things that I think makes it so much more fun is that people in the finance space, they actually have like money, like hard cash. Whereas you go to the real estate conference, it's awesome. You meet like the old guy there that is worth a $100,000,000. He only has $400 in his bank account. All the rest of

Dan Austin: [4:56] the money is

Mike DeHaan: [4:57] in equity. These guys don't have shit for equity.

Dan Austin: [5:00] But they got cash flow.

Mike DeHaan: [5:01] All they have is cash, you know. Yeah. Tons of it. And like a lot of these guys, we sat next to a guy on the last night at dinner, he's like, yeah, we're pretty small. You know, we do about 100,000,000 a year in loans. And that's like a lot, just so you know. Like, he's probably making 3 to $4,000,000 a year. So owner of this company churns pretty well and like it's a pretty systematized company once you build it out. It takes a while to get there. But there's just so much cash, like in this space, you know, you have people like that. And then you have other companies that are doing like 500,000,000 a month Mhmm. You know, that are also there, that are basically the top top people that everything's trickling up to. You know, it's a very much like a different vibe. But one of the things that was so interesting, that's always interesting to hear when you go to these things is what the big money sentiment is around real estate as a whole. And this is all private lenders too. Right? So they don't really care about, like, the commercial the commercial loans, the, like, residential loans, like, owner occupant kind of stuff.

Dan Austin: [5:56] The Fannie, Freddie stuff.

Mike DeHaan: [5:57] Fannie, Freddie stuff. It's all just looking at, like, what the private business debt is doing. And we went to Nobu for dinner. If you guys don't know, that's like very, very expensive sushi place. One of our vendors took us there. It's very nice.

Dan Austin: [6:10] And

Mike DeHaan: [6:11] yeah. It was super nice. The total bill was, you know, a few thousand boxes. Was pretty hefty more than I'm typically gonna be spending on a meal.

Dan Austin: [6:17] Mike eats a lot of fish.

Mike DeHaan: [6:18] You know what? Our our sales team eat so eats a lot of fish. Yeah. But we were there and they were telling us about some of the new loan programs that they have for investors. And the rep that we're there with, she's like she's like, oh, let me tell you about this new thing that we're doing.

Dan Austin: [6:31] Oh, yeah.

Mike DeHaan: [6:31] This like blew my mind. She's she's like, she's like, So we're now we now have they call it a like a rescue loan program. So we'll do like hard money loans for our floor credits 500. You can have as many lates as you want. Basically, it has to be up to 50% loan to value or loan to ARV of the of the asset. And she's like basically going through how loose they are. So they don't have to have money, they don't have to have experience, they don't have 500 credit. And I said to her, I was like, so is this like the moment that we're gonna remember when the next like big short movie comes out Yeah. Right. In like two years

Dylan Koch: [7:04] Which is in Vegas. That scene is in Vegas. Yeah. That

Mike DeHaan: [7:07] scene is in Vegas, dude. And she's, like, walking through, like, how they have they're having all these, like, shitty loans that they're not gonna do on the and was like, what is happening? Like, I feel like we are we are seeing a glimpse in history.

Dan Austin: [7:18] Doesn't bother her though. Right? She's selling loans.

Mike DeHaan: [7:20] Totally, dude. And that's that's the problem.

Dan Austin: [7:22] Everybody's making money along the food chain.

Dylan Koch: [7:24] They're almost like bragging. Right? Totally. Selling this. Yeah.

Mike DeHaan: [7:27] Right? Absolutely, dude. It was so reminiscent of that scene in the movie where he's going through, and there's like I think there's he's actually talking to a dude eating in a fucking sushi restaurant. It's probably in Nobu. And the guy's like Totally. How about you show me, your bank account and I'll show you mine. Right? And he's talking about how much money he's making. That is fully how it felt.

Dan Austin: [7:45] You know what the difference is? Is this like random people's money. It's private money. Right?

Mike DeHaan: [7:49] Totally. That's the major difference is The government's not coming in to save anybody. Mhmm. There's a lot of these people that are are backing these, you know, the private mortgages that are getting wrapped up and sold and like now these new like junk more like private mortgage programs, it is extremely wealthy individuals. A lot of them are from overseas. It's like hedge funds that are corporations, right, that are built up of private money that they've either raised, they've accumulated whatever. And it's not these different banks and that are trying to sell it off to the government and do everything else like what's happening in 2008 quite the same. And so what the like, as they're not using like consumer money. And so what the actual end situation of it is, I don't know. Because like, guess worst case, like, they all lose their money and like, is that a bad thing? Like, maybe?

Dan Austin: [8:37] Yeah. Especially because some of a big chunk of it is like foreign and foreign nationals. And on the higher level, it's like Yeah. I guess the positive outlook is like they're buying and investing in the American dream, like big Chinese big Chinese funds that we talked to. And then like we even talked to a guy who I don't remember how much he had, but he's like, yeah, got like floor I've this is big in Florida. There's I've met two or three people now that have 80 to $100,000,000 of like South American money, you know, they want to invest in Florida because, know, it's close.

Dylan Koch: [9:04] Yeah. If it remains international, you wouldn't think I guess my thing is if this is so much money, how big can it be so where it is systemic to maybe regional banks?

