Commercial vs. Residential Real Estate: Playing the Real Estate Game For Big Wins

Mike DeHaan: [0:00] Real quick, guys. If you want to take your real estate investing business from 6 to 7 figures in the next twelve months, and you wanna do without being a slave to your business, then you have to check out our scale community. You can get the full details at collectingkeys.com/scale. But very basically, it is a community of like minded investors who are working to become the absolute top tier investors in their market. Along with three coaching calls per week led by Dan and myself, we also have a whole bunch of videos and materials that go into all the different SOPs that we use to run our business on a daily basis. This includes how we manage our sales team, how we hire, how we do our marketing systems, how we get the best assignment fees possible, how we do renovations, how we do all the different kinds of creative financing. And if you are serious about taking your real estate business to the next level, it is absolutely something that you should check out. So go to collectingkeys.com/scale, see all the details and see if you're a good fit. If you're doing residential, honestly, you're paying penny slots. You can spend it like a bunch of times, you get a lot of things. Every now then you'll get a winner. Yeah. Half the time you'll get nothing. The thing is when you're doing like commercial stuff, you're doing like thousand dollar slots. Yeah.

Mike DeHaan: [1:11] Like when you hate, you're gonna make a shit ton of money, but you're gonna have to spend a lot of time just to even get the capital to get started. What is going on, guys? Welcome to today's episode of the collecting keys real estate investing podcast. Today is Wednesday. This is the Mike and Dan show. If it is your first time here, we are the show where we teach you to make massive income, not just passive income with your real estate investing business. And I am Mike DeHaan here with my cohost, Dan Austin. Hey. And on these Wednesday shows, we talk about real estate investing business in whatever else we feel like for the week. So we are here mid April, and I'm pretty stoked, I just sold one of my rentals. It was my old primary home,

Dan Austin: [2:00] so I got it

Mike DeHaan: [2:01] all that free. And it ended up being all in all about a $300,000 gain from when I bought it to when I sold it. And if you wanna know my secret, I bought a property before 2020 and just happened to be in one of the luckiest markets in the country that appreciate rapidly. And yeah, sorry guys.

Dan Austin: [2:21] I'll continue to argue that you can't be lucky if you're not playing the game. For sure.

Mike DeHaan: [2:25] Right? Absolutely. So

Dan Austin: [2:27] not everybody had dumb luck. Everybody decided at that point in time that invested in real estate to make a very educated decision. Yeah. And because of that, you won.

Mike DeHaan: [2:37] Yeah. I mean, you're in the game long enough, you're eventually gonna hit a home run. And if you just happen to be in a period where you have a crappy pitcher, you can hit a lot of home runs in a very short period of time.

Dan Austin: [2:47] Yeah. You can't win the lottery if you're not playing. Mhmm.

Mike DeHaan: [2:50] So, yeah. Know it's funny like thinking back to them though too because there was so many little things. I mean we were both in in real estate. That was my primary home that I bought 2017. But even after that when I started buying rentals 2018 and 2019, the way that we would look at like cash flow and like appreciation and all that sort of stuff. I mean we were underwriting things with five and a half to 6% interest rates. And the appreciation that we were expecting, what do they used to say, like two to 3% per year. And that's how we would analyze like the

Dan Austin: [3:20] I never even thought about appreciation Like when I was buying Respira, I was like, I guess this is the value it should always be. And I was happy with that the way I was buying it because like I was first and foremost looking at the cash flow position and I recognized that rents would likely go up over time. Yeah. But I never thought about the value of the property going up. Now, obviously, as an educated investor, I recognize that that's a real thing. Up Now and we're now we're realizing it could go down.

Mike DeHaan: [3:44] Yeah. And again, a lot of people, he's like,

Dan Austin: [3:46] it doesn't just go up anymore.

Mike DeHaan: [3:47] I know. I mean, even this property. Right? So I bought it for 210,000, I sold it for 520,000. If I had sold it a couple years ago, I probably could have sold it for more. $535.40 at that point. But it was impossible to know when the peak of the market was gonna be. Also if I had missed the peak and I tried to sell it later, if I tried to sell it like last fall, late fall twenty twenty three, I probably would have only got like $4.70 or $4.80. But the market rates starting to turn around, being springtime up here in Northwest, it was a pretty easy sale. It's also is like honestly a great house, like a really really awesome location. So that helps too. But, you know, so it's been, you know, that's my sort of big win along with all the other transactions that we have closing. But it's been interesting looking at April versus March because March our lead flow was insanely high, and April we're actually looking kinda quiet in comparison. Yeah. Like I bet that we will figure out April with 50 to 60% of the leads that we had in March, and I have no idea why. I think it's just like, I don't know, everyone's past the selling season now. Are people moving on?

Dan Austin: [4:54] Spring break, bro. Honestly,

Mike DeHaan: [4:57] maybe, a little bit.

Dan Austin: [4:58] People want kids too, they travel, don't do anything, or they're at home with their kids and they're going crazy, so they're, you know, they're not used to that, they gotta figure out work schedules. Yeah. Last thing they're thinking about is is selling their house fast for cash.

Mike DeHaan: [5:10] There's probably a little bit of that, but how many of our sellers have kids and they're going on spring break, dude? Most of them can't afford to pay their mortgage.

