How the Rich Avoid Estate Taxes – and You Can Too

Dylan Koch: [0:00] If anyone's listening to this, that's how wealthy people create wealth.

Mike DeHaan: [0:02] Like, you gotta have a little bit of Dylan keeping it under control. But I will say people liked our tangent. You know? Yeah. We literally had a borrower for our lending company who's like, this is an awesome thing because I'm going to go and sign docs to buy a property with you guys while I'm listening to Dan talk about, like, India skyscrapers

Dylan Koch: [0:18] or something. India skyscrapers and, like, eyeliner for men or some I don't even know what you're saying. Eyeliner. What's

Mike DeHaan: [0:26] going on, guys? Welcome to the collecting keys real estate investing podcast. I am your host, Mike DeHaan here with Dan Austin and Dylan Cook, who is back today. If you missed last week's episode, Dylan was gone. And so Dan and I did what we did successfully for many years. Thank you, Dylan. It's just talk about nothing for an entire entire thirty five, forty minutes, and we had a great time.

Dylan Koch: [0:51] Hey. Correct me if I'm wrong, but you said you've told me anyway that the downloads went up when I started coming on the podcast.

Mike DeHaan: [0:56] So They did. For sure. You know what? Last week, it maintained the level that we've been at for a while.

Dan Austin: [1:02] So who knows what You it

Mike DeHaan: [1:03] need to catch

Dylan Koch: [1:04] your

Mike DeHaan: [1:04] title. Dude, like, content in general is really tricky right now. Like, this is why you see all these 've talked about this before, like all the dorks getting into YouTube. Because the YouTube algorithm is like fundamentally better. Right? You have to produce good content in YouTube, but like it actually does have a platform for people to discover you where podcasting kind of doesn't. Like I have a GoPod friend of mine who's started doing YouTube stuff like a lot. He does a couple times a week. He's making several thousand dollars a month now off of just his ad spend from those. And his videos get a lot of views, but what he has to do is like, there's a very templated kind of like photo that he has to use. Everything has to be like fear mongering. Right? Because people just Right.

Dylan Koch: [1:45] It's very doomy, which I don't like. Yeah.

Mike DeHaan: [1:47] It's always has to be doomy. Like people don't want educational stuff. People don't want whatever. I mean, it's the same with like this. Right? Like, if you look at a lot of the top podcasts, a lot of them are news pundit kind of like, in like, political influencers are like the big like Tucker Carlson kind of people. Right? Like, those are the biggest podcasters right now.

Dylan Koch: [2:07] Yeah. Or they already had some clout from something else. Like the All In Guys or Rogan. For sure.

Mike DeHaan: [2:11] So yeah. So let me rephrase that. Like the people that are have grown in the podcast space that aren't coming with like a previous history, they have to be kind of like doomers for everything. And that's, I don't know, it's silly. But

Dylan Koch: [2:24] I don't like the incentives. Like, know the guy you're talking about, and I've seen some of his stuff. And don't get me wrong, content's great, but it's always like, the world is falling every single day, and that's now how I make money.

Mike DeHaan: [2:33] Totally. And the problem is is that Spurs, just like this toxic sort of thing with, you know, everyone feeling like the world is collapsing all the time. There's the whole Charlie Kirk incident last week. I've never seen it's been a long time since I've seen so much just like doomer posting from my entire social media, from people that haven't been active on social media for like years. It just brought like everything doom and gloom out of the woodwork. And the problem is that, yes, the incident was was very extreme, but it's also now like they're constantly sharing and, like, pushing all this other, like, doomer stuff, and then all the news cycles kinda, like, jump onto it. Because they're all now, like, trying to ride the momentum so they can maximize their ad revenue over this period of time where people are, like, engaged and stuff. It's a freaking nightmare.

Dan Austin: [3:20] I don't

Dylan Koch: [3:20] know if you like if I scroll on x if I scroll

Mike DeHaan: [3:24] on x and there's like the two columns, there's like the for you and then like the suggested for you. If you

Dylan Koch: [3:29] just like filter back and forth between those two, it's a totally different like feed. Right? Because the one that's more algorithm driven is all the stuff that's like very doomy, like things are gonna get the most clicks, that's most trendy right now. But if you go to like the other column that's just like the people you follow, I don't know exactly how it works. It's just basic stuff that I would expect.

Mike DeHaan: [3:48] So Well, and that's the problem is like all these platforms, they push that towards you. So like I made a story post during the Charlie Kirk thing. And typically my stories will get like 200 ish views. Like it's kind of high. So I have like 45 no. Less than that. 4,200 followers. So not a lot. Just like 200 ish views. That story post for some reason got 1,500. I have no idea why. Right? And then all of my other stories around that were down to like 200 again. So it saw like the AI that freaking Instagram has, Meta has, saw this topic and said, let's show this to everybody.

Dan Austin: [4:26] Which makes sense though. Right? Because it's like, what is everybody talking about?

Mike DeHaan: [4:29] But like we shouldn't do that. Right? Like, honestly, it shouldn't look at explicitly negative things.

Dan Austin: [4:35] That is a 100% the goal of it though.

Mike DeHaan: [4:37] That's the goal of it. Totally. But I would say if you're trying to have an actual, like, I would say free market uninfluenced form of media, which shouldn't be like forcing things that they it knows will cause conflict, outrage, conversation, quote unquote. Because if you let's say you're gonna make a post about something that's more positive. Say it's Super Bowl team wins, whatever. That same thing doesn't happen. Right? Like why? It kind of does though,

Dan Austin: [5:01] like on certain things. But you're right. The negative gets so much more emotion because people are like, oh, cool. Yeah. My team won or whatever. Right? Like Super Bowl's a big thing or like a big sporting event. But the negative stuff is just so much more satisfying.

