Commercial RE Is In Trouble, Dealing with Rotating Interest Rates, The Best Way To Protect Yourself From a Downturn

Mike DeHaan: [0:00] There's always this big thing with these tech guys, because they have a lot of money, making these bold proclamations about what's gonna happen nationwide when really their only world view is their own little tiny bubble that is already an anomaly for the rest of the country. Yeah. Right? And he's saying like, you know, oh, all these $500,000,000 office buildings, you know, all these, like, malls or whatever, I bet you that 90% of towns The United States don't even have a $500,000,000 office building. Alright, guys. Welcome to this episode of the collecting keys real estate investing podcast. This is Wednesday, the Mike and Dan show, where I, Mike DeHaan, and my cohost here at Dan Austin, talk about real estate investing business and everything in So happy what day is it? Tuesday we're recording this, but we have big news, and that is that real estate is officially melting down, or going to melt down. I know you're getting pretty fired up before we hopped on. You read some tabloids somewhere, you're probably waiting in line to check out at the, I don't know, Walgreens or wherever people your age go to buy things.

Dan Austin: [1:12] You know, I don't go to the grocery store, dude. You know that.

Mike DeHaan: [1:15] You're on the Instacart train these days, that what you do or you send your wife?

Dan Austin: [1:18] I don't even do that. That's not even my thing. That's not my what would you call that? It's not in my description here. That's not in my lane. It's out of Yeah. My I don't do that.

Mike DeHaan: [1:27] But either way, you said real estate was melting down, something that you wanna talk about, hot off the press.

Dan Austin: [1:33] Oh, where should we start? I mean, there's all sorts of stuff going on. I was watching, it's funny that I don't use Twitter a lot, but I do use it, I I actually kind of enjoy it because it does Twitter's really good at like the clickbait stuff because you only get so many characters. I don't know how many it is, but you can only say so much to people like Elon Musk who I follow. He's like, I probably only follow, I don't a handful of people, that's why I say all of his shit. But so David Sacks, I I actually follow David Sacks quite a bit because I think he's a smart guy in general, and I listen to the All Podcasts.

Mike DeHaan: [2:04] Okay. Who is David Sacks?

Dan Austin: [2:06] He's the one of the hosts on All In Podcast. If you don't know what the All In Podcast is, you're probably under a rock because it's, I think, one of the number one podcasts going around the world

Mike DeHaan: [2:15] at this point. Let her not listen to it. You haven't?

Dan Austin: [2:18] Oh, yeah. Well, it's like, I don't know. I think it's business. Like, I think that's what you consider I

Mike DeHaan: [2:23] don't I

Dan Austin: [2:23] don't know if I'd I don't know what I consider it. I don't listen to it every week. I listen to it, a cherry pick episodes. I've listened to it for probably maybe a year now. I think they only started a couple years ago. But David Sacks, he's he's a widely known guy. I think he was partners or at some executive level with Elon at PayPal when they did that whole deal. Yeah. So knows him. He's also for South Africa. Maybe related, I don't know. Anyways, he's pretty cut into the commercial real estate as a tech guy as well for the Silicon Valley area, so he knows kinda what's going on there locally, so he's been tooting the horn of commercial real estate probably for six months. He's like, this is a big problem, commercial real estate, commercial real estate, In the context of actual commercial assets such as office towers and big shopping centers and stuff like that. Places that are brick and mortar that don't necessarily have the exact same need as they did even three years ago, especially these office towers that are $500,000,000, and cannot easily be converted to residential space. So anyways, he's tweeting his normal tweets, then Elon Musk, he's like, I concur. I think his tweet was word for word, I concur, as in the CRE commercial real estate is melting down and residential will follow.

Mike DeHaan: [3:37] See, here's always the problem I have with people like this trying to make claims like that, is because he probably lives in San Francisco. People that live in these bubbles,

Dan Austin: [3:46] or he loves to

Mike DeHaan: [3:47] live in Austin then, people that live in kinda like Elon Musk. I know Elon Musk does.

Dan Austin: [3:51] Yeah, I don't know where he lives, personally. I know he doesn't live in California, like, full time, I don't think.

Mike DeHaan: [3:56] But there's always this big thing with these tech guys, because they have a lot of money, making these bold proclamations about what's gonna happen nationwide, when really, their only world view is their own little tiny bubble that is already an anomaly for the rest of the country. Right? And you're saying like, you know, oh, all these $500,000,000 office buildings, you know, all these like malls or whatever, you go to I bet you that 90% of towns in The United States don't even have a $500,000,000 office building. They don't have anything even close to that. Think about Spokane.

Dan Austin: [4:30] I will argue that Spokane

Mike DeHaan: [4:31] And what's the most expensive building in Spokane, do think?