Dan Austin: [5:15] Well, there's it's not even that they're traveling though. It's that they're like, oh shit, my kids are at home. Have to figure out what to do with them. Sure. Know, it's just tough. You know?

Mike DeHaan: [5:24] Yeah. That's probably one of the more legitimate issues. I always look at like kind of the news and think about is there something that's spooking people. You know, especially because it's an election year. And so going into every election year, surprise, we have a new foreign conflict, it's gonna be the next World War Three and the end of the world. Mhmm. Every four years that happens, people are like, they get so surprised. Yeah. Like at this point, you should just expect it, it's part of the elections Cool.

Dan Austin: [5:47] Dude, there's a three front war going on if you're looking at the as... If you're looking at the European countries as the allies against all these other people, if you kinda look how it's being positioned. Right? You've got you've got Russia, now you have Iran, and you had Moss, which is, I guess, by by Iran, a conduit of Iran, but it's like, who else are they gonna throw at us?

Mike DeHaan: [6:06] I know.

Dan Austin: [6:07] You gotta have the enemy team to fight together.

Mike DeHaan: [6:09] Yeah. Yeah. Right. And they just like... Because they go, what countries have had a bond, if it went over the last fifty years? That's what they're gonna make as their their little squad. But with things like that though, I mean it does affect real estate, right? And like people's respect is

Dan Austin: [6:23] It affects a lot of things and it definitely should, you should at least have some like recognition of geopolitics and what's going on in your world. But like, you know, you can't, in my opinion, I can't control that and I can't change if like World War three it breaks out, but what I can do is is continue to invest like I would if it didn't happen, and the best case scenario, this is what I was telling somebody the other day, they were kind of like, well aren't you worried about this when you're investing? I'm like, okay, so here's the way I look at it, is if the entire world implodes, nuclear war, we're all screwed. Yeah. It doesn't matter, at that point it matters, do you have bullets, cigarettes, and alcohol? Are the only things that matter that point in time. Money, assets, it doesn't matter, right? And so, if we're all there, we're all kind of bumped down to the same level, and then it's primitive, it's primitive like actual like fighting like as far as like whoever's the best is gonna rise to the top, whoever can control the most, right? So we all get to start from zero. Yeah. Other scenario though that doesn't happen and I stay invested, I keep growing, I keep working and I'm still better off than the average person. That's true. So to me, it's like why bank on worst case when you should bank on best case because worst case you're screwed anyways. There's nothing you could do. Yeah.

Dan Austin: [7:35] Hoarding cash and gold shekels is not gonna like do anything for you at that point in time.

Mike DeHaan: [7:40] Yeah. Yeah. That's true. I mean, even though the other people try to hoard at that point, know, it's time buy like bullets. To be honest, 95% of people listening, you're gonna be completely screwed at that point anyway. Right. Yeah. Right. Exactly. Yeah. That's always my favorite is you have these guys that think that they would be able to, I don't know, hold up against like The US Military if there was like some sort of coup. I was like, you're so Crude. Yeah. Tank. Right? Or or even like the the random person that fancies themselves as survivalist. I was like, when some of these North Idaho people that are like legit fucking psychos come down, like you're in big trouble.

Dan Austin: [8:13] Yeah. Those dudes live for this shit.

Mike DeHaan: [8:15] Dude, yeah. They they have literally been training. Like they have training camps that are not that different from the Al Qaeda ones that they used to show us in early two thousands Yeah. Propaganda.

Dan Austin: [8:25] That shit's all over the North Idaho, dude. They're ready. They got their militias. Down, dude.

Mike DeHaan: [8:30] Yeah. I mean, it's just interesting to always try and get into the mind of sellers. But one thing that is interesting right now though is, I mean we were talking about the commercial real estate space for a while, and how much that's turning over. Some of these deals that are coming up, did you see this one in Baltimore? I have the article pulled up right now. But there's this property. It's 100 North Charles. It's a skyscraper in Baltimore. It's been listed for auction for $1,500,000. It's a skyscraper dude. It is like a legitimate skyscraper, you know, big building, and starting bid's 1,500,000. The... There's the one that sold recently down the street for $24,000,000. K? Which was a decrease from eight years earlier at $66,000,000. Okay? And currently they're trying to sell this one at auction for 1.5. It's 23 stories, 346,000 square feet for 1,500,000. So theoretically, if this thing was occupied eight years ago, it should have been worth close to $60,000,000, and now they're trying to offer it for 1.5. Has there ever been a change in perceived value like that with real estate in anything? That's insane.

Dan Austin: [9:45] That is insane. Yeah. I don't know. I don't know what the the percentage of like swings have been in in history on stuff like this. I would go and venture to guess Baltimore. Like, I haven't been there in a long time, but I've heard it's not a very nice town.

Mike DeHaan: [9:58] Yeah. And that that bridge has got knocked down by that tanker, so it's even worse now.

Dan Austin: [10:02] Right? You can't get in or out anymore, dude.

Mike DeHaan: [10:05] They're suffering. It's on their ship. That's crazy. That's and I mean, is going to auction, so it will no doubt get bid up to a higher price. But the fact that they are making that the starting price is like unbelievable.

Dan Austin: [10:17] Right.

Mike DeHaan: [10:17] They're currently selling this 30... 346,000 square foot skyscraper for the same price as a three bed, one bath home in Seattle. Right? It's insane.

