How to Find Hidden Opportunities in Today’s Real Estate Market

Mike DeHaan: [0:00] Real quick, guys. If you want to take your real estate investing business from 6 to 7 figures in the next twelve months, and you wanna do without being a slave to your business, then you have to check out our scale community. You can get the full details at collectingkeys.com/scale. But very basically, it is a community of like minded investors who are working to become the absolute top tier investors in their market. Along with three coaching calls per week led by Dan and myself, we also have a whole bunch of videos and materials that go into all the different SOPs that we use to run our business on a daily basis. This includes how we manage our sales team, how we hire, how we do our marketing systems, how we get the best assignment fees possible, how we do renovations, how we do all the different kinds of creative financing. And if you are serious about taking your real estate business to the next level, it is absolutely something that you should check out. So go to collectingkeys.com/scale, see all the details, and see if you're a good fit.

Dylan Koch: [0:59] I've had probably five or six deals lately where lead comes in, looks good, I mean, there's definitely some level of financial stress, the motivation there. We walk it, we get the property under contract, we take it to title, and we come back, and the payoff is 20 k more than, like, our contract price for.

Dan Austin: [1:21] Hey there. Welcome back to today's episode of the collecting keys real estate investing podcast. This is the podcast where we teach you to make massive income, not just passive income with your real estate investing business. This is your first time here. I am your host, Dan Austin. And unfortunately, my cohost, Michael Dahan, is MIA. We don't know where he's at. He's out somewhere gallivanting. If you find him on Instagram at mike underscore invest, let him know. It's an unfortunate situation. I don't think we've ever had a Mike and Dan show that wasn't Mike and Dan. This is a first. There's a first time for everything, but we're here. We are saved with the fan favorite, our producer ish slash cohost today, Dylan Cook. How you doing today, Dylan?

Dylan Koch: [2:06] I'm doing well, man. How are you?

Dan Austin: [2:07] Yeah. I can't complain. It's a rainy day in the Northwest, which is unfortunate because we're the middle of June. That kinda sucks.

Dylan Koch: [2:14] Dude, we have like a heat wave over here. It's like 95 plus all week this week. I We've gotten two calls for HVAC this week already.

Dan Austin: [2:21] Seriously? Yeah. Seriously? That sucks, dude. Yeah. Dude. Yep. I don't think our heaters or air conditioning have ran into like three months just because it's been like this steady 50 degree flat disgusting weather. Actually, wife and I were watching the news the other night, and they're just like, oh, there's a heat wave. And I'm like, whiners. A bunch of whiners over there. I'll take some of that. I'll take some of that. Yeah, man.

Dylan Koch: [2:41] Sorry to the listeners. If I sound different, I'm getting over something. I don't know what it is. So if I sound a little bit better the following week, but AIDS? Yeah, I think that's a leading candidate, I thought too. This test take a little bit to come back though, so fuck you, dude.

Dan Austin: [2:56] Oh, man. Dude, that's such a bad story when I this is a total side tangent. See, this is what happens when Mike's not here. So when I was in the army, we used to have to get AIDS tests every six months or HIV test every six months and they would mail them to the barracks where everybody lived and they were just like a little note card, right? And it just said, you have AIDS or you don't have AIDS, it was that simple. And so one of the guys got it, got the didn't get AIDS, sorry.

Dylan Koch: [3:19] Yeah. Damn, dude. Got the That's name.

Dan Austin: [3:23] Got the card, right? And the check mark was like worn off, so somebody else put it that you do have HIV Oh, Jesus. And gave it to the guy, and he's like, hey man, got some dudes to break to you, and the dudes for like an hour thought he had HIV. It was the worst joke to play on somebody else, and then they're like, gotcha, that is so terrible.

Dylan Koch: [3:43] I think what's worse is like, shit, is that believable? Like, you know, they're like questioning all your life decisions up

Dan Austin: [3:50] until He's that like, how

Dylan Koch: [3:51] did I get AIDS? Yeah. Oh no, it's the toilet

Dan Austin: [3:54] seat, man. Guess that's

Dylan Koch: [3:55] what On it a lighter note, I'm gonna celebrate a small win this morning. We got a six unit apartment building under contract this morning. Nice. And shout out to Simply Leads. There's a cold call from you guys that Nice. First got it on the books, and then I went out there yesterday, and she signed

Dan Austin: [4:14] this morning. Dude, that's awesome. So that's actually pretty good. So a six unit, you signed it, they came in and you basically signed it around in the same week?

Dylan Koch: [4:22] Oh, yeah. So I mean, this person had some levels to motivation, whereas one they inherited it from their parents in like 2002, and her and her husband who live in the property are getting a divorce. They're currently living in two separate units of the same complex.