Dylan Koch: [5:13] Like all the big social media partners literally hire like trained psychologists to make, how do we make this more addicting? That's literally like like job titles there. They don't call them addiction specialists, but it's basically what they are.

Dan Austin: [5:23] Right? Who's the best at it that I actually kinda appreciate this? I don't do it very often, but the YouTube shorts. Like, if you slightly show them if you like something, it just fucking drills you with the Like, same there's no like, we'll test over here. It's like, no. You wanna see this? I'm only gonna

Mike DeHaan: [5:38] show you.

Dylan Koch: [5:38] Let's try more unhinged shit until you'd stop.

Mike DeHaan: [5:41] Yeah. I know, dude. Well, it sucks because then if you like stance me for even like five seconds, that's all you have now forever. Until you like intentionally see something else out.

Dylan Koch: [5:50] You've seen them like, it's like a meme where it's like, oh, I set my phone down face up with like some tar like an ad that you don't really care about, but now that's all your phone shows you is because I thought you looked at it for fifteen seconds.

Dan Austin: [6:02] Totally, dude.

Mike DeHaan: [6:02] We've all had the experience though too where you talk about something. You just like mention it like your wife or whatever, and all of sudden you're getting ads for it. I'm like, you fuckers. Like, get out of my phone. Stop listening.

Dan Austin: [6:11] Yeah. I get a lot of Grindr advertisements.

Mike DeHaan: [6:16] I bet you do. I bet you do, So we're just going let that sit. You guys can take what you want from that one. Anyways, well, Dylan, welcome back. Did you wanna dive into what you went through? Because I do think there are some good business and just like general life lessons Yeah. From that.

Dylan Koch: [6:33] Reason I miss is mostly because I got in a, I I guess, somewhat serious car accident.

Mike DeHaan: [6:38] You're going 60 miles an hour. I'd say that's pretty serious.

Dylan Koch: [6:41] Yeah. The airbags were deployed, car was totaled, EMS was on the scene, etcetera. And I had to wear you know, I got pretty banged up. But like, nothing broken. No head things that I'm aware of.

Dan Austin: [6:50] Your face doesn't even look that much worse, dude.

Dylan Koch: [6:52] Yeah. The surgery did a great job. Anyway, so like all that to say, like, I guess for the severity of the incident, walked away pretty okay. But I was banged up last week. And so the I guess the if you're going to the lessons to take away from this is have your estate stuff lined up. I'm 32 years old, and I could have been worse. My family was not in the car, it was only me. So that was lucky. But have you go to attorney and just have the basic stuff. And whether that be beneficiaries for retirement plans, or some kind of roadmap where like, if I would have passed away, and my wife would have been dealt with just the portfolio and the active rehabs that we have going on, they would have all went to shit. Right? And so that's kind of like a wake up call. Like, she doesn't want to be involved, at least have the resources so that she can figure it out or the right people to talk to. This is our insurance guy. This is our lawyer. This is our finance person, whatever it may be. I think like a huge thing there is like

Mike DeHaan: [7:44] you said, have the resources. Right? And this is something that we harp on a lot, and I really wanted to bring this up for a real estate show, is because real estate people are notoriously non liquid. They tend to have an incredible amount of equity and very, very little cash reserves. And that's fine if you're only thinking of like, well, here's my reserves, my risk for my rental properties. What happens with like the reserves and risk for your actual everyday life where stuff does happen?

Dan Austin: [8:08] Yep. And if people have a portfolio, they dump on their spouse who doesn't usually know anything about it. Mhmm. And they want that to like run. How's that gonna I mean, could your wife take over your rental properties, Dylan?

Dylan Koch: [8:21] No, she couldn't. Not that you'd expect

Dan Austin: [8:22] her to, but

Dylan Koch: [8:23] No. But there's a about a third of my portfolio is still under third party management and the instruction would just be give everything to him. And then he's a friend of mine too.

Mike DeHaan: [8:34] Well, even like on top of that, right? So you had to buy a new car. Obviously, you have to have the money to be able to do that. You have to deal with your medical bills over the short term and while the insurance process goes through that, which can take a long time. Like there's just the general inconvenience of, like, let's say that you have like your laptop in the car. You have this like general stuff that happened to be damaged or get lost or whatever. And now you have to like replace your entire setup. There's so many different pieces that Like I'm thinking about people that I know that are quote unquote wealthy real estate investors that they would be stressing about that. And that's a problem. Like that's such a silly position yourself in.

Dan Austin: [9:12] You have a 7 figure net worth whether it's 1,000,000, 10,000,000 or whatever, and you can't grab a $100 easily, like you're really like you're screwing yourself and you should mean

Dylan Koch: [9:21] You can't grab a 100 k's without like refi ing or a line of credit. Like Right.

Dan Austin: [9:25] You can't dip in your bank account or a line of credit or just sell something real quick that like a stock or something that you've got, some of your Bitcoin. Something that's relatively liquid. Like you have to have some liquidity. If you're all in on properties, right now you're not going to want to sell it. You know, most markets are down and your paper net worth is way less than it really actually is.

Dylan Koch: [9:43] It could quite literally make you a distressed seller.

Mike DeHaan: [9:45] Absolutely.

