Creative Financing Will Cause the Next Real Estate Crash

Mike DeHaan: [0:06] What is going on, guys? Welcome to today's episode of the collecting keys real estate investing podcast. This is the show where we teach you to make massive income, not just passive income through real estate.

Dan Austin: [0:18] It's hard every time.

Mike DeHaan: [0:19] It's hard every time. Dude, we we need to have our taglines. We'll know what is coming up. I like

Dan Austin: [0:23] it, dude. It's a good tagline.

Mike DeHaan: [0:25] So if this is your first time here today, this is Wednesday. This is the Mike and Dan show and I am Mike DeHaan with my cohost here, Austin. Hey, yo. And we talk about real estate investing business and how to make money just kind of in general. So we have a lot going on and we are currently going for the full real estate entrepreneur bingo here. Feel like getting like the full like blackout I

Dan Austin: [0:52] was just gonna say like that's how my daughter plays bingo, it's only blackout.

Mike DeHaan: [0:56] Oh, yeah. Mean, you don't want the game to end. Right? Yeah. So we're currently dealing with a situation we have a lending business, like so many other real estate people end up building out as you kind of like vertically integrate businesses along with your primary business. And we are currently facing our first foreclosure, which I'm not excited about by any means, but it will be one or more piece of experience that we are checking off of the real estate pool belt. So Not what I was hoping to check off. No. Not what I was ever hoping to check off. Right? So if you look at like the theoretical real estate bingo cards trying to get a blackout, so many things you have in there, right? You have like wholesaling a deal, you have flipping a deal, you have like an eviction, you have what what else do you have? Like a land development.

Dan Austin: [1:42] We haven't got that yet. We've got a

Mike DeHaan: [1:44] land sub plat. We've done that before. Sub plat? Yeah. You could have

Dan Austin: [1:47] Sub financing or creative financing. There

Mike DeHaan: [1:49] you go. Sub to creative finance. We should like create this as like a thing and then you have to see how many you you check off on the box.

Dan Austin: [1:57] The bucket list It's like one of those like you see like like the Karen's will post online, put a check mark next to every state you visited and they post it, they like, oh, I've been to Alabama. Yeah.

Mike DeHaan: [2:07] But like like bingo's cooler. The problem is when someone's so desperate to get a bingo that they're giving like junk loans, they can hit the foreclosure Yeah, I would wanna encourage that.

Dan Austin: [2:15] I mean, this this is one of those situations too, the foreclosure stuff, it's like, I don't know if I wanna say this, but like, you kinda like reap what you sow type situation, but it's like Yes.

Mike DeHaan: [2:24] Know, we're

Dan Austin: [2:24] in the business of lending, inevitably certain things are gonna happen, just like when you're in the business of landlording, If you don't have a horror story, you just haven't been in it long enough. And so Yeah. It was just one of those situations where we we actually wholesale the deals. Mhmm. So we we found them, got out contract, wholesaled them, so we knew the deals were good. And the operator, we we had vetted, I mean, a good operator, good enough at the time, but things have changed since then, it's just not gonna work out. And now you're on kinda like this weird situation where you want the person to be successful. Absolutely right? But then also you can't wish that they're successful or hope that they're successful and not do anything to protect yourself.

Mike DeHaan: [3:02] Mhmm. And it's actually been a very interesting sort of like experience going through this because there's kind of this stigma that when people face things like foreclosures or pre foreclosures, that they are kinda like bad people, that they are ill sort of like minded, right, or they're like not well intended with everything. Whereas I will say, I do think that this guy is a good person.

Dan Austin: [3:27] Good. Really? Yeah.

Mike DeHaan: [3:28] He's generally a good person. I do think he has good intentions for what he's trying to do. He just got himself, you know, over his skis a little bit. Mhmm. And he's in a situation where he has to make a choice. Right? And we gave him several options about how to approach this. We said, you know, you can either like pay us a penalty right now, then we can work with you to list the properties and get these things moved. We said you can deed the properties over to us in lieu of foreclosure, or we can go and we can do a foreclosure process. Like it's fully up to you. And some cost bias, you know, pride, whatever you want it to be, he has decided he wants to go the ugly route for some reason. Or I will say, rather than that, we had like a Zoom call, we were kind of in agreeance, turns out he doesn't have the money to even like pay us the the penalty and stuff that we need to get things together. And, you know, instead of going the easy route of deeding it over, he's decided that he wants to try and raise the foreclosure process to get the deals done before we can take action.