Dan Austin: [4:39] Nice.

Dylan Koch: [4:40] And then part of their divorce settlement is they have to sell to get some equity out, right? So it was just like, I think it was a good timing. We hit them at the right time

Dan Austin: [4:47] That's awesome.

Dylan Koch: [4:48] Kind of a thing. And came to our numbers make sense. It's not a home run deal for us

Dan Austin: [4:52] by any means, but it'll be a solid base hit. So will you keep is it a keeper?

Dylan Koch: [4:55] I'll keep it. Yeah. Yeah.

Dan Austin: [4:56] Definitely keep That's awesome. Multifamily, that is legit. And if you guys are curious about Simple Leads, go to simply, s I m p l I leads dot net. We don't have .com yet. We're in the process of buying.com. I'm so embarrassed to say .net. But we will buy.com, so we can say simpleleads.com. And thanks for that shout out Dylan, because I I talk to people a lot about calling and texting and I always say, you know, we're not like warm calling, we're cold calling. Yeah. And so you gotta follow-up with these leads when they come in. A lot of people get discouraged, they try to just read the notes and say, oh, this one, they said they want retail value, I'm not gonna call them. It's like, everybody wants retail value, everybody wants more than retail value. So you've got to do the follow-up, you gotta do the calls, and it helps, it pays off. So that's good to hear, man.

Dylan Koch: [5:39] Yeah, absolutely. Don't get me wrong, like, I think there's an analogy out there of like what every nine ninety nine calls you get one deal or something or whatever it Right, may

Dan Austin: [5:49] absolutely.

Dylan Koch: [5:49] And you get that too early, but yeah, no, it worked out great for this one and we'll keep it. I had six more units to the rental portfolio and hopefully there's more to come.

Dan Austin: [5:57] Love it, dude. Yeah. It's funny you say this. So I was just doing the scale coaching call today, and I told a story about it was a cold call that we got here in Spokane for one of our deals, and it came in. The the ARV of this thing was like 475 k. The guy wants $4.35. So it's one of those where you're like, dude, like there's money right in front of me, but there's not enough room and it's a turnkey 2,017 built, really nice property. And anyways, like we're like, man, if we can get them at 400, we can maybe maybe do something with it. We're just not sure yet. So we're debating like, should we run the appointment? Should we not? Just decided to run the appointment. So go out there, guy's super nice, great appointment. Turns out that the guy's like, you know what? I should just list Like, it makes more sense. We're like, you know, honestly, we think it does too. Like, we could get you money fast, but you're gonna lose so much equity that you don't need to lose. He's like, but my mom's moving with me and her house is a shithole. Would you guys wanna buy her house? We're like, absolutely. So we're gonna run a we're gonna run an appointment on it. It's just like one of those things where do your follow-up, know, kinda run these leads out as far as you can just to make sure there's an opportunity because we get referrals all the time. Sometimes there is just hidden, you know, hidden distress that you find when you show up and you can work with them. There's just so many ways to make money in

Dylan Koch: [7:07] this business. Don't prejudge anything. Totally. Funny you say that because I've bought in three houses from three members of the same family. From that same exact like, yeah. Really? Yeah, there's the parents, there's a daughter, and then another daughter, so her sister.

Dan Austin: [7:22] Yeah, man.

Dylan Koch: [7:24] They all make pretty bad decisions, but if we're talking

Dan Austin: [7:26] about it. It works out good decisions for you.

Dylan Koch: [7:29] Speaking of greedy investors buying a bunch of real estate though, how about, I would like your opinion, Dan, on legislation was presented to basically ban hedge funds, quote unquote hedge funds, from buying basically single family homes entirety. And they would have ten years to basically dissolve

Dan Austin: [7:49] their current portfolio of homes. Like offload them? Yeah. Okay. Right. Interesting. So couple questions if you know this answer, you might not, is what defines a hedge fund? Because like would like JPMorgan Chase like a bank be considered a hedge fund because of just like a size and they're just using that term or what? So they do have a brief definition but I

Dylan Koch: [8:09] think this would get further ingrained, but here I did have it. Basically it was anyone who controlled other people's money, essentially. Yeah, JP Morgan, or what is it, Blackstone would qualify, a lot of the people out here would all qualify for these kind of groups. But just some like, it depends on who you ask in market studies because they had one Totally. One group, the Urban Institute, which said that 574,000 single family homes are owned by large institutional investors of at least 100 properties as of June 2022. Which they said that was 3.8% of all single family rentals, be specific with the rentals And part so you're at 4%. Then if you go a different group, right, let's see here, the National Rental House Council puts the same ones at 145,000,000 in the country, which point 04% of homes. There's like, this is a big difference on who you ask, how they're doing these studies. And so the larger context question is here, is why? Is why are these retail deals buying homes like post 2008? Yeah. And then two, should they be allowed to do it?