Dylan Koch: [9:46] Yeah. Like what we target. Yeah. Totally.

Mike DeHaan: [9:48] And like right now, your point where you said there, Dan, is if you did need to sell those assets, that's not something you're going to do in the next month, right? Unless you're selling And you should becoming a distressed seller and selling it at a huge discount. Realistically in a lot of markets, you're looking at three, four, five, six months to be able to gather that. And then depending on your state, so Washington is really bad for this. There's a handful of other states that are as well. There's also an estate tax, right? That will basically have additional tax on your assets that are being moved down. And that is regardless of how much of that is liquid. Right? So if you don't have it in a trust, which will allow you to kinda get around a lot of these estate taxes. So Washington State, basically how it works is you die, your stuff passes down to your next of kin, to your spouse. If it was owned directly by you and not jointly by your spouse, that estate tax needs to be paid within six months of your death. And it's gonna be based on the amount of your entire estate. Right? So very realistically, your spouse could now suddenly have like a million dollar freaking estate tax bill.

Mike DeHaan: [10:51] Where's the money going to come from? If you don't have this is where like things like whole life insurance actually makes sense. Because you need to have that whole life insurance. Not so they get a million dollars, but so that they can pay the estate tax. So they don't get taxed to oblivion and have to basically upend the entire life that you guys built together so that she can just like not have to go into bankruptcy, I guess. Like that's that's why those sort of products exist. But you need to think about that.

Dylan Koch: [11:17] Quick aside from this, good that ties along with it. I know of a very successful real estate group that was fifty fifty partners. And they did not like, this would be good for you guys if you don't have it. It's like a business life insurance policy. That if the other person passes away, you get paid out. His partner passed away, and they end up having to sell 50% of their portfolio, so he could pay the wife of his partner who died.

Mike DeHaan: [11:38] Isn't that key

Dan Austin: [11:39] to Yeah. Is kinda weird.

Dylan Koch: [11:41] It was all equity. Is that like

Mike DeHaan: [11:42] a key man policy? Is that what they call that? I don't know what

Dylan Koch: [11:45] it's called, but I would just ask your insurance guy. But it's basically insurance for the other person.

Dan Austin: [11:49] Yeah. You could get insurance for people. Yeah. I don't know if you'd call it Keyman, but something similar. I've heard of it. On that sale, I got two questions. One, I guess more of a statement is like the interesting thing is is the way I have a setup for, you know, notes when I when I dive, like what to do. Like, it's like go to these resources and because Mike and I do have a shared portfolio, which we have been shrinking. The idea is

Mike DeHaan: [12:12] is that Mike, it's like, okay, here's what I believe they're worth. Right? Here's what if I died today, which you gotta update this spreadsheet, but it's your PFS basically. Here's these properties. Here's what I would do if I

Dan Austin: [12:24] was to sell these and then leverage Mike to handle that. Doesn't mean we have to sell them, but like this is what I would ask to do. And then you're banking on some level of trust of your business partner to like at least not be a dirtbag. Which I trust Mike wouldn't like try to rip my wife off after I die.

Dylan Koch: [12:40] Nah. Yeah.

Dan Austin: [12:41] You know? And you could put guardrails into into that conversation. Right?

Dylan Koch: [12:44] Yeah. You can say they require appraisals or stuff like that when they sell stuff like that.

Dan Austin: [12:48] Right. Exactly. And that's you could put a lot of that stuff in your operating agreement or a separate agreement and stuff like that.

Dylan Koch: [12:54] This is also where trusts come in, like the irrevocable trusts are like, you can put in there this can't be sold for ten years. And it's like, you like, whatever you can say.

Dan Austin: [13:01] Right. I think, you know, between Mike and I, we've been pretty

Mike DeHaan: [13:05] I would say we're taken care

Dan Austin: [13:06] of because we're both decent people, but also, you know, there's probably some things that we could do. Especially around like the businesses, not the properties, the businesses. Like how do you how do you handle that? Because you still have 50% ownership, but what does that business need to

Mike DeHaan: [13:18] look like? And is there a buyout and

Dan Austin: [13:20] all that stuff? But the thing I was gonna ask you, Dylan, is like, what are

Mike DeHaan: [13:23] you gonna do now to set yourself up or

Dan Austin: [13:25] to set your family up in case you do die really suddenly? Do you are you looking at researching or doing anything different?

Dylan Koch: [13:32] Yeah. So we had the basic stuff done. Like I said, the beneficiaries, life insurance, some of the estate stuff, but not all. We have a transfer on death on all of the properties, like in the deeds, more operating agreements. So I guess I am having another meeting next week with the our family business attorney, I guess. And we're just gonna review everything. All the business four downs, like holding entities, what's underneath. And then Amanda, my wife, like, she's not involved, but she knows what's going on, if that makes sense. So like, she knows what we own. She understands most of it. And we do have once a month meetings. So I think she would figure it out. I think what she wouldn't know is, what do you want me to do with these properties if I were to pass away? So like, that would be the conversation and probably putting that in writing somewhere. Because some of these are even for like our daughter, like, you know, I want one of these to be for her when she's 18, 20 years old. So like, just stuff like that that that are a little bit more nuanced.

Mike DeHaan: [14:24] Yeah. That stuff where like getting a trust as well would probably make sense for you because then you can have not only just your wife, but you can have a third party that can help make those decisions. An attorney or beneficiary. Well, your wife would be the beneficiary or your child, but you have another trustee.

