Florida Real Estate is in Big Trouble

Mike DeHaan: [0:00] Real quick before we jump into the show, we created the collecting keys podcast to be a real estate investing podcast that is created by real estate operators for real estate operators. And we want operators everywhere to know what it really takes these days to be successful in this business rather than all the fluff that all the other content creators and podcasters out there make. And so one of the challenges with this is that it's challenging to grow because most operators are too busy out there working. Right? And they aren't always learning or actively seeking new learning material. And so if you could please share this show with any fellow operators you know, you know, you can text it to them, you can post it on your socials, you can leave us a good review that you then share somewhere, that would be amazing. But really, whatever, it really helps us continue to get excited to create content, and it will also help you because everyone that you expose us to will get better as a real estate operator and close more deals. So if you could do that for us, it would really need a ton. And, otherwise, we appreciate you guys, and let's get into this episode. These markets seems be doom and gloom everywhere.

Mike DeHaan: [1:07] If you wanna stay in this business, just move to a market that's a little bit better. What is going on, guys? Welcome to today's episode of the collecting keys real estate investing podcast. This is the show by real estate operators for real estate operators so you can continue to grow and expand your business in this ever changing economy. And you are here today with me, Mike DeHaan, and my cohost, Dylan Cook. Sometimes Dan is here, but today he is on spring break with his kids. So it would just be me and Dylan riffing today. So I appreciate you guys all joining us. If you enjoy real estate or you enjoy listening to us, please share share this with your friends and other business owners. It's the greatest way for us to continue growing this thing. So cool. So I am fresh out of a little community event that we had down in Utah with our scale community. It's pretty awesome. We had about a dozen folks come out for that to kinda mastermind for the the week. Did a little late spring season skiing, which is a lot of fun. And it's always good just to get people from all over the country kinda together. Because we had guys from the Midwest. We had guys that are doing business down in Southeast. You know, several people down, like, the Southwest, all sort of came together in in Utah for a little ski and mastermind trip. And one of the things that was, I guess, pretty interesting is just how, you know, how it is dealing with this kind of business.

Mike DeHaan: [2:25] We kind of all have, like, the same problems, but it kinda just varies by, like, degree or, like, the details just based on the market. You know? And it seems like now more than ever, almost like completely random, I feel like. Don't know if what you're seeing in Ohio and some of, like, the cities and stuff, but we had, like, some people that were operating in the same states that were seeing completely different things. We had people that were, like, across the countries that were crushing it, the Marks seem to be independent of each other. But I don't know, dude.

Dylan Koch: [2:54] Yeah. I mean, for what we're doing here in Cincinnati, like, did 11 total flips in 2024. And going into this year, for two reasons. One, I was like, I just hated managing 11 flips. So was like, I don't wanna do that many this year. But the second thing was, I was a little bit pessimistic of like listing with like where the mortgage rates were, the affordability stuff that we talk about. So I've been more wholesale friendly, and honestly like, I see stuff that's listed out and it goes pending in two days. I'm like, should've done it, you know, I should've like But I didn't know that at the time, so I was being conservative. But it's honestly, it's like been kinda on fire here.

Mike DeHaan: [3:29] Yeah. I see and is it like all over Ohio or just in Cincinnati?

Dylan Koch: [3:32] No. I mean I maybe I'm not the best person to ask for that, I don't think so. I think like Cincinnati's good, I know Columbus is still red hot, but outside of that, even the suburb markets out of here, I think it's been still pretty seller friendly.

Mike DeHaan: [3:46] Yeah. Why do you think that is?

Dylan Koch: [3:48] Is it like homeowners that are moving there for affordability? It's actually funny you asked. The Cincinnati specifically had a a net migration in for the last, like, consensus that was done. I'd have to look if that was 2023 or 2024. But they broke that down. It was actually more, like, residents left. The new people that came in were mostly, like, minority based, like, migrants.

Mike DeHaan: [4:10] Really?

Dylan Koch: [4:11] Yeah. And I think a lot of that was this is gonna be all of it. Procter and Gamble's, like, the biggest employer here. Mhmm. They're expanding a lot, like, out here, and I think that brings in a lot of international talent too.

Mike DeHaan: [4:21] So Oh, interesting. Yeah. I mean, there's always, like, little stuff like that that makes a bigger difference than you think. I know one of the things you posted in our Slack for the preshow is this came up last week, and we feel a talk about it. But how Zillow is expecting like national home prices to fall. You know, they they said 1.7%, which Dan responded really means 10.7%, which I think is Yeah.

Dylan Koch: [4:42] And they're looking at Probably true. Year over year from like March to March. But like, if Zillow telling you that prices are gonna fall, like hell is basically freezing over.

Mike DeHaan: [4:51] Right? Of course. Because their entire industry is based on, you know, people going on there to buy houses and being able to sell leads to agents. You know, but the main notable areas are like New Orleans, you had Austin, you had San Jose. I know the entire state of Florida is in really big trouble. Yeah. I've been hearing this through the grapevine. If you

Dylan Koch: [5:09] see the schematic that they posted on here, like, Florida is just has more listings year over year than, like, any other state by a large factor. Yeah. Followed by probably like East, Southeast Texas, and then maybe California. Yeah. But it's some of the ones that are like, you know, the most trendy on the way up, also the biggest fall on the way down.