Dan Austin: [9:14] Yeah, it for sure could be at some point in time. Right? Because there are some hedges in there. I don't think that they have pension funds or anything like that invested in them, but you know, they do have American tax dollar or American taxpayer money in them.

Mike DeHaan: [9:25] Of course. But a lot of it is overseas though, you know. And so like one of the main funds that we we sell our stuff to, they're backed by a bank out of Austria. And it's just like a large bank that's over there, you know. When we did our onboarding with them, we basically get to see up their chain because essentially what some of the paperwork that we sign is our understanding that if they go underwater, people that we sell to, here's actually who owns the debt that we're selling. Right? And so we get to kinda like see that. And there's all these different tiers that are expanding so much further than just like the The US balance sheet. It's really really interesting. And then like the one I was talking about with this lady that's doing the jump ons, it's like a guy's money. It's like a dude. According to her, not even like an old guy, he's 37 from Russia. Right? And he has a shit ton of money and he basically, he is using his own funds to create these private money tranches that he then securitizes and sells the bigger money beyond him. K? And so it's really really fascinating. And I'd say well, it makes me realize how dynamic the financial piece actually is. And the the thing that's so fascinating as well is that it moves, I would say, significantly faster than the real estate piece of it. Because, like, you're just pushing around paper. You don't actually have as long of, a lead time like you do with real estate.

Mike DeHaan: [10:48] So I think it's just stabilized and all these different things. And so versus the comps you went to in Newport Beach in August, there was, like, conversations that were completely different that were happening at this one in Vegas, just what, three months later.

Dylan Koch: [10:58] Yeah.

Mike DeHaan: [10:58] But with the same people. Right? But they're just working on different stuff, different kinds of money, different sort of, like, loan packages and offerings. Everybody's scaling, it seems like. Mhmm. And what you're starting to see as well is you're starting to see more and more private money get into stuff like land, get into commercial, industrial properties, those sort of things, which hasn't really existed that much in the past. There was this is the first time that we've been to stuff like this, and I've actually seen some

Dylan Koch: [11:20] of these funds that are advertising that. Sounds like it's a perpetual search for yield.

Mike DeHaan: [11:25] Exactly. 100%. Yeah.

Dan Austin: [11:27] A 100%.

Dylan Koch: [11:28] Where is all of these people gonna put some of this money?

Dan Austin: [11:31] Yeah. A 100%.

Dylan Koch: [11:32] Mhmm. With equities at all time highs.

Dan Austin: [11:34] Well, I always think there's so much money out there.

Dylan Koch: [11:35] Yeah. But like, there's a lot of money, but it has to find somewhere to go. And they're always gonna look for the highest yield with the least return. Risk adjusted return is the name of the game. Right? And once you get to a $100,000,000, there's very little things that you can invest in and scale and debt is probably one of the biggest things you can do.

Mike DeHaan: [11:52] For sure. And so for us, our primary business with the lending company is origination. Right? Like Dan and I, we don't, We have a small fund. We'll hold some of our hard money stuff and we have a little bit money that we've raised. But at the end of the day, our goal is to kinda like sell off everything. All the DSCR's, we're obviously not carrying this on our balance sheet. And if you look at this, like this conference, almost everyone there was trying to buy the notes that were originating. You know, there was very few people that are actually on the origination side. And so there is, I would say, a lot more money than hustle in the space right now. Mhmm. Because not a lot of people wanna be building out a sales team, running their lead gen, doing everything else. But there's a ton of people that want to basically be the recipient of that. And I would say it's like, unlike the real estate end, that is the from a finance perspective, it's like the same as if the real estate, the people that say like they go bigger faster. Because a lot of these guys, it's funny, they don't even have an incredible amount of experience originating loans or anything else. But their whole thought is like, if I can just find a bunch of people that can bring me the loans and I can carve off my 1% of a billion dollars, that's more appetizing to them than generating a bunch of like $200,000 loans. Right? Which makes sense, you know, and it's like a more sophisticated level to play in. But they're very similar to real estate where there's like the deal finders. That is absolutely a minority of people that are in the space.

Dylan Koch: [13:12] The more that you guys start doing this, were you surprised at the level of middlemen? Like, how many middlemen there actually are?

Mike DeHaan: [13:22] Yes. I didn't realize the level

Dan Austin: [13:24] of

Mike DeHaan: [13:24] tiers because, like, even, like, below us, like, we're direct lenders, direct originators. There's also brokers that aren't affiliated with anybody. And so they basically just go out and find people and then they would come to us to get it funded. And then you can basically become a correspondent where you sell loans to these different lenders and you kind of have their process entirely. And then you can basically go step up or you originate your own and then you sell on secondary market yourself. And then you can actually become the ones that packages it and sells on like the big big market. So you're like, you are the secondary market basically. And between every loan, there's five or six people that it goes through before it finds its final resting place.

Dan Austin: [14:01] Yeah. I mean, that we know of.