Dylan Koch: [14:39] So can

Mike DeHaan: [14:40] be a third party. It can be like a friend. I dunno if you have like a brother or like something like that that can also help. And what you do is they basically get ranked on kind of like their priority. So if your wife's like, I don't know. I need to seek assistance. There's someone that they are designated to seek assistance from that should be equally as informed or should be legally allowed to get the same information that she would have and can help her make an informed decision?

Dylan Koch: [15:01] Luckily, do have I mean, I'm rather organized, I guess. Like we have a Dropbox file where you could probably find everything. We have like the passwords for most of our stuff that you could figure out. So it would be a little bit of a treasure hunt, but it's not like it'd be impossible. So if that answers your question, I don't know if that's perfect or if you even have advice for that, but that's the plan.

Mike DeHaan: [15:21] I mean, I think it's very individual. I think it's hard to give advice and stuff like that because everyone's opinion is different on level of risk. Complexities are different. The states, there's different state laws on what you're allowed to do.

Dylan Koch: [15:33] But even the refis that you guys did for me, there's prepayment penalties on those. You don't want to touch those. There's just some that you've owned for maybe ten years, right?

Dan Austin: [15:40] Yeah. The thing that I've thought about, and then I guess I'll give like maybe my things that I've done, because I don't have a sophisticated trust or anything yet, but I do plan to put one into place as it makes sense. One is a password saver that you and your whole family that needs access to it can have that because like, I don't know how it is in your families, but like one, usually one spouse always takes care of like a segment of things. Right? And another one does other things. Like, I pretty much run all the financials and stuff for our our family. And I also get tired of my wife asking me for the password for, you know, random shit. Like, because, know, like, you're like, oh, I forgot the password. And and it's like, so a family password that you and your spouse have access to. So anytime you guys have a new thing that has a password, you just put it in there, You can kind of calculate.

Dylan Koch: [16:25] But we have a password manager that has a master password that saves all your passwords and everything else.

Dan Austin: [16:29] Yeah. And that's what I'm talking about. Yeah. Yeah. Like that's what you whatever you call it. Password manager. And then a kind of if this, then that type scenario. Because you can you can set a lot of the stuff up with a trust like Mike is mentioning, where it's like, these are the things that happen when I pass away, you know, all these sorts of things and certain people are involved and not. But just in like as

Mike DeHaan: [16:49] a stop gap is I have a kind

Dan Austin: [16:51] of a spreadsheet with all of the the assets and like what to do and how you know, here's the life insurance chunk. And for me, if

Mike DeHaan: [16:59] I was to die or my wife and I die were to die, it's

Dan Austin: [17:02] it's about simplifying it and looking at your estate and what you have. And like, if I die with my life insurance policy, if we have

Mike DeHaan: [17:10] to fire sale all of the real estate, is she gonna be okay raising the kids? They're gonna be more than fine. They'll never have to work,

Dan Austin: [17:17] think about anything again during the time of raising the children and all that stuff.

Mike DeHaan: [17:20] My wife will be basically retired. She doesn't need the freaking real estate or

Dan Austin: [17:24] the headache of that. So it's like, here's a good strategy. Here's who

Mike DeHaan: [17:26] you talk to about these properties. Here's how you should sell these. So I just kinda have

Dan Austin: [17:30] a if this then that type scenario depending on when and then I just update that annually. Probably should do it quarterly, but that's kind of like my stop gap.

Dylan Koch: [17:38] Think that's more than 99% of people do.

Mike DeHaan: [17:40] Totally. I just played this scenario in my head, Dan, where you you passed away. Very sad.

Dylan Koch: [17:45] That's why he's got a smile on his face. Yeah.

Mike DeHaan: [17:49] And your your wife gets like the red envelope that says like master password on it, and she opens it. And in there is just written midget lover 69 as your password to get into everything. She's like, goddamn it. Goddamn it. I knew it. I it. Oh, wow. Yeah. But If you are a real estate wholesaler and flipper and you want to be around other people that are looking to grow and expand your businesses in this ever changing economy, then you need to check out our scale community. Go to collectingkeys.com/scale, and you can get all the details there. But long story short, we are a small tight knit little group of serious real estate entrepreneurs that are looking to really make massive income and not just passive income to this ever changing economy. So if real estate wholesaling flipping is kinda your thing, go to collectingkeys.com/scale. You can book a call with me in there if you want, I'd love to see if you'd be a good fit.

Dylan Koch: [18:40] The other thing that I guess kinda ties along with all accident and stuff is a lot of people in the, I don't know, fire, retire early community that all do this, it's always like, okay, when do you do the Dave Ramsey approach of just live on rice and beans, delay gratification, cut your expenses, which my wife and I have lived under our means pretty much our whole lives. Like, you know, we've never really been extravagant. Even when we were both pharmacists, you know, we didn't really blow any like large amounts of money. So all that to say is I kind of just said, fuck it. I'm in a portion now where we have a little bit of wealth. We have some equity. So we bought a 2025 Audi as my new car. And it was pre owned. I mean, only got 3,000 miles on it, but it's a 60 55, $60,000

Dan Austin: [19:24] I couldn't go brand new.

Dylan Koch: [19:25] Car. No. Still couldn't go brand new. No. That that was okay with that. Like, you know, now I drive a nice car that, you know, I've been wanting for a very long time.

Dan Austin: [19:33] So Hell, yeah.