Mike DeHaan: [5:29] You know, and something that we talked about this before the show that I've kind of observed, which is interesting, is a lot of, like, the red states that were just super red hot in 2021 and '22, which people were fleeing to because of COVID or because of running away from the liberals or whatever. Those markets, I feel like, are the ones that are going bust now. And is that the result of, like, just the massive boom? It's basically, like, the after effect of it, or is it the fact that these states, like, red states typically have a much lower income? And as real estate prices have gone up, there's just, like, less people in general that can afford houses. Because up here in Washington State, dude, stuff's on fire. Yeah. We enlisted a property in Tacoma over on the on the West side of the stage South Of Seattle, and we had 30 walk throughs in the first weekend. And we got 10 offers, and we we ended up accepting an offer that was over asking price by a decent amount with no inspection or anything else. It's like 2021 vibes. Right? And this wasn't like a special house. It's like a standard house in like a neighborhood. It's a hotel, so we just made it look nice enough. But it wasn't like a full rental or anything.

Dylan Koch: [6:35] I mean, my first question to you, Mike, would like, is that one of the only houses that are listed in the area? Like, that's affordable?

Mike DeHaan: [6:41] No, dude. There's there's several. And I think where this one kinda stood out was the fact that we did go the little bit of the extra mile and we put in the new flooring. We redid the bathrooms. Right? And, you know, the kitchen, I think we threw a new countertop. Right? Our total rent on one was, like, $16. It wasn't crazy.

Dylan Koch: [6:58] Yeah. It's not bad at all.

Mike DeHaan: [6:59] But it looked better than the competition in the neighborhood that was fundamentally the same price. Right? And that's the thing is you just gotta you know, when it's a more competitive market, when it's a buyer's market, you have to be the one that stands out. And, also, what we did too is the other houses were listed in the neighborhood for, like, $4.30, $4.40. We listed ours at $4.25. So it looked better and it was cheaper, and guess what? We got an offer for $4.40. Yeah. Yep. But everyone went to our house. So it's so, like, it it drove up the the price there. Exactly. And then we had similar in Spokane. Right? So it's over on, like, the red side of the state, but we listed a house on Friday. We didn't have quite as much traffic. People are generally have a lower income. But we got several offers in the first weekend, and we accepted one that was, I think, 7,500 over ask. Wow. On Monday. So

Dylan Koch: [7:47] Yeah. On Monday. So like both of them went within the next first seventy two hours of them being listed. Yep.

Mike DeHaan: [7:52] All listed on Friday, all pending on Monday. Easy deals. Right? But the thing that's interesting in Seattle in particular, you know, people have always kinda ripped on it because of politics and that sort of stuff, but it does have a generally high income. A lot of people move there as families because they have a good schooling system. It's a beautiful area of a generally high quality of life. It has amazing outdoors. Right? And there are a lot of, like, larger companies that are there. You know? And even though it has sure. It has high high sales tax. We have a high property tax. It doesn't have a state income tax. And some people, believe it or not, do you want like the blue politics? Right? And so they figure if they're gonna go somewhere, that's kinda the place to go. And and rate that you're seeing real estate fly off the shelves there, I think, is very reflective of that.

Dylan Koch: [8:38] I think a lot of real estate investors specifically, definitely fall on the right side of the spectrum Mhmm. Of the political spectrum. But if you're a doctor or an engineer or someone like who is just a high w two earner, we can't live our own echo chamber. Like those people are have high paying jobs

Mike DeHaan: [8:55] Mhmm.

Dylan Koch: [8:55] And they want a nice place to live, they don't really care about anything else.

Mike DeHaan: [8:58] Exactly. Yeah. And if they can go and they can have their place on the water, you know, and sure they have to pay their income tax, they're gonna have to do that. The friendly guys can't do that anyway.

Dylan Koch: [9:06] Yeah. I mean, things are probably the quality of life for the family, and like good schools.

Mike DeHaan: [9:11] Exactly.

Dylan Koch: [9:12] Yeah. Even here, like, Cincinnati is blue, but like the general area is is a red state.

Mike DeHaan: [9:18] Mhmm.

Dylan Koch: [9:18] And there are specific areas of town where I'm like, you're willing to more take a not a risk, but like, I'm not worried about this not selling because it's been one of the best school districts in the local area.

Mike DeHaan: [9:28] For sure.

Dylan Koch: [9:28] And like those are obviously, those are fewer to come by, but when they those opportunities arise, those are the ones you have to take advantage of.

Mike DeHaan: [9:33] Absolutely. You know, and I think that that's realistically what you need to be doing with your business right now is, you know, in order to do this transaction risk, you have to have buyers. So what you should be doing is looking where stuff is still selling and move your business there, whether that's internally within your market. Right? Sure. You might find less deals because they're harder to come by, but that's also the opportunity. Right? And you would you would rather have fewer deals you can actually sell than a bunch of crappy deals that you're just fighting to get off your books.

Dylan Koch: [10:02] Especially if you're taking them down either hold tail or flip. Absolutely. But even a lot of the buyers that I talk to, like, I want it in this school district. Or like, they're just being more selective

Mike DeHaan: [10:13] Mhmm.

Dylan Koch: [10:13] In the areas and price points that that they're buying at. Yeah. Which I can say actually, it's funny, that's a side tangent. Me and a buyer were going back and forth on a price or one of the properties that's not far from my house, and I was like, I thought ARV is probably like $3.35. The price per square foot would've been pushing it a little bit. So he he's like, we'll do it for and he got me like $2 off my ask price. Was like, whatever, get the deal done. So all said and done, you know, I remember $3.35. He listed this thing at $3.59, and then they got an over ask offer, and they ended up selling for $3.70

Mike DeHaan: [10:45] Wow, that's crazy. That's like twenty twenty one vibes to the max. Yeah.

Dylan Koch: [10:49] Yeah. That's a good thing about this buyer, he actually paid me my $2 off the original. He he brought me back and like gave me my original number.

Mike DeHaan: [10:55] Nice. There you go.