Mike DeHaan: [14:03] That we know of. The way I think about it

Dan Austin: [14:05] is is there's like, there's originators. Intergalactic bank. Right. There's originators, there's platforms, and there's like aggregators. Mhmm. And, like, the platforms, you think of, like, a tech focused company where they're they're very tech driven to say, hey. We're gonna create a platform that makes it easy to collect all of these originators Mhmm. Loans. They wrap those up, sell them to an aggregator who then at some point either securitizes or they go to a securitizing company that will wrap that up in a $100,000,000 tranche and sell it. That's kinda how how it goes. A little bit I don't think it's any more challenging at any level. It's just it's all about who you know. So most of the guys that are aggregating loans or are on platforms, they just they've been in the industry twenty years and they are smart people. And they were given an opportunity to start a company or they started their own company. And they just had they had relationships on Wall Street or relationships at banks. We don't have either of those, but we have relationships with guys like you, Dylan, which it makes us really good at originating.

Mike DeHaan: [15:01] Yeah. So it then there's ton of value on both sides, you know. And then you what you wanna do is you wanna be the best at one side, and just gotta meet people that are on the other. And I think that's where a lot of people get stuck.

Dylan Koch: [15:10] It'll be interesting to see because turning it back to, like, the more government level. I mean, Powell said they're gonna stop QUT on December 1. But what's different about that is the the balance sheet of at the Fed is basically comprised of different durations of treasuries, T bills, bonds, treasuries, and also mortgage backed securities. But what they're gonna do in this next cycle is when they start QT is they're basically keeping all of the, government backed debt and letting all the MBS fall off.

Dan Austin: [15:39] Expired.

Dylan Koch: [15:40] Yeah. Right. So they're just not renewing the debt. And so I don't know. Like, people will say, yes. QT is happening, which means it's we'll have more liquidity because you're not drawing away from the balance sheet. But the composition might matter. Mhmm. Right? Because if they're actually buying more short term stuff, which is what they've been doing lately, t bills, bonds, then they have an inverse relationship. So you would actually think that yields would go up the one that they're buying. I don't know what what's all that's gonna happen. I'm just saying like

Dan Austin: [16:05] When those bonds roll off, does that mean that the banks that issued them have to issue them at a higher yield?

Dylan Koch: [16:12] You would think

Dan Austin: [16:12] so. Because nobody's gonna buy them? I would assume so.

Dylan Koch: [16:15] Correct. Because that there has to be a buyer. And this is where the whole, like, leverage ratio comes in with primary deals with banks. Mhmm. Right? They got rid of that because so that banks could have more treasuries. But when Yellen was in office, and actually Besson criticized her for this, now he's doing the same thing, is they took their treasury duration from, like, fifteen to thirty years all the way up to t bills. And that's just because of what the t bills were paying. So now this debt maturity comes sooner. Right? So what do you roll it into? You have to roll it into more t bills. So I don't know. Again, I don't know that how this plays out, but I think what everyone they use their memory. Like, this is what happened last time, and all this happened. Like, the repo spiked back in 2019. Like, I don't think it's gonna be the same outcome because the composition of what it is is changing.

Mike DeHaan: [17:00] Yeah. It's hard to say. Obviously, we're getting into kind of, like, uncharted territory with a lot of this stuff where probably nobody knows it at a consumer level, where it's gonna be a challenging change of culture is there's so many people that are used to monitoring what the fed rates are doing. Things can adjust mortgage rates. Right? There's a whole industry with realtors and Mhmm. Traditional mortgage lenders, things sort of like beating that drum. But I do think that that's going to be shifting away very, quickly. And this is something, I mean, deal with this on the DSCR side as well. Even right now, we have some of these borrowers that have come in and they're like, well, I'm gonna wait for rates to go down a little bit more. I'm like, they might not because they see like Trump talking about stuff or the rate drop or whatever. But like on the private level, it's completely different. And the only reason they're ever tied is when the actual end buyers of it are comparing the private yield to what they can get from US bonds. But if they're no longer interested in US bonds, then they're not gonna be tied at all. Yeah. Basically gonna be based off whatever price they're willing to pay.

Dylan Koch: [17:56] Price is it really is the supply and demand at

Dan Austin: [17:58] that point.

Mike DeHaan: [17:58] Supply and demand. Yeah. Totally. Yeah. Even at, like, just a tier above us, like, when we generate our loans where we sell them to, it's crazy how much it varies. We can generate a loan and we can be trying to sell it to three different people. Their pricing will vary by a whole percent sometimes. You know, like there might be a loan that one company will buy for like 6.25, another company won't buy for less than 7.5.

Dylan Koch: [18:21] Well, let's say your biggest phone that you sell to is like, oh, we met our quota for the month

Mike DeHaan: [18:24] or whatever. And we're done.

Dylan Koch: [18:26] We don't want it like, well fuck, but the way we just, you know, told our lender that they're gonna get or a borrower, I should say, is gonna be totally different.

Mike DeHaan: [18:33] Yeah. We literally have one of those right now. That that's almost exactly what happened is they basically were like, oh, yeah. So we've we are up against the end of the month. There was basically all these like rate locks that came in. Like, we can only really do like so much at these rates, You know, it's like both on an underwriting perspective with their processing capabilities, as well as their financial capabilities. And so we are having to prioritize who's actually gonna get the rates that we promised them thirty to forty five days ago and who isn't. Better be me. Yeah. Well, It was the people that were further along and those that have been easy to work with. So that's also a tip for you guys, be easy to work with and get shit to your lenders quickly because otherwise, if their end buyers change their mind and you're the ones kind of like dragging your feet as possible, they'll sell you tough shit. Sorry, your rates just went up.