Mike DeHaan: [19:34] This is always my my take on this is people try to go backwards with their money. Just go forward. If you focus on making enough money that you have wiggle room, it doesn't matter. You don't need to do the rice and beans thing. Right? And even if you do inflate your lifestyle a little bit, like let's say you're at the point where you're spending 250 to $500,000 a year, right, on your lifestyle, which is pretty extravagant for most people. That's not like extremely crazy, but like that's living like a pretty sweet lifestyle. You probably have a very nice house. You have very nice cars. You can fly first class to Europe as a family a couple times a year. You can do a lot in that kind of price range. If you do that, but you have $5,000,000 in assets, right? And like it gives your family the ability to continue that lifestyle, wind down that lifestyle, or make moves without needing to like suddenly have the head cut off. Right? And so it's all about perspective. People are like, well, we got to like live super meager in a defense thing. It's like, or you live very aggressively by learning to make a ton of money and actually just stacking that equity for yourself or that cash or that net worth. And then you can live however you want. And if bad stuff does happen, then you deal with it then, but it gives you some runway.

Dylan Koch: [20:40] Cutting your expenses to nothing is an uphill battle. Because if inflation, like we talk about, is gonna continue to go up, you're fighting something that you're it's like- You can't control. Fighting against the yeah. The the water that's coming at you. Right? Like you're fighting upstream. It's that's tough. So

Dan Austin: [20:54] It is. Country music phenom, Tim McGraw has a song entitled Live Like You Were Dying. It's very reminiscent of this. You know? What would you do differently? Would you would you buy an Audi? Would you like what what are you doing? Are you actually living the life that you have envisioned or want to live? I think too often, especially in the real estate world, people are so worried about numbers. And Mike and I see it a lot on the lending side because people are like, oh, that's $12 a month in cash flow.

Mike DeHaan: [21:20] Like, are

Dylan Koch: [21:21] you kidding me, dude?

Dan Austin: [21:22] You're getting a $100 back in a cash out refi, dude. Who cares about $12 a month? Like, live your life. But I think it's natural and that's just it's just a culture around the industry outside of all the flyboys with the Lamborghinis who are all posing at their guru shit. But like most real estate investors on the average are are known to be cheap in numbers people. And that's how you

Mike DeHaan: [21:41] get to where you're

Dan Austin: [21:42] at because you're trying to build wealth over a long period of time. But really, you should. I mean, like, you at least what what percentage are you able to live your life every day?

Mike DeHaan: [21:50] If you're not living what

Dan Austin: [21:50] you want to live even a little bit, you're probably on the wrong track.

Dylan Koch: [21:54] Mean, whole purpose to go on your own and do this business is to lead lead the life that you wanna live. Right? So like, I don't think a lot of people want to be eating take home meals leftovers every meal five days a week, or you know, like, or driving a 2,000 Toyota Prius or whatever it may be. So that decision made a lot easier because of the active income that we have.

Mike DeHaan: [22:13] I would say the people that make that the ultimate flex, it's because they are either not actually that successful, or they are trying to sell you a dream, and they are trying to relate to you as a poor person that is not like them. Right. That's my general opinion. But especially because, like, if you make like a little bit of money buying like, you know, an Audi or driving a kinda shitty car. Like, it isn't honestly that much money. Like, that that's when I kinda realized that Dan and I had made it. This was years ago when I just met up with Brian Dossi in Florida, he let me drive his Ferrari. And I was like I realized I'm not a car guy at all at that point in my life because I did not get a lot of that personally. I was it was a cool experience, but I was horrified I was gonna crash it. And I was like, I do not care about cars. And then I was like, I wonder where they put this cost. And I was like, oh, that's it? Like, bro, that's suddenly so unimpressive to me. Like, if I was to go and buy one, it was like a few thousand dollars a month, which, yeah, is a lot if you're working a w two job and you have kinda like a fixed standard income. But if you have a business where you occasionally pop off, like, an 80 or $100,000 a month, you're like, I could pay for the whole thing with like a good October.

Mike DeHaan: [23:19] You know? It doesn't matter. Like, honestly.

Dylan Koch: [23:21] Yeah. And we put, like, we put, like, half down right on the car and the rest of it's financed at, five and a half percent. But my credit score is in the 800. So I was like, guess got, like, tier one credit or whatever. It's a 5.5%. So all I to say, my premium's, like, $5.60 a month. We don't even have That's our only car payment.

Mike DeHaan: [23:39] And you know, and who cares, right? And even though So you bought a depreciating asset, it doesn't matter because on your total balance sheet, it's like a thing that's in the dusty closet in the corner. It doesn't matter.

Dylan Koch: [23:50] I love that you brought that up about the buying a liability piece. And I almost like made an example of this on social media, but we're literally We refinanced out with you guys. Right. We literally pulled out 50 ks, and now it's rented for $2,000 a month. And my PITI plus expenses is like $13.50, 1,400.

Mike DeHaan: [24:08] Oh, nice.

Dylan Koch: [24:09] So So literally, that one deal not only paid for the down payment, but pays for the the payment going forward.

Mike DeHaan: [24:15] There we go.

Dylan Koch: [24:16] Which is how if anyone's listening to this, that's how wealthy people stay wealthy or create.

Mike DeHaan: [24:20] Totally. Because also you pull that $50, you know, it's not like you pay taxes on that.

Dylan Koch: [24:24] Exactly.

Mike DeHaan: [24:24] Right? You just got that money out, and it's on a liability, a debt that is being paid off by another person. Like that's where the acceleration of wealth and real estate really comes. But, you know, that's the thing that for some people, you have to have like an appetite for debt. You have to be willing to accept that, yes, there's always the chance for that to go sideways. But if you're a financially responsible person, the chances of that are honestly relatively low.