Dan Austin: [4:25] Right. And this is funny about the whole situation is that this was supposed to be like a what, a two week loan? Mhmm. Originally, yeah. And we had to we had to restructure restructure it it from the first initial loan, which was just kinda gap funding, waiting on, he was waiting on some other funding. So we just kinda covered that gap funding, the funding never came, and the loans started getting really expensive. So, in his favor, we restructured it, because this is, in my opinion, the right thing to do. And even with that restructuring, we just weren't able to get it across the finish line in time. And it goes down to making sure that you, as a person, loaning money, you have to start the processes, that's, this is kinda why we're here, is like start the processes, so that you can cover your downside. Because if, it's like with a tenant, I'll use that relationship again, you have a tenant that keeps pushing and pushing and pushing, they're gonna just keep taking, you give them a mile, and then your heart, you know it's the wrong thing to do, but you want to make sure you're being kind and nice to them, and they end up taking advantage of you. Not because they wanted to, because that was their only option.

Mike DeHaan: [5:23] Mhmm. Totally. Right. And that thing, it just comes down to its business. Right? Mhmm. And even though you fully want the person to be successful, like with this guy, I absolutely wanna be successful. I mean, talked to him on the phone, very cordial. But when we were on the Zoom call, it wasn't like an us and them thing at all. Was okay, dude, how do we get through this?

Dan Austin: [5:39] How do we solve the problem?

Mike DeHaan: [5:40] Right? We solved, came up with a solution, he wasn't able to execute on his side of it. Yeah. And such a important lesson I guess too in making sure that if you are going to do these sort of deals that you have all the appropriate paperwork and systems and everything set up for it because Uh-huh. Like you said, this started as a transactional loan. Uh-huh. Right? Or I guess like gap funding was supposed to be for like a week or something like that.

Dan Austin: [6:03] Yeah. It was literally like a week or two.

Mike DeHaan: [6:05] And there's people that do stuff like that and they're like, I don't wanna like get all the paperwork and all those sort of things, let's

Dan Austin: [6:10] just do it. I've been that guy before, I'm like, yeah, let's just make this fast, and it's like, no, don't do it.

Mike DeHaan: [6:15] Just make it fast, I'll just give it to, wire it to your account, and then you can use it to flip the house, whatever. If If you did that, it's completely unsecured, we'd be fucked.

Dan Austin: [6:22] Yes. Hey. Absolutely. Like, if you trust the person, you're like, let's just get this done, they need it real fast

Mike DeHaan: [6:27] Mhmm.

Dan Austin: [6:27] You can get yourself in a ton of trouble. Because then, when that person's up against the wall, fight or flight, and they're like, hey, I know that you have no recourse, so now I'm in control, which not in a bad way, but they can take the time and make a decision that's as beneficial to them as possible, where it may not benefit you because you have zero recourse if you don't do it right. So, even when we do funding, and this is just for anybody looking to do any type of funding, or maybe in the future, or you're looking for funding, like on double closes, doing the right thing is the person getting the loan is a lendee, lender, lendee, like getting the right paperwork in order, because you'll go to some title companies, we work with several title companies across the country, where they're like, what do you wanna do? No, we can't do that, in reality it's because they don't understand it. And so, making sure that you get the promissory note, the deed of trust, or the mortgage, depending on what kind of state you're in, all the insurance stuff, like, all of the proper paperwork to do alone in order, and getting them to understand what that's for, even if it's for two hours. Yeah. It's gonna cost 5 to $600 to have it drafted, maybe more, take a little extra time, but things happen because we've had stuff where we've wired money, and it doesn't close when you think it's going to, and it's two weeks later, and it just happens more often than you would think.

Mike DeHaan: [7:38] Yeah, and people get cheap about stuff, right? Know, that's an insurance policy. Here's a great thing, if you're a lender, you don't have to pay that. Make your borrower Yeah. Pay

Dan Austin: [7:47] Exactly. It's just part of the cost, yeah.