Dan Austin: [10:27] No. I see. I'm looking at some of these other buildings too. It is it is nuts. And then meanwhile, you come to Spokane where we're at and they're trying to sell a three unit commercial retail space for $3,000,000. It's under rented by $20 a foot and there's ten year leases on it and you're like, really? Come on guys.

Mike DeHaan: [10:44] Yeah. I think it's like the commercial real estate more than anything just shows the incredible

Dan Austin: [10:51] Stupidity of people.

Mike DeHaan: [10:52] Well the stupidity of people, but like the variability that you see across location. Yeah. Because like residential homes will obviously have some variation, but on average, you know it typically aligns with what the income is of the people that live there. Yeah. Right? Yeah. And so each place will have like its prices that are upper class, prices that are lower class, all the stuff that's in between. But the commercial real estate does not. It's purely based off of the value that you can get from you know, the tenants that you can put in those properties, and the rental rates you can get on a commercial level.

Dan Austin: [11:22] You know what I have thought though, after you and I have been doing kind of a dive and learning about commercial real estate is, a lot of times people say like, oh I wanna get into commercial real estate just more sophisticated, it's like no, I actually, I personally think at a mid level, people buying like, you know, A class, skyscraper, apartment buildings, that's the debt institutions, that's different. Yeah. I'm talking like your typical strip centers, I'm talking about the dentist office down the road. I'm gonna like say this, I think there's actually more dumb people doing that.

Mike DeHaan: [11:53] They just have more money. 100%.

Dan Austin: [11:56] They just have more money, and there are people that are like doctors and lawyers who are smart enough to say, I don't wanna deal with the tenants in flushing, you know, crap down my toilet, so I'm instead gonna invest over here. And a lot of times, if you're not a savvy investor, like, their returns are worse, they buy them more poorly, and then they are willing to sit on them from an ego standpoint to not lose money. Yeah, They'll sell a building that should be sold for 2,000,000, they'll sit on it for two years, try to sell for 3,000,000.

Mike DeHaan: [12:23] I mean that that's absolutely true. People exploit that, right?

Dan Austin: [12:25] Yeah, yeah.

Mike DeHaan: [12:26] In ways that they raise money or you know, Matt Onofrio Yeah. If you guys haven't heard about who that is, go give him a Google. He was somebody who was extorting incredible amounts of money and is doing time for it was a mortgage fraud, think is what they eventually got him for. But his whole model was he would wholesale these commercial deals to what you know you call dumb investors, like dumb big money pretty much. Would be people that have a medical practice or they have some kind of business that is not getting to real estate at all, but they have a ton of cash. He would oversell them the deals because he would sell them on like these tax benefits. Yeah. And these other things. And he would even falsify leases. Yeah. To make it look like the cap rates were higher. But because they were willing to park the money, it's a higher asset, they've been hearing all these big gurus talk about the power of commercial real estate, and how you can increase the value by increasing rents, and those sort of things, and the passivity of it because you have these triple net tenants in them Yep. That you can absolutely do that. You know, they do, they park money, they sit there, they're not willing to lose it. It's non recourse debt, so if they do lose it, they're like, I guess that I'll just walk away and still keep my house, whereas on the residential you don't see that quite as much.

Dan Austin: [13:34] Totally. There's a lot more on the line in a lot of those cases for sure. Yeah. And I do think that for like the good good residential off market operators, they are typically more talented than a lot of the folks I see, even on the commercial real estate side, like agents and all that sort of stuff, like there's just less, they don't work as hard, and they're just, they're not as big a problem solvers.

Mike DeHaan: [13:55] For sure. Well, I will say though, that the people that are the good problem solvers, that are the good operators in the commercial space, they are way richer than the residential good operator.

Dan Austin: [14:04] Oh, yeah. Oh, yeah. Yeah. Yeah. Think about guys like like Matt Yeh who who are 100%. Part of his group and like he obviously... He is taking underperforming assets and repositioning them and making piles of money doing it.

Mike DeHaan: [14:15] Totally. Right? And because you can do the same general process, make multi 7 figure paydays instead of needing to do, you know, 50 deals to make a 7 figure payday.

Dan Austin: [14:24] Yeah. The difference in that that I found is, you have to be even better networker and you have to connect with the right people and you have to get them to believe in you and what you can bring to the table, because a lot of the commercial agents will just kinda like, they'll slap you off, they won't even talk to you, like until you prove to them that you're actually going to make them money. Yeah. Where a residential agent, there's so many out there, you could bend the ear of 20 of them and make them walk houses with you or list houses for you overpriced and you'll never run out of agents wanting to do that for you.

Mike DeHaan: [14:53] Yeah. Hey. We really appreciate being a listener of the Collecting Keys Podcast. Did you know that we also are on social media and on YouTube? You should go and shoot us a follow on those as well. You can find both Dan and I on Instagram. I am at Mike underscore invests. Dan is at investor man Dan. You can also find short clips from the show at collecting keys podcast on Instagram. And if you wanna see our faces talking while listening to the show or you wanna check out some of our crazy animated adventures we've been putting together into some funny little web cartoons that sort of show the crazy stories that guests tell on the show, then you should go over to YouTube and check out the collecting keys channel. Shoot us a subscribe over there. It really helps in human grow our audience. We really, really appreciate it. Well, anyways, enjoy the rest of the show you guys. We appreciate you all. The other thing that I really struggle with with like the commercial, many like large multi family sort of stuff, is the amount of patience that you have to have. Because like realistically a lot of those guys, they will work for years sometimes to get one deal. Mhmm. Alright? Or like for them, it's like a good goal to do like one or two deals in a year.