Dan Austin: [9:17] So that, I love how you explained how they cut the data because like it makes no sense when you're like, oh it's point o 4% of homes. Like that's a pretty small number. And even like to be honest, 3.8% of single family rentals or where that that study is, that's really not that much in the grand scheme of things. Like I'm actually surprised it's not higher. Right. You know, you think about all the build to rent, all the acquisitions from hedge funds and I buyers, all that stuff out there and then all the mom and pops, compared to that to all the mom and pops, I just thought mom and pops would be so few and far between but I guess everybody's buying rental properties these days. So to me, it's not that large of a number. I think that it is a political ploy because everybody's saying, oh, these hedge funds are buying up properties and driving up home values. I don't think that's the case. I do think that they helped kind of float it up higher, I but don't think they're buying enough. I think there's enough dumb people out there overpaying for properties as well, that if anybody's gonna push it up, it's gonna be those people.

Dylan Koch: [10:14] No, tend to agree with your line of sight. I was reading this, was just kinda thinking like, you know, well one, why are they buying these assets in the first place? Historically I think Wall Street hasn't really been single family home buyers, right?

Dan Austin: [10:28] Right.

Dylan Koch: [10:28] And you go back to 2008, I'll try to find this chart, but like they were building, they were building, they were building, like single panels were getting developed, and then they fell off a cliff, and they didn't come for like ten years.

Dan Austin: [10:39] Totally. So

Dylan Koch: [10:39] there's, what this says, four to 7,000,000 homes short right now for like people in The United States. Obviously it's geographic dependent. But the reason why prices probably are still remaining high is there's just not enough freaking homes.

Dan Austin: [10:54] See that is interesting actually, that's a great point. So there's not enough homes, and I tend to believe the study, but I also know real estate's hyper local. So like where we're at in Spokane, like we we were one of the hottest markets in the country for a while like in the 2122 build up. I don't know, I feel like everybody has a house though.

Dylan Koch: [11:13] Right.

Dan Austin: [11:14] Like I don't feel like we're running out of houses like nobody here that I know they're like, dude, I just can't find a house. Like even when the market was super hot, wasn't that they couldn't find a house, was that they couldn't find a house they like. There's plenty of houses. Yeah. So I wonder though, are these these large metros though, like New York City, San Francisco, LA where they just can't go anywhere else and everybody wants to be in this densely populated area so there is a shortage.

Dylan Koch: [11:37] Yeah, no that could be it too or are people like co living more? You know, they have a roommate longer than they traditionally would have before.

Dan Austin: [11:43] It's possible.

Dylan Koch: [11:44] Or yeah, or co living longer, I don't know, there's something like that, but definitely the 50 metro areas, like the biggest metro areas are probably impacted by a lot of those more.

Dan Austin: [11:52] Totally. But anecdotally,

Dylan Koch: [11:54] hedge funds were big in Cincinnati, like for a while. I have sold to hedge funds in the past. And when someone came into town, I would look at what they were buying at, and I'm like, there's no way that this is gonna like continue, right? And guess what? A lot of them are selling a lot of their stuff because they're forced to now. And so I think people see the headlines and they think that they should be regulated and they should you know have their hands tied Because they want this immediate satisfaction and gratification. Yeah. And I think if you just let the market do its thing over a long enough period of time, it's gonna work Right. Itself Because that's

Dan Austin: [12:28] what I'm seeing here. When you talk about that, what ARV, I'm sure you went to like Open Door and these other folks and you're just like getting like 96% offers, what were they buying at, or were they over ARV?

Dylan Koch: [12:39] They were never really over ARV, but what, and at least in my experience is, they would buy the dog shit of the dog shit, and I think they were really under arresting what their rehab numbers would be.

Dan Austin: [12:50] Yeah.

Dylan Koch: [12:51] And if something was worth $2.50 ks and it still needed 50 ks worth of work, they would be happy buying at 190, 200 ks. They don't need a lot of equity, right? And a lot of them operate off a yield, a cash flow yield, not like a cash on cash like we would do. So if they could have like a money, like, I forget what it was, but it was like a 12% yield on their money, which was like a three or four year calculation, they would buy it.

Mike DeHaan: [13:16] Hey. We really appreciate being a listener of the collecting keys podcast. Did you know that we also are on social media and on YouTube? You should go and shoot us a follow on those as well. You can find both Dan and I on Instagram. I am at Mike underscore invests. Dan is at investor man Dan. You can also find short clips from the show at collecting keys podcast on Instagram. And if you wanna see our faces talking while listening to the show or you wanna check out some of our crazy animated adventures, we've been putting together into some funny little web cartoons that sort of show the crazy stories that guests tell on the show, then you should go over to YouTube and check out the collecting keys channel. Shoot us a subscribe over there. It really helps in human grow our audience. We really really appreciate it. Well, anyways, enjoy the rest of the show you guys. We appreciate

Dylan Koch: [14:00] you all.