Mike DeHaan: [7:48] And they'll be like, oh, you're gonna make a payment? I'm like, yeah, I am because I wanna insure my money that I'm giving you to be able to do this deal and you're still gonna pay me the point or you know, whatever my agreement is because that's what happens when you're the borrower Yeah. Because you are kind of at the mercy of what the lender wants to charge you if you just used to work with them. Totally. So anyway, checking off that on the bingo. I don't know if we have I mean, we already got a lot of other like weird like fringe bingo spots checked off to We us got over the like landlord tenant getting into a fist fight. We have a property owner getting kidnapped from a sale. We have a body found in a property. Wait, which one

Dan Austin: [8:23] did we have that one in?

Mike DeHaan: [8:25] So we never we didn't buy that one.

Dan Austin: [8:27] Is that good today?

Mike DeHaan: [8:28] No. It was was out in like the valley. If you remember, there's like we have like the photo of the like the body print like, after it was, like, cleaned up.

Dan Austin: [8:39] I was thinking you're talking about the the apartment we flipped that had two dead bodies in it over the time of ownership.

Mike DeHaan: [8:44] And the same unit, that was different. We never had to deal with that though. Yeah.

Dan Austin: [8:47] Yeah. Authorities don't The murderer that lived The transients. We had a van that was basically rented out in the parking lot of that building, and it was so funny in that one, as I digress here. Well, I was talking to one of the tenants in that, and he's like super pissed off and all hot and heavy. I'm what's going on? He's like, my girlfriend broke in. My ex girlfriend broke into my apartment. I'm like, what are you like, really? He's like, yeah. She came in through the back door, and I was like, dang, that sucks. And he's like, yeah. She lives out in that van out there. And I was like, there's like a van with like four crackhead transients in it. I was like, are you serious? Like, and he had like a 10 year old daughter and like, it

Mike DeHaan: [9:22] was just this weird situation. Was like, golly. There was some freaky shit going on in that apartment, man. That one was rough. It a tough one. But anyway, major digression there. But Yeah. Outside the foreclosure though, you know, it's testing going good. I've been super stoked about how the instant investor program has been going along well. It's like seeing some of the guys really start to hit their stride in there. It's been super fun. We're prepping for keys calling here. But I guess, like, when this episode comes out, it'll be next week, which is crazy. Oh, wow. Yeah. That's coming up real fast.

Dan Austin: [9:50] I'm excited, dude. I am so pumped. That's gonna be so much fun.

Mike DeHaan: [9:53] Yeah. I've been bringing some great speakers though. We had Amanda Cruz come on today and talk about Mobile Home Parks, which was a really great call. That was legit. I love just like having this platform and having this podcast in general. Like it gives you the ability to talk to like true operators without like them necessarily expecting anything in return just because they wanna like come on your platform.

Dan Austin: [10:14] Absolutely. The interesting about her too is like, we get the exposure to a person like Amanda who like legit, you can tell, like she kicks ass because she shared way more information about how to do mobile home parks than you hear on any other podcast, even a mobile home park podcast. You just don't hear that quality of information and the experience level coming from her, she she's on the ground doing it. That's cool.

Mike DeHaan: [10:36] Yeah. So if if you guys missed that, she was on what what episode was it with ours? I mean, like, really quick. It was like one forty seven. Yeah. Episode one forty seven. So it's a month month or so ago. Yep. But yeah. So she came in to talk, which was great. And then we've had several other folks that are starting to line up some, like massive deals. One guy's doing like a big lane development deal and they court a lane, which is gonna be awesome. Yeah. That's gonna be sweet. I'm trying to buy one of those. I know. Right? Yeah. It's been fun. I guess like building out our own tribe as well as like just like being involved in The Netherlands.

Dan Austin: [11:07] It's like anything too. Like it takes a while to build and to really curate what the vision is and then the tribe kinda takes it over and then they just kinda make it their own and it's been really cool like tons of engagement. Which is

Mike DeHaan: [11:20] the best part. Yeah. So I've been super excited about that recently. And then I guess like on the wholesale sort of side, I mean, just been fine. It's funny I guess like by traditional October's, this has been our slowest October that we've had, not necessarily in terms of like deal flow, just lots of push off from sellers right now. I think that the nationwide crunch of housing and affordability right now is gonna start to reach a tipping point here really soon because we're starting to have more and more people all the time who come out, they say that they wanna sell, but they're just like literally not able to because they have nowhere to go. Right. And I don't know what is gonna ultimately happen, right? Because like there's 30 people that we talk to almost every day that they like need to get out their property. Like they're going to lose it because of some sort of situation in their life, but their options are either to sell, get out of the situation, and then probably end up homeless because they can't afford to buy a new house. They can't afford to rent anything. They can't get approved or rent anything if they have bad credit. Or they can stay in the house for another three months and then get kicked out. Right. Because the debtor will come and take the property from them.