Mike DeHaan: [16:00] Yeah. Right? And like we're we're used to doing 20 a month. Yeah. Yeah. Exactly. Do you understand the timeline that it takes to go through not only the networking, but to hunt deals? Realistically, 9% of the ones that you see you're not going to have an interest in. Yeah. And then when you do find it, you have to contract and you get an accepted offer, which is not always easy. Then you have to raise money for it and do your due diligence, And there's a huge probability they're gonna fall out after you're doing due diligence. You're not gonna be able to get the money or you're gonna find something in their fake pro form a that they sent you that isn't fully true, of course. And then after you get past that, you have to go and get financing if you're not buying it cash. There's about a 50% chance that your lender's gonna be like, actually we don't like this deal for We one reason or don't like you for one reason or another, and now you have to start over or back out. Know, there's all these stories, like I feel like commercial guys always say this is kind of a thing that stands out to people that are not in that space, is they'll say, yeah I put $30,000 due diligence on that property and I walked away.

Mike DeHaan: [16:59] Yeah. But that's part of the game.

Dan Austin: [17:01] It

Mike DeHaan: [17:01] is. You know? And for me, I guess not having a proof of concept, it's really really hard for me to get excited about that. Yeah. Right? Even though I understand like the larger potential and the long term upside of owning that asset, I'm just like, but there's so many ifs. Whereas like I feel like with the residential side, because we have the system so unlocked, we don't have very many ifs, they're all whens. I know that we will find a deal.

Dan Austin: [17:25] There was a lot of ifs when you bought your first property, but those ifs go away pretty quickly because Yeah. And the general life cycle of residential deal is so much faster, so you learn quicker.

Mike DeHaan: [17:34] And the exes is easier. If something goes bad, you just sell it. And you take a loss and you get, you know, at least a good chunk of your money back.

Dan Austin: [17:40] Yes.

Mike DeHaan: [17:41] Right? Or like if something does go really sideways, you can at least just talk to a couple people and get enough money to get out of it.

Dan Austin: [17:47] It's

Mike DeHaan: [17:47] true. Like we had to do with these sub two deals they got called. Yeah. Right? That was pretty much the worst case scenario. We had to come up with what $800. But that's a reasonable amount of money versus if you own an $8,000,000 property, and all of sudden something goes wrong and you have to figure out how to come up with $3,000,000 to get out of it, like that's a problem.

Dan Austin: [18:05] I was reviewing this within one of the accountability groups I'm in. This like 20, I don't know, $27,000,000 like industrial facility. I was like, I don't even know where to begin on where to like, what do you do? Like, what if that goes bad? I know. Like,

Mike DeHaan: [18:22] yeah, it's non recourse debt, bro. You just walk away and say sorry, guys. Sorry, investors. Your money's gone.

Dan Austin: [18:28] Yeah, I'm just like, I don't even know where to start. Because like, if you're trying to like, well, I'm speculating that if I can get this deal, then I can get this these leases leased up at this price. This deal would be this. Yeah. But it's like, man, there's a lot of what ifs in that process. When you're talking about a $27,000,000 industrial space in town, whatever, across America, it's like crazy.

Mike DeHaan: [18:50] The problem is, right, as Sino referenced, is if you're doing residential, honestly you're paying penny slots. You can spend it like a bunch of times, you get a lot of things, every now and then you'll get a winner. Yeah. Half the time you'll get nothing. The thing is when you're doing like commercial stuff, you're doing like thousand dollar slots. Yeah. Like when you hate, you're gonna make a shit ton of money. Yeah. But you're gonna have to spend a lot of time just to even get the capital to get started to start playing that game.

Dan Austin: [19:13] Yeah. Yeah. You gotta come with a suitcase of $100 bills.

Mike DeHaan: [19:17] Yeah. Right? So, you know, and they're not gonna be giving you free drinks while you're going either. Gonna have be pouring your own drinks and

Dan Austin: [19:23] Right. Go and walk to the Exactly.

Mike DeHaan: [19:25] Yeah. So it's interesting to sort of see how that pan out though because

Dan Austin: [19:29] It is.

Mike DeHaan: [19:29] I mean, also in Baltimore, which apparently is the new Detroit, there's been a lot of talk about how they're selling those houses. You can buy like blocks of houses for a dollar. Cool. Have you seen them? And they're giving like up to $50,000 incentives per house to do renovation. And then you look at these houses and like, it's hell a lot more than $50,000.

Dan Austin: [19:47] Right. You're like, oh, that sounds great. And then it's actually just to build a new house.

Mike DeHaan: [19:51] Yeah. But they're like the old East Coast row houses. You can't just knock it down and build a new one.

Dan Austin: [19:55] It would be pretty cool to go own a block.

Mike DeHaan: [19:58] I mean, we could do that. I don't know.

Dan Austin: [20:00] I might wanna own a block of houses in Baltimore.

Mike DeHaan: [20:03] Just think about it. It's a $100. You go and you buy a 100 houses. Who cares? Dude, it's all about stacking that door count, right? I'm gonna go and spend a thousand bucks and be like, here's how I bought a thousand properties for a thousand dollars.