Dan Austin: [4:34] Downtown office building wise? Like what's the most Wells Fargo building, That's the biggest building. Tallest building.

Mike DeHaan: [4:39] I bet someone could come buy that for like, I don't know, $20,000,000?

Dan Austin: [4:43] I think it'd be a little more than that. I wonder that's the other story there. Yeah, that's a good question, you should look it up. The other part of the story is though, is like Spokane, the touristy has a very high vacancy rate the last few years since COVID downtown. So I think it's like 40 or 60% of offices downtown are vacant. Yeah. And guess what? The streets are packed with homeless people. So we left the offices, and then the homeless people moved in.

Mike DeHaan: [5:07] Yeah. Literally describing San Francisco. Probably describing

Dan Austin: [5:10] Maybe it most of the West just a West Coast problem. I don't

Mike DeHaan: [5:14] I mean, I don't know that. But the thing is as well, we talked about this a little last time too, with the West Coast, the thing that we do have going forward is that they are cool places to live. Right? Like, honestly? Yeah. Generally speaking, it's ish weather.

Dan Austin: [5:27] We don't have too much extremes. We have pretty badass outdoors. Yeah. I mean, you're into anything with outdoors, you're not gonna

Mike DeHaan: [5:35] Yeah. And as a result, you know, people have moved here and stuff has gotten expensive. Right? Like that's that's how it works. And and I mean, as well on that same note, right, people are saying all the time that, in fact, someone someone shared this in our instant investor meeting this morning, that there's this graphic going around that the declining real estate prices is not a nationwide problem. It's strictly a West Coast problem. And they shared this map that and I'll I'll put it in the show notes too. But they shared this map that is literally This is verified data? I don't know. Probably. I mean, I don't think it's incorrect just looking at oh, I guess it's it's for according to Zillow. So verified enough. Right? Yeah. And that it is like, all the West Coast states are kinda like red, like the values are going down. And then as you go across the Midwest and down to the Southeast, things are turning green out. They're going up in value. Everyone likes to use that as a political statement saying people are fleeing the blue states, going to the red states, whatever. What that is, is that's an affordability statement. People are leaving the especially now with virtual work, people are leaving the places where a three bed, two bath house cost them $500,000, and they're moving to the places where it cost them still a $150,000.

Mike DeHaan: [6:43] Like, some of the main areas where prices are increased, it marks here plus 10%, like in Memphis, like some of these Tennessee, some of the areas. We are buying properties with our business in those markets for like $30.

Dan Austin: [6:56] They're cheaper.

Mike DeHaan: [6:56] They're so much cheaper. And people now, if they don't need to be tied to a location, they have virtual work, they're going to be able to live wherever they want. And most people, they want home ownership more so than they care about moving out west. Because I think that's a big thing, is you used to have people that were born in Ohio, born in Kentucky, whatever, and they would move to the larger metros to go and work the jobs that they just got. Instead, they are staying where they are, and they're getting those jobs working remotely. Right? And they're able to, you know, stay close to their family and buy more real estate. Right? And buy real estate instead of trying to go and figure out how the hell they're gonna buy a $1,300,000 family home in Seattle. You know? It doesn't make any sense. But

Dan Austin: [7:41] Well, so I guess what I would add to that, just looking at this graphic, because assuming Zillow is a private entity is incentivized to publish, like, clean data that's not swaying anything because it's percentages. Right? So theoretically, going down by a million dollars a million dollar home going down by 10% is a $100, but in a cheaper market, 10% should still feel like the same swing for the people there. But what I'm seeing here is is you're talking like migration. I don't know if there's like actual huge migration. I've heard like some qualitative data like with like California, people are like, oh, people are fleeing California, but they are, but there's just as many people moving there, so there's not a net negative migration. So I think what I see though is more so these are expensive markets, and some of these are boom and bust markets that are red, like notorious boom and bust markets, right? Like Phoenix area, you have, I think Vegas is in here, Seattle's not notoriously boom and bust, but we know the I 5 Corridor, Seattle, and down into California, they went up a lot, because like we were saying earlier, they're great places to live, right? People want and there's huge job opportunities for people moving here, and so I think because of that, and then also a migration, just like of an immigrant population moving to these areas from outside The US, making those areas rise rapidly, and with that rapid growth, there has to be some rapid decline, rapid, I'm doing that in quotations, which feels like, doesn't feel like a large swing to me. Don't know if you're feeling that.

Dan Austin: [9:15] I don't feel like in the residential markets and the West Coast, I'm hearing tons of information where people are like, Boy, it's a bloodbath out there. I'm still hearing realtors selling deals. I still hear investors flipping houses, and so I don't know if that graphic was meant to show something else.