Mike DeHaan: [12:37] Right? And so, like, I don't know what is gonna give. Something has to along the way, but it's become like one of our most common conversations is like, thanks so much. I just don't know where I'm gonna go. Right. Or like people will be like, I will sell to you only if I can like stay here. This is how much I can afford. Right. Right? Which makes it impossible to do business because we're not a charity. Mhmm. Right? And there's it's just such a tough deal right now. Like, I don't really know how things are gonna improve from there.

Dan Austin: [13:07] I'm still pretty bullish on like the single family and small residential stuff. It's interesting listening to others talk about like multi family, talking about maybe it's like 10 to 15, maybe even in some areas 20% off of its height, so there's some opportunity now to step into multi family. So I don't know where investor money will go, and I really love watching Aaron and Muchasseggi, if you don't follow him on Instagram, think that's his handle, like Aaron Muchasegi. Yeah. Look him up. Mhmm. It's g u I on the last three. Anyways, talking just like he's getting all these, he's posting a bunch of stuff about just like offices, which we've all kind of understood, like, it's been in the media, but like, offices stuff's like really starting to go into crunch. Like, he posted one today, like a Yeah. A fully occupied office space and the lender's still foreclosing on it and choosing to not re up the or extend the debt because they just wanna get any office off their books.

Mike DeHaan: [13:53] Isn't that crazy? That's wild. You would

Dan Austin: [13:55] have never thought that. Like a high rise, we're talking a high rise.

Mike DeHaan: [13:58] Yeah. And and so I guess the reason that they're doing that is because there's the balloon payment coming up.

Dan Austin: [14:03] Right. Which is typical on a commercial debt. Yeah.

Mike DeHaan: [14:06] When you get these commercial loans, there's the balloon payment that comes up. And what you do is you go to the lender and you say, hey, cool. We wanna reassess the property. You give us a new rate, do all those sort of things, and then we go from there. But they are just choosing to not even have that conversation.

Dan Austin: [14:18] Yeah, because they want it off their book. Mhmm. They wanna clean up their balance sheet going into, probably going into 2024. So you see that crunch, we know that's happening, that's a lot of times, this is what people talk about regional bank issue, right, that's where a lot of that debt sits, whatever that means for some of these big big buildings, but having the multi family kind of coming down in cap rates expanding a little bit, and then residential, like you're saying, it's just so tight. We're still in that, like, I don't know, like just deadlock. Not enough people moving, there's not enough inventory moving. Obviously, there's a supply issue, but then the cost of ownership for the average person is so stinking high. What's going to happen? So you have all these asset classes that are kind of like expanding, and some of them like office falling apart, so where will investor money go? If it goes into the single family and small multi family space, it's not gonna change what you just explained. People are still gonna have a hard ass time finding houses, because all the inventory's gonna get popped up. Mhmm. And then you have all the build to rent guys, and big bankers, and hedge funds still getting into the build to rent space, so that creates inventory, but it doesn't really actually create inventory because they're building and keeping it or building it and selling it to a fund that's going to keep it. So it's just very challenging in all spaces.

Mike DeHaan: [15:27] For sure. I mean, what I kinda worry about happening is ultimately all these people, they end up walking away with nothing they choose to not take the cash offer now and like walk away with some money, go figure it out. Instead go to foreclosure where they walk away with zero equity at that point, they just lose all of it. And then who's gonna come in at that point is all of the investors who are gonna be coming in and you know buying for it, probably bidding each other up because the mortgage rates will be low or whatever and they wanna like you know buy it over other people. And then you have all the lien holders, the banks getting paid off, plus you have all the other all the extra equities that all these investors are now hungrily bidding each other up on. Who makes all the money in that situation? Freaking bank. Right. After all that's said and done for their own shady business practices to even get people in these situations in the first place.