Dan Austin: [19:15] Be easy to work with. Don't be a pain in the ass. Be cool too. I mean, we're getting preferential treatment

Mike DeHaan: [19:20] Mhmm.

Dan Austin: [19:20] By our buyers because they're like, well, guys are cool. We went to a conference, met them, which is why you got a network and get out there Yeah. And not be a dork, whatever that means to people. I don't know. It works out for us usually, you know. So do whatever we're doing, I guess.

Mike DeHaan: [19:32] You'll be

Dylan Koch: [19:33] pretty dorky sometimes. I mean, I know we do the work, but like I

Mike DeHaan: [19:37] don't know.

Dan Austin: [19:37] You know what mean? You at least have to be your own flavor of dork and don't guess how about this? Don't be a douche.

Dylan Koch: [19:41] Yeah. There you

Dan Austin: [19:41] go. And make it easy to Mike's point to work with. But also having single channel risk is any business has that. Mhmm. So you gotta be careful on how your supply chain works. And for us to supply have a supply chain that has multiple outlets works, but also for what we're doing, which is basically, you know, we use our own capital to raise capital where some people don't have that ability or choose not to do that. That at least gives you an option that you get to control the money and control the yield and somebody can't shut it off.

Mike DeHaan: [20:07] Yeah. For sure. I will say that from a big picture, it was like most people there were generally pretty bullish on the sentiment around real estate and how they're kinda like looking at stuff. Cautiously bullish. Like there was very little like, I would say doom and gloom talk, like you sort of are seeing in like the real estate space and like the finance world. I'll give

Dan Austin: [20:27] you my take on that is in rooms like that, everywhere there's a salesperson, and that shit will turn in a 180 degrees in a minute flat.

Mike DeHaan: [20:35] Yeah. I mean, yes and no. Mean, even talking to some of, like, the the bigger heads though, they were all pretty optimistic. All those people

Dan Austin: [20:41] are incentivized by transactions though. Right?

Mike DeHaan: [20:43] That's true.

Dan Austin: [20:44] They have they needed to be optimistic. They need us to think it's optimistic. So we need Dylan to think it's optimistic so we can keep rolling that up to the shit show. But the minute that dude that's got 3,000,000,000 in a fund is like, I'm not feeling good today. Yeah. I don't like what Trump said or I don't like whatever China's doing. I think I'm gonna pivot and move over here Yeah. Becomes once they have more opportunities somewhere else.

Mike DeHaan: [21:04] Yeah. Well, I also think there's an element of where they're just like so big, it's they have more room to fail. Right? Because that that's something also that's different about a lot of these funds is, you know, say they have a $100,000,000 bigger than that. Let's say like $500,000,000, like a billion dollars. They're gonna have a rate of failure on their balance sheet, but that's also expected. Whereas I feel like as a real estate person, you typically are always gonna be let's say you own a 100 houses or 200 houses, and you have some of them that are like an absolute dumpster fire. The problem is that becomes a compounding issue over time. Whereas with debt, it kind of doesn't. You can just kinda be like, whatever. You just write it off because you're making so much money everywhere else versus like with a house, if like, say, 7% of your houses in your portfolio are messed up, that can lead to more issues. That can lead to your debts lapsing, right, if you can't pay your mortgages or you're having to pull from everywhere else to pay your mortgages. You know, that can lead to, like, tenants trashing the houses and more issues. It can lead to penalties from like the city if you're getting fined for your houses not being livable or things like that. Versus with the debt, you kinda just like find somebody else that wants to buy it, and maybe sell it at a discount.

Mike DeHaan: [22:12] Yeah. You know, which is an easier thing for people to do.

Dylan Koch: [22:15] The risk of going to zero is probably a lot less is what you're saying.

Dan Austin: [22:18] Yeah.

Dylan Koch: [22:18] It's Yeah.

Dan Austin: [22:18] It's marketable. The risk

Mike DeHaan: [22:19] of going to zero is is honestly zero because you always have an equity piece in whatever that property is.

Dan Austin: [22:24] Which is interesting because, mean, that's why there's a we haven't ever paid attention to it, but there's a distressed debt market. We know no buyers. We have some in the scale community that have, you know, talked about buying notes and stuff like that. And so, yeah, people are willing to offload it. It's almost like knowing that you're gonna it's like when you're on your Robinhood app and you're like, I'm gonna sell this at a loss so that I can go buy my Mhmm. You know, Mazda six car or whatever you really care about. Yeah. You know, people might do that because they need money. And so same thing with debt is like, I have a better opportunity for my $100,000 note. I'm gonna sell it for $80. Mhmm.