Dan Austin: [14:00] So fundamentally, the hedge fund model makes sense to me if they are able to buy like more turnkey properties at say like 92% or 91% ARV, Because a seller is going to usually pay six to 8% in sales cost,

Dylan Koch: [14:16] Mhmm. So if

Dan Austin: [14:16] they can get all their sales costs wiped out and the hedge funds getting it at a discount, they're acquiring at a discount, there's some ARV margin and then like immediately that they're buying into and like they can get their cash yield or whatever, and also they're they're getting the value of the appreciation, depreciation, all the other stuff that comes with real estate, and they just happen to have a shit ton of money, right? So if they can aggregate all the benefits together and hit 10 or 12%, they might be able to, but if you're going in buying junk properties, that to me just just I know like it's hard for me to scale up junk properties. I can't imagine some Wall Street dork who's doing it remotely, doesn't really know what they're doing or they've got some boots on the ground guy that's just running around, doesn't know anything, right, collecting a salary. Like their number one guy, like my contact, was a sales He

Dylan Koch: [15:02] was paid on commission. How many he can buy, right? Yeah. So he was, I'm sure he was kind of finagling things a little bit.

Dan Austin: [15:09] Oh, yeah.

Dylan Koch: [15:09] Right, a little bit. So he got paid a little bit more. But, you know, they went belly up quick. And not to put a side tangent, but the day they went belly up, I had like three deals in escrow with them.

Dan Austin: [15:18] Oh, I remember you, I remember when you were talking about that, yeah.

Dylan Koch: [15:20] Yeah, and I had to go back to those sellers, and we ended, we still ended up buying all of them by the way.

Dan Austin: [15:25] Yeah, They were for a

Dylan Koch: [15:25] little bit less but.

Dan Austin: [15:27] Heck yeah dude, that's good on you man. Yeah, guess to like kinda round out this discussion, it is kind of a weird time in real estate because there is like the boomers are dying in place, I would say more than any other generation because the boomers are one of the or the second biggest next to the millennials, right? And so I've always kinda had this like thought in my head is like boomers are dying in place and then millennials are you know, delayed buying homes. So kinda like there's this this huge influx of demand which are the boomers downsizing and moving into like their little retirement home instead of going to retirement community. And the millennials first like trying to get their first property in their thirties because they couldn't do it in their twenties. Right? Right. So there's this huge demand and then of course at that same time, 2008 basically hits, the building stops. So I think it was like a perfect storm and then COVID exacerbated that by just falsely inflating by giving people too much money. So I just feel like we hit like this unprecedented storm that is not like that is unique, that we're not gonna see and the need to regulate it just isn't actually there.

Dylan Koch: [16:34] No, would just echo everything you just said. But you touched on like millennials delaying their first time home buying especially compared to their parents and etcetera. Mhmm. Another thing that kinda caught my radar was, so they buy bank rate, and they basically said, it's like the whole renting versus owning debate, right? Is it cheaper to rent, or is it cheaper to own? And their consensus was, you know, it's always been popular to own real estate, because you get all the benefits that we described. Appreciation, debt pay down, interest expense, etcetera. But with the combination of interest rates basically skyrocketing the past couple years, insurance, property taxes, just to maintain a piece of property anymore, like the cost to replace things, Going up exponentially. I was gonna read what they have here, and then you can kinda give your two senses. Nationwide, the typical home costs nearly 37% more to buy than to rent on a monthly basis. Rent increases have softened across The US over the past last year. The combination of high home prices, elevated mortgage rates, and low housing inventory creates a strong headwind for aspiring home buyers. Additionally, it's cheaper to rent than to buy in all top 50 metros. The typical monthly mortgage payment of a median price home according to Redfin is $413,000. Of $413,000 is $2,700 a month, while the national typical monthly rent is $19.80 dollars a month as of February, which is like a 37 percent difference between those two numbers.