Mike DeHaan: [9:32] The thing is, right, so it's meant to show changes from all time high, which was a year and a bit ago, which everyone knew was insane, so now we're back at closer where things should be. And also too, I don't think people like to use that politically as showing people moving away, right, as if, you know, the the property values are directly tied to people leaving the area, which is not true at all. I think it is more so that there is no migration to those areas like there used to be, and people are just staying put. Right? So now people are buying houses in places that they never would have historically done that because they would look to move somewhere with more opportunity, but they no longer need to do that anymore. Right? And then the local population, for example, in Spokane, they are going to start being able to buy houses where they already are from. Day prices will come down. More people will try to list their house in the market, less buying power here, whatever. But the point of this whole conversation is that no one knows, and people will always try to skew the data in a way that they can either incite fear Of course. Get views, or project some sort of political belief that they want you to believe. That's it.

Dan Austin: [10:40] Yeah. I mean, it's you know, socially, that's why I say whoever's posting this or Zillow, mean, you gotta ensure that, see what their incentives are to post something like that. However, I will say the thing that I noticed the most out of this graph, is there's absolutely nothing going on in West Texas of importance because every single county, if you look at all the counties on this, because I'm assuming these are county maps, is very, very square and perfectly evenly sized. You look at the other parts of the country where you're like, well, there's probably some badass that they carved around here, and some politicians negotiated to get that boat launch into their county or that part of the West Texas is just a bunch of square

Mike DeHaan: [11:16] plots of land. Literally. That's funny. I mean and so so was up going up

Dan Austin: [11:21] through Nebraska and a lot of Yeah. Exactly. They're like, there's more cornfields over here and over there.

Mike DeHaan: [11:26] That's Like, Iowa. It's literally all just squares on top of each other.

Dan Austin: [11:31] Iowa's a beautiful place this time

Mike DeHaan: [11:33] Yeah, of year, is it?

Dan Austin: [11:34] Sorry to our listeners in those flyover states.

Mike DeHaan: [11:36] From Iowa, yeah.

Dan Austin: [11:37] I I guess to wrap up to the conversation on the commercial real estate thing, I do think that there's probably some validity, and if you're looking at it purely from a balance sheet item, but you're absolutely right too. Like some of these markets where, yeah, not very many markets have big office towers that are going vacant. There's only a handful of office towers, like, you know, those major metros, which tend to recover. I think there are definitely some risks there associated with that in commercial real estate, and I think that brick and mortar continues to see devastation. You know, there for a while, there was kind of this resurgence of really cool, even in our, here in Eastern Washington, and definitely in all other big metros, resurgence of small boutique shops moving into some of these commercial spaces, and kind of that shop local, stay local attitude, But I feel like coming out of COVID, a lot of that is kind of left, and some of that shop local, buy locals moved to Etsy. And there's people killing it on Etsy, but that's virtual. They don't have a shop.

Mike DeHaan: [12:38] I also know that you have young kids. You don't get out much because Downtown Spokane's popping with all that sort of stuff right now.

Dan Austin: [12:44] Don't think it is. Dude, I

Mike DeHaan: [12:46] When was the last time you went out anywhere?

Dan Austin: [12:49] I was just down there for lunch. Come on. It's like twenty minutes from my house. But yeah. Sure. So there's bars. Right? There's bars and actually quite a few restaurants, but those are low margin businesses, honestly. They're gonna barely pay their rent, and the thing about bars and restaurants is every three to five years, they have to go through a branding cycle, or they have to close their doors, and you even look at some of the best restaurants in Spokane, or what I've thought were best, they've had to rebrand or leave or whatever. The owners are still doing stuff, but just that cycle, that business, it's not necessarily a high quality business that you want that's going to be an anchor tenant within your business of shops.

Mike DeHaan: [13:23] For sure. I mean, creates culture for the area, but it's not gonna be an anchor tenant for a large commercial real estate building.

Dan Austin: [13:30] Yeah, yeah, exactly. So I don't know, that's just kinda my thoughts. That's my feeling. Of course, that's just a feeling, it's opinion. Yeah.

Mike DeHaan: [13:36] That's been coming for a while. I mean, people have been talking about how malls have been dying since Amazon started to explode. Right?

Dan Austin: [13:41] Have you been to our mall recently?

Mike DeHaan: [13:43] I've not. I've been I've been to Riverside. Definitely done. Riverside Mall. Oh, downtown. Downtown? Downtown. Downtown. Northtown, I'm sure, is really depressing.