Dan Austin: [20:16] Alright. I got Zillow open and I mean, there's some... I'm looking at two fifty k houses. Where are you talking to these dollar houses at?

Mike DeHaan: [20:22] Just says, look up like, Google like $1 house Baltimore. Okay. Now I'm in the 30 k.

Dan Austin: [20:27] You gotta go to the South Side, okay? Yeah. You gotta go, yeah, okay. I got some $30,000 houses. Some $10,000 houses.

Mike DeHaan: [20:33] Yeah. Baltimore's silly selling vacant houses for a dollar.

Dan Austin: [20:36] You just have to pay a shit ton of taxes. Dude, this is like a multifamily super 10 k.

Mike DeHaan: [20:42] Yeah. That's what I'm saying, dude. Let's just invest and boost those numbers for the gram.

Dan Austin: [20:48] Dude, all I can tell is it has spaces for four front doors. All the windows are broken out. The doors are just like pieces of plywood, but it is a stone exterior so like that looks solid, But every single window on this thing is broken. It's a four plex.

Mike DeHaan: [21:05] That's crazy. For 10 k, man. That's just... I mean, that's a part of the country. It's... Know, that just exists like that. It's crazy. If you listen to this, you go, I'm gonna go buy a four flex for 10 k. The thing's only gonna be worth 50 k when it's fixed up. It's gonna take you $200 to do it.

Dan Austin: [21:20] Yeah, exactly.

Mike DeHaan: [21:20] I'm you might be able to cash flow this thing like a beast, you're gonna have a hell of a lot of money locked in there.

Dan Austin: [21:25] Yeah. Yeah. It's not worth it. Otherwise, everybody would be talking about Baltimore.

Mike DeHaan: [21:29] I mean, probably might at some point, people talk about Detroit now.

Dan Austin: [21:32] That's true, they do.

Mike DeHaan: [21:33] There was a similar scenario not that long ago where there was houses in Detroit that were in Detroit that were being bought up for a dollar.

Dan Austin: [21:39] I think for that all to happen, I think what ends up happening is the government steps in and provides the strategy that seems to work in the capitalist environment, is they provide the major employers there an incentive to basically produce more labor. Right? And so you look at the American motor manufacturers, that's like Detroit. And so the government has obviously helped them coming out like the two thousand eight crisis and all that sort of stuff. You've got these battery car incentives that you see coming out, so they're building all that sort of stuff. And so I think, I don't know what Baltimore's industry is, but I would assume now that it's like a dying city, they're going to need some bridge builders at the very bare minimum.

Mike DeHaan: [22:16] Yeah. You ever watched that show, The Wire?

Dan Austin: [22:18] The Wire? No. I don't think so.

Mike DeHaan: [22:19] On HBO, it's a good show. You should watch it. But that's based in Baltimore. Is it? And, yeah. It's it's like a a cop show. And so based on that, I'm assuming that the main industry in Baltimore is drugs. Because that's that's my only context. And Baltimore's a really sort of shitty rough place in that show, that's like a show from the nineties Yeah. Or early two thousands. So that's old. And it still hasn't gotten any better.

Dan Austin: [22:42] I mean, the government started incentivizing heroin use in the I 5 Corridor in Seattle, Portland, San Francisco. Oh my god. That helped the industry grow massively. The heroin industry. The drug industry.

Mike DeHaan: [22:54] The wrong kind of industry. Exactly. Yeah. I was I was at a conference last week in Charleston, South Carolina. It's a cool city. I know a lot of people really like it.

Dan Austin: [23:04] I imagine a lot of cannons. Do they have cannons around town?

Mike DeHaan: [23:08] They do. They literally have an area you can go visit. This gets called the battery. And it's like you go. The edge of the city right where all the cannons were that they would like defend the city with and they have cannons there. I don't know if they're real or they're fake or whatever. Course, it was under construction when I went there because they're renovating it for the busy summer season when everyone goes and does their American history tour on the East Coast.

Dan Austin: [23:28] Right.

Mike DeHaan: [23:28] Yeah. So I was over there in Southern United States. It was for a Go Bunce event that was regional, so it was all people that were from there. And I just love it when people in that part

Dan Austin: [23:37] of the world talk about

Mike DeHaan: [23:37] the homeless problem. I was like, I've seen one homeless guy since I've been here. Yeah. You come into the Northwest, we have thousands of them.

Dan Austin: [23:46] You know what?

Mike DeHaan: [23:46] Where in the parks, like outside the nice restaurants you wanna go to, you'll see the homeless On top

Dan Austin: [23:51] of that, we have like normal people that wanna look homeless in this area, like that's the style.

Mike DeHaan: [23:57] You can't even tell.

Dan Austin: [23:58] Yeah, exactly. Just all look homeless up here. Everybody's got beers.

Mike DeHaan: [24:03] And when they might be, know, you're like, I'm in this restaurant and my waitress has track marks, like she might be homeless, I have no idea.

Dan Austin: [24:09] Might be homeless. I do know I'm gonna pay $90 for this plate of food though.