Dan Austin: [17:59] That's yeah. That makes sense. And that doesn't even count the maintenance and cost of owning a property. Right? So I was actually just having this discussion internally with myself the other day about just like the home maintenance and like I was telling my wife, I like, yeah, we should just like sell our house and like move into like a condo where we don't have to worry about anything. And like in the impetus of that conversation was is so I I've had a lawn maintenance guy do my my outdoor lawns for the last five or six years. Basically, well, maybe longer than that. Since I started owning rental properties in 2016. Because you start buying rental properties, it just becomes better to just have your lawn guys swing by your house to mow your lawn. So I've been doing that forever. And then this year, I was like, know, I'm gonna I'm gonna do the lawn this year. I got my son, he's like all giddy about things with motors in it, so he bought like a riding lawn mower, did all this stuff and I'm like, I absolutely hate this. I have no business doing this, I don't wanna mow my lawn, I don't have to mow my lawn. And then I was just thinking about all the other stuff that you have to do from a home ownership just to keep up on your property so that it doesn't become a distressed property that we go in and buy. Right.

Dan Austin: [19:04] It's a lot man, it's a lot. And then you include the cost of debt, like the appreciation that we're going to be seeing, like if you're a home buyer today and you're buying a home, the appreciation you're gonna see going forward and the debt pay down you're gonna see going forward just isn't really a benefit right now for you. Over thirty years, yeah, it's still going to be a benefit on the macro level, but I just think that 2,700 versus you know, 2,000, go ahead and throw on another 4 to $500 a month and just general maintenance that you have to do. It's kinda like owning a car, you gotta buy tires every four years.

Dylan Koch: [19:35] Yeah, at least.

Dan Austin: [19:37] That, At yeah. So it it just like adds up and that $2,000 a month seems pretty cool when you can just walk out, lock the door and leap. Yep.

Dylan Koch: [19:45] And if something breaks, call your landlord, they'll fix it. Exactly. Know, the shit

Dan Austin: [19:50] rolls Yeah, shit rolls downhill. But that's a huge thing and I'm seeing a lot of people renting, know, like in our whole market, but I'm not, like for us as landlords, I'm actually not seeing our rents go up, which is you know, not cool, just because for whatever reason the market, the rental market where we're at has gotten pretty soft and so we're renting for on average I would say like 50 to $75 less a unit today than we were when we first leased those, when those leases were rolled, they're rolling now a year later. Yeah. It's kind of a not ideal, don't know how you're feeling over there, but

Dylan Koch: [20:20] I mean, anecdotally for us, it's like, well when I first got, I think I bought my first property in 2018, I remember underwriting places at like $506,100 dollars for a one bedroom. And now you can get anything for probably less than probably $75,800 here for like in a decent area. But no, my market in Cincinnati is definitely still investor friendly. We serve good demographics for that. But it has definitely softened, right? I just had, we took over that 13 unit building, and the place is now half empty, and I'm gonna start throwing these places up for rent. I have a better understanding here coming soon. Great. But I did have to underwrite conservatively, you know, on what I think I could get in rents when we were doing that.

Dan Austin: [21:03] Yeah. That deal. Yeah, totally dude, and it's like the numbers where they're saying like 1,900, $1,972,000 dollars a month, I'm like, dude, what are these people? These must be the coastal elites that are elevating and buoying up the rest of the average because when you're talking about yours, your rent's being at that price, then in Spokane, would say for like a two bed, one bath, we're looking at like 1,200 to 1,300. If you're in a nicer area, it's higher, but those the I bring that up because like the margin of going up and down really isn't that much and hasn't been that much for us in that same period of time. Like you're saying 500 to 800, like that's in the grand scheme of things is not that much more money for you at the same time your taxes and insurance went up. Right? And debt service costs went up. It's that really is just kind of following what your additional costs have gone up, where like you would be hoping that you went from 500 to 1,500 overnight. Yeah. That's really hard to do.

Dylan Koch: [21:56] I had another wholesaler reach out to me the other day and he's like, hey, you still buying? I'm like, basically said, if it's a single family, I'll flip it. But anything like for buying old, I really can't make pencil anywhere. And so I don't know if I'm not underwriting appropriately, I think I am, but it just isn't worth the squeeze at this point for me. I'd rather just flip it, make the 20 or 30, and then keep it multi units.

Dan Austin: [22:21] Yeah, do we feel the same thing? Like I don't know that we've bought a single family home in a year and a half now. We've sold some, they just Right. They don't make sense really in any market right now, and even if you're going to like a cheap market where you're like, I can get 1% rule, that's cool, but it might not be cool in that market. Right? You still might need to be underwriting 2% in that in that cheap market, some like Southeast market where there's a bunch of ill bullies out there playing hammer darts in your in your unit. Right?

Dylan Koch: [22:47] How are property taxes up in your neck of the woods?

Dan Austin: [22:51] They're not like crazy Texas crazy, but they're decent. Yeah. Where I live specifically, the school district is pretty expensive, so ours are significantly higher in this kind of region of our town. But on average, you know, if you look at like a three to four hundred thousand dollar house, you're gonna pay about $4,000 a year in property taxes. Honestly, that's probably about the same. I think Ohio surprises a lot

Dylan Koch: [23:14] of people with our property taxes. Like, it's usually pretty high.