Dan Austin: [13:50] Yeah, go to the trampoline park once in while. Oh, there

Mike DeHaan: [13:53] you go. I don't know, then that's that, and then the multi family space is a whole other thing altogether. Like right now, I should find the exact article Aaron Numisukechi sent to me on Facebook, and he said that, it was basically saying that of all of the foreclosures, I forget the exact number, it was an insane amount was multi family assets of all real estate foreclosures going on in The United States Yeah. Right And it's tied mainly to two things. One is to bad actors in the space who learned how to syndicate and abuse the system. Right? Yeah. Then, of course, the scapegoat guy that they use I say scapegoat. He actually was a scumbag based on what was being posted. But he started doing multifamily real estate in 2020, bought 500,000,000 worth of assets with his fund in, like, three years, and is now losing literally all of them before closure. But they went through and like, he was a nationality. He was Indian. K? He had a medical background, and he had his whole thing that he marketed towards other people of Indian descent that were in the medical field. So he immediately has huge credibility, right, which is And real how we went through, like, his documents, and he had it written in where he received between four to 6% of all of the money raised as basically his, like, fee.

Mike DeHaan: [15:08] So he made stupid money, right, doing all this. Jesus. Had no intention of ever doing anything with the properties. Literally, some of them he bought and never even made the first loan payment.

Dan Austin: [15:20] So he was just raising capital to get that money out extort. At least he bought assets like this.

Mike DeHaan: [15:25] Well, mean, you have to to be able to show it, and then he just would collapse the whole thing. So that was kind of the extreme example. But going further into the article, were talking about how the huge number of people that were buying those kind of assets in 2020 and 2021 with revolving interest rates. And a lot of them were like three years. Right? And so all the 2020 people, they're coming up right now, and their interest rates that were at 3% are gonna be coming in at seven, and they're gonna be changing every single year after that. If they can't sustain that additional cost, they're gonna be in big trouble, and they're gonna be a bunch more that come in 2024, more in 2025. And then from there, it should start to catch up again because people will have been acquiring things at those higher rates already. At those yeah. But it's gonna cause huge issues with that asset class. And this goes back to an episode a while, I don't know, three or four weeks ago, maybe longer than that, where I'm like, I do not understand the exit for these multifamily people. Where is your buyer? Yeah. You don't have a buyer. Mhmm. You know? And they're completely screwed.

Dan Austin: [16:23] Yeah. You're absolutely challenging. Yeah. It's completely challenging. You layer that on with I mean, I know people that were syndicating those last few years that had no idea what they're doing that are also bankrupt. You know? There's a lot of people out there that were all of a sudden syndicators, which is just this I'm not gonna share my opinion on that right now, think everybody knows what that is, but the other stuff they're doing, to get these deals done, so here's a challenge with those types of folks, is they're raising capital from other people that they know, or from people they don't know. But if they get this capital, now they gotta make the deal happen. They might even get a LOI out, find the deal, and say, okay, now we're gonna go raise our capital. Now they have this money sitting there, they have this need to spend it. Then they're getting these bridge loans and this mezzanine debt, this basically additional debt against the property just to make the deal go through, and guess what? That bridge loan is twelve months, it's coming due in this crazy environment, all the other additional debt and crap that you're just throwing on there to try to get this deal done just to invest money, because yeah, you're getting, a lot of these guys are, you know, they're getting an asset management fee, you know, 1%, 2%, They're getting an acquisition fee of one to 2%, you know, and so they're incentivized to make these deals go through, with whatever they have to do. And at every turn, if they're like, well, we can just kinda tack on, we can slap on this additional little debt here to get us across this finish line here, let's do it, let's make it happen, and the investors are no wiser, they don't know. Because they're friends and family, or they're trusted, they're like, yeah, like you said, you're from a very niche group, like doctors, notoriously, there's a lot of doctors out there that end up creating syndication funds, good and bad. I don't know any of them that are bad personally, but that creates credibility within the medical community that, hey, this is one of ours.

Dan Austin: [18:04] Pilots, same thing, because you'll see pilots out there that have become syndicators, and they're automatically trusted within the pilot community. You have these communities of like minded people, and same types of people that automatically give trust to a person, because they passed a similar threshold of life, whether that's a degree, or a certification, or whatever. That shit happens.

Mike DeHaan: [18:23] You see it everywhere. Mean, you've sat with GoBundance that we're both involved in, right? Those the easiest sales for people. It's like, oh, you're a GoBundance guy? Yeah, sure, I'll just go past all the hard work, And I'll underwrite as a result, there's been bad actors in there in the past, right? And I don't know, just really interesting to sort of see. And I think that that is the unspoken risk of those larger assets, that when people don't know what they're doing, and they're trying to jump into them, and they're trying to just make a deal because, like you said, they need to because they've raised some money, and they have all this pledged funds they need to figure out what to do with, and these different Ultimately though, I think that it's just that's why it's so important to learn how to actually run analysis, and to know how to actually hunt and find your own deals. Mhmm. Because at the end of it, even if you buy a bad deal, or kind of a whatever deal, but unless you bought it at a discount, you're not gonna be as bad as if you're buying at retail and you're trying to squeeze some extra stuff out of it.