Mike DeHaan: [24:13] Yeah, right. No, it was a good conference though, and it was one of the things that's always interesting for me as an entrepreneur and real estate investor that most of my network's in the Northwest, is when I go to places, and Charleston's a very expensive city now, there's been a lot of growth there, but like the people that live there are different than like the Northwest crowd because I feel like they're legitimate entrepreneurs. So the whole thing with this GoBundance event was it was meant to be it's like to see, you know, for everyone there that's part of GoBundance to connect, and like we did a thing on the second day where we went and like toured people's local businesses, things like that. Yeah. And if you come to like the Northwest or California, honestly even like Texas, some of these like really larger metros, everyone that has like the net worth and sort of business requirement for GoPundance, they're either full time real estate or they're like a high income w two with... That has done real estate investing the past couple years and built up that net worth. Right? Yep. And very rarely do you see like people that have like a true sort of like standard business where they provide a service and they do something, especially brick and mortar, don't see that at all. But when we were down there, it was like the opposite.

Mike DeHaan: [25:21] So many of the guys had these really interesting just businesses that were innovative or even if they were like traditional businesses that they have scaled it out and optimized it. Like one day you had a series of donut stores

Dan Austin: [25:33] Hell yeah. I love donuts. That he

Mike DeHaan: [25:34] runs it out. Everyone likes donuts, but I'm like, never would have thought of that as like a business that will make you rich. But he was like, he was going through like the costs about what it takes to make a donut, what they sell them for, and how they determine their location so that they get a lot of foot traffic and all these things. His good stores make like $20 a month net

Dan Austin: [25:50] That's awesome. To him. That's great.

Mike DeHaan: [25:51] He has like seven or eight of them.

Dan Austin: [25:53] That shit wouldn't fly in the Northwest though. Down there, down south, they do way better margins because people have, you know, bigger bellies.

Mike DeHaan: [25:59] Yeah. I mean, I think that definitely helped. Yeah. You know, but then on the on the contrary, there was another guy, him and his wife, they have these smoothie chain that they run. They're called bomb bars. Right? Because they basically, they make their sweets with these little like smoothie bombs, they're called. And they're like these little things that are like dried food. And they actually have really good ingredients. But you put that in and you can get those, you can buy like the little smoothie balms separately

Dan Austin: [26:20] Mhmm.

Mike DeHaan: [26:21] On Amazon and stuff. And like super good product, really good story, like just like true entrepreneurship around how they went to get their things manufactured and all this stuff. And they're like young people. I'm like, I don't know why we don't see a lot of that in the Northwest.

Dan Austin: [26:34] Well that's tough for a business environment,

Mike DeHaan: [26:36] Maybe, or maybe it's like the fact that our real estate has allowed us to be financially comfortable that we don't have the desire to Yeah. That? Don't

Dan Austin: [26:44] Well, mean also down in Charleston, they don't you know, they don't have Amazons and Microsofts and Google's and all the big companies.

Mike DeHaan: [26:50] They have Boeing?

Dan Austin: [26:51] Yeah, but you know how that is, it's basically why they have so many donut shops down there.

Mike DeHaan: [26:56] I mean you're not wrong.

Dan Austin: [26:57] I don't know, I'm just speculating, I have no idea. Yeah. I do think that it probably is like a regional thing, I think there's probably also something to be said about like where small business can thrive, there's probably something, it's like certain cities like incentivize it to where it's better. Where like, where we're at in Spokane, I can't speak to the Seattle area in Washington, but like, I feel bad for a lot of the restaurant owners where we're at, because it's really hard, I mean restaurants in general are kinda like the main small business you see when you're in like at least our town.

Mike DeHaan: [27:25] Like Mhmm.

Dan Austin: [27:26] They're really tight in a business like that. And then we also have kind of a cost sensitive population when it comes to dining out. Yeah. But we have some awesome restaurants, but you're gonna have to pay extra money to go to those awesome restaurants, the ones that don't have the Red Robin logo on the outside.

Mike DeHaan: [27:40] Sure. I mean, and and down there, to be fair, food and stuff was expensive.

Dan Austin: [27:43] Was it?

Mike DeHaan: [27:43] It was like the same prices up here. Yeah. Like, you went out in somewhere and you got like a beer or something, it was $8. Surprise. Or like, you know, I went and went to the gym one day with the the Go Buns guy I was crashing with down there and we went and got like the breakfast burrito at a coffee shop afterwards. And the breakfast burrito I got plus the coffee was I think was $18.19 bucks. It wasn't cheap.

Dan Austin: [28:02] What do you think that they pay the people down there then?

Mike DeHaan: [28:05] Less than they pay up here.

Dan Austin: [28:06] That's why I'm curious because like our minimum wage is like $16.17, but if the breakfast burrito costs the same up here as it does down there, their Yeah. Their margins are maybe better.

Mike DeHaan: [28:13] Maybe. Yeah. Don't know. Well, know the thing that gets people in Washington is that b and o tax.

Dan Austin: [28:17] Those

Mike DeHaan: [28:18] are because it's tax on like gross revenue, which is ridiculous.

Dan Austin: [28:20] Yeah. They definitely have that. I don't know. Well, did any of those guys own an ice cream shop? Because that's that's one of my my bucket list items. I gotta buy an ice cream shop.

Mike DeHaan: [28:29] I don't think so.

Dan Austin: [28:30] There's gonna be somebody in GoBundance.

Mike DeHaan: [28:32] Yeah. There probably is like the ice cream tycoon that we don't know.

Dan Austin: [28:35] I know.