Dylan Koch: [10:56] Yeah. So it is what it is, but like that's the thing, man. Like that's the thing that they're looking for.

Mike DeHaan: [11:01] Yeah. You know, if you are in a market where it isn't really experiencing that, you know, or if you're in Austin, or if you're in Florida, you're in these markets where it seems to be doom and gloom everywhere. If you wanna stay in this business, just move to a market that's a little bit better. It's relatively easier to run a virtual market right now. Sure. You won't get to have your trusted handyman go and, like, walk all the properties. Just find a new one. Like, there's more people out there. I I was texting with a I guess, meeting with a guy on Instagram today. Young guy, and he was trying to figure out his business. He usually lives here locally, and he's been doing stuff in Florida. And I was like, bro, stop doing stuff in Florida. I was like, just go find deals here, you know, and I'll show you how to take them down or just send them to my team, and we'll close them, and we'll split the deal with you. I don't care. Yep. I was like, there's stuff that's red hot up here.

Dylan Koch: [11:44] Yep. Yeah. Actually, there's a there's a young guy here that lives here, but he also does stuff in Florida. And like only land. Like only these like small like land things. But he's making it work for right now. Andy's texting. I'm like, bro, how are you texting right now? I don't

Mike DeHaan: [11:56] know how to get past the regulation. I know. I think they're just playing with fire if you're doing that. I've Probably. I've seen a handful of guys doing that. In my my mind, that's kind of a ticking time bomb. But, you know, it's it's just interesting. Like, just be realistic. Right? Like, don't try to force stuff in your market if it isn't working. Like, don't be afraid to go other places if you wanna be a professional in this business. You know, a big thing about being a professional business owner is being adaptable. And if you're gonna keep just, like, fighting tooth and nail, like we don't have a brick and mortar style business, you can do this everywhere. It's not like you have like a bookstore or something, where you can't like move your bookstore to somewhere that's better.

Dylan Koch: [12:30] No. Exactly. Yeah. Right?

Mike DeHaan: [12:32] Or you can't like stand up an ecommerce chain of your bookstore, it's not gonna do anything, but

Dylan Koch: [12:36] And if 20 like if, you know, you did, you know, this whatever worked in 2022 and 2023, I'm sorry. It might not work right now.

Mike DeHaan: [12:44] It's definitely.

Dylan Koch: [12:44] Yeah. Like, and that might be your underwriting, that might be your marketing, that might be the buyers. Mhmm. You know, there's a whole different things in this business that could change, that is a variable that changes another variable. So and find people who are doing it. Most people are more likely to like like you just said, collaboration with your competition. Like, you're gonna both make money.

Mike DeHaan: [13:02] Yeah. For sure. Like, people asked on the scale call today, you know, we started talking about starting to some more stuff with Tacoma. They were like, well, how did you sort of get going with that? And I was like, well, we had Greg on the show a couple weeks ago, and he's there. And he's a good operator, and we got a lead there. So we just JV'd it with him. And then we're like, we should do more of these, and that's what we're doing. Like, if you wanna find the market, just go and peruse, you know, the local Facebook groups or go and look on props and see who the good buyers are and find people that are doing high transaction volumes in a market. Find leads there, then just go to them to get your first ones done. Sure. Might give up half the deal or more, but that's how you learn how to, you know, learn about their connections, learn about their process, and then you can do it on your own, which you gotta figure out.

Dylan Koch: [13:46] And you could be a data nerd with all this stuff. Like, go too down in the weeds where you're not doing any work and just looking at the data. But most things of public records, you can figure out, okay, most of the out of a 100,000 purchases, 30,000 were cash buyers in this zip code. Like, you can find that kind of data out between different jurisdictions. And so, go where the most cash buyers are.

Mike DeHaan: [14:05] Yeah. You don't understand. Don't ask. I just wanna ask Chad GPT, you know, where where the best markets to wholesale real estate are like everyone else in that's gonna go.

Dylan Koch: [14:13] Can I actually tell you a a story about that real quick? There's someone in our scale group that messaged me and said that, you know, we asked I think it was Chad GBT or one of the AI things. He's like, what the best ZIP codes in Cincinnati were to have an off market business. And the ones that they provided were I literally would have been the the exact opposite of what I would've picked Mhmm. Here Yeah. Locally. So this shows like Was that Alex? It was. Yeah. Yeah. That's

Mike DeHaan: [14:39] funny. Yeah. Something Alex Yeah. Would I mean, that's it's funny with the AI stuff as I have been using it a lot for doing some systems, basic stuff. So, like, we just hired three junior acts that work in our office, basically, just doing cold calling and and, like, some general prescreening stuff. And building out their processes on, like, Mojo dialer and all those sort things was actually really great with ChatGPT, because I literally just told it what I wanted to do within Mojo, and it wrote out the entire process as it exists in the app, which is pretty sick.

Dylan Koch: [15:08] Yeah. That's awesome.

Mike DeHaan: [15:08] And then what I did is I just basically read through it, and I just grabbed screenshots of what it was talking about, and I just pasted them to the doc. I'm like, SOP done. Took me twenty minutes.

Dylan Koch: [15:17] Yeah. Yep. That would've taken you hours prior to that.

Mike DeHaan: [15:19] Absolutely. Stuff like that's great. But like if you're trying to use it for, like, subjective things, the problem is is it just comes with whatever bullshit's been spewed onto the Internet, which we all know is trash most of the time. You don't really realize how little people on the Internet know about stuff until you're reading about something that you actually do know a lot about. Right? Have you ever noticed that? Yes. Yeah. And and Chad GPG is just eating garbage, and it's so it's gonna spit garbage back out.

Dylan Koch: [15:47] That goes along the lines with, once you've been doing this for a while, you almost underestimate how much you know compared to when you first started.