Mike DeHaan: [22:53] Yeah. It's much quicker transaction too than selling real estate. On some of our debt trades, we'll go and send it to our our buyers and they'll be like, cool. Sounds good. We'll send you the line tomorrow. And that's it. But the best thing is weird is you they give you the money and then you actually do the transactions and the collateral afterwards because it's so fast. So it's like if imagine if you sold a house, Dylan, and the second they signed the PSA, you toss in the keys, and then they pay you in like forty five days.

Dylan Koch: [23:18] That's a bit different.

Mike DeHaan: [23:19] Yeah. It's very weird. Yeah. Right?

Dan Austin: [23:21] Yeah. Yeah. Yeah. So this is actually a different thought while you're talking about that. Was thinking about this. So talking about like what we're talking about is like, assuming there's liquidity in the debt markets, it's easy to trade notes. Right? Yeah. If there is a liquidity issue in the in the private debt markets, like we had, I guess you would say, the 2009, you know, financial crisis when basically housing and everything went crazy. If you had that same crisis in the private market, does that really trickle over into the public markets if at all? Because say Dylan, who's a real estate investor who's built up some wealth around this, has 50 houses, all private debt against them, and he is now distressed. And Dylan loses 50 houses. Sucks to be Dylan. But 50 people didn't lose 50 houses. One person lost 50 houses. And the people that live in those houses will likely keep living in them.

Mike DeHaan: [24:13] Maybe. I mean, it depends. Right? Like, if they all go to foreclosure auction and they get picked up by wholesalers or house flippers to go and kick out all those people.

Dan Austin: [24:21] Well, that could happen too, of course. But I mean, fundamentally, those would stay as units. Right? I mean Correct. Fundamental you'd think. Right? I don't know. But, know, that's why I'm just kinda like thinking about the private credit market is like a a separate market and all these real estate investors. I mean, Dylan probably owns several houses that people lived in at some point in time that know that maybe for some reason can't afford to live there anymore because of affordability issues or financial issues or whatever. But we're only affecting Dylan's wealth.

Dylan Koch: [24:46] Yeah. I think you have a a point there. And back in o eight, there was this, like, a lot of shadow banking that people didn't know kinda what was going on. They call them was it non bank financial intermediaries or something? They have a different name, but they're basically the same thing now. But where my mind went was, what if there's a lot of, you know, Dellons or Mikes or Dans and the let's just call it the upper 50% spend so much into the economy right now, but now those people can't spend.

Dan Austin: [25:11] Mhmm.

Dylan Koch: [25:11] So it almost would be more systemic from GDP standpoint is now they're not spending into the economy. Right? Like, so

Dan Austin: [25:17] Okay. Now yeah. Because they are the spenders. Right?

Dylan Koch: [25:19] They are the spenders. They they're the vast majority of spenders. And now they now they're like, well, I I'm

Dan Austin: [25:24] Tidying up.

Dylan Koch: [25:25] Batting down hatches. I'm not setting it. Yeah. Right. So that's where my mind went. I don't know. But, I mean, from a moral standpoint, I think it's better if people who private people lose their own money, right, other than it being systemic risk to other taxpayers and everything. Right.

Mike DeHaan: [25:38] Yeah. Yeah. But I mean, you know, capitalism doesn't always care about morality. That's like the least of the, the issue there. Right?

Dylan Koch: [25:44] No government cares about morality.

Mike DeHaan: [25:46] No government.

Dan Austin: [25:46] That's true. That's

Mike DeHaan: [25:47] true. What are morals? Right. I mean, morals are really just a construct. At one point we were were killing each other with rocks because we, you know, they're from a different tribe. It didn't even their their politics didn't matter. They just weren't part of my family. I'm gonna kill you.

Dan Austin: [25:59] Yeah. Exactly.

Mike DeHaan: [26:00] But I think too, what's interesting about that as well is if you look on an average in an average place, Dylan, upper class, one to two percenter. The difference is is that if things go sideways, if you look at Dylan in the 1% to, like let's say Dylan's in, like, the 1%, like, that range. Like, the the range is now 1% to, like, point 1%. Dylan's at the bottom of the totem pole. Yeah.

Dylan Koch: [26:25] Yeah. Sure.

Mike DeHaan: [26:26] Dylan is the you are the poorest rich person. Right? You are the you are the tallest dwarf, as they say, in in succession. Right? You're in, the worst position. And even though you're in a better place than everyone else below you, when they have actual leverage on you, you're completely screwed and there's not a lot you can do about it. And so that's the group that would end up getting bit the most if things go sideways because fundamentally, you would be the quote unquote middle class.

Dan Austin: [26:50] You you stand to lose the most, like Totally. Literally.

Dylan Koch: [26:52] You stand to lose the most on paper, definitely from like a net worth perspective. Mhmm. It'd be very, very hard pressing where our daily needs aren't met though.

Mike DeHaan: [27:00] Correct.

Dan Austin: [27:01] Yeah. Yeah. Of course. Yeah. It just hurts. It just hurts when you look at your Excel spreadsheet.

Mike DeHaan: [27:05] Yeah. Hurts it ego. Hurts I had a mentor a couple years ago who had gone from he had a year where he made $7,000,000 and that current year that I met up with him, he had made $1,500,000. And he's like, you know what the worst part is about going from making $7,000,000 to $1,500,000? And I was like, no. He said, well, your life doesn't really change, but nobody feels bad for you.