Mike DeHaan: [28:35] You just gotta find out who they are. But the point being, don't know, I'm curious to hear what anybody else's opinions are on that too, and what other places are. Because like also a lot of people I've met from like the Northeast, they also seem to be very real estate driven. Yep. Or they're in finance. Right? Like they're in something that is around money.

Dan Austin: [28:52] Financial basis, yeah.

Mike DeHaan: [28:53] Yeah, you don't see a lot of people that have these random brick and mortar businesses anymore. Yeah. Unless they're acquiring them or they're doing them at some sort of mass scale. Right. These ones are all ones that were founded from the ground up that they like built out.

Dan Austin: [29:05] That is super cool. That is really cool. I like to see that.

Mike DeHaan: [29:08] Just a different different culture. Yeah. Mean, it's cool. Charleston is a fun city too. Super flat, which is weird for me,

Dan Austin: [29:15] No hills.

Mike DeHaan: [29:15] See how old it was. Yeah, no hills. Good environment, lots of young people, like definitely lots going on.

Dan Austin: [29:21] Well, think just to wrap that conversation up, like you and I were talking this weekend about it a little bit, and there is something to be said about like, if you're in like a coastal city, I mean Charleston's but kinda like the West Coast in particular, the Pacific Northwest recently, has gone, like a lot of people that tend to be at the forefront of like the millionaire real estate folks, like it happened in the last five years for them, because real estate Totally. Prices shot through the roof in this area for the first time in kind of a while, to be honest. Certainly in And our so you have all these people that have some level of like wealth, but they didn't really do anything besides play in the real estate pool. Like they wouldn't be the ones starting that brick and mortar business and being successful, because it's challenging to do, to say the least. It is. But these people kind of end at the same... Have ended up similar in similar spots. Just different Yeah.

Mike DeHaan: [30:10] Yeah. I mean in... With that same direction, Grant, I would say that if you are a new person looking to casually build wealth, real estate is probably not the best way to do it right now. Right? You need to be doing it on some kind of like serious level where you are actively trying to force appreciation or buy properties at discount. Yeah. Because like the people that do what a lot of us did in these areas where we just like were buying properties, you know, six, seven, eight years ago or longer, and the growth that we've had, that's not gonna happen again. And now is that probably not gonna happen? You're also probably not gonna be able to get like just cash flow. Did I remember like back then, and me bringing full circle back to going through our Memorand stuff, like, man, I don't buy anything that's less than a 15% cash on cash return.

Dan Austin: [30:54] It is.

Mike DeHaan: [30:55] Can you imagine finding a 15% cash on cash return property off the market with current interest rates?

Dan Austin: [30:59] It's definitely tough, there's not enough arbitrage on the rates. They're really

Mike DeHaan: [31:03] It's impossible. Yeah. It's literally impossible. You have to buy

Dan Austin: [31:05] it at such a deep discount that the numbers Mhmm. You'd be stupid to not buy it for that reason. I am curious though, because part of me still thinks like there are some markets and we know guys that we help market for where there is cash flow in their markets that they can sell bikes, their properties are so cheap. You know, sub $100,000 acquisitions for houses that need 5 and $10,000 to work.

Mike DeHaan: [31:27] Yeah. But I will also say that if you are somebody that is actively trying to learn how to do this, you probably don't live in one of those markets.

Dan Austin: [31:36] A lot of people don't, Aaron. You're right.

Mike DeHaan: [31:37] Right? They're like, they are few and far between and obviously we know people, we have people in our scale community that live in these markets that are absolutely crushing it right now. That's like, I won't say luck, it's like just circumstantial for like why they're there. You know, if you're in a position where you're actively trying to learn how to create wealth through real estate, which you probably are if you listen to this show, I'm imagining that you living that you live in some kind of major metro, or you live somewhere where that's probably not possible. So, yeah. I don't know. Or maybe I'm just completely pontificating. If you if you do live in a larger... In a smaller market and you're like, I think I have those opportunities, I just can't figure it out. Let me know, because I'd love to help you get there. Because those are the best people to work with.

Dan Austin: [32:17] I do think Midwest is still a cash flow market, some are not anymore. We have to look at that. And so if you want to be in the Midwest but you don't live there, like Mike is saying, guys you will have to do this shit virtually. And that is not the average person. It's not, you need to dig your heels and you need to figure it out and we... We're... It seems average to us because we're around people that do it, but it's not the average investor that's looking to learn how to do real estate. Because it's like an extra step.

Mike DeHaan: [32:44] Yeah. It's not something you can do casually. Like it's not something where you can just like look at properties on like a Saturday and decide you're gonna make an investment. Like you need to be actively networking, actively building relationships there. And we have, you know, several people in scale that have done that. We've done this ourselves as well.

Dan Austin: [32:59] That's

Mike DeHaan: [32:59] But, yeah, goes back to what I'm saying before, just to be... The old days where you're like, I'm gonna go to a meetup once a month and connect with a realtor who's gonna send me property every once in a while, and that's something I used to build wealth. You're gonna be looking for a very, very, very long Yeah.

Dan Austin: [33:12] You're gonna go to this local meetup and there's gonna be a bunch of liars there telling them all the cool shit that they're doing. Yeah. And then they're gonna try to

Mike DeHaan: [33:19] get you to buy

Dan Austin: [33:20] their badass deal and then you... Turns out they're not actually doing any cool shit and they'll lie to you.