Mike DeHaan: [15:54] Oh, yeah.

Dylan Koch: [15:55] I don't know. I think I had a conversation with someone the other day, and they're like talking about this like running comps or like getting an ARV, and it's like, okay. Lisa, this is where the conversation is starting. And I don't know. I don't know where I'm going with that other than like don't sell yourself short because you probably know them more than you think you know.

Mike DeHaan: [16:10] Yeah. Well, I think it's called is it the Dunning Kruger effect, is that what that's called?

Dylan Koch: [16:14] Yeah. Yeah. At the beginning, you're like,

Mike DeHaan: [16:17] I don't know anything. Well, yeah. Yeah. But then you know everything like kinda step one.

Dylan Koch: [16:21] Yes. And then once you learn more, you realize the more you didn't know prior to that.

Mike DeHaan: [16:26] Exactly.

Dylan Koch: [16:27] The other thing that so I listened to this episode twice. Yeah. And there's a guy called, the Reventure Consulting, and he just had a kind of a grab your attention headline of 50% of The US will see falling home prices this year in 2025. But he's talked he basically just think what he does is he takes a lot of Redfin data, because they have a pretty good API, and like makes pretty good UI out of it, user interface out of

Mike DeHaan: [16:49] it. K.

Dylan Koch: [16:49] He noted it's the worst of housing affordability since 1981, like in basically since pre 2006 is when the next closest outside of 1981. He was very good at basically saying prices need to come down, because it's unrealistic that wages are gonna continue to come up. And he's also unrealistic to think that the Fed can cut rates all the way down to two to 3% to get the ten year down. Because we also can't do that. So like, the only thing that really is left to do is prices to come down, if those alligator jaws have to close at some point.

Mike DeHaan: [17:20] For sure.

Dylan Koch: [17:20] And he, you know, he had a poll on here of his YouTube audience of 18,000 people, which I guess isn't nothing, but it's not huge. And 58%, like, don't care about where rates are, they just need prices to come down, and 34% said they would need the mortgage rate to drop to 4% or lower for them to consider borrowing. To me, that just is like a lot of people who do own homes are probably kind of quote unquote stuck in their house, because they're they can't afford anywhere else.

Mike DeHaan: [17:42] Here's also the other thing I would say. So it's his 18,000 people on YouTube. Who's watching YouTube? Young people.

Dylan Koch: [17:49] Yeah. The people who are going to be like researching that exact topic.

Mike DeHaan: [17:52] Well, and not only that, but, like, the younger people that their only knowledge of what real estate mortgage rates look like is in the four percents because when they were getting into their early twenties, you know, early to mid twenties, that's how things were through, like, 2019 to, you know, 2023, 2024. Now they're seeing rates as high. But even those of us that are a little bit older, like, I mean, god, my first house that I bought back in 2015, I remember getting mortgage quotes that were in like the mid sixes.

Dylan Koch: [18:21] Yeah. I think I was I think I was around 6 for my first one. Yeah. I've been 2018.

Mike DeHaan: [18:26] Yeah. Think we by bought ours down to like 5.9, and that was like pretty sweet back then. And then even like getting like up to 2020, like when I was doing my first DSCR loans back in 2018, 2019, it'd be like 9.5, dude Yeah. On some of these. Like, it was incredibly high.

Dylan Koch: [18:43] Yep. Yeah. But the problem is, like, that was at a price that 9.5 still made sense.

Mike DeHaan: [18:46] Yeah. For

Dylan Koch: [18:47] sure. To me, 9 and a 0.5 doesn't make sense on a lot of stuff anymore.

Mike DeHaan: [18:50] It doesn't. Yeah. For sure. That's it's always interesting with stuff like that. Mean, you're at 18 k isn't a large sample size, but it's not insignificant either. It's not like some of the studies you see where, like, they asked 30 college kids in New York City what they think. It's like, yeah, it's not a good sample size at all.

Dylan Koch: [19:06] Have you seen there is a guy on YouTube, that's like a series that goes around, and basically asks like what he appears to be boomers, or maybe the gen x's. It's like, could you afford your house today if you just started? And a lot of them are like, no. No. They just they're lucky to buy it in the nineties, and they've never refi ed, they never did anything.

Mike DeHaan: [19:22] Totally. Dude, fuck. Even if you bought it in '21, like, couldn't afford this house that I'm in right now. Yeah. No way. If I had to buy this house with a seven and a half percent rate, I'm in this thing at 2.9.

Dylan Koch: [19:32] Well, yeah. See, that's a huge difference.

Mike DeHaan: [19:34] Yeah. My monthly nut on this would be like $10 in this house. Yeah. Yeah. I just wouldn't do that. Like, my it's not worth that to me.

Dylan Koch: [19:40] Yeah. No. No. Actually, we just got our escrow balances increasing on ours because our, you know, insurance and property taxes went up last year. It's not actually, for the audience, if you have PMI, the private mortgage insurance, we still have that because I'm just an idiot and never got rid like, we probably have the equity to get rid of it, so that'll be one of the phone calls I have.

Mike DeHaan: [19:58] Yeah. Oh, Yeah. How long have been paying that for no reason?

Dylan Koch: [20:00] Probably two years too long.

Mike DeHaan: [20:02] Oh, shit. That sucks. Just flushing that down the toilet. Does that just go to Uncle Sam?

Dylan Koch: [20:09] PMI, I think, protects the lender. Right? Like so it's like the lender's just getting an extra kickback.

Mike DeHaan: [20:14] But wouldn't the lender be Fannie Freddie? I'm assuming they bought your note.