Dylan Koch: [27:28] I mean, he's right. Yeah. Yeah. Totally. Right. He's right. You know what I

Dan Austin: [27:31] would do?

Dylan Koch: [27:32] I just go get some fifty year mortgages. That's what I would do.

Mike DeHaan: [27:34] Oh. Seriously, what's your take on that? I would say one of the the biggest things that I've noticed as this whole conversation of fifty year mortgages has been all over my social media, is how incredibly ignorant people are to how amortization rate works. Yes. Right? As they're trying to like explain all this different stuff with like how the interest pay down is is calculated. And also how people just generally don't understand math, like at all. Not even just like people, like quote unquote people that are in your Facebook group, but people that are like freaking financial gurus are posting shit. Like, that's not how it works, dumbass.

Dan Austin: [28:05] They don't know shit. You know, it's dumb.

Dylan Koch: [28:06] The first thing is if you're getting a fifty year mortgage, your interest rate is gonna be higher than a thirty year. Of course. The payment between those two things is not gonna be that different. Like, what? $50 a month on a, what, $350,000 mortgage? Right. And so obviously, it's all front loaded on the Aimsco. I think if you're an owner occupant, it's more than likely a terrible idea. Now, if you're an investor and you have cash flow and you're like, my whole thing is cash flow, I don't care about everything else, then sure, you can make a case for it. And if you're gonna invest a difference in the S and P 500, but no one's gonna actually do that. That's the other part. It's like the practicality behind it. So all in all, net negative.

Dan Austin: [28:37] The challenge I think is like people and this is where I feel like this is such a stupid pitch for brokers, like the the loan brokers that do this is like, over time, this is how much interest you pay over thirty years. It's like, who cares? What is it relative to rent? Mhmm. That's what you gotta think about. Yeah. Now, obviously, an interest only loan is a totally different loan than a thirty year fixed. Between like, okay, you're gonna do a fifty year loan, you're gonna pay this much more in interest. You're gonna do a fifteen year, you're pay this much less in interest. Like, at the end of the day, what is it relative to your other places to spend money? And that is rent. Yep. Mortgages tend to be about the same within a percentage, a reasonable percentage of what people can pay for rent in a comparable home. Mhmm. And so that's really what it matters. And so doing a fifty year, the only thing that does is continue to drive inflation because of the way the American economy works is naturally, people will just still end up paying more for housing. Yeah. And then rental rates will go up with it, and it'll just kinda do this. It has nothing to do with how much interest you're paying. It doesn't matter how fucking long the the loan is.

Dan Austin: [29:36] It just matters that you're giving another opportunity for wealthy people to add additional wealth Yeah. I. The banks.

Mike DeHaan: [29:42] Well, I think they've mostly moved away from the wholesale space of this is how much interest you're paying over x period of time because that's like what boomers cared about when it was like still hear

Dan Austin: [29:50] it though. I still see it. It's so stupid. The fifteen year is not even an option anymore for people, so I don't think you hear. Like when I was first buying houses or when I was first coming into my twenties, 15 versus 30 was a real conversation people were having.

Mike DeHaan: [30:03] Totally.

Dan Austin: [30:03] Now it's not even an option.

Mike DeHaan: [30:04] Well, it's be it's because the prices were lower and ultimately you buy a house, right, you're buying the monthly payment. That's what the average person is buying the house for. But when I bought my first house in 2015, I had that same conversation with this how much interest you're paying. Right. But I think it's because that was kind of the end phase period of time where a lot of the home buyers were people that were career people that had four zero one k's and they're like, I need to get save $1,300,000 so that I can retire comfortably.

Dylan Koch: [30:30] With my paid off house.

Mike DeHaan: [30:31] With my paid off house. And they would say, if you paid it off now, you would have an extra $450,000 at retirement. And then coming out of

Dan Austin: [30:38] the eighties with high high rates, I can see also why people would tend towards that.

Mike DeHaan: [30:42] For sure. You know, but like they weren't considering, well, what if they instead just like took money and put it in s p 500, put it in their four one k, put it in whatever. There's they don't they're not considering any other forms of growth. Right. It's like when like buying stocks and stuff online was still a little bit janky. You had to do $10 trades on freaking TD Ameritrade or whatever.

Dylan Koch: [30:59] Right.

Mike DeHaan: [30:59] Right? And so a lot of people didn't do shit like that. But now it's just the entire ability to generate money through investments. The opportunity cost is much higher for people. And so I don't think you really hear that unless they are super old school or they went to like the whatever loan broker school that is no longer relevant. It's like similar to like how a lot of realtors, they will have these different sales pitches around I don't know. Like, what would a fucking realtor's pitch, Dylan?

Dylan Koch: [31:25] It's the, marry the house, date the rate. That's in my favorite one. Yeah.