Dylan Koch: [24:49] One thing I did realize during this whole thing, because I was out of commission for a couple days, is like the business still ran, but it didn't run well.

Mike DeHaan: [24:56] Mhmm.

Dylan Koch: [24:56] So I gotta figure out what's like going on there. Like, the VA still did their jobs. My equity assistant still did their jobs. Assistant was still doing her jobs. But, like, I still need to be involved to make sure, like, people are still doing their their shit. And so, like, I gotta figure that part out.

Dan Austin: [25:11] Was there a lot of questions that they had for you that they needed from you, or is it just stuff that you needed to tell them that they didn't know yet? More this the latter.

Mike DeHaan: [25:19] Okay.

Dylan Koch: [25:19] Yeah. But honestly, it's like, it's the things that frustrate me. It's like, hey, I'm done with this. What should I do next? I'm like, use your brain. Like, you should probably know what to do now.

Mike DeHaan: [25:27] Like That's employees though, dude. That's so hard. I mean, you deal with that all the time. Ultimately, right, when it comes to an employee, they're highly motivated to just be done working because they can do nothing. Like if they go and they think and they do extra work, they know that you're just going to bring them more work later. Or that's going be something that they have to do on like a regular basis. And that's like, I don't know, probably 90% of employees would fall into that bucket. Yeah. That's where finding employees is so hard because you need people that aren't going to be like that. You can try to incentivize people with commission structures or bonuses or different things. But that doesn't work for most people. And like with your size business, Dylan, I would say that is the hardest part to kind of get out of that because you don't quite have enough money to like pay an A player. And if you do happen to find one that comes into your business, there's also a very good chance that in the next twelve months, they go, I'm just gonna go do this myself because I'm basically doing that but for this guy. Because you can't you're also not providing like enough financial security for them to get like golden handcuffs.

Dylan Koch: [26:29] Right. Yeah.

Mike DeHaan: [26:30] So when you grow, it gives you a little more flexibility. But there are. They're they're hard to find.

Dan Austin: [26:35] There are unicorns out there where you'll find that employee that just there's they just wanna be with you or alongside you. Yeah. Thing right now. And I and I think it changes. Like Mike and I in the lending business, we definitely don't have employees that will just stop working. Right? Like they may not do things the way we need them to or what you know, there's there's things where obviously we want, you know, more efficiency and we're building this newer business. But like, we definitely don't have an issue of like lack of work or them seeking new work. Like, which is great because they're self motivated.

Mike DeHaan: [27:02] That comes from creating a mission though that they're excited for as well. Right? Like, I mean, we only have three employees over there. So we have, you know, Robbie does all our processing. We had Chance, it's our LO, and then we have an admin.

Dylan Koch: [27:13] Me and Chance are best friends, by

Mike DeHaan: [27:14] the way. We talk like daily right now. See, Chance is great. He's super personable, but like he came, I stole him from a lending company that was very stagnant. And he has an opportunity to grow with a company that is in his area of expertise that has like growth potential for him, like very significant growth potential. And also it's very dynamic. Like we're changing a lot. He told us, we went to lunch yesterday, that he has had the most successful thirty days as a loan officer than he's ever had in his career. For a company that is a, like probably less than a tenth of the size of the one that he came from. Right? So it's unbelievably small. And then we have Robbie, who's been with Dan and I for almost three years now. And he's just like so bought into like the vision of kind of like working for us and being part of this operation and what that looks like. Because he's been a part of us when we launched our partnership program, we're pushing all that stuff. He was part of scale, right? He helped us build a lot of that out. He helped us go down the whole franchise route with home we were doing that. He's been a part of like five different things. And he's still here because he sees the potential and he wants to be a part of that. Right?

Mike DeHaan: [28:18] But it's really, really hard to get that and find people that are willing to do that. Because at the same time, we've also had like 80 employees that have come through that no longer work for us anymore.

Dylan Koch: [28:27] I think the point that drives that home, and I hope you're okay with me sharing was, I know at one point Robbie went to you when you guys were winding things down with like the partnership was like, hey, I'll take less money if you just like don't get rid of me.

Mike DeHaan: [28:38] For sure. Yeah. Literally. Right.

Dylan Koch: [28:41] Yeah. Yeah. Like and I know you you didn't do that, like, to be clear, but, like, that just shows that level of commitment.

Dan Austin: [28:48] Yeah. Yeah. He's dedicated dedicated to mission. For sure. There was a couple headlines I would love to round out the show with if you guys would wanna partake in this.

Mike DeHaan: [28:56] We gotta talk about the big one because, I mean, it's been all the talk of the town. Wait. What's the one with the big one?

Dylan Koch: [29:02] Yeah. Don't know. Where are those going?

Mike DeHaan: [29:05] The big one that all the real estate dwarfs talking about.

Dan Austin: [29:08] Jimmy Kimmel getting fired, that is the one you wanted to talk about.

Mike DeHaan: [29:11] Yeah. Jimmy Kimmel. I mean, I have my own opinions on that.

Dylan Koch: [29:15] Sure you do. Yeah.

Mike DeHaan: [29:17] It's the the Fed interest rate piece is the big one.

Dan Austin: [29:20] Yeah.

Mike DeHaan: [29:20] Okay. Yeah. Let's hit that one.

Dan Austin: [29:21] That is a good one to talk about.