Dylan Koch: [20:17] Maybe it goes to the servicer? Probably. Yeah. I don't know. But you're probably right. It's this private mortgage insurance. Ours is like $800 a year total.

Mike DeHaan: [20:25] Yeah. There's some private mortgage insurance company that's owned by like fucking Nancy Pelosi's younger nephew that's just like making all this money. Yeah.

Dylan Koch: [20:32] Oh, a 100%. A 100%.

Mike DeHaan: [20:33] So is that like sub q insurance at the same thing? Sounds like it. See see how much? It's it's protecting them when all these FHA's blow up.

Dylan Koch: [20:41] Well, problem with like PMI is it's almost like the people who have to pay it are the people who have the lowest down payment, or the people who probably can't afford it. So like, you're taking away discretionary income from the people who don't have any.

Mike DeHaan: [20:51] If you think about that, right, that is the biggest flaw with the mortgage industry, is the people that have lower credit, lower liquidity, they wanna charge them more money because they're more risky, but they're also higher like, more likely to fail. And if you make it harder for them to succeed, of course, they're gonna be more likely to fail. Yeah. Right? But at the same time, it fully makes sense that they would want to make it harder for that person to qualify for the loan, because they wanna save their money for the more qualified individual. If anything, you should

Dylan Koch: [21:21] be like, okay, we'll give you a higher rate, but you can only borrow up to 60% LTV or something stupid. Exactly.

Mike DeHaan: [21:28] Right? Or the rate kinda like stays the same, and it reduces you how much debt they're allowed to get. But the problem is the entire industry wouldn't work because most of those people are poor. So that's the root of everything is that the vast majority of people that have been buying houses cannot actually afford houses. Hey. So you've heard us mention our scale community before, and I don't have a lot of time, so here are the quick highlights. In scale, you get all of our processes and systems that we use to do about a 150 deals every single year. You also get a community of investors that are verified crushing it in their markets, otherwise, wouldn't even be members. And that way, you don't have to waste time with nonstarters like you find in other groups. You also get preferred relationships with marketing companies and even lenders that will give you 100% financing. If just heard all that and said, nah. I don't really need it. That's not gonna help me. I don't know what to tell you. You're lying to yourself because all those things are guaranteed to help you explode your business and buy more deals next year. So go to collectingkeys.com/scale, and let's see if you qualify.

Dylan Koch: [22:24] There's similar themes that we talk about a lot on the show, but I think we might see actually start a trend, you know, depending on where you're at, obviously. But like, I don't know, prices at least here, it might still be red hot, but they're not really going up.

Mike DeHaan: [22:36] Yeah. I'm not hearing you too.

Dylan Koch: [22:37] That makes sense. Like, they're going quick, but they're not, like, the ARVs are kinda staying the same.

Mike DeHaan: [22:41] Yeah. Like, prices are like dead flat across everything. They've been the same since '22. Like, I don't think I've we've seen any growth in in prices since like late two thousand twenty two. But if you have a good property, they'll still sell. You know, I wouldn't say, like, in a weekend, like, is kind of anomaly that we have that, but in a couple of weeks, for sure.

Dylan Koch: [23:02] Yeah. We had one that I tried to wholetail as a duplex, and, like, I didn't really do anything to it. I just bought it and threw it on the on the MLS. And I had a appraisal, literally like a done piece of for the hard money stuff. I upload to MLS, and then as its value is $2.15, I listed it at $2.15, I had like two walk throughs. I didn't get any offers.

Mike DeHaan: [23:21] Yeah. So I

Dylan Koch: [23:21] was like, but I think it's because it doesn't look great. Yeah. I think presentation matters more than anything else right now. So we took it down, we're gonna put some money into it, and relist it for a higher price obviously, but

Mike DeHaan: [23:31] Well, just like everything else, right? It's marketing, it has to show good. It's just like if you have a restaurant and you try to have, like, weird stock photos of food that look gross and aren't, your real restaurant items, then Yeah. You're not gonna get as good of business. You had some good dirt on a guru that's failing, which is always one of my favorite.

Dylan Koch: [23:48] It's a Robert Ritzenhaller.

Mike DeHaan: [23:50] Robert Ritzenhaller.

Dylan Koch: [23:52] With REM Capital.

Mike DeHaan: [23:54] Okay.

Dylan Koch: [23:55] And basically, they have they have like five properties under management here in Cincinnati. But here here's a a news article.

Mike DeHaan: [24:03] I just left some guru trash.

Dylan Koch: [24:04] City of Cincinnati sues real estate investment company accused of allowing squalid living conditions at apartments. And basically, like, says these tenants have running sewage Nice. Cockroaches, unsanitary conditions, active water leaks, and so the city is suing them for unhabitable conditions. Yeah. And this is just one of five that they own. Nice. And so I dug a little bit more in today, and I realized he's a $170 behind on property taxes on one of them.

Mike DeHaan: [24:35] Nice.

Dylan Koch: [24:35] And he has mechanics liens out the ass, and I think his wages are getting garnished by someone else. Perfect. All this to say, like, all of these properties are bought, like, from 2020 to 2022. Every single one.

Mike DeHaan: [24:47] It's probably starting to come up on those like, metal commercial rate adjustments and everything else. Dude, there's so many of these guys right now. I mean, even like the biggest names. Right? Do you follow that ballbusters Instagram page?

Dylan Koch: [24:59] I don't follow them, but I know who you're talking about.

Mike DeHaan: [25:01] Yeah. They're pretty funny follow. But there was one the other day with this guy, he was posting his luxury apartment that he lives in Miami, and this place is like a piece of shit. Right? And it it's supposed to be like a fully furnished thing, and it's super expensive, and all sort of stuff. And I also just falling apart. It's owned by Grant Cardone. Oh, wow. The apartment complexes. It's like it's a 10 x building. Yeah. And by, like, I guarantee you that when you're when you're playing at that level, they're all just business and financial decisions. Like, yeah, we will let people like 85 people live in squalor because it why would we put more money into it for no reason? You know? Especially if it's non recourse debt.