Dan Austin: [31:29] That was pretty ignorant. Marry the

Mike DeHaan: [31:31] house, date the rate. That's like a good one. It's just so like shortsighted. Right? And it's so just like, obviously, they're incentivized me to do a transaction today. It's the same with like the mortgage brokers that are kind of pitching that. But like if you look at the big picture, what people are really buying is that monthly payment. And so we're talking about this fifty year mortgage, the reason people are talking about it is because they're assuming what Dylan just said, is that the rate would be exactly the same but now it's over a fifty year amortization, which would never happen. Even if they offered this as a product, it would probably balance out where the monthly payment would be exactly the same, just now you're gonna be front loading more interest on it. And so it would really change nothing. Yep.

Dan Austin: [32:07] Well, at a rise for prices to maintain that, to stay high in the same interest rate environment. Totally. Right? So if nothing changes in this interest rate, then prices have to go up. If prices don't go up, interest rates go up. It's like, again, it's gonna cost you the same amount every month regardless. And it's just gonna cost you more over time.

Dylan Koch: [32:23] Well, did that, plus the they're getting rid that minimum six twenty credit score.

Mike DeHaan: [32:27] That is the equivalent of us having the conversation with the lady talking about the 500 credit thing. And why would

Dan Austin: [32:33] you do that?

Mike DeHaan: [32:33] Like, that's freaking nuts. Dude, history doesn't repeat itself, but it often rhymes. Like, that that is the epitome of of, like, the no doc ninja loans. Because, like, there's, like,

Dan Austin: [32:43] an issue with credit scores. What is the claim?

Dylan Koch: [32:46] I mean

Dan Austin: [32:47] Are they racist?

Dylan Koch: [32:48] They've gotta prop something up. No. I don't think that's it. But you gotta keep propping it up. And if you wanna like, we've talked about on the show how many times housing and how many different sectors it touches. Right? And so they wanna keep the train going and then to keep going, you gotta loosen the standards Right. Until it all comes crashing down, which who knows if that'll actually happen.

Mike DeHaan: [33:04] Yeah. That is the 2025 version of the ninja loans, the no income, no job loans. Yeah. Right? Right. 100%.

Dan Austin: [33:09] The no credit, no money room.

Dylan Koch: [33:11] They did see the portable mortgages thing, which I don't think this will ever pass. I actually think it's a decent idea. Whereas like, if I had $250,000 at 3% off of my mortgage, I could go apply that to a new mortgage. Mhmm.

Dan Austin: [33:22] I like that.

Dylan Koch: [33:22] But the banks the banks would never agree to that because they're like, well, I want him to pay off that two and a percent mortgage. I get a 6% mortgage so that way I can make more money. And how much lobbying power the banks have, I just don't see that going through. But I do think it's a good idea.

Mike DeHaan: [33:34] What they would do is if they were good at sales, right, is they would say like, well, we need to get you like, your blended rate needs to be at the rate that we want, so we're gonna sell you the second mortgage at 8.5. Right. Regardless.

Dan Austin: [33:44] Yeah.

Mike DeHaan: [33:44] So your blended rate's gonna be 6 and a quarter, but it gives you more buying power to give more debt with us. That's what they should do.

Dylan Koch: [33:51] But still, is that any different than what's being offered today? Like,

Mike DeHaan: [33:54] yeah. Absolutely. Because basically what's happening now is that bank is getting the $250 from you at a lower rate that they're basically now able to make you pay and they're just getting money at that.

Dylan Koch: [34:03] Yeah. Right. So, but again, who wins here?

Mike DeHaan: [34:05] Yeah. The people at the top, not the consumer. The the lender. Yeah. Yeah. The consumer never wins in in debt at the end of it.

Dylan Koch: [34:11] I guess it's like, I have 250,000 left in my 3% mortgage. I wanna go buy a $250,000 with zero Like that's something, like you'd have to make an even trade.

Mike DeHaan: [34:19] Yeah. That wouldn't work. You'd have to be like trading up. Be like the consumer version of a ten thirty one.

Dylan Koch: [34:24] Yeah. Actually, that's a good analogy.

Mike DeHaan: [34:25] There we go. We just came up with a new financial product, you guys. We can call it the, what do we have? The I'm trying to think about a DDM. We don't have a good like alliteration for our

Dylan Koch: [34:36] We'll report back next week. Yeah. We'll report back. We

Dan Austin: [34:39] have some time to think about this. Mike just got back from Vegas. He's got brain fog.

Mike DeHaan: [34:42] Dude, fucking the cigarette smoke, man. I'm never staying in like a primary hotel on the strip again. I just can't

Dan Austin: [34:48] It's pretty bad.

Mike DeHaan: [34:49] Deal with it. Dude, my throat was wrecked until I got home yesterday.

Dan Austin: [34:52] Mine too.

Dylan Koch: [34:53] Did Shane smoke some cigs when you're out there?

Mike DeHaan: [34:55] No, dude. Like just being in like the casino where everyone is smoking cigarettes. I mean, I did

Dan Austin: [34:59] have a cigar.

Dylan Koch: [35:00] You did you did

Mike DeHaan: [35:01] you had three cigars.

Dan Austin: [35:03] So I mean, I can't complain too much, but they they were really nice.