Dan Austin: [16:19] Those are terrible lending practices. Yeah. And I think investors are continuing to drive the investment in real estate acquisitions in the small multi single family space anyways, and so that would just extend that further if you have that situation right, and so it just doesn't doesn't fix the problem. But I just all I think about is like, how do I buy more? And talking to a lot of people, they're like, I don't know how. Mhmm.

Mike DeHaan: [16:42] Right now. Yeah. Right now. Like it's hard. It's just I don't know how. Well, especially with with lending Mhmm. Rates and things like that, like has to be some sort of creative financing or it has to be just like an insane deal that's very very hard to find.

Dan Austin: [16:54] But you can. You can find them and they're just not. I think the challenge is is like, it's if one is good, more is always better, is like the idea. So why can't I have more and and we've been so used to that of like having that abundance that now it's like, okay, you have to be able to sit on your hands for a minute and let let that next deal come, as opposed to trying to force it, which we've been talking about all year. But it's like seems like at that point, now I'm just hungry to do a deal, but that's not the time

Mike DeHaan: [17:18] to do one. I know. Or it is time to do one. It's time to make sure that they're still good deals. Right? They're still valid. Like, honestly, what that one of the things I'm seeing is there's this huge wave right now. So back in 2021, the big wave of, like, all the people who didn't quite understand what they were doing, they were all doing these at wholesale deals. Right? And they were buying these properties that were, like, pretty poor deals, they would go in, they would pay way too much for it, and then they would basically just like replace the carpet if that and then try to sell it for like a higher price.

Dan Austin: [17:49] Shook caulk and all the cracks.

Mike DeHaan: [17:51] Yeah. Just smelling good. Yeah. And then and they they were literally just chasing the appreciating market because every month it would be worth more and more than it was before. Now what I'm starting to see is this rise of just dummies that are chasing cheap debt. Sub two. Like, in terms of, like, buying sub twos or buying these other shitty deals that all these pays more be dorks send out across the the Facebook pages. They're like these deals that is like you're paying above retail price with and they always advertise it like buy a 3% interest rate in Post Falls, whatever.

Dan Austin: [18:25] Are you talking about somebody specific?

Mike DeHaan: [18:27] I would never talk about a 2.875 interest rate deal, a single family in Post Falls or whatever they sent out the other day. It's like an

Dan Austin: [18:34] $18,000 fee on it.

Mike DeHaan: [18:35] Yeah. Well, exactly. Right? But that's the whole thing is you're paying retail price for the property and then the seller decides they want to have their cake and eat it too. So they're also having a second position. Gotta have that second position. So you're extra leveraged on it.

Dan Austin: [18:49] I do the Morby method dog. Otherwise, you're not gonna be in the in the group anymore.

Mike DeHaan: [18:54] It's so dumb. And then the entry fee, like as the investor get into it is like $50,000. So you're basically you're paying a large amount of money to get into a property for above retail price to get a debt that even with that debt with a second position is cash flow negative. And my favorite thing is like, oh, this deal is only for people that have a long term outlook on building their wealth and aren't trying to make money right now. Mhmm. Yeah. They're just speaking buzzwords to all the dumbasses who don't understand how real estate works because they're like, I wanna be a long term guy who, know, I'm trying to build wealth over my life. Yeah. Look at all that equity in there. Yeah. I don't need any equity because I have that cheap debt. Look at my pay down every single month. It's just so freaking dumb. Yep. Because what's ultimately gonna happen is the market turns over, all those people are now underwater.

Dan Austin: [19:39] 100% underwater.

Mike DeHaan: [19:40] Yeah. Rental rates come down. They cannot cash flow at all. Now it's a massive liability.

Dan Austin: [19:44] Oh, good.

Mike DeHaan: [19:45] That second interest only payment whatever with the freaking seller is due in five years, that ultimately comes to you and you have no way to even pay that back because you have no equity in the freaking deal. It just creates a mess for everyone and there's nobody that wins. Yeah.

Dan Austin: [19:59] But if you're wholesaling it, who cares that the seller's gonna lose their ass and the buyer's gonna lose their ass.