Dylan Koch: [25:37] Yeah. I mean, I don't know. You're one have the little bit integrity as a human being not being a piece of shit.

Mike DeHaan: [25:43] Absolutely. You know, a lot of those guys though I mean, everyone everyone says that until all of a sudden you're you're on the hook for $25,000,000 that you don't have that you've embezzled from other people. You know? And I'm not justifying what they're saying at all. I think that they're absolute dirtbags, but that's the situation that a lot of them get into, especially the ones who only started in 2021.

Dylan Koch: [26:04] Yeah. And the problem is, like, I'm not gonna divulge this, but like, when I skip trace them, I can there's a primary address on here. Hell, yeah. And I can look it up. Right? And it's it's a nice place. Yeah. So like, where is this money actually going is the biggest thing. Like

Mike DeHaan: [26:17] Hell, yeah. Let's go door knock him.

Dylan Koch: [26:18] Well, did cold call him, and the voicemail said his name. So I'm

Mike DeHaan: [26:21] God, he's the like, come on, dude. If you're gonna be a criminal, like, at least get an LLC and a like a what am I talking about?

Dylan Koch: [26:30] The lawyer. VoIP phone or something, man. Like

Mike DeHaan: [26:33] I don't know. I blank the lawyer that you're supposed to, like, make for your LLC. You know what I'm talking about? Like, the contact

Dylan Koch: [26:39] A lawyer that says, make your LLC? I don't know.

Mike DeHaan: [26:41] You know what I'm talking about? I'm fucking brain dead. But, yeah, like, at least have it go, like, registered agent. Thank you.

Dylan Koch: [26:47] Oh, yeah. Okay.

Mike DeHaan: [26:48] Yeah. So like, people can't find you and it just goes to some random office, like, come on.

Dylan Koch: [26:53] Well, and the other thing, and this is just hilarious with the same one, is they didn't like do the the entity transfer type stuff. So he got revalued from like a 1,000,001,200,000 valuation, to like a 4,500,000 valuation. Okay. That's why his property taxes went up so high, and that's why he's delinquent so much. Nice. If you're gonna raise millions of dollars, just know what you're doing, at least to like at some level of basic confidence. Yes. This is all to say, like there's a theme here that maybe there's more blood in the streets. And I'm trying to capitalize on it, if I can reach out to him and buy it, and save face, and he can get some of his investors money back, that's a could be a win for everybody.

Mike DeHaan: [27:29] But Yeah. No way, dude. It'll be gone. You've been seeing that a lot with GoBundance guys too. It's like a lot of these guys that were investing with these new operators in '22 and '21, all their deals are going bust. I have one of my one of my GoPod friends. He's literally lost over $500,000 in the last year off of syndications.

Dylan Koch: [27:47] Oh my god. From the LP physicians?

Mike DeHaan: [27:49] For all from LPs. Yeah. With, like, credible operators too, dude. Like, people that were, like, on stage at the events, and they gave them money, and then they've lost all of it. Some of them have done it with like, okay, cool. We're gonna try and figure this out. Other people have just like popped smoke and disappeared.

Dylan Koch: [28:04] What do you think the the crux of that is? I mean, obviously, people say we're from 3% to 7% interest rates, But that were they assuming that rates are gonna be three on the on the refi?

Mike DeHaan: [28:14] I think that's a big part of it. Right? I think that they didn't understand how like increased interest rate would affect your caps.

Dylan Koch: [28:23] Yeah.

Mike DeHaan: [28:23] Right? Your cap rate. I think there's just a lot of ignorance that happened there. I think there's also a lot of people that grossly underestimate how much projects for things like that cost. Oh, sure. Right? So they end up going over budget, you know. And when you're doing like a fifteen year apartment complex, going 10% over budget can be like a million dollars.

Dylan Koch: [28:44] Mhmm. Yeah. It can be very,

Mike DeHaan: [28:46] very significant on the list.

Dylan Koch: [28:47] One of the major things I saw when I was pitching some LP positions because and they I only looked at ones that were kind of local. There'd be a certain, you know, neighborhood, and they're like, well, you know, based on 3% rate rent growth over the next five years, we think that a one bedroom's gonna rent for 1,500 in the zip code. I'm like, there's no

Mike DeHaan: [29:04] Exactly.

Dylan Koch: [29:04] Freaking chance.

Mike DeHaan: [29:05] Totally. Did. Yeah. So I I do think there's a little bit of responsibility on the LP as well as the GPs with those is being able to see that and call bullshit because I'm the same way. As you look at some of those and they're like, oh, yeah. One bedrooms, her studios rent for 800 in this market. I'm like, do they though? Like I understand that they have now, but when you suddenly have a thousand more of them, are they all gonna rent for that?

Dylan Koch: [29:28] Yeah. Yep. And then like they do the agreeable gray in the walls, gray floors, gray cabinets.

Mike DeHaan: [29:33] Exactly.

Dylan Koch: [29:34] And it's just like, there's no amenities. You know, it's a nineteen sixties building. Yeah. You have a boiler that you pay for the heat that you didn't account for, like, all this kind of stuff.

Mike DeHaan: [29:42] Yeah. I think a big part of it as well is back then, because everyone was in I mean, we saw this with house flippers too, dude. People would be buying these houses. And I'm like, there's no way they make money off of it. And then sure enough, they would sell it three months later for like a $35,000 profit because the market was just like on fire. And so you got all these people that had this sort of ego that they couldn't lose, or there was, like, this whole thing of, well, other people lose, but that's not gonna happen to me because I'm smarter than everyone else. Right?