Dan Austin: [23:17] You guys are higher.

Dylan Koch: [23:18] It can range from two and a half to 3% of your assessed value.

Dan Austin: [23:21] Yeah. That's that's pretty high. We're we're right around like 1% is where we're kinda hovering. Yeah. Just depends on the school district and the different, like, assessments they have in your area. But yeah, I mean, it's definitely killed us because these property taxes, like, yes, the values of the home was went up, but so did the taxes quite a bit. They they actually so our assessor has a tool now and we're maybe behind the times, but it used to be they didn't really assess it until the property changed hands. They just didn't have a good way to do it. Every like few years they would try to reassess it with a drive by. They didn't have a good tool, but now they have a tool where they can live every day if they wanted to. They could change the price because the tool does a live assess like a live call, you know, live comparative analysis. And so it kinda stinks because, you know, your house goes up in value with the market and then it likes to stay above value when the market goes down.

Dylan Koch: [24:08] Isn't that Yep. Ours is every three years, the reassesses. That's not

Dan Austin: [24:14] bad, ours is annually dude,

Dylan Koch: [24:15] Yeah, ours is still is every here two years. And I mean that's a specific county, there's other neighboring counties that are once a year. But I mean, I wanna get your opinion on this, Sam, is that, so I've had probably, I don't know, five or six deals lately where lead comes in, looks good, I mean there's definitely some level of financial stress, there's We motivation walk it, we get the property under contract, we take it to title, and we come back and the payoff is 20 k more than what we need like our contract Yeah, price

Dan Austin: [24:45] we just had that one, it was 80 k more.

Dylan Koch: [24:47] Yeah, right, and so I guess are more and more people, and the trend I'm trying to put with that is a lot of these people refinance when it was hot in 2020, 2021, or they recently bought. And they're having a tougher time I guess keeping up with those payments. I don't know what it is, but it sucks because there's not really a way around it other than a short sale. Totally. They're still gonna lose out on them.

Dan Austin: [25:09] Yeah, exactly. Someone's gonna have to lose. I don't know if it's gonna be the bank or them or who's gonna lose. Someone's gonna have to come to the table with money. We have seen just recently on that same topic like folks that have gotten like throughout COVID, like got some special lending and did some special stuff that I don't know about. Like not not for bears or anything like that, but like second loans on their house. Like we had one that was like an actual like second loan that they didn't actually really know. They they were under the assumption it would be forgiven. And so I don't know what they did. It wasn't like a second mortgage. It was just some sort of lien. It was like 80 k. And so we went to do the payoff and it was 80 k more than what they thought because like, oh well, we're kind of under assumption, we didn't have to pay that back. Yeah. So there's people out there like that and then there's of course the forbearance people who would tax on the end of their loan Right. Which is fine but it will increase their payoff a little bit. If they bought it recently, like they bought it in 2020 time frame, like they're not gonna have that much debt pay down or that much equity anyways. And so there's definitely I wanna say we're seeing a crazy amount of it. We're definitely seeing some level of that.

Dylan Koch: [26:12] Yeah, I just noticed it a little

Dan Austin: [26:13] bit more as of late, I don't know why. We've definitely been like just this year in general been trickling in leads that are like that one I just explained where the guy wanted $4.74 or $4.35 for a house worth $4.75. He was fortunate that he had some equity in it, right? Which he probably put a down payment on. Right. He's just getting his own money back. Exactly. There's just some of that where you see, yeah, people are like, I wanna sell my house and they can't. Like I even in my neighborhood, there's people, and I know Mike's had this in their neighborhood, there's people that bought like two years ago or a year ago and they're trying to sell their house now. Like that's like the worst situation, you're gonna be losing money. Yeah, no, 100100%. Just on sales costs alone, let alone any other shit you've got going on. Yeah. We're in

Dylan Koch: [26:55] a weird time right now, like you said, we had all these unprecedented things that kind of went on top of each other. Mhmm. And I like to follow some of this macroeconomic stuff, and I won't say I'm an expert by any means, but one of the things that is very popular amongst investors of all sizes, including real estate, is the inverted yield curve. Do you know what I mean when we bring that up?

Dan Austin: [27:17] I do, but I feel stupid because I don't know how they calculate it.

Dylan Koch: [27:21] Well no, so you can take any duration, right? And so it's just like the t bills to the thirty year, anywhere in between those lines. And if you just lay it out, that should be the y axis being like how much it is, like interest rate over time on the x axis, it should basically just be a wide up and to the right. It's the longer duration out risk, the higher that premium should be to taking that duration risk, right? Right. Well, there's been, historically, you take the two year treasury and the ten year treasury, and if those ever invert, meaning that the two year pays more than the ten year and vice versa, then that has been like a 100% indication of a recession within the next eighteen months after it happened. Sure. So that first happened though back in July 2022, and it's remained inverted, which is now the longest streak that we've had that inversion to take place.