Mike DeHaan: [20:04] See, and that's the other situation too, is now you have all, yeah, the wholesalers that are washing their hands of the entire giant pile of spaghetti that they just mixed up. I don't

Dan Austin: [20:14] know how you make that pitch, like, when you're trying to be ethical, especially if you're like a, you know, a godly man, man of the cloth, and you're trying to, you're trying to like, be an ethical wholesaler, and you go into somebody and you get them locked up on sub two, you get them with a seller carryback, and you're like, we're gonna take care of this, and we're gonna sell to some other random person you're not gonna get to underwrite. Is that the conversation, or is it that you tell them that you're gonna do it yourself, and you're keeping it, and you're taking care of their problem?

Mike DeHaan: [20:39] It is. Well, right, so that's like what wholesalers get a lot of flack for, is we don't always disclose the fact that we're finding another buyer. But it's even worse when you're wholesaling these sub two deals because the seller is still responsible for the debt, but now you are passing off that responsibility to some other freaking person that has not been vetted at all. They have no idea what the outcome is.

Dan Austin: [21:01] That's my biggest problem with that. Not that you can't or shouldn't do that because I think that is an opportunity, but it's like, at some point, have some ethics in the game where you have to do the right thing and that might not be what's the best thing for you in that situation. Totally.

Mike DeHaan: [21:14] And right. And there's an issue with the people that are buying these deals. There's the issue of people that are wholesaling these deals. Mhmm. And in my mind, this is the thing that, like, in two years, just like we look back at the whole tale of people in 2021, and you're like, those dummies when they all lost their ass in 2022. Right. We're gonna be looking at the exact same thing in 2024 and 2025, and looking back right now and be like, wow, those people were stupid. Why were they buying those deals?

Dan Austin: [21:36] It's like grabbing five houses on Sub 2 and they're just gonna lose all their butts because they're like, well, I'll just be able to sell it.

Mike DeHaan: [21:42] Yeah. Well, the worst part is too because the debt still stays tied to the seller, not only does the person on title lose the property, but the sellers are the ones that get wrecked.

Dan Austin: [21:51] They are the ones that get wrecked because they're the ones still holding the bag, right, the whole due on sale clause and they're kind of there with the loan when this person defaults because it's still in their name. And I think the biggest challenge with these two is most people are doing them because they're bad deals. That's how they negotiate, and typically it's because the seller doesn't really have that much equity, or the equity they had in 2022 is now gone, but they still think it's there, so then the person negotiating the deal is like, I'll give you I'll give you that equity on like a on a carry back, do this Morby method thing, which is absolutely just trash because the property never actually had that equity at the point of sale anyways, and so now you're you're adding a premium to it with a person that this deal never actually worked for, and selling it to somebody that never should have bought it.

Mike DeHaan: [22:36] Yeah. I mean, it's just like the blind leading the blind. You know, it's just a bunch of nonsense going on. So I don't know. Like, did I mentioned before, I have people trying to force deals to make them work. That's currently what people are doing because their desire to get a deal done is so high. Mhmm. It's just not the time for that. You still need to have your basic due diligence completed and understand exactly what you're buying me again into some of these things. You know? And you know it's a big red flag. When I see these people, it's always like always seems to be like it's, I don't know, like a lady that's like in their forties, then obviously like just learn about real estate and they go and they post on this Facebook page. They're like, does anyone have any creative deals for sale? I know. I'm like, oh god, you're just like begging for someone to come and take advantage of

Dan Austin: [23:19] you. Right.

Mike DeHaan: [23:20] Like, come on.

Dan Austin: [23:21] Or I my actually, I like the person that's looking for seller finance deals, no money down. Yeah. Me too. Yeah. Nerds. Bunch of nerds out there.

Mike DeHaan: [23:33] But between that and then like just the situation with all these sellers and where they're gonna go, all the young investors making dumb decisions, you know, all the very corporate investors letting their $300,000,000 properties go into foreclosure. I think there's a big mess coming, man. Like, honestly. Hey. Like, if you just look at like the very kinda like macro picture

Dan Austin: [23:55] Yeah.

Mike DeHaan: [23:55] I think that there's it's like death by like a thousand cuts right now and the cuts are just getting deeper and deeper and deeper.

Dan Austin: [24:01] Yeah. I'm kinda curious, like, when will the cash kinda get out of the system? Because there's still a lot of cash in the system, and there's a lot of investors that are also sitting on cash that, you know, that's not in the system, but that they have ready to go. So, how much will that money be able to come in and kinda keep it from, you know, I guess, buoyed up? Maybe keep it buoyed a little bit because there are still sophisticated people out there that we know that are ready to buy things. So

Mike DeHaan: [24:24] that's Yeah.