Dylan Koch: [30:10] Yeah. Ego is the enemy.

Mike DeHaan: [30:11] Yeah. So, you know, when

Dylan Koch: [30:12] you're when you're playing with

Mike DeHaan: [30:13] other people's money, it gets weird. And then also too, when you're raising money like that, what a lot of the newer GPs would do, because they would get taught this, is that was in, the peak of, like, never invest with your own money kind of thing.

Dylan Koch: [30:23] Yeah.

Mike DeHaan: [30:23] Right? Is they would make the capital stack was completely favorable towards them, the LP just got screwed if anything went sideways.

Dylan Koch: [30:29] Yeah. Or a lot of it's posturing, they would say things like, we don't make money unless you make money, but they're taking like a 2% ACC fee, a 1% property management fee. Yeah. Even going like rehab construction fee, they just add all these bullshit fees on the back end of it.

Mike DeHaan: [30:44] Yeah. That's always my biggest knock on that kind of industry in general, is it just doesn't make sense. I also think that a lot of the wins that they were trying to get weren't that good for the size of deals that they were doing. Yeah. Like, I remember at my first ever GoBundance event talking to this guy. He was a young guy. He's probably, like, in his mid twenties. And he was trying to do these syndications. And I say he wasn't trying. He was doing them. And they were, like, these, like, 30 to 40 unit apartments in the Midwest. And he was, like, walking to me through the numbers, and I was like, wait. Wait. So let me get this straight. If everything goes exactly how you want, when you sell this property in four years, which would not even be now, this would be in, like, you know, 2026, this would be happening. Tree's gonna get wrecked if he hasn't already. I was like, so he's out of the for you. You're gonna make, like, a $120? And he's like, yeah. He's like, and then the thought is basically you just have a couple of those that you sell every year, and like that's how you live. And I'm like, that doesn't make any sense, dude. With how much money I make. I was I was like, I can go and flip three houses and make a $120 like next month.

Dylan Koch: [31:46] Yeah. Then that's an important point, and because I think people get enamored with the unit counts, and AUMs, and all the the glamor shiny objects. Whereas reality is like, this off market business, you can make a lot of money in a short amount of time.

Mike DeHaan: [32:01] Yeah. You can. You know, if you're gonna raise money, you gotta like, be an expert.

Dylan Koch: [32:05] A 120 k for four years is like $30 a year.

Mike DeHaan: [32:08] Dude, it was exactly. It wasn't a lot. And these are these are deals that he was buying for like 1.5 to $2,000,000. Right? And he was like doing a little value add and increasing rents, and he had all these different things that he was doing. I'm And like, sure. I guess on a $1 profit, a $120,000 profit is okay. But not if you look at, like, the time horizon, especially because his whole thing was he was heavily trying to just raise capital, do all of them. Yeah. You know? And I'm like, well, what happens when that doesn't work out? And then I'm sure he's gonna get roasted. Those And all start coming due. But

Dylan Koch: [32:38] Yeah. Well, there's books coming out about how to raise private money, and there's, like, 10 of them all come out at one time. That should be a top indicator.

Mike DeHaan: [32:44] I know. Right? Yeah. No shit. It's like, that's with any book right now, dude. That's they're all trying to sell you something.

Dylan Koch: [32:51] That's true. That's a fair that's a fair thing. But like, I don't know. Books are like a heyday for like five, ten years ago. Well, yeah. And like, don't feel like anyone reads anymore.

Mike DeHaan: [32:58] Well, they don't read because there's no knowledge really in books. Like, that's actually a Alex from Mozy thing. I've heard him say that a couple times. Really only reads like old books, because books used to be about passing on information to the next generation. Now they are used basically either for ego or for promotion.

Dylan Koch: [33:14] Mhmm.

Mike DeHaan: [33:15] And that's so true. So true. A lot of the books that are like written by some big name is a GoBundance guy that does this in his this is his company. Is he, like, works with CEOs to, like, write books and help them get on the New York Times bestseller list. It costs, like, $200. It's very expensive. He targets, like, c suite executives, you know, and, like, kinda big, quote, unquote, entrepreneur slash influencers, gets their whole life story. They do these series of interviews. They actually write the book, and then they have all of their connections to basically front load all of your sales to get you on the New York Times bestseller Wow. So it's all bullshit.

Dylan Koch: [33:51] Like, honestly. Yeah. It's all construed. It's like buying followers followers on, like, Instagram or something.

Mike DeHaan: [33:57] It's exactly the same thing, honestly. It's it's like the baby boomer, like the rich baby boomer version of buying followers. That's hilarious. You know? It's like so look at how many books we sold, but how many of those are in The Philippines?

Dylan Koch: [34:07] Yeah. One other thing I wanted to talk about real quick that you mentioned prior to the show was, it kinda related to the GoBundance, like, the Kiavi lending side Yeah. Of how, like, there might not be lending might be drying up a little bit for some of the biggest lenders that are out there.

Mike DeHaan: [34:19] Yeah. Yeah. I know. I heard this through the grapevine. I don't know how true this is, so don't take my word for it. But one of the hedge funds that we've been working with with our lending company was telling me this in a phone call the other day that some of these large companies, specifically KIAVI, which is the big one that a lot of people know, they're currently, I guess, no longer lending in Florida. And they've also said that they will no longer do cash out refinances unless it's on loans that they funded the hard money for, which in my mind tells me that they're probably, like, low on money. And instead of putting in new money to pay off somebody else's loan, they just wanna basically rearrange the debt on money they already have out, and they're probably willing to do that. And I've also heard that they currently have 18% default on their books they're

Dylan Koch: [35:01] trying to deal with. Yeah. That the 18% default rate was the most striking to me because that's a huge number.