Mike DeHaan: [33:24] Exactly. You're gonna have some guy up on stage that has a really unfortunate tooth to gum ratio that's gonna really have a great sales pitch for you and you're gonna be fully bought into it and it's gonna be the worst they've ever seen.

Dan Austin: [33:36] They're gonna teach you how to find deals for yourself.

Mike DeHaan: [33:38] Yeah. Yeah. Absolutely. And that's definitely not a weirdly specific comment.

Dan Austin: [33:43] That was so specific.

Mike DeHaan: [33:45] I'm just saying in general, there's a look, can just tell.

Dan Austin: [33:47] Right? Yeah. There is there is a look on these guys. I still remember actually going back to the first meetup. Did I take you to the first meetup I went to in Spokane? And the dude was a slick rick, man. He was sound the whole time, like he was just

Mike DeHaan: [33:59] Oh, yeah. Yeah. I remember that out in the valley.

Dan Austin: [34:01] Yes. What was that name? His name was Chris something. What was his?

Mike DeHaan: [34:04] Yeah. He's in jail. Is he really? Yeah. Because I I knew somebody

Dan Austin: [34:09] Either financial fraud or child child stuff.

Mike DeHaan: [34:12] It was financial fraud. Okay. But yeah. Chris McIntosh. There you go. That was it. I'll put him on blast all day. Go look him up. McIntosh spoke to you you'll see that he went to jail. But yeah, know several people that like did deals with him from that. And he was like just embezzling money. Yeah. He was like the kind of guy that would raise money from somebody to do a deal and then would never actually...

Dan Austin: [34:33] Yeah. He would just straight steal people's money.

Mike DeHaan: [34:35] I hope this isn't the same person. Candidate for Spokane County Commissioner?

Dan Austin: [34:40] Probably. You can't ask in Washington state. You can't ask if you have a criminal record anymore, so.

Mike DeHaan: [34:45] Oh my god. Yeah. It might be him. Yeah. So, well, if that is him, then fuck me.

Dan Austin: [34:52] That's... Kinda looks like him.

Mike DeHaan: [34:55] Dude, I think it is.

Dan Austin: [34:56] It is him, man. Same age?

Mike DeHaan: [34:58] No way. Yeah, buddy. Like literally the known real estate criminal that I know has stolen money from people Yeah. Who's running for office in our... He's like, it's the same as his LinkedIn that's tied to his next gen REI. Goddamn it.

Dan Austin: [35:11] Dang it, dude. That's that's politics for you, baby. They're all disgusting I pigs can't out

Mike DeHaan: [35:17] believe that.

Dan Austin: [35:18] Oh dude, yeah, he was bad. Like I remember, and I don't remember how I got onto his meetup, but like I was like, oh yeah, let's go to the meetup and yeah, he actually would get a pretty solid turnout too. Yeah. Everything was like the sales pitch to like do his like next gen or whatever he called and you'd go to like his personal house and like sit in a circle and talk about real estate, he'd coach you on how to do it and then he'd bring in these other dudes, the total like, hey, we're taking a busload of people to go down to the auction, and we're gonna help you buy auction properties, and then they just do their whole sales pitch. Like that was the whole thing. I was like, oh, this is not my Yeah.

Mike DeHaan: [35:55] And he was just looking for people to give him money, and then he'd

Dan Austin: [35:57] put

Mike DeHaan: [35:57] the house together. And then he promised that he'll pay you back afterwards. You don't need a deed of trust. But we're gonna be a JV agreement on this and I'll pay you. But those aren't enforceable of anything, so that sucks.

Dan Austin: [36:07] We're scared back.

Mike DeHaan: [36:08] Man, that's a throwback. Yeah. That was literally the first ever meetup we went to. Remember that.

Dan Austin: [36:13] Punny. It was. Anyways. Good times.

Mike DeHaan: [36:15] And now he's running for city commissioner, so.

Dan Austin: [36:17] So all that to be said, be careful what you listen to, even when you go to meetups, because there's a reason why people go to meetups, and I always love what Alex Ramosie says, what it what, how does it go, it's like, I'm in a loss, it's like basically when your experience finds money, experience always gets some money. Yeah. Totally. Yeah.

Mike DeHaan: [36:34] Yeah. So That's very very true.

Dan Austin: [36:36] And when you're coming in there with no experience, you have money, and someone there's with experience asking for your money, there's a good chance they're gonna get it and you're not gonna have any left.

Mike DeHaan: [36:43] Yeah. That's very valid. So... Yeah. And then I guess to finish up with an action item is if you... Do you wanna get into real estate right now? You need to do it seriously as a business? You're doing it casually and you listen to show and you're a casual investor? Go find some other shows to listen to as well. So listen to us, but go find other ones because you should probably expand your horizons. Yep. Because if you're a casual investor, it's gonna be very very tough. And it's probably gonna be easier right now, I think, if you learn to do anything with business that probably isn't real estate if you're like super green. Unless you're like, I wanna focus on the wealth building side as well, you want to pursue getting discounted assets, then that's definitely super viable. But if you just wanna be like a cash flow, like buy and forget it guy, it's probably not time to it right now. It's not

Dan Austin: [37:25] to to So true.

Mike DeHaan: [37:26] Cool guys. Well, thanks for listening. We appreciate all of your time. Please go and share this show with anyone who might find it interesting and we'll talk to you guys next week.

Dan Austin: [37:34] See you.