Dan Austin: [19:20] Absolutely, and the number one, the prettiest girl in the room is the guy or gal that knows how to find a deal and source a deal. Doesn't matter what other skills you have. If you can bring a deal to the table, and it's a natural deal because you knew how to market to it, you knew how to sell it, you knew how to get under contract, you knew how to do all those steps to find and secure a property. Money comes, expertise comes, all the other stuff comes, and so building that skill, mean, that's kinda what we've done in our business, well, it is what we've done in our business, and that's like the number one skill I think you can have in this industry, finding good deals.

Mike DeHaan: [19:54] And for some reason, it's always the one that gets pushed by wayside, you know? Right. Talk to so many people who have these large multifamily sort of ambitions, and they always start doing things like, oh, well, what if I start with a property management company so I know how to manage it when I find that thing? Oh, what if I start a construction company so I can save on the renovation costs when I ultimately find that multifamily property I'm gonna buy? It's like, you're putting the car before the horse. Just find

Dan Austin: [20:21] the multifamily first and hire each of those out because I'll tell you what, none of that sounds interesting to

Mike DeHaan: [20:26] But that's what people do.

Dan Austin: [20:28] Owning a good asset sounds good, but not all the other crap.

Mike DeHaan: [20:30] Yeah. No. It's it's it's interesting. And and also too, that's the greatest way to hedge against any sort of market shift is if you're if you bought things at a discount, the market drops 30%, but you buy over 30% off, cool. You're at zero. Yep. You know? And everyone else is underwater at that point, so you're doing pretty good. Right. Yeah, the market as a whole, he knows. I think that just focusing on the skill set. You know, my thought is whenever there's kind of questions in the market or just around like the economy in general, it's when it's so important just to focus on your own skills and your own knowledge base as opposed to like trying to make big moves. I mean, how many people have we talked to over the last little bit that are have decided like, I'm just trying to hold as much cash as I possibly can right now because I don't know. That is what wealthy people do. Like, you know, they get away from this Dave Ramsey bullshit of like, I need to invest x amount every single month. Instead, it's like, or we could just like wait and see what happens because I have enough skill set and enough of like a long term vision that if I don't invest for an entire year, that's fine. Because at least I will have like saved that and I'm not gonna miss out because I am actively doing things to create more opportunity or to figure out how to create more opportunity. That's where, like, the real growth is going to come from, not just from, like, throwing things in the market blindly and doing dollar cost averaging, which is honestly kind of a farce that the stock market sales machine sells you. But

Dan Austin: [21:54] Now they're incentivized.

Mike DeHaan: [21:55] Right? Of course they are. Yeah. I think you gotta

Dan Austin: [21:57] look at what people are incentivized to do. Yeah? Your adviser is incentivized to have more wealth under management because they get a percentage of that. Stock brokers incentivize to broker stocks. So when the market's down, they still need money. Yeah. So you should invest yours. Buy. Buy low, sell high.

Mike DeHaan: [22:13] Yeah. Exactly. But then but then when you sell, I mean, that's even the whole thing with the Wolf of Wall Street, isn't it? They're like, oh, and then when you know, they just bought Disney for what did they say when he bought Disney for 60, and I take you out for 110. Again, tell me that you don't want to go into HP for 85. So I could take you out again at 120. There's like the whole sales pitch that they have with it. Yeah. Yeah. Yeah. Because they could I mean, I don't know if they still do like that in brokers anymore, but in that movie, they get commissions based on the trades. Right? So they're strongly incentivized to re trade you over and over again. I have no idea if that's still valid at all. I don't know how that space has changed, but I'm sure it's not the same as it was back then.

Dan Austin: [22:51] Yeah. Well, a lot of folks will catch you, like the wealth advisors and stuff that work for these big companies, because they do do pitch mutual funds that they get a fee Yeah. For selling that, and and so you just gotta be careful with that stuff. I've bought mutual funds from that's how I learned how it works, from a wealth adviser, and I realized that I had to pay a fat fee up front, and then the one that he pitched me was shit, and I didn't make any money for three years on it. Yeah.