Dan Austin: [28:15] That's So

Dylan Koch: [28:17] I'm just gonna read it all here. The two ten curve inversion is a time honored signal of an upcoming recession. Short term bond yields more than lower maturities because investors expect interest rates to remain high in the short term as the Federal Reserve battles inflation, while long yields are lower on expectations, essential vehicle cut rates, to simulate a weakening economy. So the whole point of bringing this up is everyone and their mother has been screaming recession for the past two years. Right, we haven't And had so know none of this is financial advice and we're not experts on this, but if you had to give some reasonings on why it's inverted, why it's remained inverted for so long, where does your mind go to? So first thing I I guess comment as as I always like to say

Dan Austin: [29:01] this, there's a first time for everything. And I feel like honestly since like the early two thousands, like maybe it's 2001 like timeframe, every I feel like everything's been unprecedented. Like hey, we've never seen that before. Like I feel like as an adult, as an adult, everything has been like, we didn't expect that, but then I have to go back and say, well, what about the thirty years prior to that? Was that the same thing? The eighties, the seventies, all the issues we had then, like, we never expected that. So none of this shit's ever expected, and I feel like I have a gripe with economists and that is that they are absolutely impeccable historians but they don't know what the fuck they're talking about when it goes to what's gonna happen next, right? Yep. They all will have it and sometimes people will guess and get right but they will be able to, like when I went got an MBA, took macroeconomics, like they can literally break down with precision exactly what happened, when it happened, who did why, and tell you exactly why, and then they'll put their own political bet depending on who they voted for Sure. And that that's the ledge you'll get, right? So great historians, but not great at forecasting the future. Part of me would say, why is this happening? You said this first happened in 2022 is when it

Dylan Koch: [30:07] first inverted? July 2022. Yes.

Dan Austin: [30:09] Yeah. So I think we had COVID, which was unprecedented. We had unprecedented like shutdowns, spending, and in 2022, things started happening and guess what we continued to do? Spend, spend, spend in a very inflationary environment and now they're just like, what do we do? Because it's almost like stagflation, which I loosely understand that term. And so I I just think that it's just kinda like nothing's happening. Like it's like gridlock. Kinda like we see in the real estate market where it's like buyers aren't really wanting to buy and sellers really aren't wanting to sell, but things are moving. It's just like a slow kind of slow pace. Right, and mean stagflation I think is just high inflation with low unemployment. It's like

Dylan Koch: [30:50] one of the things that they try to, there are mandates that they try to meet. Right. But I don't really know what this means either other than, what's the saying is like History sometimes doesn't repeat, but it often rhymes. So all these historians will come back and like, okay, well this has happened before, but it's never the exact scenarios that you were in before. But if you do plot out those M2 money graphs post COVID, and that data goes all the way back to the 1900, that is unprecedented. So the question for me is, okay, what does happen next? And I'm not saying we're gonna get it right, but it's better to be informed than uninformed in my opinion. Everyone And I listen to is like, the Fed, meaning the Federal Reserve and also Congress, like the Treasury Department, don't have any more options because when that COVID type happened, they restructured a lot of the debt, so they got locked in at two, two and a half, 3% rates. Well now that those are coming due, they're having to lock in at five, six, 7% rates, and so now our deficit just keeps getting bigger and bigger, and a large portion of that deficit is just going to interest expenses. Right? So a third of that deficit is just paying interest on our own debt. How do you get out of that? You can't without some kind of recession in my opinion. Right? Totally.

Dan Austin: [32:06] Yeah. It's like having a credit card that eventually your fees and your interest are bigger than the principal. Yeah. Right? And then you only make enough money to pay the to pay the interest and the only way to get out of that, yeah, you're saying like recession. So that's actually one thing that a lot of conservative economists like would applaud Donald Trump for was his plan was to do a hundred year 0% interest, hundred year bonds, which back then people like, you're an idiot. It actually makes sense now because we would have restructured our debt as a country to be like low interest. Right? Which would have been super cool. But outside of that happening, because it didn't happen, to point it by bringing that up is that we have to figure out how to bring interest rate down, which could be to drive the economy into a recession, so that

Dylan Koch: [32:48] you get lower interest rates, and then you can restructure debt again. Right, and I think that's it. But then how when you lower interest rates, to me that's just gonna kick inflation up higher than it already is. Right? And we have these other factors too. This is the battle that they're facing, and I don't know if there's even an answer. But okay, so how does this affect us as real estate investors in our local markets? I think when shit does hit the famines, I think it'll happen eventually, no one knows when. But as long as you have a solid portfolio, like fixed debt, they'll get these adjustable debts on all of your properties, and you have some money in the bank, you'd be able to take advantage a lot and really like change your life during those one to three years after whatever that happens.