Mike DeHaan: [29:22] Because that that's like all the real estate doors are coming out. So this is what we've been waiting for, but then the ten year went up. So I think that's funny.

Dylan Koch: [29:29] So ten year went up, but mortgage rates are still kind of trending down. I think it's more of a supply and demand mismatch. Like, because they don't just they follow the ten year, yes, but there's a ban that they follow it in. Right? That I mean, what I saw that if you're an FHA, so you can be more clear on the DSCR side. But FHA borrower right now, if you got a good DTI, good credit, I mean, you can get high fives to low sixes on the thirty year. That's a lot better than it was the past couple of years.

Dan Austin: [29:53] So let me ask you this, Dylan. You know, there's a lot of bulls, you know, over the last year or two or like, oh, it's too late. The Fed's gonna do too little too late. It's gonna hurt the economy by pushing out these rate drops. Is this a too little too late scenario? Or is it fine? It just is what it is and supply and demand mismatch, demands kind of dwindled recently, like, and is it a big deal?

Dylan Koch: [30:15] It's hard to say, Dan, because from historical perspective, if you just look at their track record, the Fed is notoriously always too late. Right? In fact, in the last time they cut during something like this, it was like August 2007 is when they they started cutting rates when things were at their high, and then shit hit the fan a couple months later. Right? And so there was always chatter then. Like, they should have cut a lot earlier to help with all of these job losses, etcetera. But the difference is now, one, we have a lot higher baseline inflation that we do, which is you don't typically lower interest rates in that environment. And assets are still, like, at record highs. Stock market's at record highs. Real estate's still pretty much at record highs on a relative basis. And so this is like the whole stagflationary argument over a lot of economists is like, this is the worst it can get. You have Mhmm. Rising prices with job loss. Right? And so I can't give an answer for you. I know it's not great, but I don't think it ends well.

Dan Austin: [31:14] No. I think what it ends no, it ends well for people like you who have assets.

Dylan Koch: [31:18] Agreed.

Dan Austin: [31:18] Right? I was listening to a guy talking, I don't remember who it was, or maybe I was reading an article after this, was that, like, if you own assets, good for you because they're gonna keep going up due to an inflationary situation. If you don't have assets, like, you know,

Mike DeHaan: [31:33] you're you're gonna be more poor. You're gonna be more poor than you were before compared to the people with assets.

Dylan Koch: [31:38] Top 10% of income earners account for 50% of American spending right now.

Mike DeHaan: [31:42] Isn't that crazy?

Dan Austin: [31:43] How much was that? The how much percentage?

Dylan Koch: [31:45] Top 10% of American citizens, the wealthy, account for 50% of domestic spending.

Dan Austin: [31:53] I believe that. Yeah. That makes sense. That's crazy.

Mike DeHaan: [31:55] And I would say we've been seeing this trend for a while, but now more than ever, it is very apparent, the split between the haves and the have nots, not only just because of that, but also at like an institutional investing level. So, like, you know, Dan and I on the lending side of things, over the past, like, month, we've really gotten a ton of exposure to, like, big institutional money. Right? So we went to this vent down in Southern California about three weeks ago. And we were meeting guys down there that, you know, they they talk in the hundreds of millions to billions. Right? They're not talking about hundreds of thousands of millions like we do in the real estate, like, residential real estate world. These are, like, huge money people. They are so aggressively seeking to place their money places. It is unreal. Like depending on your your loan to value, it is very easy to get DSCRs that are below the owner occupant home loans right now, which has like never happened. Never. Right? Never happened. We've had people that are like getting stuff at 60% LTV. We're quoting them in, like, the low to mid fives on a thirty year fixed institutional debt. Like, that's insane.

Dylan Koch: [32:57] Yeah. But think from their perspective, I guess, are they gonna lend people who they can back it with their current balance sheet and their collateral, or do you lend to someone who has student loans at a 96 and a half percent leverage ratio?

Mike DeHaan: [33:09] Exactly. You're so right. And that's they're they're wanting to lend to that 10% of people that you mentioned before that are 50% of consumer spending. Because do you know what? That 50% of consumer spending can also be used to pay off their debts if things go sideways. Right?

Dylan Koch: [33:22] I wonder if this just thought just came to me. If there's any chatter amongst the elites and the governments themselves, if they know that Fannie Mae, Freddie Mac, and all of the government sponsored entities are gonna go private, And none of these debts are gonna be backed by the government anymore. So like that demand for that is gonna go way down. And so why lend a Sally who has a 400 credit score if it's not backed by the government? I'm sure there is. Mhmm.

Dan Austin: [33:47] Yeah. And they the Fed said in their statement, they're going to continue to reduce their balance sheet, meaning sell off and not buy more secured mortgage backed securities.

Dylan Koch: [33:56] Yeah. I think the QT that they're doing now is not actual selling. It's just not renewing of the debt. But most of it is MBS, not treasuries. So yes.

Mike DeHaan: [34:05] Correct. Right.

Dan Austin: [34:05] Yeah. So that's kind of wild. So yeah, I think that's a really good observation though.

Mike DeHaan: [34:09] Mhmm. Yeah. I mean, would imagine so. And what the end game is, I have no idea.

Dylan Koch: [34:13] I just think if you were to take a poll of even real estate investors, someone who's not in the lending space and said, hey, what do you think is lower today? 60% DSL, TV DSCR loan or a FHA under occupied 5% down? I bet 90% of those people or higher take the FHA one. And they're wrong.