Mike DeHaan: [23:15] Yeah. I mean, that sucks. I mean, will say the equivalent of that though that we have in the real estate space is wholesalers and realtors. Right? The equivalent to yeah. Totally. Right? If you are looking to buy a property, even if you're using a realtor on the MLS Dude, you can make so much money on

Dan Austin: [23:31] this one. It's 20 k. How many times have people been like, dude, it's only a 20 rehab? I'm looking, I'm like, bro, I think it's like a 60 k rehab.

Mike DeHaan: [23:37] All the time. And then realtors will post that on the Facebook groups, like, $20,000 Just

Dan Austin: [23:41] flip this wall.

Mike DeHaan: [23:42] I'm like, the house doesn't even have electrical. You're talking about $20,000 rehab.

Dan Austin: [23:47] Yeah. Where's the foundation?

Mike DeHaan: [23:48] Exactly. Just dumb stuff. But I mean, even if it's someone that you're directly working with, this will happen is, you know, the realtor has a conversation on the back end with the other realtor, and the selling agent is like, hey, look, they just like really wanna get this done. And your buyer's agent comes back and goes, okay, so how about if, you know, we negotiate with them this way, you just like, let the roof go. Like, I have a roofing guy I'll connect you with. He's really competitive. Like, he will make sure that he gets done. Because he's not getting paid either. Yeah. Like, sure, he it can be your best friend. It can be your hairdresser. It can be your cousins, neighbors, whatever. I don't know. Whoever people get their realtors from. But they're not getting paid until you close the deal. So they just want you get it done.

Dan Austin: [24:27] Anybody that gets paid on a transaction, you should know that they're incentivized to make that transaction Absolutely. You know, even like even this is funny. So like, we're selling one of our buildings. We actually have a commercial broker on it. And I love how every time I get the chirp in from the senior broker, like, great clean offer, good job, this is a good one, it's like, I'll be the determiner, I'll determine that. This is a great It's like, no, you don't need to coach me up. Like, I'm gonna look at it for what it is. Yeah. Like, I'm I know what I'm doing here. And it's like, he should know that. Come on. Like, quit trying to sell me on this transaction.

Mike DeHaan: [24:59] Yeah. And so basically, what happens is we we got an offer today, and they sent it over, and we're working with the agent, and it's a designated broker that always immediately comments, and likes to give a good praise. But he's now done this like eight times, as we review his eight offers, and you're like, you didn't even look at it, because his last offer was shit.

Dan Austin: [25:15] And then I'll respond back of like, remember the one we got from the Pace Morby door? Yeah. Whatever that was, the whole, I couldn't even understand the offer. Three of us sat there and read it, I could not figure it Yeah. And I just said, Hey, I can't understand this offer, so that means I'm out. She finally responded, she's like, Yeah, I thought it was kinda complicated. I'm like, Then why didn't you say that? You don't just like think that, like, well, maybe he'll say yes, and I'll make, you know, whatever amount of money.

Mike DeHaan: [25:41] That's how the real estate game works, right? And why they get flacked. That's also why if you find good ones, they're worth their weight in gold 100%. Because they're hard to find.

Dan Austin: [25:49] There's very few of them.

Mike DeHaan: [25:50] And I do think that that'll kind of change around in the real estate space as more and more, I don't wanna say amateurs, but small time investors are becoming more educated on the real estate process in general. Because a lot of those people, especially when it comes to sort of commercial assets like this, the brokers are used to all of their clients just being old guys that bought the properties in the eighties. And they're like, I don't know what this shit means. Should I accept this? Sure. And they're just like, yes, because I wanna make my $18,000 commission.

Dan Austin: [26:21] Oh yeah, from the investor standpoint. Yeah. From the investor perspective. Because I was gonna say, there's still surprisingly a lot of people out there that don't know how to even look at a piece of property from Oh, a personal ownership

Mike DeHaan: [26:34] for sure, right? Yeah. But I mean, it's definitely more than it was ten years ago.

Dan Austin: [26:38] Yeah, there's a lot more education around it. It's a lot more easily accessible too.

Mike DeHaan: [26:41] Yeah, absolutely. And then not only that, it's a lot more interest. You know, there's a lot of younger people that are wanting to get into it because they recognize the financial freedom that can come with real estate. Right? But whereas I feel like not that long ago, the only people that owned rental properties were kind of like slumlords, who were just like, I don't know. I have a whatever roofing company I need to place money somewhere, and I don't give a shit about these properties. You kinda

Dan Austin: [27:08] wonder how some of those old guys we do buy these from, like, do they ever think about getting into real estate? Because I'm like, don't know that you really know what you're Actually, I know you don't know what you're doing. Why are you owning properties?