Dan Austin: [24:25] The question I have. Because I don't have a question that there's gonna be some problems going into 2024, it's just

Mike DeHaan: [24:30] how deep do they go. Totally. Because instead

Dan Austin: [24:33] of the government having to print money, we all have that money, and we're all ready to redeploy it. That's where I think they're having a problem with inflation, is because there's just so much money out there, that even though they're talking about savings rates going down, and all that sort of stuff, there's still a lot of people, because all that money went somewhere. Somebody got more wealthy because of it, and it's not the individual person out there, it's investors that were in the game, when they were able to extract equity and put it in the form of cash, companies that were selling widgets that got to sell a whole lot more $1,200 TVs, right, there's a lot of, there's still that, that wealth is still out there somewhere. Absolutely.

Mike DeHaan: [25:06] Yeah. I mean, and I think if anything right now, it's like better time than ever to start focusing on your skills and learning to build your pipeline. Right? And even if you're not able to close on a lot of the deals that potentially come through, establish those relationships with sellers. Mhmm. Right? Because you've been if the stuff does come around, then you'll be able to make your money. And so that's kinda what we've been focused on. We've had a longer cycle time in terms of negotiations and closings and things like that. Yep. But we're able to do that because we have a pipeline bill. You know, we send our mail every single month. We have our SMS team that's working for. We have our our back office services program that you're running with people where, you know, we're just like running people's marketing and lead intake for, what, 25 different markets across the country for different investors right now. And that sort of gives us a unique perspective, I guess, to see what a lot of the conversations look like from everyone across the country in every market. And it's the same sort of patterns, but the funny thing is is across the entire country, starting to see an increase in new leads coming in, but it's a lot of people that are coming with like, need to figure this out. I need to figure this out. I need to figure And this so if you're able to build your bucket and like really, you know, fill it up right to the brim, when stuff does come over the end, you're gonna be the ones there to catch it. So it's time now more than ever to be investing money into getting those leads and having those conversations so you can be ready to capitalize on things when stuff does get weird.

Dan Austin: [26:31] Right. I like that analogy too because those leads do come with a value. Right? It's like having a book of clients as a as a sales rep or something like that. Like those leads that you're producing don't aren't garbage because you didn't close a deal this month. Yeah. You're just getting ready for them to spill out of that bucket and be the first one there to catch them.

Mike DeHaan: [26:45] Yeah. And I I think that that's a mentality that when you're starting out, especially if you're first starting out in like off market real estate. When you're in real estate, right, when you first are like a newer investor, even if you're not new investor but you've never had your own pipeline before, your entire mental process is opportunity, analyze, yes or no, move on. Okay? When you start to do direct to seller, and you start to generate your own leads, it more comes to, okay, seller conversation. Is there even like an opportunity here to begin with versus like, this is an opportunity yes or no you have to analyze. Does it even exist? Right. And then from there, you have to figure out what is the opportunity and how and when can it come together. Not just like yes or no, I wanna do this. And sometimes you're having these conversations with people for six, nine months. I think our longest we had somebody that we first connected with for two and a half years before we talked about buying their property. Yep. Right? And there was some monthly check-in that we did.

Dan Austin: [27:44] This is investing, right? You have to have the long term vision, the long game, and that goes with anything in your business. Like, don't think just because you spent money didn't pan out that you didn't you didn't learn something or earn something, because that's what you're doing as a business owner, you're figuring out things and all that money goes somewhere, as long as you have the long term gain. All you're worried about is short term gain, you're only looking month to month cash flow, yeah, it's gonna look terrible if you invested in a system that didn't work out, or you bought leads that didn't turn into anything that month, it's gonna just look like crap, but have that three, five, seven, ten year vision and

Mike DeHaan: [28:13] Yeah.