Dan Austin: [33:29] Absolutely, yeah. There's always an opportunity and don't don't let like fear overcome because honestly, I didn't know to be fearful when COVID hit and all the OGs that were wholesalers back in 2020, 2019 when I first started were basically like, we're out, like we're done, like we don't know what's gonna happen next and I was like, well, I'm kinda committed here. Like I Yeah. Sending I'm sending mail out. Yeah. Yeah. Might as well at least like try to get my money back and we just went all in, right? And we didn't know to be fair folks, we didn't know what we didn't know and you'll always hear the big dogs, the OGs talking about like how they're gonna cool it. It's like, they earned the right to cool it. They earned the right to

Dylan Koch: [34:06] cool it.

Dan Austin: [34:07] And they're gonna miss a huge opportunity, right, because they're not willing to risk because they've already taken their risk, they made big money and now they're sitting back and saying, I don't really wanna risk my $10.20, 100,000,000 whatever there is, whatever portfolio is because like I don't need to anymore. When you're first starting out, you kinda need to risk it, but the good thing is is you have less the risk so that your your downside is lower. Yeah. What do you have to lose at the beginning? I mean Exactly. And so you gotta you gotta risk it to get the biscuit as they would say. And I agree with you a 100%.

Dylan Koch: [34:36] My tangent here that I'm gonna go on is my not great, because all of these people would have been successful no matter what, but the early BiggerPockets crowd, like the ones that got in from like 2010 through think. To present, to really, like 2020. Yeah. Would they have all been successful? Probably. Would they have been as successful to the extent that they were? Maybe not. Right. Because they just had the biggest tailwind in real estate, probably ever, in the past decade, right? Yep. And so, but they didn't know that, no one knew that going in, so it still had the balls to go like move forward with it, but.

Dan Austin: [35:05] Yeah. And they all wrote books on how how badass their strategy was, and their strategy wasn't anything good, right? Yeah. David Green keeps writing books and I don't know what he could possibly be writing books about because he doesn't do anything crazy and he hasn't done anything that wasn't something Brandon Turner already did. It's just books on how he can reword reword every phrase with a different analogy. Exactly dude. Dude, they should just rename it the bigger analogies podcast. There you go. Anything else, Dylan? What else should we chat about? Dan, I didn't really have

Dylan Koch: [35:35] much planned for today.

Dan Austin: [35:36] Is there anything currently on your mind that you wanna dive into? No, I don't have anything I wanna dive into. I just really hope that Michael's okay out there and that we can get him back next week for the Mike and Dan show.

Dylan Koch: [35:48] We'll see. This is kinda nice having with Adam. It was actually.

Dan Austin: [35:51] It was a lot quieter. But in all seriousness, he will be back. I think you will have when this episode drops, you will get to hear one of his Friday focuses on his time at the Alex Tremozi two day event And then the next Friday focus, I think he's gonna drop it. So this as this airs, make sure you tune in for this Friday's focus. She'll get the second half, the second day of that. And Mike and I got upsold. So we're going back to a deeper dive workshop because the first one was so good, and you'll get to hear all about that from us as we kinda dive into that and learn more about it. I read some of

Dylan Koch: [36:23] that on Mike's newsletter right before we hopped on this. Yeah. Looked like you had some good bullet points on there.

Dan Austin: [36:29] Yeah, especially from like building a business standpoint, like there's just a ton of good systematization stuff that we learn and just good like basic like, duh, you should do it this way. There's a lot of things that are kind of like moments where you're like, you know it, but then having somebody that's so successful break it down that simple makes it so much more palatable, I guess, for yourself.

Dylan Koch: [36:49] He is the best business articulator that I think I could listen to.

Dan Austin: [36:54] Like Yeah. Layman's terms, simple and and analogies and things you can understand, and obviously he practices what he preaches. If you are a listener here and you'd like to practice what you preach, you should go and share this podcast with somebody because that's how we grow the show. We desperately need you to share the podcast, to share the word, to share the good gospel and go download our episodes because that's what helps us grow the show, what helps us grow our influence out there. If you wanna connect with me or Mike, I'm at investor man Dan on all platforms. Mike is at mike underscore invest and Dylan, what's your handle? It's just eleven d and then k o c h. Eleven d cook. Eleven d cook on Instagram. Alright.

Dylan Koch: [37:35] On that cigarette. Have a good

Dan Austin: [37:37] day, Dylan. See you guys all next week. See you guys.