Mike DeHaan: [34:29] Of course they would. And they're they're absolutely wrong. It's not even like comparable. Like, you're a whole interest point interest percentage less. Right? And and not only that, but the fees alone to get into that, the SCR are gonna be significantly cheaper as well than all the bullshit they make you pay as a FHA.

Dylan Koch: [34:44] So why are you making why is my loan 6.8%, Mike? I think it's 80% LTV, that's why.

Mike DeHaan: [34:51] Yeah. I'd say 80% LTV. Like the ones that we've been doing cheap. Like there's been a lot of people that are doing rate and terms that were at like, you know, when they refinanced in 2022, they got stuck with like a seven and a half. But now they're like just doing a rate and term at 62%, and they're getting five and a half, five and a quarter. There is a huge amount of incentive, I would say, for people that have good credit and are reducing, like have less leverage. The rate drop that you see from like the 70 to 80% range to like the 67% range is like asinine. It's like almost 2%.

Dylan Koch: [35:24] Yeah, that's huge.

Mike DeHaan: [35:25] And so, yeah, like that really, really is They're really encouraging people to not fully stretch themselves.

Dylan Koch: [35:32] Can we talk real quick about how I'm doing a loan with you guys? And this is not your fault to clarify, but we got an appraisal for someone who went inside the property for 375,000. And I was like, that's baller. I was spending like $3.50, but $3.75, I'll take it. We're gonna do a 75 percent LTV loan. And we did a CDA, the desktop analysis, right? Comes back at $250,000 Completely blew up.

Mike DeHaan: [35:56] This is the one that we moved it away from the hedge fund though, right? We went somewhere else?

Dylan Koch: [35:59] We did. We're trying again now. But like what chance tells me is like, there's a chance that happens again. We just hope it doesn't. Right? Like

Mike DeHaan: [36:05] Well, there's always a chance. But I would say that the people that we're moving you to are much more aggressive. We've almost shifted all of our loans away from that first one and are moving over to the other one because these guys wanna play ball. Like, they're they're willing to do a lot of stuff. Dan and I, we've been joking. It's like, did they have a 500 was it $500,000,000,000 fund? Is that what they said they're trying to, like, fill?

Dan Austin: [36:25] I don't remember. Yeah. They got something.

Mike DeHaan: [36:27] It's insane.

Dylan Koch: [36:28] That is ginormous. That's like top 1% of fund. Like, that's ginormous.

Mike DeHaan: [36:32] It's huge. And like these they're based out of Colorado, and they're like aggressively trying to capture a piece of private debt. And Dan and I are joking constantly. We're like, we got to just like take as much as we can from these people, Because right now, we can literally beat anyone in the market on DSCR. I'm so unbelievably confident of that, you know, depending on the on the LTV and everything else. But eventually, we're gonna get a call from, like, our guy over there. He's gonna be, like, on a helicopter out of the city. He's like, sorry, guys. Shit's done. I'm headed to Nicaragua. See you later. And he's gonna he's gonna just disappear.

Dylan Koch: [37:06] Yeah. Yeah.

Mike DeHaan: [37:09] Yeah. He's gonna snap his phone Totally. After that

Dan Austin: [37:11] and throw it on helicopter.

Dylan Koch: [37:12] They stomp on it. Yeah. Yeah.

Dan Austin: [37:15] It's so true.

Dylan Koch: [37:16] It's just what pissed me off about that whole situation is some guy who has not been in the house, sitting in his desk like an armchair laptop is like, I think this place is worth 40% less than what a person who's been inside the place thinks.

Mike DeHaan: [37:28] And the thing that's so frustrating about that is you paid $800 or whatever for a professional to do that. And then, like, some paper pusher is just like, nah. Fuck it. Overwrite it. I'm like, come on, guys. Then why even make you pay for the appraisal? Like, just don't even do it.

Dylan Koch: [37:42] Exactly.

Mike DeHaan: [37:43] So but yeah. You're right. Not our fault. We're we're just what's called the correspondent. We're one that talks to you. We get to serve you the shit sandwich from them after they tell you to go f yourself.

Dylan Koch: [37:52] I can always tell other companies he's gonna go and Chance calls me and like his tone. And I think I was like, news or good news?

Mike DeHaan: [37:58] That's good feedback. I'll beat that out of him. He needs to always be happy. That's how my team needs to be going.

Dan Austin: [38:05] Talking to hype ish voice.

Mike DeHaan: [38:06] So Dylan, I'm really going to tell you that your loan sucks. Yeah. Hey, Dylan. Hey, thanks so much. Yeah. It's really quick. I got to tell you. So

Dan Austin: [38:41] super pumped.

Mike DeHaan: [38:41] Bought a new car. You had a great reason to.

Dylan Koch: [38:43] Car that had a 150,000 miles. I drove for eight years, so needed it. There you go.

Dan Austin: [38:48] Did you get the a eight? What'd you get?

Dylan Koch: [38:50] No. I just got it's a 2025 a five s line. So it's like the sportier kind. Yeah.

Mike DeHaan: [38:57] Sweet, man. Well, not an a a, but it's nice.

Dylan Koch: [38:59] Not an a, but it's nice.

Mike DeHaan: [39:01] Next time, if you're in a school zone, instead of doing 55, you can do 85 in the same sort of stretch there. So be careful. Yeah.

Dan Austin: [39:07] How are the kids in that school bus doing, bud?

Dylan Koch: [39:12] You two are the fucking worst. Alright, guys.

Mike DeHaan: [39:16] Well, thanks for listening, everybody. We'll talk to you guys next week. Bye. 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.