Mike DeHaan: [27:19] This is something I have always thought about, especially when we meet some of these old dudes, and we're like, know, we're buying their properties from them at this point because they're heavily distressed. I'm just like, how did you buy this in the first place? Like, you don't know how to do an email. You can't do a DocuSign. No eSign. Yeah. It's like, and I'm meeting you at the bar at 11AM on Tuesday to sign the document. Like, how did you buy this? And you Yeah. You gotta work. You own how many? 18 of them? Are you serious? It's like, what is that? I don't know. I've never figured it out. Know? And it's not just that the property was that much cheaper that long ago. Mean, it was, but these people obviously weren't raking it in.

Dan Austin: [28:00] No. Obviously not, because they're 18 properties, they're still going into bankruptcy. Yeah. Right. But also, all of their properties are like one third of market rents. Wow, I could fix this problem for you.

Mike DeHaan: [28:09] Yeah, no shit, right? But they're like, Oh, but she's great. It's like, She's your ex wife.

Dan Austin: [28:16] It is surprising how many people we've looked at houses where their ex wife lives there. A lot. In the house or the apartment.

Mike DeHaan: [28:21] Yeah, like way too many. And then we go to walk the house, and like the actual wife shows up just to make sure that the landlord doesn't get too buddy buddy with the ex wife. Did happen for me. We've had a couple of those. I think what, two maybe? Two or three?

Dan Austin: [28:33] That's funny.

Mike DeHaan: [28:34] Yeah. It's it's interesting. Folks on the skill set, folks on the business side. Think it's another thing too is if you're a smaller investor trying to figure out really treating it like a business probably earlier than you needed to five or six years ago. Actually, having, like, a general system, actually, like, knowing how to run analysis and not just, like, throwing things into the wind and hoping that it works out. Like, those times are gone, unfortunately. They're not gonna Yeah.

Dan Austin: [28:59] It's just a lot more formalized, a lot more professionalized out there. Yeah. Gotta step up if you're gonna be in the game.

Mike DeHaan: [29:05] So there's nothing wrong with that. No. I would also say it's also easier to get into the game than it used to be because there's so many services out there. Mean, if you wanna market, right, you can find you can find people that can run SMS for you or direct mail. You can, you know, work with us, and we'll, like, do the whole system for you. Right? Like, there's there's so many different iterations of that out there now from various capacities.

Dan Austin: [29:26] Well, even the tools that we use from when we first started, how more advanced they've gotten, and how much easier it is to use those tools versus when it was first coming out, know? There's just definitely so much better to be operating now than it was even three or four years ago. Like, it's you can just go on you can like learn all this stuff. Yeah. You know, I always talk about this, like, can't it's not like you can't learn it, and if you're willing to invest in yourself, you can do this business quite easily. The biggest problem I see is people aren't willing to invest in themselves. They get nervous when they're having to invest, even if it's $100 a month or $200 a month for a CRM, or spending a little extra money on real marketing, and actually, you know, getting out there and being consistent, but the other thing is, people aren't willing to wait, but they're not willing to pay to get there faster.

Mike DeHaan: [30:09] Yeah.

Dan Austin: [30:10] Can, like you said, you can sign up for our service, we can get you there way faster than if you started your own business, whatever, that's fine, or we can show you how to do it, like you and I have learned and paid people to go faster, but other people just those are the two things that I see people not willing to make Yeah. The leap into this industry for.

Mike DeHaan: [30:24] I know. And it's funny. People always they wanna cut on the small things too. Mhmm. Which I think is funny. I mean, even today on our on our coaching call, they're talk there's one of our guys who's closed a bunch of deals and made some really solid money. And now it comes down to he's like, well, it's like I need to figure out how I'm going to carry the cost of like a lead manager, like an overseas lead manager, which is gonna be 800 to $1,000 a month. And it's like, well, if you look at it over the course of the year, right, it's 9,600 to $12,000. If they get you one deal, that'll pay for it. If they don't get you a deal in the next three months, or they don't help you out, then you need to fire them at that point. So it's relatively low risk.

Dan Austin: [30:59] Absolutely. That's with anything, you know, there's things that you and I have spent money on, where it's like, you're spending money, you're like, ugh, I don't wanna spend money on this, and then boom, you pop off a deal that pays for that entire year's worth of marketing, or whatever it is, and that inevitably happens. And same thing goes when you actually get a big pay bump, like you get a big fat 20,000, 30,000, $50,000 fee. If you look at your burn rate, go say, okay, here's my burn rate, maybe it's $5,000 a month, I just paid for ten months of my business operating, I can take some risks. I can take two months worth of risk, three months worth of risk, and I'm still going to have seven or eight months worth of burn, if I do nothing else, if I make zero money. And if you figured out how to get from point A to point B, and get your first wholesale fee, or do your first flip, or buy your first rental property, and actually cash flow on it, you've done what 99.9% of people can't do. You've already proven you can do it, now you just have to do it again. Yeah. It's doable to do it again.