Dan Austin: [28:14] I assure you it'll

Mike DeHaan: [28:14] all pay off. Exactly, and just make sure you're nurturing those people as they come in, Put them on like a drip campaign whether that's call, text, whatever it is. And once you've kinda like broken the seal and they've engaged with your business in some capacity, then it's much easier to continue that conversation. There's a huge reason that, like, major companies, they still advertise. It's purely to stay top of mind. Like Coca Cola. Do you really think that Coca Cola needs to advertise what Coca Cola is? No. Everyone freaking knows that. Literally are always marketing so that they're top of mind when you're like thirsty and I'm like, oh, I just saw a Coca Cola commercial. That's what I wanna do. What you're trying to do is be on a smaller scale. Once people are familiar with your company, you just need to advertise and stay in front of them. So even though they can't necessarily sell right now, in nine months when they are completely fucked Mhmm. You're the first person that they call because you've been communicating with them and advertising to them and showing them your brand on a very regular basis for the last nine months. Totally. Right? Then that's gonna be the key I think to the people that are able to be successful if slash when things finally start to turn over and stuff still start to open up again. But beyond that, I don't know what's gonna happen now once we get to that phase, but it might be interesting. Especially with what what were they what was Jamie Dimon saying from Chase that like the COVID savings should be gone by December and we're at like record high consumer debt.

Mike DeHaan: [29:37] So basically everyone has a ton of debt and no one has any money like in terms of like the average person out there. So I think that these problems are gonna continue not even just across real estate, but just across everything else, it's debt driven.

Dan Austin: [29:50] Yeah. Like more of a more of a consumer recession next year maybe. I'm not an economic expert. Yeah.

Mike DeHaan: [29:56] That's what I would think so. You know what I mean? And stuff just is getting tight for people as well. It's funny, I was I was talking to one of my GoPods. We talked about GoBundance last week on the podcast and the beat up that we just went to in Laconia, Georgia, and how I felt like it was all the heavy hitters that were there at the event. And one of my GoPod members actually said something that I thought was very valid. They're like, yeah, you probably got like all the biggest guys because they're the ones that are doing well. There's probably a bunch of guys that are really struggling right now, and they're like, damn, I'm not gonna spend, you know, $67 to go to a week long conference, don't know if I can't do that.

Dan Austin: [30:28] Right. Yeah, you're probably right. They're questioning, they're prioritizing their expenses, but obviously now's the time to actually prioritize that as a value add to you or your business because that's where you learn how to be successful. That's how you make the next step in your business when you're kind of

Mike DeHaan: [30:42] down and out a little bit, right? Yeah, exactly.

Dan Austin: [30:44] That's why

Mike DeHaan: [30:45] I think, side tangent there, but I think just big, moral of the story is, right now, focus on getting leads coming in the door, optimizing your systems, working on growing yourself in your education, and as tempting as it can be to want to buy deals and, you know, continue your wealth generation, do all different things. Just make sure that you actually know what you're getting yourself into, especially when you're looking at some of these people that are peddling these terrible creative deals. Absolutely. Or these lenders that are trying to get you into this nine or 10% debt with five year prepayment penalties. Right. Which is a very serious thing that's going on right now.

Dan Austin: [31:20] Yeah. I mean, think about it from that perspective, like everybody in the real estate industry is transaction oriented. Your loan officer, your real estate agent, your wholesaler, your flipper, like everybody is transaction based and so you just don't wanna be the one holding the bag while everybody else made the money.

Mike DeHaan: [31:36] Exactly. Which can happen, especially if you're the end investor. Everyone made money servicing you to help you buy that house. Yeah. And they all got their money and they moved on. So when the market starts to turn over, you're the you're the one that's gonna get bit at the end of it. So cool. Right on, Dan. Anything else there before we finish up?

Dan Austin: [31:53] No, man. I'm good. Cool.

Mike DeHaan: [31:55] Well, right on, guys. Well, thanks so much for listening to today's episode of the Mike and Dan show. You should give us both a follow on Instagram. I'm at Mike underscore Invest. Dan is at investor man. Dan Oh, yeah. Okay. Just hired a marketing manager and are starting to throw out some major content on there. So give us a follow. Let us know what you think. Even if you think it sucks, just let Dan just DM him and just let him

Dan Austin: [32:16] know that Please do. I love that kind of feedback.

Mike DeHaan: [32:19] He loves negative feedback. He's an army guy. He just likes to be kicked in the nuts every once in a while.

Dan Austin: [32:23] Yes, please.

Mike DeHaan: [32:24] But choose a follow there, guys. We really appreciate it, and we'll talk to y'all next week.

Dan Austin: [32:28] See y'all.