Mike DeHaan: [35:07] Well, last couple of times I went to Vegas, I stayed up north in like the Fountain Blue and like resort world, which is like, those are more like resort hotels. And up up there, you know, they're a little classier. People smoke vapes like an adult. You know, they're not they're not ripping ciggies. They're smoking their blue raspberry fucking douche flute. Yeah. And and like it's it's just it's just a better vibe. It's a

Dylan Koch: [35:26] better vibe.

Dan Austin: [35:27] Yeah. It's a better vibe.

Mike DeHaan: [35:28] You're right though. You guys

Dylan Koch: [35:29] are turning into true finance bros.

Dan Austin: [35:30] That's what

Dylan Koch: [35:31] I'm gonna say. Oh, I

Mike DeHaan: [35:31] actually got a Patagonia vest coming in the mail like a bluffy. I'm excited to start wearing

Dan Austin: [35:35] it. It's got SLA Capital embroidered on. We have talked about that. We do gotta get some Finance Pro vests.

Mike DeHaan: [35:40] Those actually are pretty nice vests though, those custom ones I could order. I know. We might need to. Did Chance with the with the

Dan Austin: [35:45] Oh, he'd be great.

Mike DeHaan: [35:46] Puffy vest.

Dan Austin: [35:47] Dude, that was a good story when they thought we were cops. My god.

Mike DeHaan: [35:49] Oh my god. Our sales guy, you know, works out. Fit dude. He's got mustache.

Dan Austin: [35:54] Slick back hair.

Mike DeHaan: [35:55] Slick back hair. He's got a style.

Dylan Koch: [35:57] He's a porn star, so what I'm hearing.

Mike DeHaan: [35:59] Yeah. He's

Dan Austin: [35:59] a very universal stache.

Mike DeHaan: [36:01] Yeah. But he he went to the bathroom at the there's a quick quick story here, then we'll wrap it up. Went to the bathroom at the first restaurant we went to on the first night. And, you know, he's in there washing his hands and this other guy in there and he just goes, what's up? And Chance is like, hi, man. What's going on? He goes, are you guys cops? He was like, what do mean? He's like, he's like, our friends aren't talking. We think that you and that bald guy, you guys look

Dylan Koch: [36:24] like cops. It's just the military

Mike DeHaan: [36:27] and Dan coming out. Yeah.

Dan Austin: [36:29] He was like, no.

Mike DeHaan: [36:29] Not at And then he said the guy he said to James, he's like, if you come over and you tell all my friends that you guys are cops, it's like, buy you a round of drinks. So then Chance went out there and he goes, he's like, yeah. Yeah. You know, cops basically went this whole thing. I guess it was these three like Italian guys. And I don't know. I'm assuming that they were up to no good if they're really worried about these cops that were sitting at the table over.

Dan Austin: [36:46] Cops. Yeah. Yeah. Yeah.

Dylan Koch: [36:47] No. I'm not a cop. I need cocaine right now.

Dan Austin: [36:49] Also, Chance looks like he looks like a

Dylan Koch: [36:51] dirty cop.

Dan Austin: [36:52] He does. That's probably why. They're like, what are these guys up to? Are they undercover?

Mike DeHaan: [36:55] That was like our joke for the whole weekend. It was like, lay low. Like, people are gonna think you're gonna bust them for for something.

Dylan Koch: [37:00] But that's hilarious.

Mike DeHaan: [37:01] Anyways, cool guys. Well, thanks for listening everybody. Hopefully you enjoyed Finance Talk and the, Real Estate Show. Lots of good stuff. And I would say like big picture, there is a a lot of, I wanna say innovation, there's a lot of dynamic movement going on in the financial space that is Mhmm. Becoming more and more hungry for different kinds of real estate deals. And so just keep inquiring with your lenders, keep reaching out and talking to people, and there's probably deals that you'll find relatively quickly that weren't always financeable that will become financeable relatively soon. But you gotta have good credit, you gotta have money, you can't be a schmuck unless you wanna get one of these like 500 credit loans in which the case of Russian guys are gonna steal your house and you fail anyway. So right on guys, besides that go to clickthekeys.com. We opened up our scale community a few weeks ago. You So can go and you can join that, hang out with us in the Slack channel over there as well as the other members. Come talk real estate, come and see the four ish years of wisdom that we have in there of conversations around building your real estate companies. And just chat with me and Dan and Dylan as well. So, just collectingkeys.com. You can sign up there.

Dylan Koch: [38:00] If you wanna love from SLA Capital, I have a referral code you all can use. Yeah. Use Dylan's referral code. Yeah.

Mike DeHaan: [38:06] Oh, there you go. If you hit us up and, say that you're you're applying because of Dylan, well, Dylan will make a few bucks. So that way he can afford to pay for his fancy new BMW payment.

Dylan Koch: [38:16] It's an Audi, bitch.

Mike DeHaan: [38:17] Oh, Audi. It's an Audi? Oh, shit. But whatever. Same car. Anyways, guys, have a great rest your week, and we'll talk to you guys next time. See you. See you. Thanks for listening, everyone. If you want more from us, you can shoot us a follow on Instagram. I am at Mike underscore Invest. Dan is at investor man. Dan and Dylan is at Dylan underscore does underscore deals. Choose to follow and send us a DM to let

Dan Austin: [38:40] us know

Mike DeHaan: [38:40] what you think of the show.