Mike DeHaan: [31:54] Yeah, and after a point, have to bet on yourself. Know, people are so eager to throw money into stocks, or rental property, or they have a friend that has the next greatest business idea, and they're like, oh, sure, I'll give you 20,000 to help you launch that, and you're gonna three x my money in five years? That's amazing. Or instead, just make yourself that startup company, invest in that right now, and a thousand extra money in the next three years. There you go. And be fully in control of it, and don't believe that the system's gonna work. But people will do the investment much quicker than they'll ever bet on themselves, and it's really, I don't know what that is.

Dan Austin: [32:32] They'll invest in other people with very, very little knowledge about those other people or what they're doing.

Mike DeHaan: [32:36] Yeah. I think a lot of it comes down to fear. They don't know what they don't know.

Dan Austin: [32:40] Well, it's fear of what's not the average, what's

Mike DeHaan: [32:42] not normal.

Dan Austin: [32:43] That's really what it comes down to on a lot of this stuff. Everybody's, it's ingrained in everybody's head. This is how our parents' generation made their wealth, was like, well just invest in the market. You just give somebody your money, and they'll make sure it's taken care of. Put it in your four zero one ks, what a great investment. Really when you actually peel the onion back. To go from that to, I'm actually now going to run my own investments, I'm going to invest in real estate, or maybe you're investing in private equity, or maybe you're investing as an LP in some syndications, like that is a stray from the norm, but it's normal for a lot of people. So think about it that way, like it's just a different grouping of people that you're associating with.

Mike DeHaan: [33:26] It's like a different culture, it's just not the one that gets talked about in school, and Exactly. That most people's parents grew up with.

Dan Austin: [33:33] But you know who talks about it a lot? Rich people. Rich people.

Mike DeHaan: [33:36] That's right. I mean, and that's honestly, that is a separation of social classes right there. That is kinda like the separation if you look at it at its core. That's why you see all those stupid infographics that go around on Instagram that are like, oh, this is how rich people look at money versus how poor people look at money. I hate that shit, by the way. It's so dumb.

Dan Austin: [33:55] Yeah. They're usually pretty simplistic.

Mike DeHaan: [33:57] They're so simplistic. Graphics, but, you know, they motivate people. And you're always like, this is posted by guy from India 46731, who's just like trying to get a bunch of likes so we can monetize his Instagram profile. Yeah, exactly. Yeah. Oh my god. Anyway. Moral of story, focus on skills, learn to find discounted assets, and if you learn how to find anything in discount, you'll be the coolest person in the room no matter where you go. So there you go.

Dan Austin: [34:21] I said prettiest.

Mike DeHaan: [34:22] Yeah. I was trying to make it more like gender neutral 2023. I'm just trying to stay up with the time.

Dan Austin: [34:27] Boys can't be pretty. Is that are

Mike DeHaan: [34:28] you assuming I am? It's a feminine word. Yep. I guess I'm backing myself back.

Dan Austin: [34:34] Boom. So

Mike DeHaan: [34:36] Anyways, alright, guys. Well, thanks for listening. We will sign off here. You should go check out collectingkeyspodcast.com/free and get our free five step guide to generating off market leads. So you can find all these discounted assets that we just spent the last twenty minutes talking about. It's really not as hard as you think, but give you a great little layout there and get you started in as quick as two weeks if you really want to. So clickthekeyspodcast.com/free, you get that. If you're clicking around, you'll probably find our store too, and

Dan Austin: [35:02] you might find a new piece of clothing for your wardrobe.

Mike DeHaan: [35:06] I know. I know. I I gotta get on my wife to get some more shirts together.

Dan Austin: [35:09] She's I was gonna ask you, do we get any more designs for our store at clickthekeys

Mike DeHaan: [35:13] We need to. This clickthekeyspodcast. This is like the the bane of, you know, being married to a graphic designer is she's very talented, and she's very very good when she does put stuff Very talented. And she's extremely offended if I hire somebody else, But also just because we're married, she has no respect for my time or timelines. So Exactly. Just yeah.

Dan Austin: [35:32] There you go. That's the truth right there. Yeah. That's But she is highly talented.

Mike DeHaan: [35:35] So, you know, I've been like, hey. It's been like two months. And she was like, yeah. I'll get to it. She's even sent drafts of stuff. I'm like, cool. So can I use that? No. Should we finalize that? No. Anyway so, yeah, go ahead and check out the store. Baddiggiespodcast.com/store. You should got some stuff there too. So, anyways, guys, thanks for listening, and we'll talk to y'all next week.

Dan Austin: [35:54] See you.