Mike DeHaan: [35:06] Yeah.

Dylan Koch: [35:06] I think in comparison, you correct me, but like three to five ish is like maybe a normal.

Mike DeHaan: [35:10] Oh, yeah. Like if that. Yeah. Yeah. Back when I first started exploring lending with the people that were pretty aggressive, we'd be getting like the eight to 10. But but Kianvi's made so much questionable decisions over the years because they're what they've been trying to do is battle for that market share. And so they've been doing, like, the 100% financing. Mhmm. It's relatively easy to get loans. They've really established these relationships with, like, collective genius and all these other sort of, like, big house flipping groups. And the problem is is if you look at a lot of those groups, who are a lot of the members right now? They're the higher performing operators, but they're also the people that have only been operating since 2020 and 2021. And so they don't actually know how to deal with a shitty market.

Dylan Koch: [35:50] Right? Kiave people too. I mean, correct me if I'm wrong, but they're are they raising from other institutions? Like where are private investors? Where are they getting their money from?

Mike DeHaan: [35:58] So I I imagine they're selling a lot of it off in tranches. Right? So they're packaging it up and selling it in large batches to big money. Okay. But I think that where their initial money comes from is is raised. And so if I look because their whole thing, they're trying to be like a a tech company that does lending. And I looked this up a little while ago.

Dylan Koch: [36:17] And trade at a bigger multiple. Yeah.

Mike DeHaan: [36:19] Yeah. Exactly. And then but then, like, a lot of their money was coming from, like, series b and series c raises. Gotcha. So how that works financially, I'm not sure. But if all of a sudden their back end buyers are tightening up on what they're willing to buy, like, they're gonna be in a tough spot pretty quickly.

Dylan Koch: [36:37] There's a a narrative out there that like hedge funds are the smart money. Right? Like, I don't know. My point in saying that is, when I was selling to hedge funds, mostly in like 2023, I was sitting at a closing table, and I got a call from like my sales guy, the business said, bro, they just drew all of our funding, we're closing up shop.

Mike DeHaan: [36:53] Isn't that crazy?

Dylan Koch: [36:54] And I had four or five deals in the pipeline, and they're they're done, they're canceled. Like there's literally no funds. Yeah. And so like, to say that they overpay, they're not as sophisticated as you think, and when the money's gone, it's gone.

Mike DeHaan: [37:06] Like I mean, I think that people think that because they have a lot of money, but also if you have a lot of money, you can afford to make mistakes and have loss. Yep. Right? And so that's what a lot of them do is they kinda just throw shit around because also do a lot of those companies, if they have like one ten or 20 x winner, that'll make up for all the losses that they had to get there. And so that's kind of the game that they play.

Dylan Koch: [37:27] Now that's all entrepreneurship mindset. Know, you can have many losses, so it really takes one or twice to be a good winner Yeah. To change your life.

Mike DeHaan: [37:33] Yeah. Absolutely. I think that's a Jeff Bezos thing is

Dylan Koch: [37:36] I think you're right.

Mike DeHaan: [37:37] What does he say? You should always try to hit a home run, but it was hit with baseball. A home run, the max use score runs you can hit is four. But in entrepreneurship, the max runs you can hit is like a million.

Dylan Koch: [37:47] Right? Yeah. It's basically infinite. Yeah. Anyhow, I think, actually this might it's either Jeff Bezos or it was Warren Buffett in one of his letters. And it was that exact analogy, he's like, you know, if you have three strikes in baseball, you're out, but like, I don't have to swing at pitches. I can sit and wait for the best pitch to come across my desk.

Mike DeHaan: [38:03] Yeah. That's true. That sounds like a Warren Buffett thing for sure. That's more conservative, whereas Jeff Bezos is like, I'm just hitting home runs every time. Awesome. Alright. Anything else to wrap up, Dylan?

Dylan Koch: [38:11] That was pretty much it. I think 50,000 foot view is just know your own market like the back of your hand, talk to people who are still doing deals, because I guarantee there's at least a couple of them. And if you wanna I get my other thing is like, you're probably gonna have to work harder than you are, so if you have a w two, it's gonna be weekends or nights, or just quit your job with when you have six months of expenses lined up and go for it. Because you're if you put your back up against the wall, you're probably gonna make it happen.

Mike DeHaan: [38:35] Yeah. Don't be afraid to be agile right now, and move your business, try new stuff. You know, people get so married to these local connections and those sort of things. But that's honestly been the biggest, I don't wanna say tip, the biggest thing I push for people that are in, like, man, my market associate around. Was like, go somewhere else.

Dylan Koch: [38:51] The same shit works.

Mike DeHaan: [38:52] Yeah. It seems scary. It's really not that hard, honestly, man. If you understand how to run comps, you understand how to sign a contract, you understand how to, like, find a buyer and make spread, that's all you have to do. It might take a little bit, but you'll least you'll be able to keep operating. You won't should be flushing money down the toilet in a dying market.

Dylan Koch: [39:08] Couldn't agree more.

Mike DeHaan: [39:09] Yeah. So awesome. Alright, guys. Well, thanks for listening. Can follow us on Instagram. I'm at Mike underscore Invest. Dylan is at Dylan underscore Does underscore Deals, and we'll see you guys next week. Thanks for listening, everyone. If you want more from us, you can shoot us a follow on Instagram. I am at Mike underscore Invest. Dan is at Investor Man. Dan and Dylan is at Dylan underscore does underscore deals. Choose to follow and send us a DM to let us know what you think of the show.